Mikhail Fradkov, Russia’s Prime Minister, has stunned the business community by saying his country's secret service must spy on large corporations to guarantee economic growth.

His comments follow a campaign led by the Kremlin against the oil giant Yukos, which culminated in the company declaring bankruptcy as its main production plant was sold in a government auction last month.

The Kremlin’s decision to pursue Yukos for more than US$3 billion in tax was widely seen as politically motivated after Mikhail Khodorkovsky, formerly Russia’s richest man and the chief executive of Yukos, entered politics in opposition to President Vladimir Putin.

"We still need help from the FSB to provide the government and the executive branch with sufficient information... that can level the playing field among businesses for growth," Interfax quoted Mr Fradkov as saying. The FSB is the secret service, which in the Soviet era was known as the KGB.

Mr Fradkov said state-sponsored spying on Russian business would "develop business and attract investments".

A spokesman for BP, which has extensive operations in Russia, admitted he was surprised to hear Mr Fradkov’s comments but refused to criticise the Russian government.

"Our chief executive, Lord Browne, has said numerous times that Russia is a place we have confidence in," Robert Wine told Times Online. "Yes, there are challenges in doing business there - as there are in many of the countries we operate in - but we remain committed to our Russian joint ventures."

President Putin is a former colonel in the KGB, and has surrounded himself with a number of other former secret service officers in the Kremlin, many advising on economic affairs.

The Russian economy - along with the political scene - has been put under Soviet-style centralised surveillance since President Putin’s rise to power in 2000, although the true extent of spying on big business remains unknown.

Mr Fradkov also said that spending on the FSB would be raised by 25 per cent in 2005, although he gave no specific figure for financing of the secret service agency. "The country’s leadership and the government is doing all it can to make sure that the special services have all that they need," Mr Fradkov said.

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