Within hours of agreeing an emergency food aid package with Russia the United States attacked Moscow's retreat from free-market economics and bluntly warned that financial decline could lead to "political drift, turmoil and even crack-up" in the world's second nuclear power.
The comments of the US Deputy Secretary of State, Mr Strobe Talbott, in a speech at Stanford University in California, were the starkest public criticism by the US of Moscow's handling of economic and foreign policy in recent months and reflected Washington's deepening concern. A copy of the text was released by the State Department. He also said US-backed financial help from the IMF "must wait until the Russian government shows itself willing and able to make the difficult structural adjustments necessary for recovery and growth."
Under a deal announced yesterday the US is to supply Russia with more than three million tonnes of emergency food aid to help the poverty-stricken country through the winter after the worst harvest for 40 years.
The deal, which includes a gift of 1.5 million tonnes of flour-quality wheat, was signed last night after several days of difficult talks between Russian and US negotiators in Moscow. The American side, suspicious of abuse of previous loans, had demanded strict conditions on distribution of the aid.
Mr Talbott, the Clinton administration's point man on Russia, Russia scholar and former journalist, said that less than a year ago, Russia seemed poised for "economic takeoff" but now faced a crisis that was "largely though not wholly self-inflicted".
Hence, it is a question whether Russia, once on the move toward democratic capitalism, has "shifted course, heading at breakneck speed back to the future or over the precipice."
"Economic decline carries with it the danger of political drift, turmoil and even crack-up," Mr Talbott warned.
Efforts by the government of the new Prime Minister, Mr Yevgeny Primakov, to find ways to pay wages and pensions and revive the industrial sector were indispensable goals, he said.
"Our concern is that, in trying to reach those goals, the Primakov team is prepared to abandon a stable currency, a viable exchange rate and a sound monetary policy." "It is operating with neither a realistic budget nor a credible system for collecting taxes. That means Russia is at the mercy of the printing press, cranking out roubles to meet payrolls and keep bankrupt enterprises afloat."
As well as the free wheat, another 100,000 tonnes of food will be supplied, and a cheap 20-year loan of $600 million will be offered to buy more.
There were two more pieces of good news for Russia yesterday: Japan said it intended to go ahead with an $800 million loan, its part of a $22.6 million package marshalled by the IMF and others; and Russia reached a compensation agreement with western creditors over its decision to pop the bubble of its wild bond market.