Yeltsin’s infant government had limited options. Kiriyenko got Boris Nemtsov to meet with coal miners who were on strike over unpaid wages and blockading the Trans-Siberian Railroad; the pledge to redress their grievances added to the government’s obligations. Dubinin and the Central Bank of Russia pressed what monetary buttons they had. With Anatolii Chubais as head negotiator, Russia talked with the IMF about disbursement of a tranche from earlier loans and about new credits. The $5 billion of a $14.8 billion rescue package to make it to Moscow in August disappeared without a trace.25 Boris Fëdorov proposed a cut in tax rates tied to a crackdown on tax debtors, targeting the 1,000 wealthiest Russians. In July, as an olive branch to the communists in parliament, Yeltsin appointed Yurii Maslyukov, a defense industrialist, former Politburo member, and KPRF lawmaker, as minister of industry and trade. But efforts to get the Duma to pass an austerity program fell flat. Refusing to trim spending, reduce subsidies, or introduce a sales tax and other new charges, legislators adjourned for a summer recess.
Yeltsin issued pronouncement after pronouncement about budget discipline, but did not swear off using the power of the purse, albeit a nearly empty purse, to please constituents. In late June he passed a day in Kostroma, on the Volga River two provinces northeast of Moscow, with local managers, students, and peasants:
Yeltsin was in good cheer and a curious mood. At the Karayevo State Breeding Farm—the enterprise is famous for its thoroughbred cows and has forty Heroes of Socialist Labor on its staff—the president tortured the director with questions about forage, calving, and cleaning out manure. At a certain moment, Yeltsin even got angry: “You are not answering me concretely! What is it, do you think the president understands something about politics but nothing about cows?” Then Yeltsin fell head over heels for the Russian flax [grown and processed in the region]. After comely young Kostroma women showed him the newest fashions at a linen mill, the president took out his fountain pen and, right there on a wall poster, labeled “Government Support for Russian Flax,” he wrote, “There is going to be a decree! Yeltsin.”26
As part of the consultations, Yeltsin had his fourth meeting with the oligarchs, ten of them, on June 2. Bankers Mikhail Fridman, Vladimir Gusinskii, Mikhail Khodorkovskii, Vladimir Potanin, and Aleksandr Smolenskii had been at previous gatherings; Vitalii Malkin of the Russian Credit Bank joined them; and four industrialists were added—Chubais, wearing his hat as head of electricity wholesaler YeES (the position he was given when he left the cabinet in March), Vagit Alekperov of Lukoil, Vladimir Bogdanov of the Surgutneftegaz oil and gas company, and Rem Vyakhirev of Gazprom. Kiriyenko sat in, unlike Chernomyrdin, who had not been present at the meetings in 1995, 1996, and 1997. Yeltsin described the state of affairs as ominous and enjoined the moguls to pay their taxes, keep their money in Russia, and keep faith in his government. He asked what they most needed from him; Fridman replied that it was stability. Perhaps, Yeltsin volunteered, I will make an announcement that Kiriyenko will chair the Council of Ministers until 2000.27 No such announcement came forth, which was not lost on Kiriyenko. The prime minister met separately on June 16 and 18 with most of the June 2 participants, and his spokesmen said leading capitalists and state officials would form a joint Council for Mutual Economic Assistance. But Yeltsin did not express an opinion. The attempt to give business-government cooperation a formal cast died on the drawing board.
