Dozens of ministers and other top officials were yesterday ordered by presidential decree to give in their notice to clear the way for the announcement of a new cabinet, which is expected by the end of the week.
The overhaul follows Mr Yeltsin's hotly disputed decision to appoint his unpopular chief-of-staff, Anatoly Chubais, as number two in the government under the premier, Viktor Chernomyrdin. The political complexion of the new government was unclear yesterday, although - to the delight of the West - Mr Yeltsin said that he intends to press ahead moves towards a free market economy.
Yesterday's decree exempted Mr Chernomyrdin and Mr Chubais who are now running the government in harness with Mr Yeltsin, giving rise to speculation that Russia is on a more liberal tack. Some incumbents seem certain to be kept on - notably, Yegeny Primakov, the Foreign Minister, who has been spearheading resistance to Nato expansion.
The Kremlin has been eyeing Russia's biggest liberal party, Yabloko, although its leader, Grigory Yavlinsky, has been fiercely critical of Mr Yeltsin and will drive a tough bargain.
The shake-up is evidence that Mr Yeltsin is determined to impose his stamp of authority after eight months in which he was sidelined by ill- health, leaving policy in the hands of Mr Chubais, the president's daughter, Tatyana, and a coalition of banking interests.
But it also indicated that Mr Yeltsin has all but abandoned the politics of consensus. While he was ailing, Mr Chernomyrdin built bridges with the Communists and nationalists who dominate the State Duma, knowing the Kremlin might have to strike a deal with them if the president left office. But the majority of parliament despises Mr Chubais, and his appointment is a sign that Mr Yeltsin is no longer interested in peace-making.
Yesterday Valentin Yumashev, the journalist who ghost-wrote Mr Yeltsin's first autobiography, Against The Grain, was appointed to replace Mr Chubais as chief-of-staff to the president. But most eyes were on Mr Chubais's new role.
There appears to be a broad consensus among Western institutions that the arrival of the 41-year-old St Petersburg intellectual back in government indicates that Russia's political pendulum has swung back towards free- market reforms and tight fiscal policies. Mr Yeltsin is generally thought to have strayed from the path at times last year in an attempt to appease nationalist and anti-Western sentiment before the presidential elections. But such a conclusion is premature. Although Mr Chubais is a liberal economist, he is also a hard-headed pragmatist with a reputation for ruthlessness and with strong links with Russia's banking interests. Moreover, Mr Yeltsin's strategy usually has much more to do with maintaining power than ideology. As a result, government has zig-zagged along, veering from policy to policy as expediency dictates.
This year, Mr Yeltsin has no election to worry about, so he may try to be more consistent. This will be difficult. In his address to parliament last week he outlined an agenda which included overhauling the tax code, pensions, the budget, housing subsidies, natural monopolies, and the military. But there are practical obstacles - from overwhelming red tape and corruption to powerful lobbies who have got rich quick in the new Russia, and will resist anything that threatens their interests.
Moreover, election or not, he would be unwise to ignore the groundswell of resentment caused by Russia's economic disarray. This has deepened with the news of Mr Chubais' appointment. He is loathed for his role in Russia's huge privatisation programme between 1992 and 1994, which many complain handed state assets over to a chosen few, at the expense of the population.