Sat, Nov 01, 2003 - Page 7 News List

Putin strengthens grip on the Kremlin

INFIGHTINGThe Russian president got rid of the last major figure from the Boris Yeltsin era in a move that is expected to consolidate his own power and that of his allies

AP , MOSCOW

Russian business and political circles faced spiraling uncertainty yesterday after President Vladimir Putin tightened his grip on the Kremlin by relieving his chief of staff from duty and prosecutors ordered the freezing of a huge chunk of shares in oil giant Yukos.

The late-night announcement on Thursday that Alexander Voloshin was departing came after days of rumors that he had tendered his resignation in the wake of the arrest and jailing of Yukos head Mikhail Khodorkovsky.

Voloshin was the last major figure in the Kremlin from the Boris Yeltsin era, during which so-called "oligarchs" such as Khodorkovsky amassed huge fortunes when former Soviet state industries were privatized at giveaway prices in dubious auctions.

Infighting in the Kremlin has been a hallmark of Putin's presidency and Voloshin's departure is likely to help Putin consolidate his own power and that of his allies.

Putin named Dmitry Medvedev, the first deputy chief of staff and the chairman of the Russian natural gas giant Gazprom, to succeed Voloshin.

Medvedev worked in the early 1990s as an aide to the late St. Petersburg mayor Anatoly Sobchak, as did Putin after he left the KGB. He is one of the many Kremlin figures from Putin's St. Petersburg circle, which has been jockeying for influence with other groupings in the Kremlin.

Voloshin, who was named Yeltsin's chief of staff in March 1999, was regarded as a central figure in the so-called "Family," the group of businessmen and politicians who wielded enormous power under Yeltsin. Former Russian chief prosecutor Yuri Skuratov alleged in 1999 that there was substantial evidence connecting Voloshin to graft in the corruption-tainted Yeltsin administration.

Voloshin's departure appeared to signal a strengthening of the security-service faction in the Kremlin -- connected with Putin from his days as a KGB agent -- which appears eager to stem the influence of magnates such as Khodorkovsky.

The announcement of Voloshin's departure came hours after pro-secutors froze a huge chunk of Yukos shares, plunging the stock market into its second nosedive in a week. The benchmark RTS Russian stock index closed down 8 percent after the announcement of the share freeze and Yukos shares lost 14 percent.

The stock market's sharp reaction appeared to reflect investor fears that a probe of Yukos that began in July could foretell troubles for Russia's biggest companies.

Many worry that the Kremlin could launch a broad revision of the results of the privatization of the 1990s, in which tycoons like Khodorkovsky snapped up prized chunks of state assets. Some analysts believe that Khodorkovsky's arrest will serve as an example to other phenomenally wealthy Russians to refrain from challenging Putin.

The freeze was a new escalation in a four-month-old probe of Yukos, which took a dramatic turn last Saturday when Khodorkovsky was arrested and jailed after being seized by special agents at a Siberian airport.

The arrest was widely seen as an action staged by some of Putin's top lieutenants to avenge the tycoon's political activities, which included funding of opposition parties.

Voloshin reportedly resigned to protest Khodorkovsky's arrest. Top Russian media reported that Voloshin submitted his resignation to Putin on Saturday after Khodorkovsky's arrest, but agreed to wait a few more days to avoid inflicting political damage to the president.

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