Russian Economic Official Abruptly Freed From Jail

By Philip P. Pan
Washington Post Foreign Service
Wednesday, October 22, 2008

MOSCOW, Oct. 21 -- Russian prosecutors agreed Tuesday to release a senior economic official jailed a year ago on corruption charges, a rare reversal by the authorities in a case that has been linked to Kremlin infighting over control of the country's huge reserve funds.

It was unclear whether the government planned to proceed with a trial of the official, Sergei Storchak, a deputy finance minister. In a statement, prosecutors said only that they had completed their investigation and that Storchak had been ordered to remain in Moscow.

But his release was seen as a victory for Storchak's patron, Finance Minister Alexei Kudrin, the leading market liberal in the Kremlin, who analysts say has been feuding with veterans of Russia's security services and other officials who are seeking greater control of the nation's $530 billion in foreign exchange reserves.

The struggle over what to do with the money, especially $180 billion set aside from windfall oil profits, has intensified in recent weeks as the global financial crisis has battered Russian banks and stock exchanges. Prime Minister Vladimir Putin has pledged to spend as much as $200 billion to shore up the economy.

Kudrin has been at the center of the rescue operation, and the timing of the release suggests he has either gained influence in the crisis or reached a compromise with his opponents in the Kremlin, said Georgy Bovt, a veteran observer of Russian politics and chief editor of the magazine Profile.

"It's an indication of the seriousness of the financial crisis as understood by the Russian elite," Bovt said. "There's a sense that all factional infighting should be set aside, at least for now."

In a rare public breach within Putin's government, Kudrin argued against Storchak's detention in November 2007 even as prosecutors accused the deputy finance minister of taking part in a complex attempt to embezzle $43 million in government funds. Both Kudrin and Storchak denied the charges.

Several analysts interpreted the arrest as an attempt by the security services to put pressure on Kudrin, who has favored fiscally conservative policies and fought to protect the reserves from being squandered.

Speaking to reporters after walking out of Moscow's high-security Lefortovo prison Tuesday night, Storchak, 54, said he had no idea why he had been arrested and expressed surprise at his sudden freedom.

"We have a great feeling of thanks for the Finance Ministry headed by Alexei Leonidovich Kudrin, who in different ways supported me through this," the Reuters news agency quoted him as saying.

Storchak, who helped oversee the oil wealth reserves and served as Russia's chief liaison with international organizations such as the World Bank before his arrest, said he had been following the financial crisis from his prison cell and expected to return to his duties. "My desire to work has not waned," he said.

Earlier in the day, Kudrin praised the decision to release Storchak pending trial, saying, "Justice has prevailed."

"This has been my proposal from the start," he told reporters. "I think the charges are unfair and unsubstantiated, and I think not all of us have been convinced of that."

Storchak's release comes amid signs the Kremlin is also considering a pardon for Svetlana Bakhmina, a lawyer who has been imprisoned since 2004 in a case related to the Kremlin's high-profile arrest of oil tycoon Mikhail Khodorkovsky in 2003.

Bakhmina's supporters say she is an innocent victim of the Kremlin's vendetta against Khodorkovsky's Yukos oil company, where she worked as a mid-level legal executive, and they have gathered more than 50,000 signatures on a petition for her release, including that of former Communist Party chief Mikhail Gorbachev. Bakhmina, 39, has asked for a postponement of her prison term on the grounds she is the mother of two small children and is pregnant with a third. The courts have repeatedly rejected her appeals.

In a sign the government may be softening its position, however, senior lawmaker and Kremlin ally Sergei Mironov said Tuesday he believed Bakhmina, like any Russian citizen, was entitled to a pardon. "Mercy and grace to fallen people has always been a condition of Russian society and the Russian soul," said Mironov, chairman of the upper house of parliament, the Federation Council. "Everyone is entitled to expect leniency if they admit their guilt."

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