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By Janina de Guzman
Browsing the through the brightly lit Riviera food shop, you'd hardly think anything was amiss. Shoppers bustle in and out of the store located in the First River area, stopping to sample paprika- and sour cream-flavored chips offered as part of a Pringles promotion. But the effects of Russia's financial crisis - the devaluation of the ruble -- are indeed starting to make their way from news headlines to people's pockets. And for Primorians, whose food, electronic appliances, and clothes are largely imported, the implications are significant, with experts predicting a 20 to 30 percent price rise for imported products. The past week saw a jump in prices, from American cigarettes to Taiwanese chandeliers, Israeli grapes to Japanese televisions. Yevgeny Zaitsev, deputy chief of the krai's finance department, said living standards would most certainly decline further for cash-strapped Primorians, already crippled by widespread wage arrears. Ten thousand kilometers away, at the epicenter of Russia's financial upheaval, Russia's Central Bank suspended all foreign currency trade on the Moscow Interbank Currency Exchange (MICEX) through the end of the week in an attempt to avert the ruble's free fall. Meanwhile, press reports are hinting that President Yeltsin will resign and acting Prime Minister Viktor Chernomyrdin may form a coalition government with Communists, throwing into doubt Russia's commitment to economic reform. Markets shuddered as far away as New York, where the Dow tumbled 357.36 points Aug. 27 in response to Russia's crisis. In Vladivostok, the mood is apprehension tinged with exasperation, but as of yet, not full-out panic. "For the time being, things are okay," said Alexander Abramov, head of research at the Far Eastern Center for Economic Development. "When reserves are depleted, that's when prices will really start to rise." But already, prices are climbing on imported meat, cigarettes, and appliances. At the food section of the Ignat store on Okeansky Avenue, the price for U.S. turkey climbed from 13 to 14 rubles per kilogram virtually overnight. American packaged foods, like Tyson's Chicken Cordon Bleu, jumped from 15 to 18 rubles for a box of two servings. A pack of Marlboro lights now costs 9 rubles, instead of 7.5. Prices for domestic goods are also rising. Riviera shop's manager Svetlana Polikarpova said vodka had jumped 10 percent. Russian cheese rose one ruble per kilogram. Polikarpova didn't know why domestic products were increasing in cost. "Maybe inflation?" she asked. Experts are indeed predicting runaway inflation as the Russian currency continues to plummet. Government officials are trying to keep stores from hiking prices on goods purchased before the ruble began its free fall Aug. 17. If stores acquired foreign goods at pre-crisis prices, then they should sell them to customers at those prices, said Svetlana Parinova, representative of the krai's Committee on Economics and Planning. Parinova said federal customs and tax officials, as well as officials from krai pricing and consumer committees were checking area stores for illegal price hikes. However, some shopkeepers contend that to replenish stock without losing money, they must hike prices. Polikarpova said the Riviera food shop was visited last week by authorities who combed through documents looking for discrepancies in purchase and sales prices. Riviera was pronounced clean, she said. And customers? "They keep buying," said Polikarpova. "What else can people do? They need to eat." The financial situation is actually producing a run on sales of electronic goods, as people rush to purchase before prices rise further. "Why should they keep their money under their pillows?" asks Andrei Smolyanikov, assistant director of Rating company, which oversees Ignat's electronics store, where prices rose 33 percent this week. With dollars increasingly difficult to come by, people are desperate to find something to invest their rapidly devaluating rubles in, he said. The answer? Sharp and Sanyo televisions, Moulinex food processors, and Tefal electric tea kettles. Smolyanikov said he is considering raising prices again, based on a rate of 10 rubles to the dollar. "It's impossible for me to change prices each day," said an exasperated Smolyanikov. "The ruble is simply not convertible. What is the real rate?" After months of government efforts to prop up the ruble, nobody knows, he said. On Aug. 28, the dollar was selling for 9.01 rubles at Mosbusiness Bank, and 9.02 rubles at Hotel Hyundai. Dalrybbank's exchange point was not selling dollars. Moneychangers on Fokina Street were trading at rates as high as 12 rubles to the dollar. At Sberbank on Aleutskaya Street, cashiers had stopped exchanging dollars for rubles. "It's just somebody's report," said one cashier, who declined to give her name. "We just don't have dollars. Many people have taken them from their accounts." Indeed, swarms of people gathered around the tellers to withdraw their savings, whether dollars or rubles. "I think it's not profitable