This content is from: Local Insights


As Russia's economic and financial crisis continues, there have been a number of important legislative and policy developments, including the following:

• restructured executive branch — by Presidential Decree (No. 1142, dated September 22 1998), President Yeltsin reorganized and streamlined the Russian government. A new ministry for anti-monopoly policy and support of entrepreneurship has been formed, in place of the former state anti-monopoly committee and several other, smaller bodies. The ministry of trade now replaces the ministry of industry and trade (and its predecessor, the ministry for foreign economic relations). Some ministries and other executive-level bodies may wind up with modified responsibilities under new regulations now being prepared;

• banking measures — in response to the national banking crisis, the government and the Central Bank proceeded with a programme allowing individual depositors with six major, troubled banks to transfer their accounts to the State Savings Bank (Sberbank). Transferred funds would be available only after a delay, and at a non-market exchange rate. According to press reports, about 25% of the affected depositors have agreed to participate. In the meantime, on October 15 the Russian authorities announced a plan to restructure the Russian banking system. Banks would be divided into four groups; some banks would be liquidated, but the emphasis would be to preserve small and medium-sized banks of regional importance. A multi-year moratorium on some liabilities to foreign creditors was proposed, subject to talks with creditors;

• currency market — the Central Bank (in Regulations approved on September 28 1998) and the Moscow Interbank Currency Exchange (Micex) which acts as a central currency exchange (in new procedures announced on October 2 1998), have changed the system for currency trading. Since October 6, rubles are traded for hard currency on Micex in two separate sessions. In the morning session, banks may purchase hard currency on behalf of importers, and sell hard currency in required amounts on behalf of exporters (50% of exporters' hard currency revenues now have to be sold in this manner, but the government intends to raise this to 75%). In the afternoon session, banks may purchase hard currency on behalf of their clients for specified purposes, including repayment of certain foreign loans and payment of dividends to foreign shareholders; and

• tighter exchange controls over exporters — in a joint letter dated October 1 1998, the Central Bank and the State Customs Committee have announced their intentions to tighten controls over hard currency proceeds from export transactions. Under existing legislation, proceeds are required to be repatriated to Russia within 180 days of the goods being exported. The government is considering imposition of a shorter period. The new letter orders regional and local customs and currency authorities to increase their inspections of exporters and their banks, and to monitor compliance with the repatriation rules much more closely. Special attention is to be directed to transactions involving natural gas, crude oil, oil products, metals and lumber. Where violations are found, the authorities are to attempt to persuade exporters to repatriate proceeds within 10 days. The letter also discusses the grounds and standards for imposition of penalties. Because the government is focusing on the problem of capital flight (reportedly, tens of billions of dollars each year), further measures in this area are expected.

Brian Zimbler, Sergei Stepanov

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