Rumours of resignation push Kremlin towards crisis

Russia is tipping towards political crisis amid reports that the President's influential chief of staff, Aleksandr Voloshin, had resigned.

Mr Voloshin, 47, the most senior Russian political figure after the President and the Prime Minister, is also the most senior Kremlin official to survive from Boris Yeltsin's presidency. His departure would represent a definitive break between the two administrations just six weeks before parliamentary elections, and could undermine his ally, Prime Minister Mikhail Kasyanov.

The independent business newspaper, Vedomosti, reported it had been told by two independent sources that President Vladimir Putin had signed a letter accepting Mr Voloshin's resignation on Tuesday evening. The paper described the development as "the most important personnel decision of Mr Putin's career" and "a watershed" between Mr Putin's first term in office and his second, which is confidently expected to start after presidential elections in the spring.

The English language newspaper, The Moscow Times, reported that Mr Voloshin wanted to leave but that Mr Putin was hesitating about letting him go. By yesterday evening, there had was only a vague statement from the Kremlin. "If this were the case, the press service would have announced it. Those who say this do not have official information," said Alexei Gromov, a presidential press spokesman. Several officials close to both the President and Mr Voloshin said there had been no resignation, although one source declined to rule out an imminent reshuffle in the President's entourage.

The rumours and counter-rumours appear to have been sparked by differences between competing Kremlin factions on two subjects: what policies Mr Putin should campaign for re-election on, and the recent heavy-handed arrest of Russia's richest oligarch, Mikhail Khodorkovsky.

Mr Khodorovsky, head of the Yukos oil company, is in a Moscow prison after being arrested at Novosibirsk airport last Saturday. He has been charged with fraud and tax evasion. Mr Voloshin is seen as sympathetic towards Mr Khodorovsky.

"The real balance of power in the Kremlin has shifted to people in uniforms. For big business this [Voloshin's resignation] means 'pack your bags'," said Dmitry Oreshkin of the Merkator think-tank.

Mr Voloshin rose during the reign of Yeltsin and was known for his loyalty to his boss. He also helped transform Mr Putin from a grey intelligence chief into an international leader, and was involved in negotiations with the US in the run-up to the conflict in Iraq.

"This will increase instability and an imbalance between influential groups in the Kremlin. However, it is necessary to get rid of the Yeltsin-era elite which created the conditions for oligarch-dominated business and a corrupt bureaucracy," Liliya Shevtsova, an analyst at Carnegie Endowment think-tank said on Ekho Moskvy radio.