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Duma approves Primakov
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September 11, 1998: 12:11 p.m. ET
Russian parliament OKs new prime minister and replaces central bank chair
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NEW YORK (CNNfn) - Russian shares retreated further Friday after the government admitted it had missed its interest payments to several countries, and parliament approved a new prime minister.
Shares on the main RTS1-Interfax share index fell a further 3.54 percent during the day, while the central bank set its official ruble rate for the weekend at 11.4281 to the dollar, firming from Friday's rate of 12.8749.
The average rate for rubles on Thursday was 12.375 to the dollar and volume was $52.1 million.
Russia's lower house of parliament Friday overwhelmingly approved former spymaster Yevgeny Primakov as prime minister, putting the wheels in motion to reinstate a government in the economically torn country.
Primakov has vowed to assemble an economic team of professionals, regardless of party affiliation. He also asked legislators to be patient, saying digging Russia out of its financial hole will take some time.
"I'll tell you in advance," he told deputies just before the open vote. "I'm no magician."
The Duma, or Communist-led lower house of parliament, also reinstated Viktor Gerashchenko, the controversial former central bank chairman, to the influential post.
Gerashchenko headed the bank during Black Tuesday in October 1994 when the ruble collapsed.
Harvey Sawikin, Russia fund manager for Firebird Management, said Gerashchenko will likely support the previously announced plan to print more rubles. Sawikin said that will only exacerbate the economic crisis.
"That will lead to hyper-inflation," Sawikin said. "But our view is the faster this all happens, the better, because the quality of life in Russia is already falling dramatically, and the quicker that happens the quicker there will be, in our view, a reaction back toward reforms," he said.
Gerashchenko, a controversial choice, headed the central bank from 1992 to 1994, a period when rubles values fluctuated dramatically and inflation went up.
Sawikin added Russian citizens have enjoyed three years of McDonald's and Snicker candy bars. When those things begin disappearing from the shelves, along with other imported goods, it likely will prompt a public outcry.
"We've seen it happen [during Gerashchenko's former reign at the central bank] and we know what is going to happen," he said. "Our only hope is it happens very quickly."
The market turbulence is nothing new for the cash-strapped country that has been mired in economic and political turmoil for weeks.
Before the ruble was effectively allowed to devalue last month under former Prime Minister Sergei Kiriyenko, the battered currency was trading at about 6 to the dollar. Earlier this week, the currency was hovering at around 20 to the dollar.
Also Friday, Deputy Finance Minister Mikhail Kasyanov said Russia was late on its interest payments on debt from the Paris Club of sovereign creditors because of the country's turbulent foreign-exchange market, which has prevented orderly sales of export revenues. Russia is, however, on track with other sovereign debt payments on due dates.
Moscow had been due to pay 1.6 billion marks in interest, but no principal, this year. Before Aug. 20, it had paid 816.5 million marks.
A spokeswoman for the German Economics Ministry said Moscow had promised to fulfill its debt commitments. 
--from staff and wire reports
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