A Cabinet split emerged in Russia’s Government yesterday over the growing power of the state-owned energy giant Gazprom.

German Gref, the Economic Development Minister, issued a startling warning that Gazprom’s all-out expansion strategy threatened to extinguish prospects for the growth of a market economy in Russia.

He told a conference in Krasnoyarsk, Siberia, that Gazprom’s rise represented a return to the “monopolistic capitalism of the 19th century”.

Mr Putin has promoted the policy of building so-called “national champions” to allow Russia to compete effectively in global markets. Gazprom’s monopoly has made it the standard-bearer of this policy. Its huge wealth and economic power have made it a household name across the European Union, which looked on nervously as Gazprom flexed its muscles in confrontations with Ukraine and Belarus over gas supplies.

Dmitri Medvedev, the first deputy prime minister and a contender to succeed President Putin, is its chairman.

Mr Gref is the first Cabinet minister to criticise Gazprom openly. He said: “If all Gazprom’s assets, which are already worth over $300 billion, [£153 billion] are used across all economic sectors, we will find ourselves with the monopolistic state capitalism of the 19th century, and that will be a very backward step for our country.”

He was particularly critical of plans announced last week by Gazprom and the Siberian Coal Energy Company (Suek) to merge their electricity and coal assets. Suek is Russia’s biggest coal producer and analysts estimate that the merged company will control at least 25 per cent of Russia’s power production.

Mr Gref called the joint venture “a dangerous practice for the country’s economic policy”.

Anatoly Chubais, the head of Russia’s state electricity group, United Energy Systems, also spoke out against the deal this week. He called it “a big success for Suek’s shareholders and a big mistake by the Government”. Mr Chubais has said that Russia faces energy shortages because of lack of investment in domestic supply.

Gazprom is poised to acquire from BP control of another large Siberian energy asset. TNK-BP is haggling over terms under which Gazprom will lead the project to export Kovykta gas to China. Last month Bob Dudley, head of TNK-BP, said: “We can see a Gazprom majority role in the project and it might be part of a greater East Siberian cooperation rather than just the Kovykta field, but that remains to be seen.”

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