Putin fires chief of staff, names his replacement

MOSCOW -- President Vladimir Putin tightened his grip on the Kremlin on Thursday by relieving chief of staff Alexander Voloshin from duty, Russian news agencies reported, a move likely to deepen political and economic turmoil following the arrest of Russia's richest tycoon.

Rumors that Voloshin, the last major figure in the Kremlin from the Boris Yeltsin era, had resigned rattled Russian political and business circles for several days. Voloshin reportedly offered his resignation after Saturday's arrest and jailing of Mikhail Khodorkovsky, the head of the Russian oil giant Yukos.

Voloshin was a key figure under Yeltsin in the years when former Soviet state industries were privatized at giveaway prices in dubious auctions. Voloshin and his allies believed that privatization would help prevent a communist comeback following the 1991 Soviet collapse.

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 is one of the many Kremlin figures from Putin's native St. Petersburg who have been jockeying for influence with other groupings in the Kremlin.

The announcement of Voloshin's departure came hours after prosecutors 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 4-month-old probe of Yukos, which took a dramatic turn on 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, a top Kremlin advocate of big business, reportedly resigned to protest Khodorkovsky's arrest. His leaving his powerful post would 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.

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.

Interfax reported Thursday that Anatoly Chubais, the head of the Unified Energy Systems electricity monopoly, invited Voloshin, who serves as the company's board chairman, to become a full-time employee of the company. UES wouldn't comment on the report.

Putin, in a Kremlin meeting with top businessmen and investors on Thursday, made no reference to Yukos. He said that Russia has taken many steps to improve the business climate, such as judicial reforms and improving demands for corporate transparency.

But later one of the participants, Morgan Stanley International president Stephan Newhouse told Dow Jones Newswires that "he assured us that this (Yukos case) does not represent a campaign against business or any change in the government's commitment to the market economy."