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  •   Yeltsin Dismisses Premier

    By Sharon Lafraniere
    Washington Post Foreign Service
    Monday, August 24, 1998; Page A1

    MOSCOW, Aug. 23—President Boris Yeltsin fired Prime Minister Sergei Kiriyenko today and replaced him with his predecessor, Viktor Chernomyrdin, delivering another jolting surprise to Russia and its crisis-battered financial markets.

    Kiriyenko, whom Yeltsin ousted without explanation after only five months in office, was considered an aggressive reformer, but he was unable to prevent last week's devaluation of the ruble and a freeze on the domestic government bond market -- moves that sorely hurt Yeltsin among average voters, Russia's powerful business elite and foreign investors.

    Some analysts here interpreted Yeltsin's firing of Kiriyenko as a desperate move to shore up support among Russia's powerful financial oligarchs who sometimes function almost as a shadow government and who could lose fortunes in the economic crisis. In the short term, at least, it means more political turmoil at a time of financial upheaval and mounting social discontent.

    Yeltsin essentially reversed what he did in March, when he replaced Chernomyrdin with Kiriyenko, saying the government needed new ideas and new energy to achieve market reforms. Since then, Kiriyenko, 36, has forced the hostile legislature to raise some taxes and cut some expenditures. But even with a $22.6 billion economic rescue package provided by international lenders, the government has teetered on the edge of bankruptcy, unable to shed the high-interest, short-term debt it incurred during Chernomyrdin's five-year tenure. Banks were fast approaching default, and fearful depositors began to withdraw their funds.

    A week ago, Kiriyenko announced that the government could no longer prop up the currency and would let it fall in value by as much as one-third. Kiriyenko also announced a 90-day moratorium on payments by businesses on their overseas debt and a restructuring of the government's billions of dollars in short-term bond commitments.

    Most financial experts agree that Kiriyenko had no choice, but the cost was high. The devaluation made a mockery of Yeltsin's vow, reiterated only three days earlier, to keep the ruble stable. It may also incite inflation. And the restructuring of the government's debt probably ensures that the Kremlin will be unable to borrow money from private investors for years.

    The Russian media heaped scorn on Yeltsin, saying he had devalued himself along with the ruble, and public trust in him is at an all-time low. The State Duma, the Communist led-lower house of parliament, also excoriated Yeltsin in an emergency session Friday and urged, by an overwhelming vote, that he resign.

    Chernomyrdin said on Friday: "We do not have any government today. And let's not lie about it: The government is to blame for what has happened, and naturally the Central Bank. . . . We need to move the economy away from the abyss."

    How Chernomyrdin plans to deal with the crisis is unclear. As prime minister, he was adept at placating Yeltsin's enemies but only intermittently championed reforms needed to build a market economy and put the government on solid financial footing. He failed, for instance, to check the growing wage arrears and the web of interlocking debts that has hamstrung the government and businesses. At best, he was considered a figure of stability; at worst, a guardian of the status quo.

    Unlike Kiriyenko, though, Chernomyrdin, 60, is schooled in politics, and enjoys support in a legislature that killed a number of Kiriyenko's most important proposals. And he is a favorite of a powerful business elite that felt ignored by Kiriyenko.

    His appointment was described as interim, but officials here say they expect it to be permanent. That puts Chernomyrdin, who has been hard at work since March on his presidential campaign, in a better position to succeed Yeltsin, whose term expires in 2000. Although the former gas monopoly executive lacks popularity and voters rank him at the bottom in polls, he can count on funding from the business oligarchs.

    The terse announcement from the presidential press service said only that the government had resigned. By law, when a prime minister is dismissed his government is dissolved, so the jobs of all other top ministers are also in question.

    The move apparently took Kiriyenko by surprise. He was at work early today, trying to devise measures to save the banks from collapse. Only about 10 days ago, Yeltsin had said he would keep Kiriyenko in place, but such reversals have become almost commonplace for the president. Kiriyenko, by contrast, had a reputation for being steadfast; Western leaders were impressed with his commitment to reform, his calm in the face of crisis and his businesslike approach.

    On Friday, Kiriyenko told the Duma that the brunt of the financial crisis was still to come and that the government did not have the luxury of popularity. "Investments do not come into a country in which the branches of government cannot come to terms between themselves," he said. "As a result, there are constant calls for a change of course."

    Despite the turnabout, White House officials with President Clinton on vacation in Edgartown, Mass., said that he will attend a summit in Moscow in a little over a week and that the administration hopes the necessary economic reforms will continue. "We'll continue to work closely with the Russian government and watch the situation closely as it evolves," said National Security Council spokesman P.J. Crowley.

    Duma Chairman Gennady Seleznev hailed Yeltsin's decision to fire Kiriyenko, telling the Interfax news agency the government "is not capable of working efficiently." But he expressed apprehension about Chernomyrdin's appointment. "This endeavor is unlikely to succeed, since Kiriyenko's government, which survived just over 100 days, continued what the former cabinet was doing," he said.

    Vladimir Zhirinovsky, head of the ultranationalist Liberal Democratic Party, said that "the president made a mistake" by dismissing the government. "Changing the cabinet will not do anything," he said. "In this country the weak are replaced by the weaker."

    © Copyright 1998 The Washington Post Company

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