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Russian rumblings grow: PM voices Yukos concern

Moscow, Oct. 31 (Reuters): Russia’s Prime Minister said today he was deeply concerned by the freezing of shares of oil giant Yukos, the closest any top official has come to publicly criticising the Kremlin’s handling of the crisis.

“I will refrain from any assessment but my concern is great,” Prime Minister Mikhail Kasyanov was quoted by Interfax news agency as saying, a day after prosecutors froze a large stake in Yukos and a top presidential aide quit in protest.

Alexander Voloshin was the main counterbalance to the hawks and sympathetic to “oligarchs” like Khodorkovsky who made huge fortunes under former President Boris Yeltsin. Voloshin is the most senior official to quit under Putin.

He will be replaced by Dmitry Medvedev, chairman of the state-run Gazprom, the world’s largest gas producer.

The escalating confrontation between the Kremlin and Yukos has presented President Vladimir Putin with his biggest political and economic crisis in three years in power and raised fears over the future of economic reforms.

Russian markets regained some ground after Putin told bankers he was committed to a market economy, but shares were still far below levels before the gunpoint arrest of Yukos boss Mikhail Khodorkovsky on charges of fraud and tax evasion.

Kasyanov, who sides with the pro-business elite that is pitted against Kremlin hardliners, said the freezing of the shares of a publicly-listed firm was “a new phenomenon, whose consequences are difficult to define”.

Putin faces calls from business leaders, the media and political commentators to rein in prosecutors and send a clear signal the Yukos campaign would not spread to other businesses. “The President should open his eyes and finally discover that prosecutors are destroying in one day what took years to create,” leading business daily Vedemosti said in an editorial. “Business can react to such a development only by shutting down,” said the daily.

Yesterday, prosecutors froze a controlling stake in Yukos owned by Khodorkovsky and his allies in a dramatic escalation of what is seen as a drive by Kremlin hawks to quash his political ambitions and reassert the state’s authority over business.

The prosecutor’s office said today it had lifted a freeze on two per cent of the company which it says belonged to individuals not related to criminal investigations. An analyst at Fitch rating agency said the action against Yukos showed Russia was not ready for investment grade — a status Moscow seeks to attract vital foreign capital.

“The events of the past week have tarnished President Vladimir Putin’s market and reformist credentials,” said Edward Parker, Fitch analyst in charge of Russia in London.

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