WASHINGTON, July 8 (UPI) -- Plunging stock prices, a renewed Kremlin drive to smash the Yukos oil corporation and now a major bank locks out its depositors: Is Russia set for a rerun of its 1998 financial crisis?
Only a week ago, the question would have sounded alarmist, even ridiculous to most ears. But now the concerns are mounting thick and fast. Russia already faces a collapse of popular confidence in its banking system greater than any the United States has experienced the climax of the Great Depression in March-April 1933.
The Guta Bank, formerly the 22nd largest in Russia has shut its doors, frozen all its electronic operations and locked out its depositors. Concerns and rumors are swirling around the Alfa Bank.
"Spooked by the closure Tuesday of mid-sized Guta and reports that top-tier Alfa was on the ropes, depositors descended on banks in droves Wednesday, intensifying a trend that has seen an estimated $5 billion, or 10 percent of all household savings, taken out of the system in the last two months," the Moscow Times reported Thursday. A major Russian bank has locked out its depositors in a nationwide shutdown, the Moscow Times newspaper reported Wednesday.
That report followed Guta's bombshell decision to shut its doors to its depositors Tuesday.
"Due to an outflow of funds throughout June exceeding 10 billion rubles ($345 million) and a significant increase in payments in July, Guta Bank is currently unable to carry out current payments and complete payments on deposits," said a sign posted on one of the bank's Moscow branches. "Guta Bank management is undertaking necessary measures to restore (its) liquidity."
Guta officials refused Wednesday to issue any official statement. Earlier, a company representative told the paper that Guta's Internet service, its telephone-banking service and ATM networks were all down, allegedly for "technical" reason.
Also, Mikhail Khodorkovsky, chief shareholder, founder and former chief executive officer of the giant Yukos oil corporation prepares to go on trial on charges of fraud and tax evasion, top Russian officials have doubled the already killing tax bill of $3.4 billion they had saddled the company with and are talking darkly about even boosting that.
Fueled by fears over the banks and wild uncertainty over the future of Yukos, Russian stock markets have tumbling and the ruble has taken a pounding too.
Now the Moody's rating agency has given its imprint of condemnation to these troubles: it has announced that it is placing the long-term foreign currency ratings of no less than 18 Russian banks and the financial strength ratings of four banks on review for possible downgrade.
Russian banking executives understandably are playing down the significance of this decision." Russian banks understand that the situation is stable and there is money on the market," Bank of Moscow Chairman Oleg Tolkachov said.
But Moody's is not alone in its fears. On Wednesday, a senior Western finance official expressed concern over the lack of fiscal support for Russia's ruble.
The Organization for Economic Cooperation and Development considers Russia's Stabilization Fund for the ruble to be scanty, OECD Economic Department Director Andrew Dean said during a review of the Russian economy, according tot a report carried by RosBusinessConsulting.
"According to him, the OECD is concerned about the fact that extra profits from oil exports are spent on decreasing the social tax instead of being transferred to the Stabilization Fund," RBC said. "It would be more reasonable for Russia to pay its foreign debt first and then start decreasing taxes, Dean believes."
Reflecting the growing worries, Russia's Central Bank Wednesday raised its official exchange rate to 35.91 rubles for one euro, dropping the value of the ruble by 0.14 rubles against the EU currency. In a three day period, the euro has gained 0.58 rubles or 1.6 percent of the Russian currency's value, the Moscow Times newspaper noted.
"The ruble's weakening against the European currency is explained as coming from a sharp surge in the euro against the dollar on the world market," the paper said. "The dollar has lost 0.5 percent against the euro over the past 24 hours and almost 2.5 percent compared with June 25."
Now Russian banks are fleeing tumbling stocks to invest in U.S. dollars. The official dollar exchange rate set by the Russian Central Bank for Thursday strengthened by 0.02 rubles against the dollar.
"As Russian stocks have tumbled, led by Yukos and the activity on the interbank market has significantly decreased, banks have nothing to do but buy dollars," RBC said. "Ruble liquidity has improved, therefore banks are more interested in dollar deals."
They are especially interested because not to use their ruble deposits is to lose them. Russia's ruble has fallen against the euro, the main currency of the European Union for three days in a row by the middle of this week.
Russia's Central Bank Wednesday raised its official exchange rate to 35.91 rubles for one euro, dropping the value of the ruble by 0.14 rubles against the EU currency, the paper said. In a three day period, the euro has gained 0.58 rubles or 1.6 percent of the Russian currency's value, it said.
Hovering over all is the question of what is going o happen to Yukos, he largest oil corporation in Russia and one of the largest in the world. For on Tuesday, Russia's top prosecutor signaled that despite previous reassurances from President Vladimir Putin himself, they were determined to squeeze Yukos until it burst.
"This is snowballing," Prosecutor General Vladimir Ustinov told Ekho Moskvy radio Tuesday, the paper said. "There is a beginning to this affair but there but it's very difficult to see the end. The level of stealing, fraud and tax evasion is so huge that it cannot all be packed into one case."
Yukos is Russia's largest oil company and is facing bankruptcy because it cannot pay off $3.4 billion in overdue taxes due by Thursday. Last week, Russia's Federal Tax Service hit Yukos with another $3.4 billion claim for 2001. Ustinov even told Ekho Moskvy Yukos could also be hit with additional tax claims for 2002 and 2003.
Russia's long-term macro-economic prospects ought to be bright. The country is one of the world's largest oil exporters and it soil and gas exports are soaring in an energy-hungry global market defined by soaring demand and inelastic supply: In other words, a major producer's sweetest dream.
But the fears sweeping Russia's bank depositors and market investors at the moment testify that without a sound financial system, the greatest natural resources cannot guarantee stability, let alone prosperity. Until President Putin and his government can address these concerns, Russia's latest crisis is likely to only grown worse.
