New probe of deputy Russian minister

Other News Materials 3 December 2007 23:35 (UTC +04:00)

( AP ) - Prosecutors have opened a new criminal probe into a deputy finance minister who has already been charged with large-scale fraud and trying to embezzle millions of dollars in government funds, an official said Monday.

The Moscow City Court, meanwhile, refused requests to release Deputy Finance Minister Sergei Storchak from pretrial detention, despite appeals from Finance Minister Alexei Kudrin, who personally vouched for him.

The arrest of Storchak, a prominent authority on international financial relations, shocked many of Russia's top bankers and prompted media speculation that the investigation has a political element amid an increasingly public struggle among Kremlin clans for influence in anticipation of President Vladimir Putin's departure from office next year.

Storchak was charged late last month with trying to embezzle $43 million in government funds. He was detained by investigators, one day before he was supposed to accompany Kudrin on a trip to South Africa.

On Monday, prosecutors said they were investigating Storchak for allegedly exceeding his professional authority. Vladimir Markin, spokesman for the Prosecutor General's Investigative Committee, said in televised comments that the allegations stem from his role in January 2005 negotiations with Kuwait over the Soviet-era debts owed to the Gulf state.

Under the agreement, which was signed in May 2006, Russia paid Kuwait $600 million of the debt in goods, and the remaining $1 billion in cash, according to Russian news reports.

Two other people have also been charged in the case - the general director of a company called Sodexim and the president of a Moscow-based bank.

In a video linkup with Moscow City Court, he again insisted on his innocence and pleaded with the court to release him from pretrial detention, saying that his health was suffering.

The court, however, refused, saying he was at risk of fleeing the country.

Storchak, one of three deputy finance ministers, was a prominent figure in negotiations on paying off tens of billions of dollars in Soviet-era debts under the Paris Club umbrella of debt negotiations. Russia paid a $1 billion penalty for early repayment under the deal, but saved $7.7 billion in interest.

The deal was a public-relations coup, highlighting Russia's booming oil-fueled economy and burnishing the country's image just eight years after the ignominy of defaulting on debts in the 1998 financial crisis.

Storchak's detention came amid the campaign leading up to Sunday's parliamentary elections and growing uncertainty about Putin's intentions after his second term ends next year. Kremlin observers say rival political clans are jockeying for influence, trying to anticipate where Putin will end up.

Several influential newspapers have speculated the Storchak's detention was a political shot across the bow of Kudrin, who was elevated to a new post of vice premier in the government shake-up engineered by Putin earlier this year.

Other media reports have tied the investigation to Putin's influential deputy chief of staff Igor Sechin, who allegedly has sought to pressure Kudrin into releasing hundreds of millions of dollars from the oil-revenue-funded Stabilization Fund to help state-owned oil giant OAO Rosneft pay down massive debts. Sechin is chairman of Rosneft's board.