Yeltsin claimed on several occasions that the emergency had passed, even as he spoke more frankly with his subordinates. On August 13 the Financial Times of London printed a letter from U.S. financier George Soros about Russia being at “the terminal phase” of a “meltdown” of its financial markets. He recommended a prompt devaluation of 15 to 25 percent and turning over management of the ruble to an expert currency board. At the request of Kiriyenko, his economic team, and Valentin Yumashev, Yeltsin made one last demurral. On August 14, in Novgorod, he stated “firmly and concisely” that there would be no devaluation. Kiriyenko, Yumashev, Chubais, and Dubinin (accompanied by Yegor Gaidar) went to Zavidovo two days later to tell him the game was up. Yeltsin concurred and, as was typical of his style, asked them to spare him the fine print. “The head of government started describing the details, but I stopped him. Even without them, it was clear that the government, and all of us along with it, had become hostages to fate…. ‘Go ahead,’ I said. ‘Do take emergency measures.’”28
On August 17 Russia let the exchange rate float, defaulted on its treasury bills and bonds, and imposed a ninety-day moratorium on payments to foreign creditors. In two frantic weeks, the ruble lost half of its exchange value, going from 6.3 to the U.S. dollar to 9.3; it was to plummet to 21 to the dollar by September 21. GKOs were reduced to all but worthless scraps of paper. The three-month moratorium favored Russians over foreigners without keeping hundreds of the banks from going under in a triage process that stretched into 1999. Citizens queued at tellers’ windows to withdraw their deposits. Prognoses of economic and social breakdown swamped the domestic and world media.29
Political change came inexorably in the wake of the financial bulletins. The alternatives facing Yeltsin, as one writer put it in September, were “the bad, the atrocious, and the bloodcurdling.”30 The leftist and nationalist majority in the Duma, and especially the far-left communists, were out for nothing less than the president’s head. On August 21 the house met and passed a nonbinding resolution calling on him to step down, with 248 votes for and just thirty-two against. Opinion makers had been scoping out an abdication in earnest since early summer, some pitching ideas for institutional innovations that might grease the skids. In an essay in Nezavisimaya gazeta on July 10, the sagacious Vitalii Tret’yakov pointed the finger at Yeltsin and his loyalists for following an “ostrich policy.” Without a change of course, Russia was in for popular insurrection, a coup d’état, or civil war; if the last were to break out, the country would come under foreign military occupation, since the world could not abide the breakup of a former superpower with a nuclear arsenal and ten atomic power stations. To stave off a cataclysm, Russia, he said, needed to hold special legislative and presidential elections within three months. The Federal Assembly should establish a Provisional State Council consisting of main ministers, parliamentary leaders, party heads, and representatives of Russia’s macroregions and trade unions. Yeltsin was to be barred from chairing the council and to be a member only if he consented in writing not to stand for another term in the extraordinary election for president. To head the council, Tret’yakov suggested Foreign Minister Yevgenii Primakov; he also recommended that Viktor Chernomyrdin be returned as the caretaker prime minister for the interregnum.31
Tret’yakov was right in the presentiment that there would be a shakeup and that Chernomyrdin and Primakov would be players in it. The Provisional State Council, though, was too contorted an idea to fly.32 And Tret’yakov miscalculated about the president. Yeltsin did not consider renouncing power in 1998, to a Supreme Council or anybody else, despite repeated testimony in the press that he was on the verge of doing so.33
Yeltsin notified Kiriyenko on August 22 that his premiership was done, after four months. The choice to replace him was the amazing one foreseen by Tret’yakov in July—Chernomyrdin, the same veteran of the red directors’ club whom Yeltsin had deposed in March. As he made the offer to Chernomyrdin in his Kremlin office on August 23, Yeltsin made a fulsome apology for the past spring and offered to repeat it on the airwaves. Chernomyrdin said the confidential amends were sufficient. It was made clear in this meeting and others that Yeltsin expected Chernomyrdin to sit until 2000 and to run for president then with his support. Yeltsin was more acceptant of Chernomyrdin’s return than excited by it.34 He divulged his decision in a televised speech the next day. “Today we need the people who are usually called ‘heavyweights.’ In my view, the experience and weight of Chernomyrdin are needed.” Yeltsin drew a link to the succession question, saying the reinstatement would help assure “continuity in power in 2000” and that human qualities such as Chernomyrdin’s “will be the decisive argument in the presidential elections.”