The Destruction of the Ruble
The next step in the rape of Russia for Washington and the secret CIA Operation Hammer was to create hyperinflation and ruin the ruble currency—state default.
By 1998, the casino of short-term debt in the state GKO bond market, at times paying interest of up to 290 percent or more, was reeling out of control. Billions of speculative hot dollars were pouring in from foreign hedge funds and other speculators. The improbable yields on three-month paper on the Russian market’s GKO bonds were paid with US taxpayers’ money via IMF loans.
By yielding those kinds of ultra-high returns, the bond market ensured that all the country’s resources and all it was capable of attracting went to the support of the state, the state apparatus then controlled by Yeltsin’s tight-knit mafia around Chubais and Gaidar.
It also insured that the giant Ponzi scheme would soon topple. It did, triggered by an August 1998 op-ed in the influential London Financial Times by the US hedge-fund billionaire and Russian oligarch insider George Soros. By the time of the ruble crisis of August 1998, Russian industrial output had fallen by almost half and poverty had increased from 2 percent of the population to over 40 percent. Until August 1998, the ruble was overvalued, making it impossible for domestic producers to compete with imports.
The IMF did not want Russia to devalue, and it provided billions of dollars to prop up the exchange rate. That was to no avail, however. The devaluation was forced deliberately, part of the Operation Hammer agenda to destroy Russia.
On pressure from the Clinton Treasury, especially from Deputy Secretary Larry Summers, the IMF made a $22.6 billion Russian bailout to save the financial assets of their bankers and oligarchs, not to save the ruble. With the IMF money in the pipeline, Soros wrote a prominent guest article in the London Financial Times where he stated, “The meltdown in Russian financial markets . . . has reached terminal phase. Bankers and brokers who had borrowed against securities could not meet margin calls and forced selling swamped both the stock and bond markets.”
Given Soros’s financial market reputation as an uncanny and unusually well-informed trader, Western investors led a panic exit from ruble GKO bonds and Russian stock shares. Trading on the Russian stock market was suspended amid growing fears of debt default, devaluation of the ruble, banking collapses, or a combination of all three.
Then on August 18 Prime Minister Sergey Kiriyenko and the Russian Central Bank jointly announced a devaluation of the ruble, a suspension of trading in government GKOs, and a ninety-day moratorium on the repayment of ruble-denominated foreign debt. Short-term debt due by the year end was $20 billion, with $6.5 billion owed to foreigners. Foreign reserves totaled a mere $17.5 billion and were vanishing at the rate of $1 billion a week to try to support the ruble–dollar peg. That signaled the end of shock therapy and the Harvard Boys but the beginning of a dramatic change in fortunes of certain oligarchs.