to keep rubles in the bank anymore," said Marina Shevchenko, 35. Instead, she plans to spend them on a refrigerator and other durable goods for her apartment. At a nearby bank office, a manager who asked that his and his bank's name be withheld said such scenes were commonplace. "You can see the crowds," he said. "It's not only here; the situation is the same all over Russia." In many banks, customers have to fill out application forms to withdraw dollars the next day. Otherwise, banks won't have enough money on hand to pay everyone. In the neighboring port of Nakhodka, the head of the credit department at Vneshtorgbank -- where the dollar was being sold at a rate of nine rubles -- expressed a wary calm Aug. 28. "Our bank is not facing bankruptcy," said Pavel Korovko. "The bank is out of the zone of risk, but certain difficulties have emerged." Korovko said Vneshtorgbank's Nakhodka branch, which specializes in overseas transactions, was shoring up Nakhodka and Vladivostok banks with hard currency. In Nakhodka, financial institutions were working together to cancel mutual debts and liabilities in an effort to avoid bankruptcy, he said. The Primorye branch of Moscow's Central Bank opened a telephone hot line Aug. 20 and has been fielding 10 to 15 inquiries a day, said press center head Olga Markova. Callers ask about price changes, dollar to ruble rates, and the security of deposit accounts. Amongst foreign companies with interests in Primorye, the reaction runs from alarm to a stiff-upper-lip, business-as-usual attitude. "We are afraid our buyers won't be able to repay us," said Lawrence Chia, regional director for Intraco Ltd., a Singapore-based company which sells cooking oil from Singapore, milk and cheese from Australia, and juice from South Africa to Far East buyers. Chia said Russian buyers pay a 10 to 20 percent advance on orders, then the full price when the order arrives in port. Chia said orders are still coming in, "but we're holding back," to avoid a lose-lose situation in which Intraco ships an order, only to have it idle in port with the buyer unable to pay. At the Washington State Trade Center, employees scrambled yesterday for updates on the financial crisis requested by their sponsor office in Seattle, Washington's Department of Community, Trade and Economic Development. "Everybody is interested and wants to know what is going on," said commercial manager Svetlana Mironova. "Companies are asking for advice." Mironova confirmed that prices of imported Washington state produce, including turkey, chicken, and beef, were on the rise, cutting down on their competitiveness. Responses vary, said Mironova. While one Russian client decided to hold off on purchase of construction materials, another pushed its American partner to speed up the transaction to cut losses as the ruble continues to fall. "The situation will stabilize," said Mironova. "It cannot go on forever." One Australian food importer will go ahead with a food exposition it is co-sponsoring in Vladivostok next month, despite the financial crisis. "Things are pretty bad here," admitted Peter Tarrant, Russian representative for Prestige Foods International, the subsidiary of International Foods Processing, active in the Far East since the beginning of the decade selling Australian meat, wine and dairy products to Far East buyers. Nobody's buying now, said Tarrant. But, he continued: "We put a lot into this market, we've lost a lot, and spent a lot. We'll stick it out." Tarrant said the crisis might even make his company more competitive by weeding out the smaller import-export companies who won't be able to ride out the financial storm. With regards to meat, one of Australia's main exports to the Far East, Primorye is too dependent on foreign meat to simply stop buying, he said, adding that 90 percent of meat consumed in Primorye is imported. "There's not enough local production," said Tarrant. "They are always going to require some imports." If prices of imported goods rise 30 or 40 percent, Primorians could look to cheaper, domestic products, even if the quality is not as good. But the anemic state of Primorye's production and manufacturing base will probably prevent local companies from taking advantage of the competitive edge. And federal and local officials are in no position to offer domestic producers tax breaks and subsidize local agricultural and manufacturing projects while the ruble continues to plunge and Russia's political future remains unresolved. Everyone agrees: Nothing can go forward without stabilization. And while many are greeting the return of Chernomyrdin to the post of prime minister as a step toward stabilization, foreign investors, repeatedly burned, and the long-suffering Russian people themselves may have a problem believing stabilization will indeed come to pass. "It's now a psychological problem going beyond the economic framework," said deputy chief of Primorye's finance department Zaitsev. "People have to trust that stabilization will come to pass." Russell Working added to this report.
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