President Yeltsin's dismissal of his government yesterday triggered a short shock in the financial markets but many suggested that any effect on the Russian economy was secondary to the serious political tensions it reflected.

The Moscow stock market fell by more than 10 per cent after the announcement of the sacking of Mr Sergei Stepashin, the prime minister, forcing trading to be temporarily suspended. It closed down 5 per cent on the day.

Currency traders reported initial panic as the rouble fell by nearly 4 per cent against the dollar before recovering slightly later in the day. The test will come today in the next trading session organised by the central bank.

Mr Alex Knaster, chief executive of Alfa Bank, said: "We don't view these events as significant economically. I think the market has developed a certain immunity to changes in government, and people were looking for an excuse to devalue the rouble."

Compared with the financial crisis which hit Russia a year ago when there was a large-scale devaluation and default, yesterday's reaction was tame. The impact of Mr Stepashin's dismissal was far less wide-ranging.

The dismissal of Mr Stepashin's government could prove delicate for the International Monetary Fund, which only signed a new $4.5 billion loan agreement with Russia at the end of last month, and may now need to re-open discussions with the new administration.

The subject is even more sensitive for other international agencies such as the World Bank.

While the IMF money remains in Washington and reimburses its own loans to Russia, the World Bank has already paid $150 million directly to the Russians since the IMF deal was approved. However, officials were drawing hope yesterday from statements by Mr Vladimir Putin, Mr Stepashin's successor, that he intended to maintain many of the existing ministers and advisers. Mr Scott Blacklin, president of the American Chamber of Commerce in Russia, said: "The situation is like having your leg broken too many times, so that you no longer have a strong limb. There are already many laws on the books and we had hoped for some strong executive action to enforce them. To force Stepashin to go so quickly cannot be construed as good news."

In a message echoed by diplomats in Moscow dealing with foreign companies, he said that he was not aware of any signs of businesses pulling out or slowing down their investments as a result of the decision. "We have such a battle-hardened bunch of companies here that their reaction is basically to let out a collective groan," he said.

Mr Lisovolik said: "Yeltsin's decision was free of virtually any economic component. It shows that political factors are going to take complete control in Russia from now on, and for at least the next year."

In spite of some limited progress during talks with the IMF, much of Russia's economic recovery in recent months has been due to import substitution triggered by the rouble devaluation, and to rising oil prices.

With parliamentary elections scheduled for December 19th, and the vote on a new president next July, there is likely to be growing pressure for both open and hidden forms of government spending on such populist actions as paying wage and pension arrears.

It was notable that amid the confusion yesterday, Mr Yeltsin signed a decree taking firmly back into the administration's hand the voting rights on the controlling 35 per cent stake that the state holds in Gazprom, the cash-rich gas monopoly.

It may prove one of the central conduits, highlighting the close relationship between business and politics in Russian life.