Will it stay up, or will it plummet before the Americans come to the rescue? Either way progress is bound to be erratic and reveal poor fundamentals.
We are talking, of course, about the Russian economy. And also, of course, about the Russian space station Mir. In both cases the West should help, but also encourage more fundamental changes to put the Russian economy and its space program on a more secure footing.
The space effort is a much easier proposition than the terrestrial one. Whether Russian President Boris Yeltsin can be brought down to financial earth is more questionable than whether the NASA mission succeeds. It now seems likely that the shuttle Discovery off today Australian time on NASA’s ninth and final shuttle hookup with Mir to bring home Australian Andrew Thomas, the last NASA astronaut to live on the aging Russian outpost.
Meanwhile back on earth, the Russian stock market has fallen by 10 per cent after batterings earlier in the week. It has lost 44 per cent of its value in the past month. The financial problems — caused by the Asian crisis, lower commodity prices and coal strikes — could trigger political instability.
So help is needed. The United States said after the Russian markets closed that it was working with other Group of Seven (G7) top industrial nations on providing financial aid. US State Department spokesman James Rubin confirmed that the G7 countries — the United States, Italy, France, Germany, Japan, Britain and Canada — were working on an aid package in addition to $US9.2 billion ($A15.04 billion) International Monetary Fund credit, the latest delayed $US670 million ($A1.095 billion) tranche of which is expected to be released this month.
In light of this, Russian Prime Minster Sergei Kiriyenko is optimistic, saying the situation on financial markets is under control and that there will be no devaluation of the rouble. It is difficult to see that his optimism is well-placed given that official interest rates are at 150 percent, boosted mainly as an attempt to keep money in the country. The trouble is that the interest-rate lever affects other parts of the economy and social fabric.
Stability is the currency is critical to avoid unrest. Hyper-inflation and a failure of the government to pays its wage debts make a recipe for revolt.
Russia is still struggling with the effects of revolutionary change. The dramatic political changes of 1989 — greater democracy and freedom of speech and movement — were very welcome. Unfortunately, the ethos of a liberal democratic state is not built overnight. The black market flourished. People and companies did not pay their taxes and the Government is now not is a position to pay its debts. Once again, it could result in social and political instability because much of the government debt is owed to workers in what is left of state industry.
The rescue must come from two directions. Internally, Russian companies, which have become rich through privatisations must do more to pay their taxes, if only in self-interest to keep the Russian economy going. Externally, the IMF should end the delay in its latest tranche of aid.
The external help is appropriate now because Russian leaders have shown resolve in tackling their own problems. Mr Yeltsin has replaced his tax chief as a first step to rein in back taxes and reform the tax system so that taxes are lower but more rigorously enforced. And Mr Kiriyenko has moved to cut government spending by ordering a 30 per cent cut in cabinet personnel.
The new tax chief, Boris Fyodorov, has said Russia has enough cash reserves to protect the rouble against devaluation, but that is a very optimistic view. Without additional help from the IMF, investors are likely to get unnerved caused further market stresses, falls in government revenue and more delays in paying government workers who could easily to loose their patience. It would make Mir seem quite stable.