Speaking after his first meeting with the premier, who the president sacked earlier in the year, Mr Yeltsin also named Mr Chernomyrdin as his favoured successor in the 2000 presidential elections.

{ Video 1 Mr Yeltsin had returned early from his holiday after sacking his entire government at the weekend.

He met Mr Chernomyrdin at the Kremlin to discuss forming a new government to deal with Russia's continuing economic problems.

As the two started their talks, the rouble was down to 7.14 against the dollar while world markets remained edgy ahead of announcements over the restructuring of Russian debt.

Mr Chernomyrdin has already said that his first priority will be to take stock of Russia's financial crisis which led to the devaluing of the rouble.

Mr Chernomyrdin: Previously premier for five years

The meeting comes after Mr Yeltsin sacked his Prime Minister Sergei Kiriyenko, along with the entire government on Sunday.

Mr Kiriyenko, who was appointed only last March, had succeeded Victor Chernomyrdin.

After taking the helm, Mr Kiriyenko faced a Russian economy in a tailspin and had been fighting a losing battle to push reform measures through a hostile parliament.

State workers were also increasingly hostile towards the government as they continue to wait to be paid.

History repeats itself

The BBC's Andrew Harding: "It's not looking good for the rouble"

This is the second time this year that Yeltsin has sacked the government.

In March, he dismissed the entire government, which was led by Mr Chernomyrdin, and took over temporarily as prime minister.

Mr Yeltsin had criticised that government for huge delays in paying wages to state sector workers.

Russian journalist Alexander Nekrassov: Chernomyrdin could be after Presidency

Before being fired, Mr Chernomyrdin was seen as a loyal premier who served more than five years as scores of other Cabinet officials had come and gone.

Mr Yeltsin is thought to have sacked the government a second time to defend his position against growing political opposition.