By BBC News Online's Stephen Mulvey

Boris Yeltsin's announcement of his retirement on the last day of the 20th Century shows that his legendary political instinct, and his sense of drama, are still intact.

The move is a dramatic gesture comparable to his address to the crowds from the top of a tank outside Moscow's White House during the attempted coup - a moment that Bill Clinton recently described as one of the most memorable of his life.

But the overriding motive for this step is clearly political.

Mr Yeltsin anointed Prime Minister Vladimir Putin as his favoured successor when he appointed him in August, and his snap resignation gives Mr Putin every possible advantage in the battle for succession.

Putin at an advantage

As Prime Minister, Mr Putin will hold the reins of power in the interim period before elections in March. He will face his opponents in the presidential election with many of the advantages of an incumbent.

He will be able to command the loyalty of a huge number of state servants, as well as appealing to voters - and there are many in Russia - who wish only for a smooth transition from one leader to the next.

A presidential election had been due, anyway, at the end of June. Mr Yeltsin's resignation brings it forward by three to four months, and this also favours Mr Putin.

Chechnya uncertainty

The Prime Minister's approval ratings have frequently reached 60 or 70% because of popular enthusiasm for the military operations in Chechnya, and earlier in Dagestan, but there is a risk that his popularity could sink if the fighting in the Caucasus drags on and Russian casualties mount.

Since it has taken many weeks to capture suburbs of the capital, Grozny, the Kremlin will be aware that it is likely to take months to subdue the rebels in Chechnya's southern mountains.

Furthermore, it was precisely when the Chechens looked defeat in the face during the last war of 1994-96 that they undertook their most daring and bloody raids against Russian territory.

From this perspective, the sooner the election can be held, the better it will be for Mr Putin.

In the three months before the election he will have a chance to show the electorate that he is capable of more than fighting guerrillas.

He will be able to take the credit for an economy that has begun to grow, and to meet foreign leaders.

It was rumoured this week that President Clinton is planning a trip to Russia in the new year; it is not clear whether this visit will still take place in the light of Mr Yeltsin's resignation.

In the run-up to Russia's parliamentary elections in December rumours were circulating in Moscow that Mr Yeltsin might resign, and hand over power to Mr Putin.

These rumours were connected to a conspiracy theory, which said that a state of emergency would be declared over the conflict in Chechnya, and that Mr Putin would rule unelected.

It now appears that there may have been some truth in the rumours, but Mr Yeltsin's resignation is not a conspiracy - it is a supremely shrewd move from one of the 20th Century's most gifted and instinctual political operators.