Russians told there is no alternative: Helen Womack in Moscow on the plummeting rouble

RUSSIA'S new Prime Minister, Viktor Chernomyrdin, shocked conservatives in parliament last week by giving an uncompromisingly monetarist speech.

As the ex-Communist deputies, who were hoping to hear him announce plans for increased state spending, gasped in disbelief and disappointment, he declared: 'We cannot spend money that we do not have. The state of our economy leaves us little room for manoeuvre.' It was a speech that could have been made by Yegor Gaidar, the architect of Russia's free market experiment, who was ousted under pressure from conservatives last December.

Mr Chernomyrdin, a former oil industry bureaucrat, gave the impression when taking over that he intended to satisfy Congress by increasing support to ailing industry and beefing up social welfare. His first act was to release millions of roubles from state coffers for the oil industry. And he followed this up with a decree restoring price control, although he later had to rescind it.

So what happened to convert the apparatchik to market reforms? Perhaps he learnt some quick lessons from the rest of his cabinet, almost all young economists who had served Mr Gaidar and who President Boris Yeltsin insisted must stay on to keep reforms on track. More likely, he sobered up when he saw January's inflation figures and realised he had his back to the wall. All he could do was fight to prevent inflation of 50 per cent a month from turning into hyperinflation, and to attack the budget deficit, projected to rise this year to 3.5 trillion roubles (dollars 6.1bn).

Russians already know all about inflation, which has been gathering strength over the past year and threatens to create a platform for fascism, as in pre-war Germany. Millions are living on, or not much above, the official minimum wage of 2,250 roubles (just over dollars 4) a month. It is a struggle for survival: a piece of cheese now costs 600 roubles and a loaf of bread 20 roubles.

At first, inflation rose quite slowly as Mr Gaidar, having freed prices in January 1991, kept a tight rein on state spending. But control was lost in the summer when the Central Bank, which answers to parliament, brought back its old head, Viktor Gerashchenko. When he saw the danger of mass unemployment looming, his response was to issue large credits to lame-duck state industries. From then on, there was nothing to stop inflation, which reached a level of 2,200 per cent for 1992.

Now it is rising at 10 per cent a week and lapping at the threshold of hyperinflation, beyond which, experts say, complete anarchy overcomes the economy. As a hedge against inflation, Russians are desperate for US dollars, and the rouble-dollar exchange rate speaks volumes. Before reform, the rouble was worth dollars 1.67 officially, though less on the more realistic black market. Last August, it was 163 to the dollar, but last week it crashed through the psychological barrier of 500 to the dollar, reaching 572 at Moscow's Interbank Currency Exchange and 650 on the street. It steadied only after Mr Chernomyrdin promised to strengthen the local currency, but without resorting to the artificial exchange rates favoured by the Communists.

One effect (and cause) of the economic nightmare has been a catastrophic flight of capital from Russia. According to Security Ministry estimates, the outflow last year was as much as dollars 26bn: dollars 8bn more than the West sent to help Russia build capitalism. Cyprus and the Bahamas are reported to be popular 'offshore' places for Russian businessmen with illegal funds, and members of the mafia - who easily evade the government's inefficient tax collecters and are conspicuous on the streets of Moscow in new Mercedes and BMW cars - are said to be building villas for themselves abroad. At the same time, leading democratic politicians have discredited themselves by taking bribes from shady entrepreneurs.

Not surprisingly, resentment and disillusionment are growing, playing into the hands of the hardliners whose power struggle with Mr Yeltsin is not yet over. In April, Russians are to vote in a referendum on a new constitution, and that vote will come down, one way or another, to a choice between empowering either the President or the deputies in a Congress created in the Soviet era. Also coming up soon are elections for Moscow mayor, in which at least two openly fascist politicians will be standing.

Opinion polls show that Mr Yeltsin still enjoys more popular trust than any other politician, but the kind of active enthusiasm needed to get people to go out to vote for him is tailing off, compared with the heady days after he defeated the hardline coup attempt in August 1991. People such as Nina, a cleaner, were enamoured of Mr Yeltsin then, but her verdict last week was: 'Russia's in a right mess, and Yeltsin is doing nothing except travelling abroad. I'm not one of those people who say we need a new Stalin, but I won't be bothering to vote in the referendum.'

A few million more like Nina, surrendering to apathy, could open the way for those who argue that what Russia needs is a good dictatorship. But even a dictator would not be in power long before being struck by the economic reality that faced Mr Gaidar and now faces Mr Chernomyrdin: Russia is bankrupt.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Health and Social Care NVQ Assessor

£17000 - £23000 per annum: Recruitment Genius: It is also essential that you p...

Recruitment Genius: Service / Installation Engineer - South East England

£25000 - £30000 per annum: Recruitment Genius: The successful Service Engineer...

Recruitment Genius: ICT Infrastructure Manager

£27000 - £30000 per annum: Recruitment Genius: This Edinburgh city centre scho...

Recruitment Genius: Massage Therapist / Sports Therapist / Physio / Osteopath

£12000 - £24000 per annum: Recruitment Genius: An opportunity has arisen for o...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most