Yeltsin fires entire Cabinet Kiriyenko is out

Chernomyrdin back as prime minister

Observers are baffled

As economic crisis worsens, president shuffles leaders

August 24, 1998|By Kathy Lally | Kathy Lally,SUN FOREIGN STAFF

MOSCOW -- As the rest of the world nervously awaited news of how Russia would attempt to avoid default and save its failing banking system, President Boris N. Yeltsin issued an astonishing decree firing his entire government yesterday.

With no explanation beyond a terse, legal pronouncement, Yeltsin threw out Sergei V. Kiriyenko as prime minister and brought back Viktor S. Chernomyrdin to replace him.

Only five months ago, Yeltsin publicly humiliated Chernomyrdin by brusquely firing him after five years as prime minister, suggesting he lacked the energy and fresh ideas needed to solve Russia's financial problems.

The dismissal of the government was extraordinary, even for Yeltsin, who is widely described as a capricious president. Observers of Russia's tempestuous leader could only guess at what he was thinking, speculating that he was more interested in personal political jousting than in the economy.

"Probably he doesn't understand the gravity of the situation," said Lilia F. Shevtsova, a senior associate with the Carnegie Moscow Center. "His instincts are all political. He doesn't make plans. He shuffles."

With quick and decisive action imperative on a whole range of troubling economic issues, Yeltsin instead opened the way for the state Duma to become embroiled over confirming a permanent successor to the 36-year-old Kiriyenko. Chernomyrdin was declared the acting prime minister, but there was no indication whether Yeltsin would send his name to the Duma for confirmation or whether he had someone else in mind.

This sort of shuffle, Shevtsova said, is vintage Yeltsin. "He understands something went wrong," she said, and when criticism mounts, as it did last week with some members of the Duma calling for his resignation, Yeltsin fires someone.

"He probably hoped his young team would solve everything, like in a fairy tale," Shevtsova said. "When they didn't, he decided to fire them."

Russia is under severe pressure. The International Monetary Fund has been seeking passage of reform legislation as a condition of a $22.6 billion loan. But if Duma deputies start jockeying for Cabinet posts and politicking over confirming a prime minister, action on the economy could be swept aside.

Last week, one desperate financial difficulty after another came to light. On Monday, Kiriyenko's government effectively devalued the currency, saying it would allow the ruble to fall by as much as a third, to as low as 9.5 to the U.S. dollar this year. The banking system was ready to implode, with a bankruptcy epidemic rumored.

The stock market has done little but plummet. A moratorium was imposed on debt payments.

In the middle of the week, the head of the Central Bank said that since July 20, the bank had spent all of a $4.8 billion IMF loan in its unsuccessful effort to defend the ruble.

The government had been expected to announce today how it would restructure its debt. Investors also were waiting to hear whether Russia would let some banks fail or keep propping them up.

The situation appeared so grim it was hard to imagine it deteriorating.

Then, just after 7 p.m., Yeltsin's office issued a bulletin "to announce the dismissal of the government of the Russian Federation." Kiriyenko and his government, who were at work at the Russian White House when they got the news, stopped working on crisis plans and started gathering up papers to hand over to Chernomyrdin, according to television reports.

Chernomyrdin plans to reclaim his office this morning.

Before leaving the White House, Kiriyenko and Boris Y. Nemtsov, a Cabinet member, strolled outside to say goodbye to coal miners who have been camped there for months to protest nonpayment of their wages.

Reporters were not allowed to accompany them, but one miner later said, "They're still hanging noodles on our ears," the Russian equivalent of, "They're still pulling the wool over our eyes."

The miners have been blaming the Kiriyenko government and Yeltsin for their unpaid wages, though Chernomyrdin was in charge when the coal industry began to collapse and wages were paid only sporadically.

Politicians had little public comment on Yeltsin's action. Most, apparently, were still trying to absorb the news. One Muscovite, asked to comment by a television reporter, refused to believe what had happened.

"You're joking," he insisted.

Some of those trying to understand Yeltsin's decision suggested that Kiriyenko and the Cabinet had begun to threaten powerful interests and that owners of insolvent banks had pressured Yeltsin to get rid of Kiriyenko.

"The fates of the masters of these banks were at stake," said Sergei Komakov, of the Polity Foundation think tank. "Possibly they were afraid the measures being worked out would mean the collapse of some banks.

"It was a moment of truth for them, to get rid of Mr. Kiriyenko and prolong their banks for a few months. It will prolong their lives, but at the expense of the state budget."

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