A pale and listless President Yeltsin designated Mr Viktor Chernomyrdin as his heir yesterday as the interim prime minister signalled a change of tack to get to grips with economic crisis.
In a remarkable political comeback by a man he sacked five months earlier, Mr Yeltsin told the nation that Mr Chernomyrdin should succeed him at the Kremlin following presidential elections in 2000.
The Kremlin said the new premier was ready to make a "serious transformation" of the monetarist polices of the ousted prime minister, Mr Sergei Kiriyenko, and risk the ire of the IMF and anxious western investors.
However, Mr Chernomyrdin also vowed to save the crippled banking sector and swiftly restructure the $40 billion of domestic bonds frozen last week in a move which prompted Mr Kiriyenko's downfall.
In a nationwide broadcast, a pale and puffy Mr Yeltsin said he had nominated the stocky Mr Chernomyrdin (60) to ensure stability in a country ravaged by economic and financial crisis.
"Behind this nomination stands another important consideration, to ensure the succession of power in the year 2000," said Mr Yeltsin.
"Chernomyrdin has probity, honesty, and is responsible. I think that those will be the decisive factors in the presidential elections."
Mr Yeltsin had sacked Mr Kiriyenko late on Sunday for failing to quell a growing economic and financial crisis which has brought Russia's banking system to the brink and the economy to its knees.
While the reformist deputy premier, Mr Boris Nemtsov, said he would not join the new government, the foreign, defence and interior ministers were expected to retain their posts, sources said.
Depressed dealers, however, said Mr Chernomyrdin's return marked a return to "crony capitalism."
"It's just dreadful," said Mr Gary Kinsey, a trader with Brunswick Warburg securities. "I can't think of a positive slant at all."
Russian deputies, humiliated by Mr Yeltsin in April when he forced them to swallow Mr Kiriyenko as premier, vowed to reject the president's nominee this time unless they were consulted on the new cabinet.
Communist Party leader Mr Gennady Zyuganov vowed to fight the nomination, unless there was an about-turn in economic policy. Liberals and ultra-nationalists said they too would fight the interim premier, who saddled Russia with huge debts during his previous five years in office.
An influential billionaire businessman, Mr Boris Berezovsky, said the interim premier would enjoy the "unconditional support of big businesses," prompting concern from economists that Mr Chernomyrdin would resort to printing money and fuelling inflation.