While the new arms race between India and Pakistan may have concentrated the minds of western policy makers, the possible consequences of an unresolved economic crisis in Russia may have more far-reaching consequences for international stability. The most significant if not the only important achievement of the successive Russian administrations under president Yeltsin has been the stabilisation of the rouble. Now, for a variety of reasons, Russia's economy has reached crisis point. Most immediate among these has been the knock-on effect of the Asian financial convulsion which, allied to a drop in world oil prices and the herd instinct of international investors, have left Russia's currency open to attacks by speculators.
It should be said, however, that other internal factors have contributed to the current state of economic emergency. The Russian government owes its workers vast sums in unpaid salaries. It has been unable to pay these debts because of its failure to collect sufficient tax revenues. Present Yeltsin, in an effort to impress outside investors, has declared a virtual war on tax evaders and Russian television nightly shows pictures of armed tax police raiding the premises of small businesses to close them down for defaulting on payments of tax.
The new campaign of fiscal stringency, however, carries all the signs of a cosmetic operation. There have been no tax raids, for example, on the huge cartels which have emerged since the collapse of communism and which control much of Russia's economy. Punishing small businesses at the expense of vast pro-government conglomerates may, in the long term, be of great detriment of Russia's fragile market economy.
In the meantime, however, any damage to the rouble's stability could engender disastrous consequences. A return to the hyper-inflation of 1992 could undermine the country's brittle political balance. Mr Yeltsin has deliberately set himself up as the only alternative to communist power and in doing so has deliberately set up the Communist Party as the only alternative to his personal rule.
Further uncertainty, greater financial difficulties, a continuation of the payments crisis and, more importantly, a collapse of the rouble could bring about the conditions for further gains by the communists in the Duma elections of 1999 and by nationalists, such as Gen Alexander Lebed, in the presidential elections of 2000. Western financial intervention to support Russia's currency appears to be the only short-term solution to the problem. Those who do consent to contribute to resolving the current crisis should, however, use their financial clout to ensure that aid for the economy does not end up supporting the unscrupulously corrupt oligarchy which has its hands perilously close to the levers of Russian power.