Yeltsin under pressure to quit as Russian crisis goes global

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BORIS YELTSIN and his country's efforts at capitalist economics both looked doomed yesterday as the fall-out from the Russian crisis reverberated around the globe and the ailing president came under increasing domestic pressure to resign.

Wall Street was thrown into panic as estimates of the amount investors have lost in the Russian debacle rose to $114bn (pounds 70bn). In Moscow, meanwhile, rumours about the impending departure of the 67-year-old president were flying with such intensity that the Kremlin made an angry denial, dismissing them as "absolutely groundless idle inventions".

In New York, the Dow Jones index fell more than 357 points, its third largest fall in history, while in London the FTSE 100 closed down 176.9 - a 3.2 per cent fall that wiped pounds 35bn off share values. In Frankfurt, the DAX was down 3.3 per cent amid nosediving stock markets across the continent. Even the usually deft-footed international financier George Soros was said to have lost $2bn as a result of the Russian crisis.

Responding to a report on New York-based CBS television predicting the Russian President's resignation, a spokesman said Mr Yeltsin was "holding all the reins of power in line with the Russian Constitution, and is preparing for numerous most important international meetings". The biggest of these is next week's summit with the US President, Bill Clinton, an event which has so far failed to inspire much hope that either man - both on the ropes - can solve the crisis.

Signs are growing that Mr Yeltsin, who has been in the shadows since sacking his government on Sunday, is severely weakened and may decide to step aside - defeated by an economic crisis that has destroyed the rouble, a social crisis that has condemned millions to poverty and despair, and his own weariness and troubled health.

His acting prime minister, Viktor Chernomyrdin, held consultations with the leader of the Communist Party, Gennady Zyuganov, deepening speculation that he is intending to form some kind of coalition government which may involve reducing the power of the president. Mr Chernomyrdin also met Alexander Lebed, the popular moderate nationalist who attracted 11 million votes in the 1996 presidential election. He said last night that the situation in Russia was "difficult, but absolutely manageable".

Intriguingly, Mr Yeltsin's close aide Sergei Yastrzhembsky - a member of the tight family circle around the president - has also been talking to the Communist leader.

Mr Yeltsin's demise is now acquiring an air of inevitability, although it would make sense to wait until his prime minister has been confirmed in office by parliament before quitting, if only for stability's sake.

Conflicting demands from the International Monetary Fund, which is insisting on maintaining the transition to a market economy, and the Communists, who advocate interventionist Soviet solutions, are adding to the pressure that Mr Chernomyrdin is under.

The IMF has made it clear there will be no more aid until Russia gets its house in order. But many Communists, and other political groups, are calling for a reverse of the monetarist policies agreed with the IMF.

That theme emerged strongly from a commission of parliamentary and government leaders which yesterday issued its draft proposals for containing the crisis - familiar remedies including currency controls, fixed prices and expanded state ownership.

"Privatisation didn't lead to a restructuring of the economy and has failed to create an effective class of property owners," the draft said. "The situation demands increasing the role of the state in regulating the economy."

As the political storm gathers pace, so too does the economic turmoil. The queues at banks in Moscow grew longer, louder and more anxious after the Russian Central Bank suspended all foreign exchange trades, as demand outstripped supply by $290m.

Exchange offers were posting rouble rates as low as $11.50 against an official fix of $7.86 on Tuesday. The bank announced that foreign exchange trading will be suspended today. "The whole system has collapsed", said Chris Woodgate, who runs ICE Securities, a brokerage specialising in Eastern European securities. "Western firms are having to pay their employees with physical cash. They have money but they can't get it out of the bank."

In a further development yesterday, the gold price fell to its lowest for seven months on fears that the Russians may start selling their holdings to raise cash.

As ordinary Russians try to make sense of this, there was a glimpse of the concern among the upper echelons of what might happen: officials said the Justice Ministry was considering a ban on political protests by trade unions.