updated 1/12/2005 12:54:31 PM ET 2005-01-12T17:54:31

German Gref, Russia's liberal economy minister, on Tuesday openly criticized growing state intervention in the economy and the re-nationalization of energy assets, highlighting tensions within the country's ruling elite.

Mr. Gref called on the government to privatize the state-owned Rosneft oil company and Yuganskneftegas the main production subsidiary of Yukos, which fell into state hands after a controversial auction last month.

"I consider direct state involvement in the oil sector unjustified. I think that both Rosneft and Yuganskneftegas ... should be privatized," Mr. Gref said in an interview with Kommersant, a Russian business newspaper.

"Today our government is ineffective and state companies, as a result, are, for the overwhelming part, ineffective as well."

Mr. Gref's statement reflects a growing revolt against the hardliners in President Vladimir Putin's government.

Mikhail Fradkov, Russia's prime minister, is among those to have called for greater state involvement in the economy. Although he and Mr. Gref had disagreed in the past, the economy minister's comments are the clearest sign to date of a clash within the government.

Mr. Gref also called for reform of Gazprom, the state gas monopoly. The economy minister, who sits on the company's board, said: "The ineffectiveness of Gazprom is obvious. And you can't use administrative levers to make such a huge company work more effectively. The market mechanism must be turned on." Mr. Gref's comments come two weeks after an outburst by Andrei Illarionov, Mr. Putin's economic adviser, who called the sale of Yuganskneftegas the "scam of the year".

Mr. Illarionov was demoted last week following his outspoken criticism and his public gesture of attending a trial for Mikhail Khodorkovsky, jailed oligarch and key shareholder in Yukos.

In an attack on the so-called siloviki former members of state security services who gained economic and political power under Mr. Putin, Mr. Gref said: "Some people like to call themselves 'statists' ... they should be isolated from running the country because their actions cause harm."

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.


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