UPDATE 4-Russia releases Storchak from jail pending trial

(Adds Storchak quotes)

By Simon Shuster and Guy Faulconbridge

MOSCOW, Oct 21 (Reuters) - Russia released a deputy finance minister on Tuesday pending his trial for embezzlement, a move that may show Finance Minister Alexei Kudrin has checked attempts to undermine his position.

Kudrin, who has become the darling of investors by seeking to shield Russia's oil fund reserves from being squandered, said the decision showed justice had finally prevailed.

Sergei Storchak, who oversaw Russia's debt and its $163 billion oil wealth fund, was arrested last November and accused of attempting to embezzle $43 million in a complex deal with foreign debts owed to Russia.

With long wavy hair, the 54-year-old walked out of the Lefortovo high-security prison in Moscow to applause and flowers from supporters.

He thanked his family, lawyers and Kudrin for their support, but said he was surprised by the decision to release him.

"We tried to lobby for this decision, to push it through, but nevertheless it is very surprising," Storchak told reporters.

"We have a great feeling of thanks for the Finance Ministry headed by Alexei Leonidovich Kudrin who in different ways supported me through all this."

Kudrin's support "has allowed me to work, to keep working even here. My desire to work has not waned," he added. When asked if he would return to work, he said: "Yes."

Storchak said he had no idea why he had been taken into custody and has repeatedly denied the charges against him.

Supporters say the case was a direct attack on Kudrin and part of a wider Kremlin power struggle between those seeking to gain control of Russia's giant reserves.

Investors have been closely watching the case, although markets did not move on the news he was to be released.

KUDRIN'S INFLUENCE

Explaining the decision to free Storchak, a spokesman for the investigative committee of the prosecutor-general's office said in a statement that the accused was not in a position to influence the investigation if released.

Under Russian rules, Storchak was freed in exchange for a formal pledge not to leave Moscow until the trial. The official date of the trial has not been set yet.

Kudrin, 48, has faced massive pressure from opponents over his fiscal conservatism and attempts to protect Russia's financial reserves -- built up during a decade of growth and high oil prices -- from being squandered.

"I consider the accusations (against Storchak) are unjust and have no foundation. I think justice has prevailed," Kudrin told reporters.

Analysts say attempts to undermine Kudrin, who has served as finance minister since 2000, intensified during the run-up to a handover of presidential powers to Dmitry Medvedev from Vladimir Putin, who stepped down as Kremlin chief in May.

Kudrin's influence has grown under Medvedev and he now is a member of a close-knit team of presidential aides who are carrying out emergency measures aimed at protecting the Russian economy from the global financial crisis.

Kudrin has kept Storchak in his position of deputy finance minister during the investigation. Kudrin said he had not yet spoken with Storchak to ask him whether he may resume his duties in the ministry.

Storchak said he had kept up with the unfolding financial crisis while in prison and had paid special attention to the impact on the Russian economy: "I don't think I have fallen behind the times." (Additional reporting by Gleb Bryanski, Dmitry Zhdannikov and Oleg Shchedrov; Editing by Jon Boyle)