Moscow: The Kremlin says Russia`s influential finance minister has resigned following a televised confrontation with President Dmitry Medvedev.
Medvedev had angrily demanded that Alexei Kudrin immediately explain his criticism of Medvedev`s policies or step down.
The open tension within Russia`s leadership follows the announcement over the weekend that Prime Minister Vladimir Putin plans to return to the presidency next year and Medvedev would then take his old job as prime minister.
The departure of Kudrin on Monday is likely to unsettle investors, who have seen the fiscally conservative finance minister as key to Russia`s economic stability.
Kudrin, a close ally of Putin, said on Sunday he disagreed with Medvedev over economic policy and would not be able to serve in a government under him if Putin returns the presidency in a March 2012 election.
"Such statements appear improper...and can in no way be justified. Nobody has revoked discipline and subordination," Medvedev said in an unusually bitter exchange at a meeting with officials, including Kudrin, in the Volga city of Dimitrovgrad.
"If, Alexei Leonidovich, you disagree with the course of the president, there is only one course of action and you know it: to resign...Naturally, it`s necessary to answer here and now: Will you write a resignation letter?"
Kudrin looked stunned.
"Yes, it is indeed true that I have disagreements with you. I will take a decision on your proposal after consulting with the Prime Minister (Putin)," Kudrin responded.
Putin`s announcement on Saturday that he planned to return to the Kremlin next year after nearly four years as prime minister was intended to end political uncertainty that has been undermining Russia`s economic performance.
But Kudrin`s dissent meant the facade of unity was cracked less than 24 hours later, and unsettled investors who praise him for policies which helped Russia through the global economic crisis in 2008.
The fact that he chose to break ranks while in Washington for talks on the global economy risked particularly irking Putin because he has spared some of his fiercest rhetoric for the United States.
Just how deep the cracks in unity go, and how much dissent, Putin faces, is unclear. Most government and Kremlin officials kept a low profile on Monday. None rushed to side with Kudrin.
Long alliance with Putin
Kudrin, 50, has been a close ally of Putin since they worked together in the St Petersburg city administration in the 1990s.
In a sign of Putin`s faith in him, he has been in his job for 11 years, through Putin`s two terms as president and his current spell as prime minister.
This signals that he is more intent on laying out his credentials to become prime minister than breaking with Putin. Chris Weaker, chief strategist at Troika Dialog brokerage, said Putin would have to choose between Medvedev and Kudrin.
Putin and Medvedev have ruled the world`s largest country and biggest energy producer in a power `tandem` since Putin had to give up the presidency in 2008 after serving the maximum two consecutive terms. Putin could feasibly now serve until 2024.
Although opinion polls show they are both much more popular than any other Russian politicians, and Putin is all but certain to win a six-year term in March, many Russians show signs of impatience with the lack of progress on democracy.