The Russian Government's move effectively to re-nationalise oil giant Yukos was today described as the "fraud of the year" - by a member of President Vladimir Putin's own inner Kremlin cabinet.

The remarks by economic adviser Andrei Illarionov could cause an icily Siberian blast to blow through the Kremlin.

Mr Illarionov made his speech on the same day that Mikhail Khodorkovsky, Russia’s richest man until his arrest on fraud and tax evasion charges last year, accused the Kremlin of stealing his Yukos oil empire by manipulating the law.

Mr Illarionov blasted "the state's incompetent interference in the economy".

"There are no rules," Mr Illarionov said, adding that Russia had decided to join the Third World.

Of the Yukos sale, he said, "We used to see street hustlers do this kind of thing. Now officials are doing it.

"The destruction of Yukos has led to the flight of foreign investors from this company, who have to move their assets into consortiums linked to the authorities," Mr Illarionov said.

Mr Illarionov said Russia's economic growth had slowed significantly.

Mr Khodorkovsky, who has been in jail for more than 14 months, published the letter a week after Yukos’ most important production unit was bought by a state-owned firm through a series of multi-billion dollar secretive manoeuvres.

In an apparent reference to the sale of Yukos’ Yuganskneftegaz subsidiary, Mr Khodorkovsky wrote that the latest episode in the case "was the most senseless and destructive event in the economic sphere since President Vladimir Putin has taken helm".

With the board of Yukos having taken court action in the United States in an attempt to protect this prized asset, the subsidiary, which produces 60 per cent of Yukos’ output was sold to a shell company registered to the address of a bar in a provincial Russian town for $9.3 billion, half of what foreign auditors who had been appointed by the Russian Government said it was worth. Then the Rosneft oil company, in which President Putin’s deputy chief of staff serves as board chairman, purchased the shell company.

President Putin defended the takeover as an effort by the state to defend its interests.

Mr Khodorkovsky accused the state of "shameless trampling on legal norms" to wrest Yukos from its former owners. He called the government’s $28 billion back tax claim, against which the Yukos’ unit was sold, a "bad joke", saying it exceeded the company’s earnings.

Mr Khodorkovsky, who was 16th on Forbes magazine’s list of the world’s richest people with an estimated fortune of $15 billion, said that his personal wealth "will soon come to zero", but added that losing it wasn’t "unbearably painful".

"I didn’t just manage my property - it managed me in turn," he said. "I was forbidding myself to say many things, because that could hurt my property."

The letter contrasted sharply with previous letters Mr Khodorkovsky published from prison earlier this year in which he apologised for his actions and praised President Putin, apparently in an attempt to regain favour.

"The Yukos case isn’t a conflict between business and state, but a politically and commercially motivated attack launched by one business, represented by officials, against another," Mr Khodorkovsky said today.

President Putin has cast the 18-month crackdown as an effort to fight corruption and shady bookkeeping, but it has been widely seen as a vendetta for Mr Khodorkovsky’s perceived political ambitions, including his funding of parties in opposition to the Kremlin.