EBRD quits Russia deal after partner's loose talk

By Douglas Busvine

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.