Russia's economy minister arrested for allegedly taking $2m bribe to approve government oil takeover

Russia’s economy minister has been charged with extorting a $2m (£1.6m) bribe to approve a state oil takeover, making him the highest-ranking official to face prosecution since the fall of the Soviet Union in 1991.

Alexei Ulyukayev’s arrest has been championed by pro-Kremlin politicians and state television as a victory in the fight against corruption, but the case threatens to expose vulnerabilities in Vladimir Putin's inner circle.

Mr Ulyukayev's ministry had been overseeing a sale of state assets when investigators said he took a bribe on 14 November for approving a $5bn (£4bn) bid by Rosneft, Russia's biggest oil company, to purchase a majority stake in oil producer Bashneft.

Russia’s Investigative Committee said it had charged Mr Ulyukayev with “receiving bribes” after he “illegally demanded” that a Rosneft representative pay him to endorse the acquisition.

Investigators accused the politician of “threatening, using his ministerial powers, to create obstacles to the company's activities in the future”.

"Thanks to a timely report of the minister's illegal activities by representatives of Rosneft to law enforcement, Alexei Ulyukayev was caught red-handed as he received a $2m bribe," a statement said.

The minister’s arrest was announced in the early hours of Tuesday morning, coming after months of electronic surveillance and phone tapping, reportedly led by the FSB security service, culminating in a sting operation recording the alleged bribe being taken on Monday.

The 60-year-old technocrat faces up to 15 years in jail if found guilty of the crime.

Mr Ulyukayev's lawyer, lawyer Timofei Gridnev, told Reuters the politician was detained at Rosneft's office, although the circumstances remained unclear.

The economy ministry described the arrest as "strange and surprising", with sources telling the Novaya Gazeta newspaper Mr Ulyukayev had not taken any money himself. No footage or photographs were released of his arrest.

The sale of the 50.07 per cent stake in Bashneft, Russia's sixth largest oil producer, came after months of wrangling that saw government-owned Rosneft face down opposition from some in the government.

Mr Ulyukayev originally opposed the sale but later endorsed it after Mr Putin said it could help fill state coffers as Russia struggles to plug budget holes left by low oil prices and Western sanctions over the Ukraine conflict.

Rosneft is led by Igor Sechin, a powerful ally of the Russian President, and investigators said they were not challenging the legality of the company’s purchase.

Mr Sechin lobbied hard to buy Bashneft, but the deal was fiercely opposed by economic liberals in the government, some with ties to Prime Minister Dmitry Medvedev, who believed Bashneft should go to private investors.

Mr Putin was informed about the case when the investigation was first launched, Kremlin spokesman Dmitry Peskov told reporters. "These are serious allegations," he said. "Only a court can deliver a verdict."

Critics have accused officials of using previous high-profile prosecutions as cover for settling commercial or political scores, a charge denied by the Kremlin and law enforcement agencies deny that.

Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs and briefly economy minister himself in the 1990s, said he was sceptical about the accusations against Mr Ulyukayev.

"It's hard to tell who's actually gaining from all this, apart from the SK [Investigative Committee], which is diverting attention away from their generals who are being investigated," he told a Russian radio station, according to a translation by the BBC.

Others highlighted Mr Ulyukayev's high-profile opposition to increasing government presence in the Russian economy, originally saying it was wrong for a state-owned company to take part in a privatisation drive.

Mr Putin himself had defended the deal, saying that because Rosneft has minority foreign investors, the sale wasn't simply a transfer of assets from one part of the state to another.

Vladimir Milov, a former deputy energy minister turned opposition activist, claimed Rosneft could be behind the Ulyukayev case in an opinion piece on the RBC News website.

"I have little doubt that the middle-of-the-night detention of economic minister Alexei Ulyukayev is an act of revenge for hampering Rosneft's participation in the privatisation of Bashneft," he said.

There had been a widespread consensus that the Bashneft stake was sold to Rosneft for a market price, meaning it was "insane" to extort a bribe from one of the most powerful men in Russia when everyone agreed on the valuation, he added.

Mr Ulyukayev has been in his post since 2013 and is close to Andrei Kostin, the influential head of Russia's second-biggest lender, state-owned VTB, and chairs the firm’s supervisory board.

Additional reporting by agencies