In his televised address to the nation announcing the dissolution of the government, the president said - with some irritation in his voice - "There is a feeling that all economic activities of the government have been limited to negotiations with the International Monetary Fund. As if the recovery of Russia's economy depends solely upon Western loans."

Despite Yeltsin's frustration at this perception, the issue of IMF loans was the first addressed by acting Prime Minister Sergei Stepashin upon appointment to his new post. Several hours after hearing of his appointment, Stepashin convened a meeting to discuss prospects to push the draft laws, recently agreed to by Deputy Prime Minister Yuri Masliukov and IMF Managing Director Michel Camdessus, through the Duma. The fund insists the Duma pass five pieces of economic legislation before it will consider granting a $4.5 billion loan to Russia.

Addressing the Cabinet, which is now only the "acting" Cabinet, Stepashin observed that the government's dissolution had complicated rather than simplified the task of persuading the Duma to accept the legislation. The acting prime minister urged the Cabinet to work with the Duma, encouraging its members to cast aside political prejudices and focus on the critical task of meeting IMF demands.

On the following day, May 13, Stepashin himself visited the Duma and held talks with its chairman, Gennadii Seleznev, stressing the importance of the draft laws required by the IMF.

On May 12, Interfax-AFI cited a high-ranking Finance Ministry official as saying that Primakov's dismissal would not produce any negative effect on the course of Russia's negotiations with the IMF. The official maintained that the IMF is concerned more with what actions are taken than with the personnel initiating them. Unfortunately, the World Bank President James Wolfenshon, was not so sanguine. "There is nobody in Russia to conduct a dialogue with," he said. "As long as Russia has no government we will not be able to do anything."

To date, neither the IMF nor the World Bank has taken measures in response to the dissolution of the Primakov government. In fact, on May 13, the World Bank's Board of Directors accepted for consideration a new draft project, which would grant Russia a loan of $30 million to help it improve the quality of its economic statistics. In contrast to other credits, the loan would not require a "nod" from the IMF to be approved.

The most pressing question is whether Russia's leadership can push the laws through the Duma within the next two months. This task was going to be complicated for the Primakov government, as the Duma stridently opposed aspects of the draft legislation - in particular the proposed hike in gasoline excises and postponement of VAT reduction until January 1, 2000.

But many believed Primakov's popularity and prestige might have enabled him to coax the Duma into swallowing bitter medicine. Sergei Stepashin, however, does not possess this sort of political capital. Moreover, no one can predict whether the Duma will even sit for the next two months or if Yeltsin will simply dissolve it.

Russia's financial outlook is heavily dependent on how the political crisis unfolds. Initially, the forex market's reaction to Yeltsin's action was moderate, with the ruble's exchange rate declining marginally, due largely to a healthy safety margin acquired after the currency plummeted 75 percent in the wake of the August crisis. In the weeks leading up to Primakov's sacking, the ruble had begun to strengthen, with the Central Bank taking advantage of the new phenomenon by purchasing dollars to replenish its depleted hard currency reserve.

The stock market's reaction, however, has been much more severe. The market had only recently begun to show signs of life after last year's meltdown. But on May 12 alone, the day of Primakov's dismissal, it lost $4.2 billion in capitalization.

It seems the trend is clear: both domestic and foreign investors will shy away from Russian stocks as long as the political upheaval continues.

But, if the Duma confirms Sergei Stepashin as prime minister, which is not beyond the realms of possibility, Russia's long-term investment attraction prospects should improve. Stepashin is essentially viewed as a more devoted believer in the free-market system than Primakov.

Major international rating agencies - Standard & Poor's, Moody's, and FITCH IBCA - have stated they see no reason to downgrade Russia's sovereign debt rating, and will find no reason to do so as long as the country continues to service its Eurobonds. Disappointingly, this year Russia has serviced its foreign debts solely by using the Central Bank's hard currency reserves. The reserves are not a bottomless pit, and it would be prudent not to further deplete them during the third quarter of this year. For this reason, it is essential to secure the IMF loan by July. Apparently Sergei Stepashin still believes such an outcome is possible.