Sep 10, 2010

By Gleb Bryanski

YAROSLAVL, Russia (Reuters) - Moscow's powerful mayor said on Friday he plans to stay in office after Russian President Dmitry Medvedev gave him a dressing-down in a row that will test Medvedev's powers.

Medvedev is still seen as a junior partner to his mentor, Prime Minister Vladimir Putin. Putin and Medvedev have strongly hinted one of them, but not both, will run for president in 2012.

The 73-year-old Yuri Luzhkov, who has ruled the Russian capital since 1992, wrote in an article this week that the mood in Russian society was "difficult" and he criticized Medvedev's decision to suspend a controversial highway project.

"I do not agree with this point of view, we do not have a difficult atmosphere in society," Medvedev told political analysts at a forum in the city of Yaroslavl on Friday.

"Officials should either participate in building institutions or join the opposition."

Following Luzhkov's article, an anonymous Kremlin source told Russian news agencies that unnamed Moscow officials -- clearly a reference to Luzhkov -- were trying to drive a wedge between Medvedev and Putin, and called it unacceptable.

That prompted a wave of speculation that Luzhkov, now Russia's longest serving regional leader, would be ousted before his current term expires in June.

Asked by reporters on Friday whether he would serve out his term, Luzhkov said he "had no reason to think otherwise" and dismissed suggestions of a confrontation with the Kremlin.

"There is no conflict, there are different opinions," Luzhkov said.

He was in Yaroslavl for the forum but said he had no plans to meet with Medvedev.

For Medvedev, sacking the heavyweight mayor would be the boldest move of a presidency that both critics and fans say has brought more talk than action.

Commentators said the political future of Medvedev, who says a new generation of leaders is needed to modernize Russia and diversify its resource-reliant economy, could hinge on the outcome of the row.

"Medvedev will become the nation's laughingstock if he does not throw Luzhkov out after such impudent behavior," said opposition politician Boris Nemtsov, a long-time critic of Luzhkov and Putin.

Putin has remained mostly above the fray. But when the Kremlin last month criticized Luzhkov for staying away from Moscow as toxic peat-fire smoke choked the capital, Putin met the mayor and praised him for a timely return.

A documentary program alleging corruption by Luzhkov and his wife, businesswoman Yelena Batourina, was shown on Russia's state-linked NTV channel on Friday.

Titled "The Cap Affair", after Luzhkov's habit of wearing a black flat cap, the program also scolded the mayor for staying out of Moscow in the worst days of the heatwave in July, when acrid smoke from peat fires blanketed Moscow.

The Kremlin used the same tactic to berate Belarusian President Alexander Lukashenko earlier in summer, when a documentary accusing him of corruption and political murder was broadcast.

(Writing by Gleb Bryanski; additional reporting by Alexei Anishchuk, editing by Angus MacSwan)

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