"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. "They asked the G7 and the IMF for more help, were turned down and decided to go it alone."