This successor as president next year. The disastrous war in Chechnya has now been followed by a war in Dagestan where a rebel army is demanding independence. It is led by Shamil Basayev - a general who caused them great problem in Chechnya. The situation is now developing into a full scale war and is soaking up resources the Russian government simply doesn't have. To avoid the demoralisation which arose from the Chechnya war, the army is using only volunteers, paid at enhanced rates. But, like Chechnya, this may also be a war Russia is unable to win outright, despite its military superiority. There is speculation, however, that Putin may have an answer to some of these problems, at least the elections and the corruption -a state of emergency. This could be called over the crisis in Dagestan. It could be kept in force for some time and used to postpone the elections until Yelsin judged that he would be better placed to get a supporter in office.
Whatever happens in these political shenanigans the poverty-stricken and precarious state of the Russian economy will continue. All contenders for government and presidency - includthe Communist Party opposition - are committed to marketisation and reform. The only thing which divides them is how to attempt to implement it. It is not difficult to see that the new Fatherland Movement has little to offer. They announced that their top priority, should they be elected, is to ensure that Russia has a new flag! "Without such a new symbol," they said, it will be impossible to get the economy right". Meanwhile the problems of the economy are of staggering proportions. Information emerging from the an investigation by international law authorities in New York have shed some light on the scale of the activities of the Russian mafia and the extent to which they are integrated into business and banking at every level.
Some mafia bosses now own banks, and are therefore able to integrate their mafia with "legitimate business" in a much more complete way The sums of money controlled by the mafia are huge. Investigators in New York claim, for example, that Semyon Mogilevich, a 53 year old "business man" under investigation laundered $10bn though New York bank accounts - a sum of money equivalent to 40% of the Russian government's annual budget - or 6% of Russia's GDP!
Huge sums of money destined for foreign investment are also routinely laundered through the city of London and Swiss banks. It is something currently under investigation in both the City of Was this what they meant by "market reforms"? London and Zurich. It is not a new problem, of course. Russia's new gangster capitalists can get a far better return for their ill-gotten gains than investing in Russia itself. It has been estimated by Fitch IBCA that $136bn dollars of capital poured out of Russia between 1993 and 1998. This sum far exceeded the total capital inflows into the Russian economy during the same period.
It is clear that whoever wins the presidential elections will need a lot more than a new flag to reintroduce capitalism into Russia and make it work.
Meanwhile the abject poverty and subsistence Prence imposed on the vast majority of the population by these processes will not only continue, but could rapidly worsen if the investment bubble on the US stock exchange were to burst.