UPDATE 3-Russia says yuan could be reserve currency in decade

* Russia's Kudrin says yuan may be reserve currency

* IMF says SDRs as reserve currency have advantages

* Moscow pushes greater role for Russian rouble

(Recasts, add quotes, details, background)

By Toni Vorobyova and Guy Faulconbridge

ST PETERSBURG, Russia, June 6 (Reuters) - China's yuan could become a world reserve currency in the next decade, Russia's finance minister said on Saturday, as Moscow seeks to whittle away at the U.S. dollar's dominance.

China has slowly started to use its economic might to carve out a larger role for the yuan CNY=CFXS, which is still not fully convertible.

"I think the shortest route would be if China liberalised its economy and allowed the convertibility of the yuan," said Finance Minister Alexei Kudrin, a close ally of Prime Minister Vladimir Putin.

"This could take 10 years but after that the yuan would be in demand and it is the shortest route to the creation of a new world reserve currency and I think China needs to think about this," Kudrin said at a panel discussion at the St Petersburg International Economic Forum.

China and Russia, the world's No. 1 and No. 3 biggest holders of foreign exchange reserves, have expressed unease about the volatility of the U.S. dollar and called for discussions on ways to create rival reserve currencies.

The European Union's economic chief Joaquin Almunia, who took part in the same panel session as Kudrin, played down the prospects of the dollar being supplanted from its leading position in the world economy any time soon.

"The dollar is obviously the main currency in our global economy as a reserve currency and this position of the dollar will not be changed in the short-term by any kind of political decision or political will," he told reporters.

"These are decisions adopted by the market and I think the markets in these kinds of issues evolve gradually."

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