Yeltsin's Surprise Cabinet Shake-Up: What it Means for Russia's Financial Crisis

Russian President Boris Yeltsin's surprise decision to sack his entire cabinet and reappoint veteran former prime minister Viktor Chernomyrdin has sent shockwaves through the country's financial markets. As the battle to tackle Russia's crippling financial crisis and the aftermath of last week's devaluation continues, Yeltsin's move has sparked a heated debate about the country's economic future. Chernomyrdin's appointment appears to be an attempt by Yeltsin to defuse rising political tensions and stabilize the government.

Key Takeaways:

• The surprise cabinet shake-up was announced by Yeltsin in a presidential decree, with no official comment from the government on the reasons behind the decision.
• Chernomyrdin, a former head of Russia's natural gas monopoly Gazprom, has been appointed to head the government for the second time, following his six-year tenure as prime minister until March 31.
• Chernomyrdin's track record indicates that he will likely favour preserving political consensus over pushing through much-needed reforms, potentially diluting Kiriyenko's harshly monetarist reform efforts and putting future tranches of the IMF loan in jeopardy.
• Chernomyrdin's close relationship with communists in the Duma may make debates less stormy, but will do little to tackle painful and unpopular budget cuts and squeezing the oligarchs for more taxes.
• Kiriyenko, 35, and central bank chief Sergei Dubinin have been the focus of political flak after the financial plunge, with the Duma demanding Kiriyenko's resignation and scheduling a no-confidence debate.
• The appointment of Chernomyrdin appears to be an attempt by Yeltsin to defuse rising political tensions fuelled by the collapse of Russia's financial markets and the rouble's slide.

Statistics:

• 15% fall of the rouble's value against the US dollar.
• $22 billion, 2-year bailout package from the International Monetary Fund and the World Bank secured by Kiriyenko in June.
• Russia's massive domestic and foreign debt burden estimated to be crippling the government.

Sources:

• Yeltsin's surprise decree sacking the cabinet and reappointing Chernomyrdin.
• Reuters: "Yeltsin Sacks Government, Appoints Chernomyrdin".
• Financial Times: "Yeltsin Fires Government and Sees in Chernomyrdin".
• BFM.ru: "Chernomyrdin: 'There is no government in Russia today'".