The Association of Russian Banks, uniting the country’s bankers, declared the action illegal and said it already cost the banks 70 billion dollars. One can be sure that most of this money will be taken from the accounts of individual investors. Right now the accounts of tens of millions of people are frozen. People have a choice either to transfer their money to Sberbank and get their dollars in rubles in November, at the exchange rate on September 1, or to extend their accounts for 3years, in the hope of getting their money in full in small portions every year or two. This is a bad choice because no one knows what the exchange rate will be in November. People are afraid to lose their money because of inflation the way they did in 1992.

People have a good reason to worry. Vladimir Vinogradov, the president of Inkombank and head of Moscow’s banking community, said that in order to save the country’s financial system 40-50 billion new rubles will have to be printed. Everyone understands that this will cause inflation which will further decrease the population’s trust in the country’s shattered financial institutions.

In January 1991, there was a money reform, when 100 rouble bills were suddenly declared invalid. The number of bills exchanged were again limited and people had to explain where they received their money. The presiding Soviet minister Valentin Pavlov confided that most of the bills were exchanged later but that it was just a “loan that we took from the population for several months.” This reform angered many people even though experts say it did not achieve its aim of cutting the amount of money in circulation. What it accomplished was that it damaged people’s savings.

In 1992, the liberal government of Yegor Gaidar watered down the savings of the country’s only savings bank Sberbank by dissolving price subsidies on goods of “mass consumption” and delaying the payment of wages and pensions. This was the second large-scale reform and so far the most painful one. Most of the people failed to protect their savings on time because there were limitations placed on the amount of cash they could withdraw. According to Gaidar, this step was necessary to stabilize the country’s financial system.

Whatever his intentions really were, his reform destroyed the savings of 70 million people amounting to $250 billion old Soviet rubles. This figure was highlighted in Russia’s Constitutional Court proceedings which reviewed the legality of this reform. It is hard to determine the actual amount lost in dollars. Since the official exchange rate was 1.6 rubles for one dollar and the black market exchange rate was 20 rubles for one dollar, it should be somewhere between $156 billion and $12.5 billion dollars respectively. Only people born before the year 1920 were compensated by the state.

Professor of economics Nikolai Petrakov, Gorbachev’s economic adviser, said the move was a huge confiscation. “The investors’ money was not burnt up but set in operation with 40-50 and then 150-200 percent interest,” he stated. “Meanwhile the investors would get back a meager 2-3 percent return.

In August 1993, the old Soviet banknotes were again exchanged for new Russian ones in a very limited period of time. This move helped the Russian government “shake off” the rubles that were kept by people in the former Soviet republics. Once again it destroyed the savings of the poor “former Soviet” people, especially ethnic Russians living outside Russia. Now, because of the government’s refusal to service its obligations people cannot get their money back again. Even the state supported savings giant Sberbank refuses to return the client’s dollar deposits. SBS-Agro, Inkobank and MOST-Bank amassing about 15 percent of individual savings deposits will not return clients money in dollars or rubles.

Every time that the state has needed money, the people have to pay through their savings. The wage and pension arrears were also confiscated because inflation decreased the value of the delayed wages and pensions. Up until recently, wage and pension accounts were a “sacred cow” that could not be touched. Now even these bank accounts are confiscated. How can anyone speak about the kind of trust that is needed in Russia’s financial system after these actions. Meanwhile Russia’s bankers acknowledge that the West is very reluctant to invest or lend money. Therefore, individual clients remain their only source of sustenance.

“Now that the foreign banks are not going to give us anything, we have to rely on our own population, as poor as it is,” stated Natalya Rayevskaya, the chairman of Avtobank’s board of directors. People still hold up to 40 billion dollars in cash in their homes and if that money could be used for investment, it could still set the economy on gear even without foreign investment. But after all the deceptions there is absolutely no more trust. Vitali Naishul, a well-known economist and strategist of Alexander Lebed’s economic program during the 1996 presidential elections, believes that “the state’s inability to fulfill its obligations to its people are the main problem of the Russian economy.” He estimates that the total amount of the state’s debt to the people is roughly 300 billion dollars. The aim should be not to increase that amount too much.

It should be noted that the Communist’s opposition to the confiscation of people’s savings has been mostly very cynical and populist. Despite all their dramatic rhetoric about the “antinational regime that robbed the country” the Communist dominated Duma failed to pass a law which would have given state guarantees for private bank accounts and set rules concerning banks' bankruptcy.

Therefore, today there is no mechanism in place of selling a bankrupt bank’s assets for compensation of its client’s losses. The responsibility for this lies directly on the Communists in the Duma.

The pseudo-democratic perpetrators of the banking confiscations should not remain unpunished. When the West decides whom to support politically in Russia, it must take into account all of these facts and avoid supporting the people who were involved in these confiscations. Yegor Gaidar’s low ratings and electoral defeats resulted from his role in the 1992 reforms. Yeltsin will not be forgiven for the confiscations of 1992 and 1998 either. There will no longer be talk of his possible run for presidency in the year 2000. So Russian democrats and their friends in the West must search for other candidates with reputations that have not been tarnished by the current banking scandal.