Crash? What crash?

YOU ARE sitting at your kitchen table enjoying a mid-morning coffee, smug in the knowledge that that the roof over your head, though not exactly yours, is at least no longer painfully expensive. The mortgage is ticking over nicely. The credit card bills plop on the doormat withoutmaking you feel sick. You have even got used to paying the instalments on the new Ford. Threatening letters from the bank have been replaced by brochures suggesting cruises in Mexico, or golfing holidays in Portugal.

Then you switch on the news. In suitably sombre tones, the BBC announcer reveals that the stock market is melting down, the pound is wobbling, and that interest rates are going up. Really going up. Up, in fact, by a mind-numbing three times, to 150 per cent. You are appalled, confused and frightened. It would be like Black Wednesday, when Britain was forced out of the European exchange rate mechanism, but much, much worse. As the crisis took hold, there would be pandemonium. Everyone involved - from the prime minister and the Bank of England to the press - would be targets for fury, blame, scapegoating.

But the reaction in Moscow last week - outside the small finance markets and the realms of the political, business and media elite - was one of astonishing indifference. I stood with Yelena, a housekeeper who earns $450 a month, as she listened to the explanation of events on the television news. "What difference does all this make to me?" she asked, anxious for a moment. Then, after concluding that while the rouble holds up against the dollar the answer was not much, she shrugged and changed the subject.

If the rouble survives unscathed (and that remains a serious "if"), most of Russia's 147 million population will be insulated from the immediate effects of the current fiscal turmoil, a dose of high fever incubated in Asia but intensified by low oil prices, labour unrest, nervousness about the new Russian government, low tax revenues, and general concern about the condition of the economy.

IN THE short term, the population's poverty has proved to be its strength; credit - from mortgages to car loans - is still the exception here rather than the rule, let alone private pensions and portfolios. Russians would far rather borrow money from a friend than a bank - and commonly do so, without embarrassment - just as they would sooner keep their money in dollars under the mattress (or salt it away abroad) than place it in a domestic account.

Bankers command about as much trust as a Sicilian with a violin case; mafias abound in the perilously rickety banking system. Even for those with a few spare roubles, the highly publicised collapse of post-Soviet investment funds and the failure of privatisation voucher schemes has deepened public distrust and cynicism.

For most Russians, cash itself plays a less central role in the struggle to survive than in the West, not least because there is not much of it around. Stories abound of workers being paid with goods, from bicycles and cooking pots to loo rolls, by cash-strapped employers. Housing, energy and transport costs are (if paid at all) still heavily subsidised. Nine out of 10 Russians do not own a car. Even basic consumer goods, like toothpaste or shoe polish, are still regarded by many as a luxury. Some estimates say that the population only buys a little over half its food from retail outlets; the rest is grown on countryside allotments and eaten or bartered.

Thus, it becomes possible to subsist - albeit at a minimum level and on a diet of potatoes and cabbage - on measly wages. Thus, millions of coal miners, teachers, soldiers, pensioners, scientists and others manage to survive despite delays in their pay packets of up to a year. And thus, the question of interest rates, stocks and bonds seems about as remote from the hard realities of daily life as the chatter in a Hollywood beauty salon.

Yet what happened in Moscow last week was none the less momentous, a fiscal tornado which threatened to wipe out the progress made towards converting a centralised Soviet system into a market economy, and shook the foundations of the government of the young new prime minister, Sergei Kiriyenko.

The boil burst on Wednesday. The stock and bond markets, in a state of high jitters for weeks, went into fully-fledged panic. The Moscow Times Index of 50 leading shares slid almost 12 per cent in one day, the steepest fall in a month which has seen share values collapse by 40 per cent. There was mayhem on the bond market, with buyers demanding yields of more than 80 per cent.

Maintaining the rouble is a lynchpin of Russian policy - and one of its few solid economic successes - but now it was teetering on the verge of collapse. To stop wild selling and an exodus from roubles into dollars, the government tripled interest rates to 150 per cent. In doing so it increased the burden of its own debt, restricting the amount of money it has to spend on a needy, clamouring public.

