Russian President Vladimir Putin's new chief of staff cast doubt, in remarks broadcast on Sunday, on legal action against Russian oil giant Yukos and said prosecutors should consider the economic impact of their moves.

The detention of Mikhail Khodorkovsky on charges of fraud and tax evasion and the freezing of a major stake in Yukos has jolted the financial community.

Putin, facing the biggest political and economic crisis of his three years in office, has refused any notion of "bargaining" with business chiefs but assured investors he remained committed to a market economy.

With financial markets sent into a skid for a time, Russian Prime Minister Mikhail Kasyanov expressed deep concern at events.

Dmitry Medvedev, appointed Kremlin chief of staff last week, said it was not clear to him whether the freezing by prosecutors of the major stake in Yukos had been an effective measure.

"The question arises: how effective legally was the freezing of Yukos shares? These shares are owned offshore and can be used as compensation for damages. The legal effectiveness of such measures is not clear," he told Rossiya state television.

"Our colleagues should probably consider all the economic consequences of measures they take."

Medvedev's appointment followed the resignation of long-standing chief of staff Alexander Voloshin, one of the few remaining from ex-president Boris Yeltsin's administration. He was thought to have been sympathetic to business and to Khodorkovsky, Russia's wealthiest man.

Major stake frozen 

Prosecutors froze a controlling stake in Yukos owned by Khodorkovsky and his allies in what observers saw as a move by Kremlin hawks to curb his political ambitions. The prosecutor's office said on Friday it had lifted a freeze on two percent of the company which it said was not linked to criminal probes.

Khodorkovsky had backed liberals opposing Putin's allies in December parliamentary elections, with the president himself almost certain to seek re-election next March.

Medvedev, 38, is seen as a moderate, pro-business figure. Though from St Petersburg, like Putin, he has no security service background.

Law enforcement authorities, he said, were "a very serious instrument and generate a strong reaction in various spheres and their activity could give rise to some sort of administrative frenzy.

"This is a dangerous thing as the consequences of measures not fully thought out will have an immediate effect on the economy and cause indignation in politics."

The State Department has expressed fears that the action against Yukos could herald a broader attack on Russian businessmen who built fortunes on the selloff of state property in the 1990s after the collapse of the Soviet Union.

Foreign Minister Igor Ivanov dismissed that statement as meddling. Washington, he said, had expressed no such concern at action taken by US authorities over major bankruptcies.

"This is, unfortunately, an example of a policy of double standards and lecturing others," Ivanov told Rossiya. "This is interference in the affairs of a foreign state's judicial body."

(China Daily November 3, 2003)