Putin confidant Yakunin to resign as railways chief

MOSCOW (Reuters) - Vladimir Yakunin, the head of Russian state railways and an old friend of President Vladimir Putin, will leave his post to become a senator in a rare reshuffle among the Kremlin inner circle that controls large parts of the country's economy.

The move would be a significant demotion for Yakunin who has headed Russian Railways - a huge state corporation with more than $40 billion in annual sales - for ten years and known Putin since they founded an elite housing cooperative together in St Petersburg in the 1990s.

It was not clear why Yakunin chose, apparently at short notice, to run for a largely ceremonial post as senator after heading one of the country's most important companies for a decade.

He will represent Russia's Kaliningrad region - an exclave sandwiched between Poland and Lithuania on the Baltic sea.

"Yakunin plans, after the conclusion of the elections, to join the Federation Council," said Russian Railways spokesman Grigory Levchenko. "The country's leadership made him this offer and he accepted."

A source close to Russian railways told Reuters Yakunin could become vice speaker of the Federation Council, the upper house of parliament.

In the current composition of the Russian political system that job would be largely ceremonial although that could change given that Russia is gearing up for a new political cycle that would see parliamentary elections held next year and a presidential election in 2018.

The 67-year-old Yakunin signed a three-year contract to stay on at Russian Railways only last year and was reportedly on holiday when news of his resignation broke.

"(His resignation) means that in the last few days, something serious happened, something went wrong," the Russian edition of Forbes magazine quoted a source close to Russian Railways as saying.

Employing almost 1 million people, Russian Railways is one of the country's most important companies and is involved in some of the biggest infrastructure projects in the world.

STRONG STATE

A nationalist and an unapologetic champion of a strong state, Yakunin is a fierce supporter of Putin and has described the president as someone who rescued Russia from chaos and restored its sense of self-esteem.

A Reuters investigation found last year that under Yakunin, Russian Railways has paid billions of dollars to private contractors with shady owners and little or no presence at their registered headquarters.

Yakunin has always dismissed allegations of corruption and reports by Transparency International labelling Russia one of the most corrupt nations in the world. The problem is worse in the West, Yakunin has said, because there is more to steal.

After being sanctioned by the United States in March last year, Yakunin said his inclusion on the list was proof of his service to Putin and Russia.

"I am in good company. I cannot hide that I felt flattered. All the people on the list are notable people, people who did a lot for Russia," he wrote in a blog post.

Outgoing Kaliningrad Governor Nikolai Tsukanov, who forced a by-election by filing for early retirement in June, nominated Yakunin as his potential successor. Under Russian law, government senators can not hold commercial positions - or foreign bank accounts.

(Reporting by Gleb Stolyarov; Writing by Jack Stubbs; Editing by Giles Elgood)

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