Russian President Boris Yeltsin has sacked his government, replaced Prime Minister Sergei Stepashin with intelligence chief Vladimir Putin and named him as his chosen successor for president.

It is the fourth time in the past 18 months that Mr Yeltsin has sacked a prime minister.

Mr Putin, 46, the head of the Federal Security Service, the main successor to the KGB, has been named acting prime minister.

Mr Yeltsin said he wanted Mr Putin to succeed him as president in next year's elections. Mr Putin immediately responded by saying: ''I shall definitely stand for the post of Russian president."

Mr Yeltsin also sacked the entire Russian Government, but has asked the cabinet to stay on temporarily.

The move was branded ''100% lunacy'' by the Communists who control the largest number of seats in the Duma, the lower house of parliament.

They said they had not decided whether they would back Mr Putin.

The Duma, which is currently on summer vacation, will be summoned back to vote on Mr Putin's nomination next Monday.

Shortly after sacking Mr Stepashin, Mr Yeltsin signed a decree setting 19 December as the date for the new elections for the Duma, the Kremlin said.

The rouble plunged against the dollar following news of the prime minister's dismissal.

Vladimir Putin: Dubbed "the grey cardinal" for his dour style

Mr Stepashin, who has been staunchly loyal to Mr Yeltsin, indicated he was not pleased with his sacking after just three months in the job.

He told the cabinet: "This morning I visited the president and he signed a decree on my resignation. He thanked me for good work - and fired me.

"I honestly expressed my position concerning my resignation ... but this is his right as the president and the commander-in-chief. I told the president that I have been, am, and will remain with him until the end."

Stern and effective

Reports say Mr Yeltsin had been dissatisfied with Mr Stepashin's political performance, considering him too moderate and not enough of a heavyweight.

In a televised address to the nation, Mr Yeltsin said Mr Putin, a fomer KGB spy, had vast experience and would guarantee reforms in Russia if elected in next year's presidential election.

The BBC's correspondent in Moscow, Andrew Harding, says Mr Putin has a reputation as a stern but effective minister.

However, he is not politically popular and the crucial issue is whether he is approved by parliament.

In Washington, the White House brushed aside news of the shake-up.

"We work with Russian ministers based on policies, not personalities," National Security Council spokesman David Leavy said. "We know Mr Putin well ... we've dealt with him on Kosovo where he was constructive."

'Death agony'

The Duma must vote on Mr Putin's candidacy within one week.

If it rejects him three times it will be dissolved and new elections called.

Duma leaders agreed to start debates on Mr Putin's nomination at 1400 Moscow time (1000 GMT) next Monday.

Duma Speaker Gennady Seleznev said he hoped Mr Putin's nomination would be approved so that elections could take place in December.

Russia's Communists said the sacking of Mr Stepashin's government proved that Mr Yeltsin was unfit to serve.

"We [said] a long time ago that this government would be sacked by September," Communist Party Chief Gennady Zyuganov said.

"It is the death agony of the regime. We are not surprised. Yeltsin has thrown the country into crisis again," he added.

Dagestan warning

After dismissing Mr Stepashin, Mr Yeltsin reportedly offered him the post of secretary of the security council.

But sources quoted by Interfax news agency said Mr Stepashin ''would not accept state service" because it would be "inappropriate in the situation that has developed".

Mr Stepashin's dismissal came a day after he led a delegation of Kremlin officials charged with defusing the crisis which has exploded in the southern republic of Dagestan.

In his final meeting with the cabinet on Monday, he warned that Russia risked losing Dagestan where Islamic rebels have seized several villages.

"Today the situation in Dagestan is very difficult. I think we could really lose Dagestan," he was quoted as saying.

Mr Stepashin's sacking triggers another political crisis as Russia prepares for the parliamentary elections in December.

The decree signed on Monday formally launches the election campaign in which all major political parties and political blocs will take part.

The Duma election will establish the political trend for the more important presidential election due in mid-2000.