On 17 August 1998, known here as Black Monday, the Russian government effectively defaulted on its debt, setting off a devastating chain reaction.

  

The rouble plunged, the stock market crashed and banks announced they could no longer meet their obligations, burning investors and wiping out the savings of many ordinary Russians.

 

Rosy picture

  

Today investors are pouring in billions, the stock market is growing at a pace Wall Street can only envy, record-high reserves have filled government coffers to bursting and the nation's debt-to-GDP ratio is better than that of Europe's powerhouse Germany.

  

"The economic situation is as good as it has ever been," said William Browder, who heads the Hermitage Capital investment fund and has been investing in Russian companies for years.

  

So what happened? Luck and oil, observers say. With a devalued rouble, the costs of imports soared and Russians turned to domestic producers, giving them a much-needed lift. The capacity that stood idle suddenly swung into action.

 

"Symbolically, it is very important. They are showing their investors around the world that they have to watch Russia."

Unnamed managing director of major investment bank

Then, six months after the crisis, the world oil price began to rise and with it Russia's fortunes.

  

The country is one of the world's major oil and gas producers and with the rising oil price, government coffers filled and the economy rumbled to life.

  

And just when a strengthening rouble threatened the recovery (a stronger rouble means Russian exports become more expensive), luck kicked in - the euro rose against the dollar, easing the effect.

  

The result? GDP grew by 5% in 2001, 4.3% in 2002 and 6.6% during the first four months of this year.

  

Foreign currency reserves stand at a whopping $64 billion (57 billion euros).

  

And, the country has been diligently paying back its foreign debt - $17.3 billion this year alone - lowering the nation's current debt-to-GDP ratio to 35%, better than that of Germany, France and Italy, according to the World Bank.

  

In a spectacular display of investor confidence, British Petroleum announced this year that it would invest some six billion dollars in Russia's TNK oil company.

  

"Symbolically, it is very important," said a managing director at a major international investment bank. "They are showing their investors around the world that they have to watch Russia," he said.