MOSCOW/WASHINGTON (Reuters) - Russia's finance minister rebelled on Sunday against Vladimir Putin's plan to make President Dmitry Medvedev his prime minister if he returns to the Kremlin by saying he would not serve in the next government.
Foreign investors were alarmed by Alexei Kudrin's snub after Putin, who is now prime minister, announced he would run for president next March in an election that could extend his rule until 2024.
Kudrin, a Putin ally, has prime ministerial ambitions and said he had "disagreements" with Medvedev who may now struggle to establish his credibility as premier after being forced by Putin to renounce his dream of a second term as president.
"I do not see myself in a new government," Kudrin, 50, said in comments released in Washington, where he was meeting global policymakers.
Setting out his differences with Medvedev over the president's support for an increase in military spending, he said: "I think that the disagreements I have will not allow me to join this government."
Kudrin won the respect of investors as a guardian of financial stability by saving windfall oil revenues for a rainy-day fund which helped Russia through the 2008 global economic crisis.
He said this month that he wanted to be part of the next government if it was reform-minded and his remarks on Sunday will not help lift confidence in Russia's economy after a fall in stocks and the rouble last week.
Many investors say Kudrin, who has been finance minister since 2000 and worked with Putin in St Petersburg in the 1990s, would be the most suitable person to lead a pro-reform government and that he may yet figure in Putin's plans.
"He is as close to Putin as Medvedev. Perhaps this is a bid for the role of prime minister," said Roland Nash, chief strategist at Verno Capital hedge fund.
Chris Weafer, chief strategist at Troika Dialog brokerage, said Putin liked both Medvedev and Kudrin but "will have to make a choice between which of the two he needs more."
Putin and Medvedev have ruled the world's largest country in a power 'tandem' since Putin had to give up the presidency in 2008 after serving the maximum two consecutive terms.
Putin, 58, won a standing ovation by accepting a proposal by Medvedev to return as president at a choreographed congress of the ruling United Russia party on Saturday. He could now serve up to two more six-year terms, meaning he could be in power for almost a quarter of a century by the time he is 70.
Medvedev, 46, agreed to lead United Russia's list of candidates for a parliamentary election on December 4 in a move intended to help the party retain a two-thirds majority in the lower house and prepare him to become premier.
Putin looks sure to be elected president in March but some Russians regard the proposed job swap by Putin and Medvedev with mistrust. Some are tired of Putin, or a small circle around him, taking key decisions in secret.
Despite such criticism, opinion polls show other potential presidential candidates, such as nationalist Vladimir Zhirinovsky or Communist Gennady Zyuganov, have little support and liberal opposition leaders have only limited appeal.
Although Medvedev's ratings are high, the strength of his prime ministerial credentials are unclear after he failed to carry through many of his reform promises as president.
"Medvedev's usefulness runs out on December 5," one economist said, referring to the day after the parliamentary election.
Medvedev has failed to emerge from Putin's shadow since they started sharing power. By contrast, Putin has in more than a decade in power cultivated the image of a vigorous leader and his policies -- crushing a Chechen separatist rebellion, taming super-rich businessmen and bringing wayward regions to heel -- have buttressed his popularity among Russians.
WARY IN THE WEST
In his previous spell as president, Putin oversaw an economic boom during which household incomes improved on the back of a rise in global oil prices and his tough talking helped restore Russia's self-confidence on the world stage.
Critics say his return to the Kremlin, virtually unopposed, could bring back memories of the economic and political sclerosis under Soviet leader Leonid Brezhnev in the 1970s and early 1980s.
They say Putin could resist carrying out pension reforms and changes to reduce Russia's dependency on natural resources. Oil and gas revenues make up half the budget so Russia, the world's biggest energy producer, is vulnerable to fluctuations in global energy prices.
Putin's decision to run is likely to cause some nervousness in the West, where he is considered less liberal than Medvedev and more outspoken in his criticism of Western policies.
The U.S. government said it expected to keep making progress in the "reset" toward better relations with Moscow, whoever was the next Russian president.
Putin's spokesman, Dmitry Peskov, dismissed any concerns of economic stagnation or worse relations with the West.
"To say that relations with the West will hypothetically get worse under Putin as president is incorrect," he said.