He also said US-backed financial help from the International Monetary Fund "must wait until the Russian government shows itself willing and able to make the difficult structural adjustments necessary for recovery and growth."

His comments, in a speech at Stanford University in California, were the starkest public criticism by the United States 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.

The stern words are likely to resonate widely in Russia.

Talbott, the Clinton administration's point man on Russia, is a Russia scholar and former journalist who previously stressed the bright side in the twists and turns of Russian policy andbehaviour since communism collapsed in 1991.

He 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 towards 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 crackup," Talbott warned. Efforts by the government of new prime minister Yevgeny Primakov to find ways to pay wages and pensions and revive the industrial sector are 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 andkeep bankrupt enterprises afloat," he said. Talbott spoke two days after the Russian government announced for the first time it would not pay its foreign debts next year and would seek to renegotiate its loans.

This came after Primakov unveiled a new economic plan last week that called for greater state control over the economy and the rouble, tax breaks for industry and some financing from the central bank through printing more money. The plan received a chilly reception from foreign creditors and the Russian press.

"Since the numbers (in the new plan) don't add up, the intended remedies only aggravate the disease," Talbott said, noting inflation was already 50 per cent higher than last year. "It has become all but impossible for the International Monetary Fund to weigh in with macroeconomic stabilisation funds that might help in arresting and reversing the slide. "Money from outside will do no good if it is inflated away or if it pauses only briefly in Russia before ending up in Swiss bank accounts andRiviera real estate," he said.

An IMF mission left Moscow on October 31, failing to agree on the disbursement of a previously promised $4.3 billion payment from a $22.6 billion bailout package agreed on in July. The IMF will remain open to new talks, but Moscow must come up with a realistic 1999 budget and a "program which could be supported by the international community," the IMF said. Russia has $17 billion in foreign debt payments due early next year and owes its own citizens billions of roubles in back wages, pensions and other debts.

Without IMF financing, it is not clear how the country can pay the bills unless it prints so much new money that the roubles it pays out become virtually worthless.

Russia's $22.6 billion rescue package has been on hold for months as IMF experts awaited the new economic plan.

Foreign cofidence in the country was shattered in August, when Moscow announced a devaluation of the rouble, a moratorium on debt repayment and a restructuring of government bonds.

WhetherMoscow can prevent an extremely dangerous breakup of Russia will depend in large measure on how it handles the economy in general and the rouble in particular, Talbott said.

He said currency was "a key manifestation" of a nation's sovereignty and unity and this century "has already shown that hyperinflation can destroy states or turn them into monsters."