Monetary crises are usually symptomatic of deeper political crises of confidence. It is a mistake to examine them separately. Such is certainly the case with the latest Russian financial turmoil. The opposition Communist Party leader, Mr Gennady Zyuganov, found a good rhetorical peg to express this linkage when he said President Yeltsin himself "has been totally devalued" by the decision to float the rouble, after he had so stoutly denied this would happen, a mere three days before.
As one shrewd commentator puts it, Monday's decision was a typically Russian choice between the very bad and the catastrophic. In choosing the former option - a float within wide bands, along with a 90day moratorium on some foreign debt repayments and a planned restructuring of the domestic debt market - the government believes it has held on to its reserves and pleased some of its crucial domestic constituencies, such as the oil and gas exporters. That it has alienated others and jeopardised two of Mr Yeltsin's core achievements, low inflation and relative social peace, stores up real trouble to come. Yesterday's news that trade unions are demanding indexation of wages due, if necessary by a national strike in October, underlines this scenario. But the government's grave difficulties are pointed up in another piece of information - that nearly all of the first International Monetary Fund (IMF) financial tranche made available in the major agreement reached last month, was used to defend the rouble's value. The catastrophic option was identified in terms of propping up the rouble until reserves ran right out, when the currency would collapse, probably bringing the government and even the reforming regime with it.
Such is the pace of contemporary financial crises, that these unpalatable choices are forced on an unwilling and relatively inexperienced Russian government. It seems to have assumed, probably accurately, that further international aid has been exhausted. But it should have been possible to have agreed rescheduling of domestic and international debt more skillfully and with less impact on Russia's overall financial credibility. It is also worrying that such a crisis should creep up, apparently catching international financial authorities unaware. After the Asian bailouts, the International Monetary Fund does not have the money available to underwrite another rescue bid, even if it deemed that to be the appropriate response. The US Congress has held up refinancing its share of the funding - and its political antennae have been focused determinedly inward in recent days. Russia's financial problems are largely of its own making. But in such an interconnected world, they have been made much worse by the lack of confidence elsewhere, notably in Asia. Were its reformist project to fail in a round of social conflict and political disintegration, the rest of Europe would be drawn in rapidly, raising deep security issues for all concerned.