U.K. Chancellor of the Exchequer Norman Lamont is not backing the wrong horse, he says. "In fact, I’m not really backing a horse," he insisted yesterday. The horse in question was Grigory Yavlinsky, deputy chairman of the committee for the management of the national (Soviet) economy, in whom the Group of Seven industrial countries appear to have put a lot of trust.

“I am confident that Yavlinsky has the support and confidence of President Gorbachev,” said Lamont. "I'm also confident that Russian President Yeltsin is interested in dialogue with the West."

Yet Yavlinsky's credibility rests on the successful conclusion of a union treaty between at least a few former Soviet republics. "I very much hope the treaty will be signed," Lamont said. "It's not so much what is in that treaty as the fact that it should be signed." Failure to sign would be "a setback," said Lamont, which would make it more difficult to deal with the former U.S.S.R.

For Lamont and the U.K. government's chief economic adviser, Alan Budd, the idea of Soviet economic and monetary union is particularly poignant. "There are interesting parallels with some of the debate going on in Europe [over European economic and monetary union]," Lamont said. The basic objectives are the same: "to establish arrangements for fiscal and monetary control which ensure progress toward price stability and free trade," he said later in his speech to governors. The Soviet republics would have to choose, said Budd, whether a single or multiple currency system would give them the best chance of price stability and free trade.

It was not a question of the West backing the Soviet or Yavlinsky horse, Budd suggested. "The West will ultimately back the structure most likely to pay back Western money," he said. That might include betting that independent republics with independent central banks might yield a safer return than a stagnant union with great regional economic imbalances.