Power struggle at the Kremlin as PM challenges Putin

Some are calling it a "Kremlin earthquake". In barely a week, the hope that Russia was embracing liberal democracy under President Vladimir Putin has dimmed sharply while fears of an authoritarian revival are surging.

The storm that began with last weekend's arrest of Mikhail Khodorkovsky, Russia's richest man and the chief executive of Yukos - the world's fourth-largest oil producer - generated fresh political turmoil yesterday. Mikhail Kasyanov, the Russian Prime Minster, waded in to say he was "very troubled" by Thursday's freezing of the company's stocks by the Russian Prosecutors' Office. It was the first time private assets have been seized by the state since 1991.

Mr Kasyanov said: "The freezing of shares of a private company that is traded on the market is a new phenomenon, the consequences of which are hard to guess at."

His intervention was in direct defiance of President Putin, who warned his Cabinet on Monday against interfering in the prosecutors' work. The comments by the Prime Minister, who rose to power under Boris Yeltsin, fed speculation that his position may also now be under threat.

Alexander Voloshin, the powerful Kremlin chief-of-staff who resigned on Thursday, was replaced by his 38-year-old deputy, Dimitri Medvedev, a longtime Putin friend and ally.

Mr. Voloshin, nicknamed the Grey Cardinal for his mastery of Kremlin intrigue, was a relic of the Yeltsin era and the main defender of big business in the upper echelons of government.

Mr Medvedev's appointment reassured some who feared that President Putin, a former KGB spy, would choose one of the Kremlin hawks, who hail from the security services and seek to reassert the state's authority over business.

But Alexander Konovalov, an independent political analyst, said: "Political stability, which was based on a balance of forces at the top, has exploded. Voloshin's resignation will surely be followed by many more. There is a new mood in the Kremlin."

Andrei Piontkovsky, a director of the independent Centre for Strategic Studies, added: "We now see the real shape of the Putin era, and we can call it bureaucratic capitalism with an authoritarian political system. It remains to be seen whether Putin himself is the author of this situation, or its hostage."

After coming to power four years ago, Mr Putin began quietly stacking the leadership of Russia's sprawling bureaucracy with colleagues from his secret service.

This group is known as the "siloviki", from the Russian word meaning "force", because of their statist mindset and liking for strong-arm methods. Russian analysts have been warning for some time that they would eventually overwhelm the Yeltsin-era "family", many of whom - including Mr Khodorkovsky - gained fabulous wealth during the volatile 1990s.

Mr Khodorkovsky's biggest crime may have been that he funded liberal political parties such as the centrist political party, Yabloko, and independent media, as well as having harboured political ambitions of his own.

Last week prosecutors unveiled their case which, in a strange echo of the Stalin era, accused Mr Khodorkovsky of organising a shadowy "group of individuals" who conspired to, "take control of the shares in Russian companies during the privatization process through deceit".

Though the country is preparing for parliamentary elections, scheduled to be held on 7 December, and presidential polls are due next March, most observers believe that state intervention, rather than the popular will, is now the determining factor.

"We have a regime of 'managed democracy', which means that state resources will be used to produce the desired outcomes," said Otto Latsis, the editor of Russky Kourier, one of Russia's few remaining independent newspapers.

"The elections are just for show," he said. "In the Kremlin they already know exactly what the vote count will be."