Yeltsin Brings Back Chernomyrdin. Kiriyenko Falls Victim to Financial Collapse

Just months after sacking Viktor Chernomyrdin, his prime minister of more than five years, President Boris Yeltsin has invited him back, saying on Monday that crisis-dogged Russia needs a "heavyweight" to take charge.


Sergei Kiriyenko, 36, enjoyed just five months in power after Yeltsin plucked him from obscurity as fuel and energy minister to replace Chernomyrdin, 60. But Sunday evening, Yeltsin announced that it was Kiriyenko's turn to fall, a victim of the devaluation of the ruble and default on government debt -- grave political embarrassments for the president.


Yeltsin submitted Chernomyrdin's name to parliament Monday and said he was bringing the former natural-gas bureaucrat back because Russia needed his experience.


"Five months ago no one expected the world financial crisis to hit Russia so hard, no one expected the economic situation in Russia to become so complex," Yeltsin said in a televised address. "Today we need those who are commonly referred to as heavyweights. ... I believe it necessary to bring in Chernomyrdin's experience and weight."


Chernomyrdin's nomination now goes to the State Duma, parliament's lower house, for confirmation hearings. If the Duma rejects the nomination in three consecutive votes, the Duma itself is dissolved and new parliamentary elections are held.


Under the Russian Constitution, the Duma has one week to take up the nomination, which would mean a Monday vote. Communist leader Gennady Zyuganov demanded that Yeltsin withdraw Chernomyrdin's nomination and instead sit down at a bargaining table to create a new coalition government -- a demand Zyuganov has often put forward, to little success.


Yeltsin, who is 67 and has had heart bypass surgery, also said bringing back Chernomyrdin would "ensure the continuity of authority in the year 2000" -- a strong hint that he was anointing Chernomyrdin his successor.


Chernomyrdin has "integrity, honesty and sturdiness," Yeltsin said, adding, "I think that these qualities will become the decisive argument in the presidential elections."


Chernomyrdin is a sluggish public speaker who makes people nod off in the back rows -- and sometimes even the front. But he might have a chance in 2000 with the full backing of the Kremlin's political machine and of the newspapers and television stations controlled by the business elite.


However, Yeltsin is famous for keeping his options open, and has long been coy about whether he will run for a third term himself. Even as he praised him, Yeltsin refrained from outright endorsing Chernomyrdin's candidacy. Kremlin spokesman Sergei Yastrzhembsky -- asked point blank by a reporter whether this meant Yeltsin would not run -- refused to answer.


A former Soviet Cabinet minister who once headed Gazprom, the country's natural-gas monopoly, Chernomyrdin was sacked in March. President Yeltsin described him as less than energetic in pursuing an effective economic policy. But on Monday, Yastrzhembsky offered a tortured assurance that the government would continue to pursue economic reforms.


"The framework of the course, the vector of the course will remain unchanged -- development of market relations," Yastrzhembsky said at a press conference. "But in terms of practice, in terms of fulfilling this course with measures, Viktor Stepanovich [Chernomyrdin] says that we should expect serious changes, a serious transformation of the former government's course."


All of Kiriyenko's ministers were fired with him, including Deputy Prime Minister Boris Nemtsov, until now a Yeltsin favorite, who survived the March reshuffle. Yastrzhembsky said Nemtsov would not be offered a job in the new government. He said Chernomyrdin would consult with legislators and regional officials on his Cabinet.


Kiriyenko's fall and Chernomyrdin's return stemmed from Russia's inability to cope with a spiralling financial crisis, which broke after Asian economies stalled and world oil prices fell. Spooked foreign investors fled Russia; interest rates rose and stock prices fell. The cash-strapped government struggled to pay high interest on its borrowing while it drained its hard currency reserves to support the ruble.


Last week, it gave up, simultaneously letting the ruble fall against the dollar and freezing repayment of some foreign debts.


Kiriyenko had also made enemies among the so-called oligarchs -- the handful of banking, media and oil moguls who have gotten rich off of government connections. In particular, he pressed Gazprom to pay its back taxes, threatening at one point to seize company assets.


Yevgeny Volk, a scholar of Russian presidential politics and director of the Heritage Foundation Moscow office, said that pressure from the oligarchs was one reason Yeltsin decided Kiriyenko had to go.


"He surely felt that there was dissatisfaction among the oligarch's with Kiriyenko's decisions," said Volk. "They very much needed a person who can better defend their interests."


Although Kiriyenko paid the price, many have blamed Chernomyrdin for the current mess. Most of the economic problems plaguing Russia arose and festered during his first tenure from 1992 to 1998.The government ran budget deficits that it financed with a mountain of high-interest, short-term debt. It was those debts in part that the Kiriyenko government defaulted on last week. Chernomyrdin also failed to win approval of a new tax code intended to fix the government's fiscal problems.


Under Chernomyrdin, the country's economy also became mired in a web of nonpayments, in which government and insolvent enterprises failed to pay bills and wages. Much of the industrial economy is conducted with barter of materials and energy.


Untangling these problems will take swift action. Chernomyrdin said that among his first tasks would be dealing with problems in the banking system. The financial crisis has left many of Russia's 1,500 banks insolvent.


"Some [banks] may not fit in" to plans to reshape the sector, Chernomyrdin was quoted as saying by Interfax. "Not all banks may be able to withstand the present difficulties. But we can't lose the system."


Meanwhile, the Duma confirmation process could drag out over several weeks, as the communists seek concessions and to score rhetorical points. Several analysts said they expected the Duma to hold out for awhile, but eventually to approve Chernomyrdin.


"They will bargain, but agree in the end," Sergei Markov, head of the Institute of Political Studies, said.