Russia: A superpower falls apart
It finally happened. After lurching from crisis to crisis - muddling through with partial reforms and quick fixes - Russia has finally crashed out of orbit. So who is to blame? Ronan Lyons looks at the key actors in the drama. Who are the seven oligarchs and were they behind the decision to devalue? What was really happening in the governments of Chernomyrdin and Kiriyenko? And what was the role of the IMF and western investors?
"Russia," commented financier George Soros last year, "is like a canoe in which seven men are fighting over a hoard of gold. They are too absorbed by this to recognize that they are heading towards a waterfall." He was referring to what the Russian media often call the semibankirshchina or rule of the seven bankers, harking back to the semiboyarshchina - the brutal reign of Russia's aristocratic officials and landowners during the 17th century.
Unlike Asia's financial crisis, which followed decades of growth and vast infrastructural investment, Russia entered its crisis on the heels of a decade-long collapse, capital flight running into hundreds of billions of dollars and the kind of mass poverty not seen since the 1940s. Industrial production, according to one estimate, has dropped since 1991 by 80%, capital investment by nearly 90%.
By the time prime minister Sergei Kiriyenko announced a devaluation and default on August 17, the economy was already on its knees. "They were losing $2 billion a week in reserves," says Richard Gray, head of emerging markets research at Bank of America.