Russian President Vladimir Putin vowed Monday not to intervene in the prosecution of Russia's richest man and appealed for calm after the oil tycoon's weekend detention sent Russian financial markets plunging.

Playing down fears of a reversal of the past decade's sales of state assets, Putin said it was for the courts alone to decide the fate of Mikhail Khodorkovsky, the head of oil giant YUKOS who has backed Putin's liberal rivals in the upcoming parliamentary election and is thought by many to harbor greater political ambitions.

Khodorkovsky, 40, is charged with fraud and tax evasion and is in a Moscow jail pending further investigation. His lawyer, Anton Drel, told Reuters he had not been allowed to speak to his client.

Some analysts and liberal politicians said the move against Khodorkovsky, dramatically arrested Saturday and charged with fraud partly related to 1990s privatizations, could undermine Putin's efforts to lift the economy and create a strong political system that would attract investment.

"There will be no meetings and no bargaining over the activities of the law enforcement agencies as long as, of course, these agencies are acting within the framework of Russian law," he told members of government.

Khodorkovsky may be a victim of Kremlin "hawks" drawn by Putin from among his former colleagues in what was once the KGB and other security services, some analysts said.

Putin called for an end to "speculation and hysteria" over the possibility of any rollback of the privatizations that put much of the old Soviet state wealth into the hands of a few "oligarchs," as they came to be known.

The YUKOS case, he said, was in the hands of Russia's court system, which he described as imperfect but independent.

"Executive authorities cannot order a man incarcerated even during a preliminary investigation, nor can prosecutors. That can be done only by a court," he said.

"If, in this instance, this is what has been done, my supposition is that the court had grounds to do so."

STOCKS SLUMP

Russian stocks sank more than 10 percent. YUKOS shares lost a fifth of their value and the rouble dropped on fears the arrest would send money flooding out of Russia. The euro also gave ground to the dollar.

Khodorkovsky heads YukosSibneft, Russia's biggest oil company created by a merger under way of YUKOS with smaller rival Sibneft.

U.S. oil majors Exxon Mobil Corp. and Chevron Texaco are thought to be interested in purchasing a stake in it. A source close to the talks said the arrest presented a huge obstacle to a deal.

"The discussions have not quite stopped but the one clear person who was driving the communications between all the parties is now incommunicado," the source said.

BUSINESS ANGERED

The financial community was indignant.

"The arrest, indictment and imprisonment of Mikhail Khodorkovsky ... is a disgraceful setback in Russia's post-Soviet development," the United Financial Group brokerage said.

"Everyone is a loser ... including President Putin himself."

Investor concern focusing on legal action against YUKOS has bubbled near the top of the political agenda since July, when a Khodorkovsky associate was arrested and charged with theft.

Many said that was a Kremlin warning shot to keep out of politics. Another associate charged with tax evasion, Vasily Shakhnovsky, was elected Monday to parliament's upper house from a remote region, winning immunity against prosecution.

Liberal politicians have called Khodorkovsky's detention an act of intimidation. Communist chief Gennady Zyuganov, who has two candidates linked with YUKOS running on his party ticket in December's parliamentary election, said Khodorkovsky "had been turned into an enemy the minute he spoke up about his political intentions."

The oil magnate backs two liberal parties competing against Putin's allies in December's election. Putin is heavily favored to win re-election early next year.

Many analysts believe Khodorkovsky's ambitions may go far beyond that -- even to seeking the presidency in 2008.

The weekend arrest operation was the latest attack by the Kremlin on "oligarchs" who made quick fortunes in the early post-Soviet years under Putin's predecessor, Boris Yeltsin.

It was those sell-offs that helped propel Khodorkovsky to a fortune recently estimated by Forbes magazine at $8 billion.

The arrest could raise Putin's standing among the bulk of voters who view oligarchs largely as robbers of state assets.

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