Russian Economy In Crisis

The ruble is on the edge of collapse, Russian President Boris Yeltsin is clinging to power, and Russia, the economists say, is bankrupt, reports CBS News Correspondent Richard Threlkeld.

Acting Prime Minister Victor Chernomyrdin tried to reassure investors Wednesday after they saw their investments plunge in value under a drastic plan to restructure Russia's enormous debts.

Yeltsin signed the decree on restructuring the country's $40 billion, short-term debt market, a day after terms of the plan were revealed. The terms announced late Tuesday confirmed creditors' fears that they would sustain heavy losses.

Investors whose bonds have matured will have the option of trading them either for long-term, dollar-denominated paper with a very modest return, or much higher-yielding paper denominated in rubles.

Even as he pledged to try to limit the damage to investors, Chernomyrdin was careful to disassociate himself from the restructuring decision.

"I would like people to understand us correctly: This decision was predetermined. In actual fact, our task was only to formulate it, and we could not do otherwise," he was quoted as saying by the ITAR-Tass news agency.

"Our top priority now, my personal task, is to soften its negative influence on stock markets and investors."

Foreign investors have already been leaving Russia in droves, and the losses they will sustain under the restructuring (receiving just 17 cents for every dollar they invested, according to some analysts) will discourage many from returning any time soon.

Russia will feel the loss of foreign investment keenly. Some analysts predict the country will be shut out of international commercial borrowing for several years.

So where has all the money gone? The more than $100 billion that foreign banks and foreign governments have pumped in to prop up the Russian economy?

International investor Jimmy Rogers says everybody just grabbed what they could and ran with the money. "And since they didn't build factories and didn't build highways and canals and railroads, there's no money to pay the bills."

Western governments cannot be encouraged by the departure of Kiriyenko and the other economic reformers and the return of Chernomyrdin either. It was Chernomyrdin's policies that helped create Russia's economic crisis in the first place.

The Kremlin insists that next week's summit with Presidents Yeltsin and Clinton in Moscow is still on. If misery loves company, Boris and Bill ought to get along just fine.