Russian minister exposes split in Putin's government

Just over a month before Russia's presidential elections, the hidden battle raging within the ruling class again spilt into the open yesterday, as one of Vladimir Putin's top ministers called for a change in foreign policy.

"In the nearest future we need to change our foreign policy goals to guarantee stable investment," said the Finance Minister, Alexei Kudrin, at an investment forum in Moscow. His call follows a series of clashes between Russia and the West over issues as diverse as Kosovo, US plans for missile shields in Europe, and the British Council.

Anatoly Chubais, who heads the state electricity monopoly, agreed with Mr Kudrin. "We really need to think about how much our foreign policy costs our economy," he said. Such aggressive behaviour in foreign policy was scaring off foreign investment, he added.

Although Mr Kudrin later toned down his words when talking to journalists, saying there had been no major mistakes in recent Russian foreign policy, his intervention in the foreign policy debate was a surprise. While most analysts agree there is a bitter battle going on inside the Kremlin as Mr Putin prepares to step down, it is exceptionally rare for ministers to criticise Kremlin policy publicly.

Mr Kudrin, who headed the Russian delegation to the World Economic Forum in Davos, Switzerland, last week, is seen as a liberal and an ally of Mr Putin's anointed successor, Dmitry Medvedev. He has faced difficulties in recent months, however, in what appears to be a concerted campaign against him by more hawkish elements for control over power and financial resources when Mr Putin steps down. Sergei Storchak, one of Mr Kudrin's deputies, was arrested late last year on charges of fraud and embezzlement.

It is unclear whether Russia's aggressive foreign policy really does put off investors. Foreign companies working in Russia report dealing with overly bureaucratic legislation and widespread corruption. But many Western investors are prepared to accept the risks of doing business in Russia because of the handsome profits that can be made.

"Investors are not philanthropists," said Leonid Radzikhovsky, a political analyst. "They are not going to pull out based on Russian foreign policy if there is money to be made here. But to really attract more investors we would need to change not foreign policy but internal policies – to ensure the courts are more independent and less people take bribes."

One Western businessman working in Russia since 2000 said: "As long as the overall political situation appears to be stable, investors already working in Russia will not be scared off. But if disputes such as that with the British Council continue to escalate, of course it has an effect on how people abroad perceive Russia."

Some analysts say that the divisions within the government are less about ideology and more about the battle for influence and money. "People are scared that Medvedev will re-divide the pie, so they are trying to defend their share," said Mr Radzikhovsky. "And attack is the best form of defence."

With Mr Medvedev all but guaranteed a crushing victory in the 2 March vote, speculation now revolves around Mr Putin's plans for when he leaves the Kremlin. He has already said that he could become Prime Minister and recent reports suggest he could combine prime-ministerial duties with the chairmanship of Gazprom, the state-controlled energy giant, which often seems to act as an arm of Russian foreign policy.

Mr Medvedev currently holds this position but will have to step down when he becomes President. The Russian daily Kommersant reported yesterday that sources inside Gazprom had hinted that its next chairman may be none other than the current President.