Russia's new PM to change Cabinet line-up

MOSCOW, Sep 13 (Reuters) Russia's prime minister-designate, Viktor Zubkov, told lawmakers today he planned changes in the cabinet line-up, and newspapers predicted Economy Minister German Gref would be the chief casualty.

President Vladimir Putin yesterday dismissed Mikhail Fradkov and nominated Zubkov, head of a financial watchdog, to replace him in a surprise move that confounded analysts who were expecting a political heavyweight to be named.

Zubkov, a 65-year-old former colleague of Putin's in St Petersburg's City Hall, was paying a courtesy call to parliament on Thursday. The chamber, dominated by Putin loyalists, is expected to confirm Zubkov's appointment tommorow.

''Zubkov said a phrase along the lines of: 'People who compromised themselves or did not do well will not be in the new cabinet','' lawmaker Gennady Gudkov said after his pro-Putin Fair Russia faction had a closed-door meeting with Zubkov.

Other lawmakers present quoted Zubkov as saying he planned to sack some ministers, but they said he did not name names.

The Izvestia daily quoted sources in the Economy Ministry as saying that Gref would leave the cabinet. The daily said he may be replaced by Andrei Kostin, CEO of state-controlled VTB Bank , which recently floated on the London stock market.

Financial paper Vedomosti, citing sources in the business community, said Gref could take a private sector job and that his ministry could go to Arkady Dvorkovich, head of the economic staff in the presidential administration.

Gref has been a standard-bearer for efforts to open up the Russian economy to private investors, fighting frequent turf wars with more hawkish officials who favour a bigger role for the state.

But he has been powerless to stop the growing influence of state-controlled corporations like Gazprom and Rosneft.

Newspapers named another possible casualty in a government reshuffle as Health and Social Affairs Minister Mikhail Zurabov, criticised for a botched reform of benefits and a shortage of subsidised prescription drugs.

GUESSING GAME Fradkov, whose departure had been widely expected, was chairing what is likely to be his last Cabinet meeting today.

''I see you are all in the mood for work. That is good,'' he told ministers as he opened the session.

Media and analysts were struggling to digest Zubkov's nomination.

Most observers had been expecting Putin to name First Deputy Prime Minister Sergei Ivanov as prime minister as a prelude to Ivanov becoming president when Putin steps down next year.

The consensus today was that Putin wanted to keep everyone guessing about the identity of his favoured successor.

''The president has carried out a very elegant manouvre: as expected he has changed the government but he has not created a rival for himself,'' Vedomosti said.

Ivestment bank Renaissance Capital said Zubkov was an unlikely contender to be president, and more an interim figure who would help ensure stability.

''Zubkov (is) very well positioned to handle the potentially unstable period during which there is a transition of power from Vladimir Putin to the new president,'' it said in a commentary.

''Zubkov's appointment ... is the clearest indicator so far that the Kremlin is determined to handle this period very strongly and confidently, thereby avoiding instability in the interim.'' REUTERS SS RK1438