Russians begin to form government: Western jitters are calmed by reports that Fyodorov will stay on as finance minister, but coalminers threaten to strike

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RUSSIA had the skeleton of a new government last night, with reports that a radical reformer was being kept on alongside an old-style Soviet industrialist. After another day of talks between President Boris Yeltsin and the Prime Minister, Viktor Chernomyrdin, Interfax news agency said that Boris Fyodorov would retain his post as Finance Minister despite threatening to quit.

The news will comfort Western governments who credit Mr Fyodorov with bringing inflation down to 12 per cent in December from near the hyper-inflation threshold of 50 per cent a month. The price has been scores of factories, including Russia's biggest car- maker, AvtoVaz, shut down for lack of cash and parts.

'What had seemed a tragedy is now looking far better. The clouds gathered but no storm,' said Anders Aslund, a government adviser. 'It was all set for a conservative formation. All that has fallen through.' He said the change of plans had been forced by panic over the rouble. 'If Fyodorov goes, the rouble goes through the floor. They know this. It is the first time that the market has mattered in Russian politics.'

A sign that the cabinet would listen to industry, however, was the confirmation of Oleg Soskovets, who is close to Mr Chernomyrdin, as first deputy prime minister. Mr Aslund described both as 'Brezhnevite'. Reformers were trounced in elections on 12 December but the resignation on Sunday of another first deputy premier, Yegor Gaidar, the original architect of Russia's market reforms, marked the beginning of the unravelling of the government.

Mr Fyodorov, Mr Gaidar's main ally, said on Tuesday he would stay on only if both the chairman of the central bank, Viktor Gerashchenko, and deputy prime minister Alexander Zaveryukha were sacked. Neither of these terms seem to have been met. But in what smacked of a calculated rebuff rather than a technical hitch, as claimed later by officials, Mr Fyodorov arrived at the Kremlin yesterday for a meeting of the Security Council only to find his name left off a security clearance list.

As officials argued in Moscow, the Independent Miners Union in Vorkuta, suppliers of energy for St Petersburg and Moscow, threated to strike next month. Many have not been paid since November and say a package promised by Mr Gaidar has not been fulfilled.

The rouble meanwhile continued its free-fall. It had held steady last year but crashed after Mr Gaidar stormed out of the cabinet saying he was besieged by conservatives. The rouble, which stood at 414 to the dollar in January last year and at 1,247 two weeks ago, plunged yesterday to 1,607.

The main reformist party in parliament, Russia's Choice, has displayed near suicidal tendencies. After securing only 15 per cent of the vote in December, it has begun to splinter. A leading member, Andrei Makarov, said he was joining a new reformist grouping called 'December 12 Union' which has of 27 MPs, just short of the 35 needed to be registered as a formal faction, a status that would ensure membership on committees and speaking time.

Yeltsin loses way, page 21