Political Giants Head For a Ruble Rumble

Russia's President Boris Yeltsin heads for the latest Commonwealth of Independent States summit meeting Friday determined to solve the ruble crisis. The trouble is that Kazakhstan's President Nursultan Nazarbayev is determined to do the same thing. and there is no longer room for their two differing approaches to monetary management to coexist.


Bluntly, events have suddenly spun to the edge of being uncontrollable. Every move now counts, including false ones.


If, one day, the Russian president says the dollar should be banned from Moscow's retail cash registers, as he did Tuesday, then those whose interests are affected, the people sitting on mounds of rubles, will not continue to sit waiting for the inevitable decree that will limit the ability to dump them.


They will wind up their worrisome holdings as fast as possible. That's what officials at the Moscow Interbank Currency Exchange expect to happen in trading Thursday, driving the ruble to its eighth-consecutive low.


This will be replicated throughout the ex-Soviet Union, where the managers of ruble-holding factories and enterprises beyond Russia's borders listened carefully to an entirely different section in Yeltsin's address.


"Either ruble-zone states jointly work out common rules and abide by them, or they leave it civilly by agreement", Yeltsin said. Sensible enough, but a few minutes before that he struck a far more aggressive stance. "We need a coordination of policy with these states on an agreement basis", he said. "We don't want the creation of a new union".


This is the problem. Nazarbayev says he does not want a new union either.


But he does, in a way. He Wants Russia, now the sole proprietor of the printing presses that print rubles and the Central Bank that issues them, to share these responsibilities with other states using the ruble.


And to make them responsive, not just to Moscow's political and economic priorities, but to Alma-Ata's and those of the other capitals.


Nazarbayev's plan for a consultative council to oversee monetary policy throughout the so-called ruble zone would expose monetary authorities to a whole new layer of influences. and Yeltsin's problem with that is that the current monetary authority, the Russian Central Bank, is already subject to so many influences that they all but cancel each other out -- leaving the bank to do what it wants.


So Yeltsin's intention is crystal clear: Let's agree on some guidelines and rules for "our" central bank to follow. Then, if any state cannot stick to those rules, it can always stop using the ruble -- "civility by agreement".


To all those ruble-hoarding ex-Soviet enterprises, the time to liquidate their worrisome positions is now, before Russia acts unilaterally to block them, preventing them from entering Russian territory, exacerbating inflation.


And unilateral Russian action is clearly an option. Only recently it was used to block Ukrainian payments, temporarily paralyzing Russia-Ukrainian trade.


The result was Kiev's agreement to speed its departure from the ruble zone, with its ruble-holding enterprises to be paid off in coupons at a loss-making one-to-one parity.


Nazarbayev and Yeltsin seldom clash in public, almost always retaining a genial, statesman-like facade with respect to one another.


But there are, in this, the elements of major conflict, sufficient already to have led to one postponement of the summit itself.


All the remaining ruble-using states need a solution badly. But there is no easy way for groups of states to manage monetary policy collectively.


Look just west, to the European Community and its tattered Exchange Rate Mechanism, for vivid illustration.


But equally, there is probably no politically acceptable way for Russia to run the ruble printing presses on its own.


In other words, a standoff. Nazarbayev and Yeltsin may be master negotiators, but this one, this time, looks unsolvable.