Indian Express Newspapers
Russian government sacking seen ill-timed; reform safe Peter Henderson, March 23 1998

MOSCOW, March 23: President Boris Yeltsin's sacking of his entire government upset Russian markets on Monday and analysts said the timing was poor, but many were optimistic that reforms would continue.

Russia's benchmark RTS shares index lost about four per cent in the first half hour, traders said, though they firmed after Yeltsin said on television that he wanted a more decisive and energetic government.

The finance ministry postponed the launch of a Eurobond -- Russia's first planned borrowing on capital markets this year -- because of the political uncertainty, lead manager SBC Warburg said.

Yeltsin, back in the Kremlin after illness, dismissed his entire cabinet in a completely unexpected move, explaining in his television broadcast that average people had not felt any improvement in their lives.

Interfax news agency reported that a leading reformer, first deputy prime minister Boris Nemtsov, was due to visit Yeltsin later in the day, which analysts saw as a positive sign he may remain in the government.

The Kremlin said first deputy prime minister Anatoly Chubais had been dismissed in connection with his transfer to other work.

Analysts speculated Chubais could be moving to head national electricity company UES, one of Russia's largest companies. UES lies at the centre of a tangled web of non-payments between enterprises -- one of the economy's most intractable problems.
The government had nominated him for the post of chairman of the board, but chief economist, Charles Blitzer of emerging markets, at Donaldson, Lufkin and Jenrette, said Chubais might take over as chief executive giving him more power.

Blitzer, former chief economist for the World Bank in Moscow, said he saw the shuffle as a way to remove long-serving prime minister Viktor Chernomyrdin, seen as stolid but generally pro-reform, and believed it had been in the works for months.

"I would interpret the timing as Yeltsin's perception that Russia's financial crisis is over, with the stabilisation of the rouble and the easing of interest rates," he said.

"This is essentially a dismissal of Chernomyrdin with a dismissal of Chubais thrown in."
Boris Berezovsky, one of Russia's richest businessmen and former secretary of Russia's security council, told Interfax news agency that Yeltsin's decision had been long-considered and was "absolutely correct."

"The only possible way for the authorities to maintain the continuity of the (reform) course is to show the necessary will."

"They must publicly cleanse themselves of those mistakes which were unavoidable in the course of reforming the country."

Traders said the outlook for markets was unclear, and activity was said to be extremely low.

"People are losing faith that Yeltsin is running the government," said senior Russian equity analyst Mayra Rodriguez Valladares at NatWest Markets.

She said Yeltsin's timing was particularly poor since analysts had expected a Monday rally on the back of a weekend call by some OPEC members to lower crude oil output, which would help Russia's oil industry.