UPDATE 7-Putin critic Khodorkovsky in Germany after pardon
* Putin signs decree pardoning Khodorkovsky
* Jailed tycoon arrives in Berlin a free man
* Investors welcome decision, impact limited
By Lidia Kelly and Michelle Martin
MOSCOW/BERLIN, Dec 20 (Reuters) - Mikhail Khodorkovsky, the Russian oil tycoon jailed for a decade after posing a challenge to Vladimir Putin, was freed by a presidential pardon on Friday and immediately flew to Berlin where he hoped to be reunited with his family.
Once Russia's richest man, the 50-year-old looked pale and thin but happy in a photograph of him being greeted by German well-wishers on the tarmac after landing on a private jet.
President Putin, who surprised Russians and gave a brief lift to the stock market by announcing Khodorkovsky's pardon on Thursday, said he was acting out of "principles of humanity" because Khodorkovsky's mother was ill.
A Russian government source said freeing his best-known and potentially most powerful critic could deflect international complaints about Putin's human rights record as Russia prepares to host the Winter Olympics at Sochi in seven weeks' time.
It also appeared to show that Putin is feeling confident in his control of the country after facing down street protests when he was re-elected last year.
Within hours of being released from Penal Colony No. 7 at Segezha, deep in the sub-Arctic forest near the Finnish border, Khodorkovsky was in the German capital and issued a statement confirming he had sought a pardon and had not admitted guilt.
"I appealed to the Russian president on Nov. 12 with a request for a pardon in connection with family circumstances," he said. "The issue of an admission of guilt was not raised."
Putin's spokesman said the Russian president had received two letters from Khodorkovsky - a long personal letter and the official pardon request. The pardon was granted unconditionally and Khodorkovsky was free to return to Russia, he said.
The former oil baron had been due to be released next August but supporters feared the sentence could be extended, as it was before. He spent the last few years working at the jail, in an area once part of Stalin's Gulag labour camp system.
With a note of defiance, Khodorkvsky thanked wellwishers for their support "to me, my family and all those who were unjustly convicted and continue to be persecuted".
In flying to Germany and possibly into exile on a hastily issued passport, Khodorkovsky was following a route taken by Soviet-era dissidents like "Gulag Archipelago" author Alexander Solzhenitsyn, who was expelled to West Germany 40 years ago.
"My father is free and safely in Germany," his son, Pavel Khodorkovsky, said on Twitter. "Thank you all for the support you've given my family over these years!"
His mother Marina, 79, told Reuters from her home outside Moscow: "I want to just hug him. I don't even know yet what I am going to say to him."
Her son said last month that she was facing a second bout of cancer and he might not see her again. She had his father told Reuters they planned to travel to Berlin on Saturday.
Khodorkovsky, named a "prisoner of conscience" by Amnesty International, said he was eager to hug his loved ones. "I will welcome the opportunity to celebrate this upcoming holiday season with my family."
He was greeted at the airport by Hans-Dietrich Genscher, the former German foreign minister who played a major role in East-West relations at the end of the Cold War and who had helped organise the plane to bring Khodorkovsky to Berlin.
Khodorkovsky had not immediately realised that his mother, who had undergone treatment in Germany, had returned to Russia, Genscher told Der Spiegel online.
Genscher told ARD television Putin had received him twice to talk about Khodorkovsky and Chancellor Angela Merkel said she had "repeatedly urged" the Russian president to free him.
The oil baron fell out with Putin before his arrest in 2003 as the president clipped the wings of wealthy "oligarchs" who had become powerful during the chaotic years of Boris Yeltsin's rule following the collapse of Soviet communism.
His company, Yukos, was broken up and sold off, mainly into state hands, following his arrest at gunpoint on an airport runway in Siberia on fraud and tax evasion charges.
In the eyes of critics at home and abroad, his jailing was a significant stain on the record of Putin, 60, who succeeded Yeltsin in 2000 and has not ruled out seeking another six-year term in 2018.
Khodorkovsky came to represent what critics say is the Kremlin's misuse of the judicial system, curbing the rule of law, and of its refusal to permit dissent. Putin, who mounted savage personal attacks on Khodorkovsky, has always insisted he got his just deserts in the courts for theft on a grand scale.
Putin would not have allowed Khodorkovsky's release if he saw him as a threat, political strategist Gleb Pavlovsky told Ekho Moskvy radio. "Khodorkovsky is Putin's prisoner," he said.
Liliya Shevtsova, an analyst at the Carnegie Moscow Centre, said the pardon was not evidence of a "political thaw" but a "demonstration of the absolute power of one man in the Kremlin who enjoys his omnipotence and who has found one more way to demonstrate it".
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Yukos's prize production asset ended up in the hands of state oil company Rosneft, which is now headed by close Putin ally Igor Sechin. Sechin said on Friday that he saw no threat of legal action from Khodorkovsky, state-run news agency Itar-Tass said.
Russian shares initially rose after Putin's announcement on Thursday but later settled back.
A sustained rally would require "a consistent track record of implementation of market-friendly reforms - in particular, of steps to improve the judicial system, so that decisions are more predictable and property rights better protected", a Moscow-based economist at an investment bank said.
Putin has staked a great deal of personal prestige on the Winter Games at Sochi on the Black Sea and is under fire abroad over a law banning the spread of "gay propaganda" among minors.
A government source said the pardons would deprive Western critics of a cause: "I think the decision to free Pussy Riot and Khodorkovsky was taken just before the Olympic Games so that they will not be able to wield this banner against Putin."
U.S. President Barack Obama and the presidents of France and Germany will not attend the Olympics, and the United States has named openly gay athletes as members of its delegation in an apparent message to the Kremlin.
Putin's amnesty is also expected to end the prosecution of 30 people arrested in Russia over a Greenpeace protest against oil drilling in the Arctic and allow the 26 foreigners among them to go home.
They faced up to seven years in prison if convicted in another case that has harmed Putin's image in the West.