View from City Road: Investing in Russia is a heavy gamble

The market has given a heavy thumbs-down to Boris Yeltsin's government following the resignation of Yegor Gaidar, the architect of economic reforms. Now the talk in Moscow is of higher subsidies and budget deficits, renewed hyperinflation and slowing production.

The rouble yesterday plunged 150 to 1,650 to the dollar and a leading reformist official warned that the exchange rate would fall to 2,000 and hit 10,000 by summer.

With the probable departure of Boris Fydorov, the finance minister, in the next few days, the key reformers will be out of government. The question for Western business is simple: is it worth hanging on any longer?

The painful reforms had brought declining inflation, but if these real successes are frittered away, the political cost of returning the economy to stability could be too high. Even privatisation, so far the most successful reform, is a questionable achievement. Much of it is a simple transfer of ownership to the collective bosses from the state.

Only in comparison with Africa and parts of the Middle East and Asia is investing in Russia still an acceptable gamble.