- Associated Press - Monday, September 26, 2011

MOSCOW (AP) — Influential Russian Finance Minister Alexei Kudrin resigned Monday following a televised confrontation with President Dmitry Medvedev, who angrily had demanded that Mr. Kudrin immediately explain his criticism of Mr. Medvedev‘s policies or step down.

The open tension within Russia‘s leadership follows the announcement over the weekend that Prime Minister Vladimir Putin plans to return to the presidency next year and Mr. Medvedev would then take Mr. Putin’s old job as prime minister. Russia will have a presidential vote despite the backroom maneuvering, but Mr. Putin is sure to win it.

The departure of Mr. Kudrin is likely to unsettle investors. He has been finance minister since 2000, and his tight hold over the budget has been seen as the key to Russia‘s economic stability.

“It is difficult to see how Mr. Kudrin’s resignation can be anything but market-negative,” said Neil Shearing, chief Emerging Markets economist at Capital Economics Ltd in London. “With oil prices starting to slide and financial markets still jittery, now is not a good time for the government to lose its arch-fiscal hawk.”

Speaking over the weekend, Mr. Kudrin said he would refuse to serve if Mr. Medvedev was made prime minister because of disagreements over policy, including plans to boost military spending substantially.

Addressing Mr. Kudrin on Monday, Mr. Medvedev called the minister’s remarks “irresponsible chatter” and “improper,” especially since they were made in the United States while the minister was in Washington for meetings of the International Monetary Fund and the World Bank.

“If you disagree with the course set by the president and being implemented by the government, you have only one choice: Resign,” Mr. Medvedev said.

Mr. Kudrin said he would decide only after talking with Mr. Putin.

“You can seek the advice of whomever you want, but as long as I’m president, such decisions are made by me,” Mr. Medvedev retorted.

The Kremlin said Mr. Medvedev signed a decree on Mr. Kudrin’s resignation. Mr. Kudrin, in brief remarks reported by state news agencies, confirmed that he had quit.

Mr. Kudrin has been widely credited with helping Russia weather the 2008-09 global financial crisis. During Mr. Putin’s presidency from 2000 to 2008, Mr. Kudrin stashed some of the revenue from Russia‘s oil exports in a stabilization fund, despite strong opposition from other ministers who wanted to spend the money. But when the financial crisis hit and oil prices sank sharply, those savings proved crucial in reducing the blow to Russia‘s economy.

Some market analysts speculated that Mr. Kudrin’s departure could have a greater effect on Russia‘s economy than the 2012 presidential election itself.

“It is unlikely that Mr. Kudrin’s replacement will share his predecessor’s credentials and clout,” Mr. Shearing wrote in a note to investors.

Before last weekend, Mr. Kudrin was mentioned as a possible prime minister under Mr. Putin if Mr. Putin returns to the presidency.