Policymakers Fear Political Fallout Of Latest Russian Financial Turmoil
Russia might seem a dubious candidate for an international financial bailout, given its chronic failure to stabilize its economy despite repeated dollops of foreign aid.</br></br>Yet compared with an economic collapse in, say, Indonesia or South Korea, the prospect of a meltdown in Russia is far more frightening to U.S. officials and international economic policymakers.</br></br>Therein lies the dilemma confronting the Clinton administration and the International Monetary Fund as Russia undergoes one of the most serious bouts of financial turmoil in its recent history. The Russian stock market fell 15.1 percent last week, and is now worth about half what it was at the start of the year. The crisis has aroused alarm that Russia could default on its $145 billion debt to foreigners unless it receives billions of dollars in fresh loans.</br></br>To critics of Russia's policies, providing such assistance looks like a classic example of throwing good money after bad. But the alternative may be a plunge in the value of the ruble that would devastate the nation's economy, kill public support for the reform program of President Boris Yeltsin and risk social chaos in the world's second-largest nuclear power. As a result, few analysts doubt that the international community will come to Russia's rescue again if the crisis intensifies.</br></br>The odds are high that Russia will end up back in financial trouble even if it gets new loans, but "nobody's going to let Russia go down the tubes," said Clifford Gaddy, an expert in the Russian economy at the Brookings Institution. "It's always going to be bailed out somehow. The Russians have 30,000 nuclear weapons, and that's 30,000 reasons why they won't be allowed to go under."