Russian finance minister ousted in power struggle (Reuters)

DIMITROVGRAD, Russia (Reuters) ? Finance Minister Alexei Kudrin was ousted on Monday in an unusually bitter and public conflict with President Dmitry Medvedev that has exposed deep cracks in unity over Vladimir Putin's plan to return to the Kremlin.

Western investors regard Kudrin as a guarantor of financial stability and have said his departure would be a deep blow to Russia's economy, setting back prospects for reforms.

"I have resigned. My resignation was accepted," Kudrin told Reuters.

Kudrin was left with little option. Medvedev surprised and humiliated him by demanding he quit at a meeting with local officials after the long-serving minister, long a Putin ally, said he would not work under Medvedev if he swaps places with Putin to become prime minister next year.

"Such statements appear improper ... and can in no way be justified. Nobody has revoked discipline and subordination," Medvedev said in the Volga city of Dimitrovgrad, looking down from a stage on Kudrin who was sitting in the audience.

"If, Alexei Leonidovich, you disagree with the course of the president, there is only one course of action and you know it: to resign ... Naturally, it's necessary to answer here and now: Will you write a resignation letter?"

Kudrin, who said on Sunday he differed with Medvedev over economic policy and particularly his decision to increase military spending, looked stunned -- although the president cannot fire him directly.

"Yes, it is indeed true that I have disagreements with you. I will take a decision on your proposal after consulting with the prime minister (Putin)," he responded.

Such bitter exchanges are rarely seen in public in Russia, where political life is usually orchestrated at the highest level and open dissent over policy is unusual.

Medvedev and Putin briefly differed over policy on Libya this year but the last open and bitter feud at such a high level was in 2004 when the then prime minister, Mikhail Kasyanov, fell out with Putin, who was president at the time.

CRACKS IN UNITY

Many economists had hoped Kudrin, a close ally of Putin since they worked together in the St Petersburg city administration in the 1990s, would not be forced out.

"This is one of the most worrying developments so far," said Lilit Gevorgyan, a regional analyst at IHS Global Insight.

"Kudrin had been the one to be really pushing forward reforms, at least during Putin's first term. If he is gone, who will be doing that? Medvedev has talked of reforms but in fact he has barely done anything."

Kudrin's departure from Putin's script has highlighted the friction caused by the announcement on Saturday that the former KGB spy planned to return to the Kremlin in an election in March after nearly four years as prime minister.

Putin's decision was intended to end uncertainty over who would be president next year that had been undermining Russia's economic performance.

But Kudrin's dissent meant the facade of unity was cracked less than 24 hours later, and unsettled investors who praise him for cautious policies which helped Russia through the global economic crisis in 2008.

The fact that he chose to break ranks while in Washington for talks on the global economy risked particularly irking Putin because the prime minister has spared some of his fiercest rhetoric for the United States.

Just how deep the cracks in unity go, and how much dissent Putin faces, is unclear. Most government and Kremlin officials kept a low profile on Monday. None rushed to side with Kudrin.

But many top-ranking officials will now be contemplating their future because the center of power is expected to switch back to the Kremlin after Putin transferred it to the government under a power-sharing agreement with Medvedev.

HIGH STAKES

Julia Tsepliaeva, Chief Economist Russia & CIS for BNP Paribas, said before Kudrin's departure that his removal would lead to a "more sizable populist wave of government spending in 2011 and negative reaction of the market."

She said his departure could mean Russia's rainy-day fund from windfall oil and gas revenues, built up by Kudrin and used to fend off the global economic crisis, would soon be depleted.

"In addition, the dismissal of the strongest representative of the liberal economic wing of the government may result in the strengthening of the 'siloviki'(security forces) influence," she said.

Medvedev, 46, and Putin, 58, have ruled the world's largest country and biggest energy producer in a power 'tandem' since Putin had to give up the presidency in 2008 after serving the maximum two consecutive terms.

Putin has continued to pull the strings under the agreement and could serve until 2024 if he wins two successive six-year terms. He would by then have been in power for almost a quarter of a century.

Although opinion polls show both leaders are much more popular than any other Russian politicians, and Putin is all but certain to be elected in March, many Russians show signs of impatience with the lack of progress on democracy.

"How much more can you take? Yet again there will be nothing, everything will stay the same. We only get empty promises," said retired factory worker Nikolai, in the village of Titov northeast of Moscow.

(Additional reporting by Darya Korsunskaya and by Peter Apps in London; Writing by Timothy Heritage; Editing by Giles Elgood)

Source: http://us.rd.yahoo.com/dailynews/rss/world/*http%3A//news.yahoo.com/s/nm/20110926/wl_nm/us_russia

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