Never mind that the budget deficit has improved (4.6 per cent of GDP in the first quarter of this year, down from 9.0 per cent of GDP in last year's first quarter) and that tax collection, though poor, has edged up. A crisis had set in. The government revealed that it has spent $1.5bn over the last month from its dwindling $14.5bn reserves (down now by nearly $10bn) to defend the currency. Brokerage houses fired off a letter to Mr Kiriyenko, imploring him to ask the international community for a stabilisation fund. Boris Yeltsin got on to the blower to Bill Clinton and his old shooting chum, Helmut Kohl, asking for "moral support". His former top economics adviser, Anatoly Chubais - sacked in March - flew to Washington for talks with the US government and the International Monetary Fund.

All the players will have been acutely aware of the potential disaster that loomed: were the rouble to collapse, wiping out already fragile confidence in the currency, Russia would return to the multiple-digit inflation that followed the immediate aftermath of the Soviet Union. Imports - which comprise half of consumer goods - would rocket in price, hitting ordinary Russians in the pocket the moment they ventured to the shops.

The likelihood of serious labour protests - which have worsened recently with a rail blockade by unpaid miners - and social unrest would increase considerably. So, too, would political pressure on Boris Yeltsin to reverse the reform process. The demise of the 35-year-old Mr Kiriyenko - who, though only in office for a month, has won western admiration for his determined market beliefs and cool head - would be a near certainty.

Russia, with its monstrous arsenal of nuclear weapons and restless crumbling army, could become significantly less stable. It was a perilous moment, even by the standards of a country that has seen its president bombard the legislature, lost a devastating war against a tiny republic, suffered a precipitous fall in GDP, and a leader who has suffered several heart attacks - all in the space of seven years.

By the weekend, Russia had pulled itself back from the brink, although not by much. The IMF - after exacerbating the panic by delaying the announcement for days - finally threw its support behind Mr Yeltsin by announcing that it would approve a $670m tranche of a $9.2bn loan. The government further calmed the markets by announcing a package of measures, including $7bn budget cuts and a shake-down of corporate tax dodgers. Even so, after recovering on Thursday, shares dipped 2 per cent on Friday, not least because the international credit rating agency Moody's Investors Service downgraded Russia's rating, placing it in the same bracket as Brazil.

SO WHAT happens now? The answer, according to investors, is that the West, perhaps via the IMF or G7, must come up with a support fund which the Russians can draw on to back the rouble, if necessary. They argue that the mere fact of its existence would inject enough confidence into the markets to ensure that the money is not spent. The IMF disagrees. Its leading expert on Russia, John Odling-Smee, said last Friday that Russia had done enough and that he would expect stability in the financial markets to be established "fairly soon".

If he is wrong and Russia does have to turn to the West for help, there may yet be a silver lining in this otherwise stormy scenario. Washington and Moscow are not getting on as well as they used to. The heady days of post-Soviet existence raised hopes to a naively high level, but now genuine concerns have begun to grow in both capitals about the decline in their relationship.

Disputes have arisen over a host of issues: Moscow's sale of nuclear technology to Iran (an issue exacerbated by the US senate's recent vote for sanctions on Russia); its supply of a missile system to Cyprus; its ties with Baghdad and its reluctance to impose sanctions on India for nuclear testing. Disagreement over Nato expansion still festers away.

For all the chumminess between Bill Clinton and Boris Yeltsin before and during the G8 summit in Birmingham, Moscow continues to resent the US's domination, and will - through its tough-nut foreign minister, Yevgeny Primakov - continue calling for "a multipolar world".

But here is the up-side. The rouble crisis just might remind the West that it must, ultimately, help - rather than aggravate and isolate - Russia during its painful transition to a market economy. If not, it must accept the risk of living with unstable, more nationalist nuclear power. And it just might also remind Moscow that, grumble though Russians always will about US power, it cannot afford not to get along with Washington.