The Russian stock market was last year's fastest growing market, as foreign investment started to flow into Russia. But this year the bubble of confidence has burst.

During May, Moscow's stock market lost 40% of its value

Seeking more and more desperate ways of getting finance, it is reported that on Wednesday the government is planning to sell securities with yields of just one week to attract more investors.

After a 10% fall on Monday, the stock market stabilised on Tuesday, but investors are still nervous and waiting to see whether the G7, the world's seven largest industrialised countries, comes up with an emergency aid package to stabilise the rouble.

This is the investors' major concern, says Eric Fine, a strategist on Russia with Morgan Stanley in London. He believes the outcome of the crisis will be less influenced by "any specific moves that the Russians need to make and far more (by) the kind of package that the G7 comes up with - whenever it does come up with a package."

Russians fled the rouble as the financial markets collapsed

Mr Fine predicts that the G7 package will have some unusual conditions attached: not the conventional demands for macro-economic reform, but more along the lines of implementing bankruptcy legislation and increasing government transparency.

Russia's government now must put into action long-delayed structural reforms that will revitalise the economy. Although, for example, the mechanisms are there to declare moribund companies bankrupt, only three Russian companies had been liquidated by August last year.

Another issue is little short of an obsession for those wanting to put their money in Russia. Mr Fine says the main concern is the tax code: "It should encourage foreign direct investment into the country, which is the healthy longer-term sort of financing which helps get Russia out of its dependence on short-term financing. The other objective achieved by a tax-code will be, over the long-term, better tax performance."

Mr Fine and many other international analysts believe that investors could come back, once the government has managed to sort out its tax code and internal revenue system.

Widespread tax avoidance and low rates of tax collection are at the root of Russia's chaotic public finances. President Yeltsin is aware of this. On Tuesday he publicly accused the man he sacked last week as head of the tax service, Alexander Pochinok, for displaying "complete inertia".

Most analysts agree that, despite this crisis, the Russian economy has been improving. Some even say that the West is deliberately hesitating before it announces a rescue package so as to put pressure on the government to implement major structural reforms.