Whatever the outcome of the present turmoil, analysts believe it will shift Russia, perhaps decisively, away from the global economic mainstream. After the virtual default on $40bn of foreign loans and the freefall devaluation of the currency, foreign investment is likely to dry up.
Yesterday, for the second successive day and as markets tumbled around the world, the central bank cancelled foreign currency trading and refused to fix an exchange rate for the rouble. Barring renewed international credits, this step is likely to be precursor of a formal decision to end the convertibility of the rouble. This will mean a step back towards late Soviet times - of a fixed rate for trade and other official transactions and a black market rate, more or less tolerated, for the rest.
In this way Russia would insulate itself from market storms. But by making its currency inconvertible, Russia would be in breach of a basic rule of the International Monetary Fund, and become ineligible for loans. The IMF therefore faces a dilemma. It and the Western community believe no more money should be lent until Moscow puts its house in order. But unless it makes more resources available, the Fund will bring about precisely what it was set up to prevent - and perhaps watch the world crash into recession.
The crisis is not entirely of Russia's making. Its misfortune is to be a supplier of commodities when commodity prices are plunging. The flip side of the record low petrol prices in the US of which President Clinton is so proud - down to barely 80 cents (50p) a gallon in some places - is a steep drop in the price of oil, Russia's main source of foreign exchange.
The West is sympathetic, but insists it will not help until the introduction of economic reforms, including an end to vast state subsidies of various sectors and the efficient collection of taxes to reduce a budget deficit that in practical terms is out of control. But this sort of change requires huge political will. Thus Russia's plight is as much political as economic. So what will happen ?
To rule out the most apocalyptic vision, military takeover is out of the question, given the present organisational disarray and dismal morale of the armed forces, and their long tradition of non-interference in politics. But some kind of political realignment seems inevitable.
Conceivably this could involve the departure of President Boris Yeltsin, precarious in health, and who has long since forfeited all confidence, at home and abroad alike, that he could impose effective government. His spokesmen yesterday again insisted he would not resign. "He is at his dacha but will be back at his desk at 9am tomorrow," an aide said last night. But the clamour could become overwhelming.
His weapon is rule by decrees. But these days, their writ mostly does not run beyond the Kremlin walls. For it to do so, a Russian President must have a Parliament which basically supports him.
A first sign of an emerging coalition emerging was the declared agreement yesterday between Alexander Lebed, former general and aspiring President, and the re-appointed Prime Minister Viktor Chernomyrdin on a way out of the crisis. But any deal credible in domestic terms would probably have to embrace the Communists, the largest party in the Duma.
Democratic purists would see this as consigning Russia anew to the dark ages. In fact such an outcome would probably be welcomed even in unlikely places. Who knows, mused Algirdas Saudargas, Foreign Minister of Lithuania which suffered 50 years of unwilling annexation by Soviet Communism, in London yesterday, "A few Communists in the Government could increase stability." Also to be factored into any guess about Russia's future is the capacity for suffering of its people. Anywhere else, a financial meltdown of current proportions would have led to a popular uprising. But under Communists and post-Communists alike, Russians have frequently experienced currency chaos.
The wiser ones this time will have put their savings into dollars. The rest will once more, almost certainly, put up with it. Perhaps at last they will be paid, even in devalued, inflation-eroded roubles. For the miners of Vorkuta, Kemerovo or the Don Basin, that is what matters- not the unlikely prospect of another $4bn from the IMF, that would vanish into the black hole of a crumbling banking system and to reimburse foreign lenders who arguably should have known better in the first place.
For the rest of the world, the long-term effects of this crisis should logically be small. The present contagion is mostly psychological, the impact on world markets out of all proportion to the size of Russia's economy and its marginal role in global trade. Only for its immediate neighbours is the risk of infection founded in the realities of trade and financial flows.
Those most at risk are the countries still economically yoked to Russia, like the Ukraine and Belarus, and other former Soviet Republics and some former members of the Warsaw Pact perceived, rightly or wrongly, as somehow "linked" economically with Moscow.
Take Lithuania for instance, enjoying 7 per cent growth and whose currency, the litas, is pegged to the dollar and 100 per cent backed by foreign currency reserves. None the less it conducts 25 per cent of its trade with Russia. And that may be a dangerous percentage, at a moment when Russia is proving the global capitalism Mr Clinton represents does not have all the answers.Reuse content