* Russia likely to face Arab Spring-style unrest-activist
* Russia’s shadow economy worth $300 billion a year
* Discontent growing over corruption, stagnation
By Guy Faulconbridge and Maria Tsvetkova
MOSCOW, June 1 (Reuters) - Vladimir Putin’s tightly controlled political system is so weakened by corruption that Russia’s paramount leader could face a revolt within five years, the country’s most prominent whistleblower told Reuters.
Alexei Navalny, who uses the Internet to lampoon the ruling party and expose high-level graft, said Prime Minister Putin was still firmly in charge before a 2012 presidential election.
But he said that unless Putin started to implement reforms and open up the political system, Russia could face an uprising like the Arab Spring protests or the revolts which swept through several former Soviet republics in the early 2000s.
“If they do not voluntarily start to reform by themselves, I do not doubt that this will happen in Russia,” the 34-year-old lawyer said in an interview at his spartan offices in Moscow.
“There is a shaky balance between the different interests and any significant event could destroy the balance in seconds.”
The comments reflect the concern among some sections of the elite about the expectation that Putin will remain paramount leader after the March 2012 election, ushering in an era of stagnation two decades after the 1991 fall of the Soviet Union.
Such open talk of unrest is also dangerous: The Kremlin allows some marginal opposition but Putin, 58, has made clear he will not tolerate an open challenge to stability.
Navalny said Russia’s position as the world’s biggest producer of natural resources gave the Kremlin enough money to douse social unrest for a time and that Putin was “no fool”.
But he said rising discontent over endemic corruption and stagnation had put Russia firmly on the path towards turmoil, adding that a “civil war” was already being fought along Russia’s southern flank in the North Caucasus.
“Corruption is the foundation of contemporary Russia, it is the foundation of Mr. Putin’s political power,” Navalny said.
“He is chairman of the board of ZAO Russia,” he said, using the Russian acronym for a closed joint-stock company.
Putin’s spokesman has denied as “simply ridiculous” charges made by U.S. diplomats that Putin rules Russia by allowing an elite of corrupt officials and spies to siphon off cash from the world’s biggest energy producer.
In a frank dissection of Russian political life, Navalny said President Dmitry Medvedev had achieved almost nothing since his March 2008 election and that he was not even worth discussing because Putin was so clearly in charge.
“President Medvedev is simply a part of the system constructed by Putin: he is not an independent part of it so it is senseless to even talk about him,” Navalny said. “He is incapable of ruling anything in this country.”
He said the Russian authorities could destroy anyone who dared to oppose Putin, but that this masked their weakness.
“They are completely weak: they are strong in the sense that they can destroy anyone or any company, throw them in jail, in the sense that they control the media and partly control the law enforcement agencies. But nothing else,” he said.
Opponents say Navalny is a Western puppet while supporters say he has risked his life to expose official corruption.
He has certainly earned some enemies: prosecutors have opened a fraud case against him.
Navalny denied the charges, which he said were ordered by his opponents, and said he would not flee Russia to avoid the fate of oil tycoon Mikhail Khodorkovsky, who was jailed in 2003 after falling foul of the Kremlin during Putin’s presidency.
“Why should I be afraid?” he asked.
He has no party but Navalny is Russia’s most popular blogger and diplomats say his biting commentary on corruption and illegal immigration gives him the potential to lead Russia.
When asked about his ambition, he winces but his eyes twinkle: “I would like to be president, but there are no elections in Russia.”
Navalny said Russia’s shadow economy amounted to one fifth of gross domestic product, or about $300 billion a year, and that state-controlled companies such as Gazprom and pipeline monopoly Transneft could cut their costs by at least a quarter if they weeded out corruption.
“Twenty-five percent is a completely realistic figure which we could reach in one week ... The same goes for Transneft.”
The comments echo criticism from Medvedev, who on March 30 said state companies such as Transneft and Gazprom had high costs because of corruption. Medvedev ordered the companies to cut their costs by 10 percent per year for three years.
A spokesman for Transneft, whose CEO, Nikolai Tokarev, has accused Navalny of being backed by U.S. politicians, said the comment on cutting costs was a “monstrous lie”.
Navalny denied working for any foreign state but said the United States and European Union should get tougher with Russian money laundering by freezing assets.
“This is money laundering and all these countries should stop the export of corruption from Russia,” he said. “Sadly, we see the export of corruption to Europe is perfectly well oiled.