News > Economy
Chernomyrdin rejected
August 31, 1998: 12:21 p.m. ET

Markets ponder Russia as Communist led house votes down Yeltsin's choice
graphic graphic
NEW YORK (CNNfn) - Storm clouds continued to brew over Russia's stock market and economy Monday after as the Communist-led lower house of parliament voted to reject Viktor Chernomyrdin as its new prime minister.
     The rejection is likely to add to the pressure on Russia's beleaguered currency and exacerbate the country's economic problems.
     Russia's central bank, which temporarily banned overseas trading of the ruble on the main currency exchange, set its official rate for Tuesday at 9.3301 rubles to the dolar, down from 7.905 rubles for Aug. 29.
     The central bank said a new type of currency fixing would be instituted on the Moscow Interbank Currency Exchange (MICEX), beginning Wednesday or Thursday. The fix will be based on trading on MICEX's electronic SELT system.
     Problems with the ruble already had investors and companies rethinking their Russian plans. Analysts said the Chernomyrdin situation is likely to add more urgency to those recalculations..
     President Boris Yeltsin, who fired his entire government earlier this month, nominated Chernomyrdin August 23 to replace prime minister Sergei Kiriyenko. Chernomyrdin himself was fired by Yeltsin just five months ago.
     Only 94 deputies supported Chernomyrdin in the vote in the 450-seat chamber and 253 opposed. He needed the support of at least 226 deputies.
     Yeltsin can now re-nominate Chernomyrdin or put forward another candidate, and must dissolve the Duma if it blocks his candidate or candidates three times.
     Yeltsin has not said whether he will now re-nominate Chernomyrdin as prime minister but a Kremlin source said the 67-year-old president planned to do so.
     In some ways, though analysts said the investment community "probably expected" that Chernomyrdin might be rejected since the Duma had voiced its opposition to his leadership and had previously rejected the nomination of Kiriyenko three times before confirming him.
     "The Russian market has been slowly grinding to a halt," said Russia markets analyst for H. Rivkin & Co. Michael Barr, saying he views Russia as if it were a "giant bankruptcy." "There are still a lot of people holding on to see what political situation will unfold."
     He added, however, he does not expect panic to erupt on the streets of Moscow for at least another month.
     "We are seeing a little more chaos going forward when (Russia) really can not afford any more chaos," he said. "There is going to be a lot of jockeying there [by the political forces] to see what they extract."
     Overseas companies doing business in Russia, especially the oil exploration and refinery firms that have joint ventures there, may not feel a significant direct impact on their bottom lines as a result of the Russian economic crisis.
     But it may soon begin affecting Russia as those companies scratch expansion plans for the country.
     "We still think things will be O.K. for another month or so, but closer to winter, the situation will change dramatically," he said. "Now everyone is focusing on the currency but next they will begin focusing on what they can buy with that currency. When that begins to run out [chaos could rule].
     Barr believes the Russian government has about a month in which to act -- before it's too late. Back to top
     --from staff and wire reports


Investors eye Russia vote Aug. 31, 1998

Bonds drift on Russian ills - Aug. 31, 1998

More nerves on Wall Street - Aug. 31, 1998