UPDATE 3-Russia backs Czech to head IMF, but Czechs don't

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By Douglas Busvine and Marek Petrus

MOSCOW/Russia nominated former Czech premier and central bank chief Josef Tosovsky on Wednesday to run the International Monetary Fund, but the Czech government immediately disowned his candidacy.

The announcement confirms news that broke on Tuesday and brings a second contender into the race to head the global lender after the European Union proposed France's former finance minister, Dominique Strauss-Kahn.

But the demarche appeared to backfire as the Czech Republic -- which broke away from the Soviet orbit in 1989 and joined the EU in 2004 -- repudiated Tosovsky's candidacy and instead endorsed Strauss-Kahn.

"Mr. Tosovsky is not the Czech Republic's candidate," Czech Deputy Prime Minister Alexandr Vondra told Reuters through an assistant.

The Kremlin denied it was playing politics by proposing Tosovsky, who headed the Czech central bank from 1990 to 2000 and was drafted in by President Vaclav Havel as caretaker prime minister during a political crisis in 1997.

"Tosovsky's candidacy, backed by a number of states, has been proposed for professional reasons," Kremlin spokesman Dmitry Peskov said. "The nomination is in no way aimed against Strauss-Kahn."

It may, however, be directed against Prague, which is at odds with Moscow over plans to site a U.S. defence system in Eastern Europe designed to intercept and destroy missiles fired by "rogue states".

Russia regards the missile shield as a security threat. Its military chief of staff, Yuri Baluyevsky, said this week it would be a "big mistake" for the Czechs to host a radar station on its territory as part of the interceptor system.

CHALLENGE

The Russian nomination also reflects a desire on the part of major emerging market nations to break a duopoly under which the EU chooses the head of the IMF while the United States picks the boss of its sister institution, the World Bank.

"I held talks with the 'BRIC' countries, and the proposal to have a full, competitive election won their backing," Russian Finance Minister Alexei Kudrin told reporters, using an acronym for the countries Brazil, Russia, India and China.

Kudrin said it was "nothing terrible" that Prague had not endorsed Tosovsky, whom he called the better of the two contenders. He said the position of the United States would be key in determining which candidate wins the IMF board's backing.

Neither Russia nor Tosovsky, who said he had "received a positive reaction from finance ministers and governors of several countries from all regions", named any of his backers.

Strauss-Kahn responded, meanwhile, with a statement issued in Beijing saying he had won China's "vigorous support".

"There's a political game going on between the West, Russia and developing nations," said Jiri Pehe, a former Havel adviser. "They (the Russians) needed someone with high professional credentials if they wanted to have a chance."

Tosovsky, 56, now chairs the Financial Stability Institute in Switzerland, a branch of the Bank for International Settlements. Earlier this year he faced allegations, which he denied, of collaborating with the communist-era secret police.

The IMF job fell vacant in July after the sudden resignation of Rodrigo Rato, who was in the midst of reforming the 63-year-old fund to boost its monitoring of the world economy and give greater voting clout to emerging powers like China.

The selection process is due to be completed by Aug. 31, after which the IMF board will decide who gets to head up the Washington-based institution. (Additional reporting by Jan Lopatka and Alan Crosby in Prague, Gleb Bryanski and Oleg Shchedrov in Moscow)

Keywords: IMF CANDIDATE/RUSSIA

[PRAGUE/Reuters/Finance.cz]