Russian President Vladimir Putin dismissed Economy Minister Alexei Ulyukayev on Tuesday over allegations he extorted a $2 million bribe from top oil producer Rosneft, a case which could expose fault lines in the Russian leader’s inner circle.
Ulyukayev, a 60-year-old technocrat whose ministry oversees a politically-charged sale of state assets, is the highest-ranking Russian official to be detained while in office since the collapse of the Soviet Union in 1991.
His case sets up a potential standoff between Rosneft boss and Putin ally Igor Sechin and those in the government who have resisted Rosneft’s ambitions to acquire more state assets at a time when low oil prices and Western sanctions are biting.
Such infighting risks triggering potentially destabilising clan infighting in the run-up to a presidential election in 2018 when Putin is widely expected to run for a fourth term.
Ulyukayev, who a Moscow court ruled should be put under house arrest for two months until January 15, faces up to 15 years in jail if found guilty.
Wearing a blue suit, Ulyukayev told a Moscow court he did not accept his guilt. It was in his own interests to cooperate with the investigation as he valued his reputation, he said.
The Investigative Committee, the state agency that investigates major crimes, said Ulyukayev had extorted the bribe in exchange for approving Rosneft’s $5 billion purchase of a stake in mid-sized oil producer Bashneft.
Kremlin spokesman Dmitry Peskov told reporters that Putin had dismissed Uylukaev after losing trust in him, but said the arrest had nothing to do with the Bashneft deal.
In a twist reminiscent of the Soviet era, Ulyukayev’s detention was announced in the early hours of the morning, with state TV and pro-Kremlin politicians calling it part of the fight against corruption.
Investigators praised Rosneft for tipping them off about Ulyukayev’s alleged wrongdoing early so they were able to catch him “red-handed” in what law enforcement sources told Russian media was a carefully planned sting operation.
His phones had been tapped and his electronic communications monitored, the same sources said.
Investigators said Ulyukayev had threatened to use his position to cause problems for Rosneft unless it paid him.
They said they were not challenging the legality of Rosneft’s purchase of the Bashneft stake or investigating it.
Previous high-profile prosecutions during Putin’s rule have been a cover for settling commercial or political scores, according to people involved in those cases. The Kremlin and law enforcement agencies deny that, saying they only target criminals.
In a country where bribes have sometimes totalled many tens of millions of dollars, there was also surprise in some quarters at the relatively small size of the alleged payment.
Medvedev and Putin spoke about the detention, Medvedev’s office said, adding: “The prime minister believes that the most painstaking investigation of this case is required.”
A Rosneft spokesman, Mikhail Leontyev, was quoted as saying by the TASS news agency that the company saw no risk to the Bashneft deal. “The deal is absolutely above board,” he said.
The minister has been in his job since June 2013. He is not part of Putin’s inner circle, which is dominated by people who favour a commanding role for the state in the economy, but neither is he a part of the rival camp of economic liberals.
Ulyukayev is close to Andrei Kostin, the influential head of Russia’s second-biggest lender, state-owned VTB, and chairs VTB’s supervisory board.
