MOSCOW A revolt by Russia's finance minister over Vladimir Putin's plan to swap places with President Dmitry Medvedev deepened concerns about reforms on Monday and raised the possibility of a battle over policy and the premiership.
Putin's announcement on Saturday that he planned to return to the Kremlin next year after nearly four years as prime minister was intended to end political uncertainty that has been undermining Russia's economic performance.
But Finance Minister Alexei Kudrin's refusal on Sunday to serve in government under Medvedev unsettled investors who see him as a guardian of financial stability, and points to cracks in the unity that Putin wants to portray.
Natalia Orlova, chief economist at Russia's Alfa Bank, said Putin's announcement was a positive development for investors who had been anxious to know whether Putin or Medvedev would run for president next March.
"That said, some uncertainty obviously still remains as the prime minister's post had been previously rumoured to be offered to the current finance minister," she said, predicting Kudrin's departure would weaken control over budget spending.
A European diplomat said privately that Kudrin's departure would be a concern but that it was encouraging that his remarks had fuelled an internal political debate.
"(It is) the first such sign from Russia in years at such a high level," the diplomat said.
The Russian rouble weakened on Monday after the weekend of political upheaval, and has now lost 15 percent in value against the dollar since a global market selloff began in early August.
The central bank, which has stepped up dollar-selling intervention to slow the rouble's fall, pumped more liquidity into the banking system via repo auctions as funding strains started to show.
Stocks, which on Friday hit their lowest level since July 2010, meanwhile recovered in volatile trade as global markets bounced back from last weeks vertiginous falls.
JOSTLING FOR POSITION
Putin and Medvedev 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 could feasibly now serve until 2024.
Although opinion polls show they are both much more popular than any other Russian politicians, and Putin is all but certain to win a six-year term 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.
Kudrin, who has been finance minister since 2000, also seems unhappy with the way Putin, 58, and Medvedev, 46, have carved up power. If he wins two more terms, Putin will by 2024 have been in power for nearly a quarter of a century.
Kudrin, a Putin ally since they worked together in St Petersburg in the 1990s, has hinted he wants to be premier and said on Sunday he disagreed with Medvedev on economic policy, particularly his decision to increase military spending.
It is unusual for a politician as senior as Kudrin to air such grievances in public or to criticise the president so openly. The Moskovsky Komsomolets newspaper described Kudrin's remarks as political suicide.
But Kudrin, 50, whose decision to save windfall oil revenues for a rainy-day fund which helped Russia through the 2008 global economic crisis, may still have a shot at the premiership.
Political analysts say Medvedev might not become prime minister if the ruling United Russia party, whose candidate list he heads, loses ground in a parliamentary election on December 4. It is also not clear how long he could hold on to the job.
"You will only be able to sympathise with Medvedev's government. Even if he manages to form a strong team, it will have to take very unpopular measures which Dmitry Medvedev decided not to carry out as president," the RBK daily said.
KUDRIN SEEN AS REFORMER
Although he has the image of a liberal reformer, and is certainly less conservative than Putin, Medvedev has not carried out many of his reform promises so far.
Kudrin may be banking on Medvedev falling out with Putin, to whom Kudrin is close, or picking up the reins of government if Medvedev makes a hash of the job.
"For all Mr Medvedev's warm words on the need to progress market reforms, Mr Kudrin has arguably been more influential in rebuilding Russia's balance sheet from the ashes of the 1998 rouble crisis," said Neal Shearing of Capital Economics.
(Editing by Rosalind Russell)
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