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Crisis Hurting Russia’s New Rich

September 3, 1998

MOSCOW (AP) _ The glitzy shops in the Manezh shopping center that used to sell $400 shirts, diamonds, rare wines and other luxuries to Russia’s new wealthy elite are empty.

These days, bored shop assistants stare at the empty corridors. Some shops have closed temporarily ``for technical reasons.″

``Nobody buys anything,″ says Veronika, a saleswoman at a posh clothes boutique.

The new rich were the first to benefit from Russia’s post-Soviet economic reforms, amassing wealth, property and businesses. Now they are among the first to feel the country’s financial and political turmoil as the currency drops sharply and the stock market collapses.

Poor Russians, who have struggled to make ends meet for years, have little to lose.

However, the wealthy are watching their world crumble. Their stores are closing, the banks they keep their money in are failing and they are being cut off by their business partners abroad.

Nobody knows how many people in Russia are wealthy. In a country where avoiding taxes is a national obsession and fear of crime is pervasive, the rich enjoy their wealth behind closed doors. But thousands of Russians, perhaps tens of thousands, have made large fortunes in recent years.

Although many rich Russians have investments and property abroad, they also have Russian assets that are becoming less valuable. Many are suffering major, even irreparable losses as the economy unravels.

``I did not lose money in cash, see,″ said Arthur Zaslavsky. ``My money is invested in apartments,″

The 35-year-old businessman invested his fortune in real estate, betting that prices would rise. Now he faces owning empty apartments that are worth a fraction of what he paid for them.

Full of glossy cafes, chic shops, glass elevators and marble balustrades, the newly built Manezh in Moscow was meant to be a showcase of the new Russia and its wealthy elite.

But it is quiet now. A few Muscovites fleeing an early autumn rain duck inside, but they barely glance at the shop windows filled with $2,000 suits and dresses.

The fallout also is starting to hit Russia’s small but important middle class.

The crisis is squeezing many small- and medium-sized private companies, once touted as proof that Russia’s economic reforms were working. The companies are owned by the middle class and employ many middle-class people, including managers, accountants and lawyers.

Russia runs on cash. There are no checking accounts, and mortgages are almost unheard of. Many Russians keep their savings at home.

Tatyana Kovalyova, office manager of a large company that imports automobile accessories and building materials, has desperately tried to squeeze some cash out of banks that are nearly paralyzed. The employees’ salaries and her own $1,200 monthly pay, about 10 times the average Russian wage, depend on it.

The company lost $20,000 on one deal because it was paid after the ruble had collapsed, and the currency’s drop wiped out its profit.

The firm has no funds to make payments to foreign suppliers, Kovalyova said.

``For the first time, nobody really understands a thing. I’ve not seen anything like this,″ she said. ``We went to some parliament people, asking what will happen. They don’t know. We went to our banker. He doesn’t know.″

Feeling that things are hopeless, some wealthy Russians just want to have a good time, spending money in casinos while they still have it.

Employees at a popular Moscow casino say the crisis has driven more people to their club, even though the entrance fee has almost doubled to $45.

Stacks of $2 chips tower in front of the players. Somebody loses and changes another $100 chip.

Two girls in black mini dresses leave, one complaining loudly that the place was ``full of those amateurs.″

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