Russians Mutter as Moscow Bans Sales in Hard Currencies

GRUMBLING, confusion, and disbelief reigned in many businesses throughout the Russian capital after a Central Bank decree went into effect on Jan. 1 banning all cash sales for dollars and other convertible currencies.

The new decree making the ruble Russia's only legal tender is designed to stabilize Russia's financial system, bolster the increasingly worthless ruble, and deal a blow to organized crime, according to banking officials.

Before perestroika, only exclusive stores restricted to foreigners and requiring identification to enter were allowed to sell goods for Western currencies. But in the past few years, both Russian and foreign-owned stores have been allowed to accept other currencies.

Under the new regulations, stores licensed to trade in hard currency will only be allowed to accept noncash forms of hard currency payment, such as credit and debit cards. Foreign airlines representatives and duty-free shops will be allowed to accept dollars and other currencies.

Although the decree was announced last October, few people actually believed it would ever become law.

``The new rules weren't completely unexpected. We were aware of them, but we simply didn't believe they'd ever be put into action,'' says Oksana Slugina, a spokeswoman for central Moscow's Irish House Garden Ring, a Western-style grocery store that sells imported food products.

Ms. Slugina says several customers unaware of the decree stomped out of the store in anger after their purchases had already been rung up at the cash register and they realized they did not have the rubles to pay for them.

Other businesses, such as the Metropol Hotel, posted notices on doors or inside menus to inform customers in advance.

``It's a stupid law. I can't see any justification for it,'' Slugina says, adding that the store, like many others, has plans to install an exchange office on its premises.

The stable dollar

Kiosks that have mushroomed throughout Moscow were still accepting dollars over the weekend. But kiosk employees say they were pocketing the dollars and replenishing the cash boxes with their own rubles.

Russia was one of the few countries in the world where foreign currencies were accepted as freely as the national one. But the ruble has taken a beating since the 1991 Soviet collapse, and many people prefer the stable dollar.

At the beginning of 1993, one United States dollar was worth 570 rubles. Today, one dollar is worth about 1,270 rubles.

The vast majority of Russians have no access to dollars. But in Moscow and other big cities, many Russians are employed by Western firms or joint ventures and receive either partial or full salaries in hard currency, a practice that will continue under the new regulations. But it is hoped that the new regulations may increase demand for rubles and keep the ruble rate firm. The Central Bank also plans to tighten import/export and customs regulations.

Prices at stores that used to accept hard currency will now be slightly higher for cash customers, as ruble prices will be calculated at unfavorable exchange rates to make up for the losses sustained by doing ruble transactions. For example, Slugina said the Garden Ring will now calculate the ruble rate at 1,350 rubles to the dollar, 80 rubles higher than the current ruble rate set by commercial banks.

Ruble prices will be regulated by the Central Bank, which has stipulated that stores be forbidden from setting exchange rates higher than the rate used by their bank. Traditionally, banks sell dollars at a rate up to 10 percent higher than that rate at which they purchase them.

Hard currency stores were recently forced to accept rubles as payment along with Western currencies. But they used high exchange rates to calculate ruble prices to discourage customers from paying in rubles.

`What is the point?'

``Prices in the stores were already exorbitant. What is the point of this anyway? To keep Russians out?'' asks American Sarah Wieben, a history teacher at a Russian school who has lived in Moscow almost five years.

Yevgeny Ivanov, head of the Central Bank's hard currency control department, told the Moscow Times daily that the new regulations were also designed to fight organized crime. ``The measure may not do much in terms of strengthening the ruble,'' he said, ``but it will certainly make money laundering more complicated for illegal businesses.''