May 31, 2013 / 6:16 AM / 6 years ago

UPDATE 1-Putin headhunts economy minister, strengthens Kremlin - sources

* Loyalist Belousov to become Putin’s chief economic aide

* Expected to be replaced by central banker Ulyukayev

* G20 ‘sherpa’ set to join Nabiullina at central bank

* Reshuffle to curtail Medvedev’s role, say analysts

By Darya Korsunskaya and Lidia Kelly

MOSCOW, May 31 (Reuters) - President Vladimir Putin will name Economy Minister Andrei Belousov as his chief economic adviser, sources said on Friday, tightening the Kremlin’s grip on Russia’s $2 trillion economy.

The appointment of Belousov, who will replace incoming central bank head Elvira Nabiullina, continues a process that has seen Putin gather staunch allies around him in the Kremlin.

The reshuffle will also mean a further downgrade for Dmitry Medvedev to the role of a technocrat prime minister with no strategic control over policy, analysts said.

Putin, who is pushing for looser monetary and fiscal policy to drive economic recovery, has shown growing impatience with Medvedev, whose government last year adopted budget reforms that set limits on spending and borrowing.

Belousov may be replaced by the central bank’s first deputy chairman, Alexei Ulyukayev, sources close to the bank and the government told Reuters.

“He (Ulyukayev) is a very likely candidate,” one of the sources said, confirming a report in the Kommersant daily.

Ulyukayev had been in the frame to replace Sergei Ignatyev as central bank chairman, but his hawkish views on inflation were out of tune with Putin’s desire for the central bank to do more to boost flagging economic growth.

Nabiullina, another Putin loyalist and former economy minister, takes over at the central bank on June 23. She has said she will place greater emphasis on promoting growth while also curbing inflation, which at over 7 percent is above the central bank’s target.

The sources said that, if Ulyukayev becomes economy minister, his successor could be Russia’s Group of 20 summit coordinator Ksenia Yudayeva.

Yudayeva is a U.S.-trained economist who, before becoming Russia’s G20 ‘sherpa’, was chief economist at state-controlled Sberbank, Russia’s leading bank. She is coordinating Russia’s G20 presidency this year.

‘MINISTRY OF GROWTH’

Ulyukayev would find himself in charge of the “ministry of growth” at a time of turmoil among liberal policymakers loyal to Medvedev.

Three cabinet ministers have been forced out since Putin named Medvedev as his prime minister on returning to the Kremlin for a third term in May 2012. The last to go was Medvedev’s deputy chief of staff Vladislav Surkov.

This week news broke that economist Sergei Guriev, an adviser to Medvedev, had fled Russia after being questioned by investigators in a probe into the defunct oil firm Yukos, whose founder Mikhail Khodorkovsky was jailed for fraud in 2005.

Supporters say the investigation served as a pretext to put pressure Guriev, who had publicly sympathised with a leader of opposition protests against Putin, as broader pressure mounts on voices critical or independent of Putin.

Guriev has resigned as rector of the New Economic School, one of Moscow’s most prestigious academic institutes, where Deputy Prime Minister Arkady Dvorkovich sits on the board.

Dvorkovich was recently barred by security guards from attending a policy meeting at Putin’s residence on the Black Sea coast. Putin’s displeasure at the government’s weak performance on the economy.

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