EBRD quits Russia deal after partner's loose talk

MOSCOW Dec 4 (Reuters) - The European Bank for Reconstruction and Development quit a Russian investment project on Tuesday after its partner caused a furore by saying it was spearheading a state drive to take over strategic industries.

A call for "velvet reprivatisation" by little-known fund manager Oleg Shvartsman last week stoked fears that the businessmen who acquired vast assets through privatisations in the 1990s may be forced to give them up.

Shvartsman told the Kommersant daily that his $3.2 billion fund management firm Finance Group was backed by unnamed politicians and "related both to the presidential administration and power bloc".

He also said he was setting up a state corporation called 'Social Investments' that would operate as a "vacuum cleaner" to take control of assets using "voluntary-coercive methods".

Analysts said the fact the comments appeared in print may point to a power struggle between rival clans in the Kremlin jostling for influence as President Vladimir Putin prepares to anoint a successor and step down next year.

The EBRD, the state Russian Venture Company and Israel's Tamir Fishman Group said they would not go ahead with a proposed venture fund "following statements by a minority shareholder in the fund's management company".

Shvartsman's company, Finance Trust, won a tender organised by the Economy Ministry in May to manage the Tamir Fishman Russian Venture Capital Fund.

"We all decided to suspend our joint activities at the moment, however we believe it is a momentary setback and we plan to continue with our activities in Russia," Eldad Tamir, co-CEO of Tamir Fishman, said in a statement.

PRE-ELECTION BOMBSHELL

Shvartsman's interview was published two days before Sunday's parliamentary election in which Putin's United Russia party won a landslide victory, tightening the Kremlin's grip on power.

In the interview, presented in a question-and-answer format, Kommersant quoted Shvartsman saying he reported indirectly to Igor Sechin, deputy chief of the Kremlin staff and chairman of state-controlled oil company Rosneft (ROSN.MM).

Shvartsman denounced the published version of his comments on Tuesday, calling it "poison". He accused Kommersant of using "literary editing" to twist his words, and denied mentioning Sechin by name in the interview.

"People are already calling me a state raider, Sechin's vacuum cleaner," Shvartsman told Ekho Moskvy radio.

But he reiterated a call for Russia to regain control over all strategic industries -- including the oil sector -- saying such a task would be realistic within the next five years.

Kommersant's editor-in-chief, Andrei Vasilyev, stood by the paper's story, saying it had Shvartsman on tape and the businessman had authorised the text.

"It's laughable because, first of all, we have his interview on paper with his signature on every page, and second we have the recording," Vasilyev told Reuters.

"Of course, compared to his oral speech, there was literary editing, but he personally approved it."

Analysts say the Shvartsman interview may be symptomatic of an intensifying power struggle in the Kremlin as liberals and hawks vie for supremacy ahead of the election of a successor to Putin in March 2008.

What is not clear is whether it was a provocation designed to politically expose Sechin, regarded by Kremlin watchers as Putin's 'grey cardinal', or a clumsy revelation of the state's real economic agenda.

"Intentionally or not, Mr Shvartsman told the truth. Truth about unavoidable diseases of such social and political systems as 'sovereign democracy'," said Anatoly Chubais, a 1990s reformer who heads power giant Unified Energy System EESR.MM. (Additional reporting by Dmitry Solovyov) (Writing by Douglas Busvine; Editing by David Cowell)