By DAVID NOWAK and JIM HEINTZ, Associated Press
MOSCOW -- President Dmitry Medvedev fired Moscow's boisterous mayor on Tuesday, ousting the man who gave the capital a modern facelift but destroyed some of its most precious historic landmarks amid a construction boom that turned his wife into Russia's wealthiest woman.
Medvedev signed a decree relieving the 74-year-old Yuri Luzhkov of his duties due to a "loss of confidence" in him after Luzhkov openly defied the Kremlin and rejected a facesaving offer to resign after 18 years on the job.
Luzhkov's dismissal ended an increasingly hostile battle of wills, squashing a regional leader's mutiny unseen in a decade of tightening Kremlin controls. Medvedev and his predecessor and mentor, Prime Minister Vladimir Putin, appeared to be sending a powerful signal that no regional leader was indispensable and no one should openly criticize Medvedev like Luzhkov had done.
The firing also clears the way for a redistribution of the capital's wealth, a sizable chunk of which has for years been controlled by Luzhkov's billionaire wife, construction mogul Yelena Baturina.
Some of Putin's top lieutenants were named by observers as possible successors to Luzhkov, and business groups close to Putin and Medvedev were expected to win more of Moscow's lucrative building contracts.
Some foreign businessmen were optimistic, saying that Luzhkov's departure could help eradicate some of the corruption and cronyism that poisoned the city's investment climate.
Andrew Sommers, president of American Chamber of Commerce in Moscow, told The Associated Press that Luzhkov's ouster should not affect foreign investment in Moscow - and could even encourage more free competition.
"How contacts are rewarded could benefit from a more transparent system," he said.
Hawk Sunshine, head of investment banking at Moscow-based Metropol bank, also voiced hope that a broader circle of investors could gain access to construction contracts.
"Luzhkov has been in power for so long, he's institutionalized preferences," he said. "So any non-market-based relations could be reversed now."
Most of Moscow's roads have not seen significant improvement for the past 20 years although the number of cars has increased six-fold. Luzhkov has been criticized for the lack of new road construction and poor planning that made busy city streets even more congested.
"Infrastructure for the city needs to be fixed because the amount of the traffic here is diabolical," said Sunshine.
Tuesday's firing ended months of rumors that Luzhkov was on the way out.
"It's hard to imagine a situation in which (Luzhkov) and the president of Russia ... continue to work together when the president has lost confidence in the regional leader," Medvedev said in Shanghai, where he was on an official visit.
Luzhkov made no public comment Tuesday, but in a resignation letter to United Russia, the ruling party headed by Putin, he suggested there had been an orchestrated campaign to oust him.
"I have been fiercely attacked by state mass media, and the attacks were related to attempts to push Moscow's mayor off the political scene," Luzhkov said in the letter, which was released to the media.
Luzhkov said he decided to leave the party because it "did not provide any support, did not want to sort things out and stop the flow of lies and slander."
Putin said Tuesday that Luzhkov had done a lot for the capital but his defiance went too far.
"It's quite obvious that there was a strain in the Moscow mayor's relations with the president, but the mayor is subordinate to the president, not the other way round," Putin said in televised remarks. "(He) should have taken steps to normalize the situation."
Luzhkov had remained in power due to his ability to deliver the Moscow vote for United Russia, which he helped create. Firing him now gives the Kremlin time to appoint a successor who can get out the vote for the 2011 parliamentary election and the 2012 presidential ballot.
Luzhkov's deputy, Vladimir Resin, was named acting mayor pending the appointment of a permanent successor, but he was not thought to be a possible candidate.
Luzhkov leaves a considerable legacy.
The stocky former chemical engineering plant manager ran the city of 10 million with the aggressive vigor of a tough foreman. His efforts to exert absolute control went as far as announcing plans to seed snow clouds outside Moscow to stop them from dumping snow on the city.
Under Luzhkov's long tenure, Moscow underwent an astonishing makeover from a shabby and demoralized city into a swaggering and stylish metropolis. As the prices for Russia's oil and gas soared and foreign investment poured into the vastly underdeveloped country, Russia's capital sprouted gigantic construction projects - malls, offices and soaring apartment towers.
Much of that work was done by Inteko, the construction company headed by Luzhkov's wife, who is believed to be Russia's only female dollar billionaire with an estimated fortune of $2.9 billion, according to Forbes magazine.
Suspicions swirled consistently that corruption by Luzhkov fed his wife's wealth.
"Moscow's business landscape is all about Inteko and its affiliates," Alexander Lebedev, a wealthy businessman who ran against Luzhkov in the 2003 mayoral election, the last before Putin made the position by appointment only, told the AP. "The procedures for construction approval have been designed to fit Baturina's companies exclusively."
Lebedev said Baturina had been involved in every construction contract over $100 million.
Inteko spokesman Gennady Terebkov rejected any allegations of corruption, saying in an e-mail that "courts have proved on several occasions that allegations like these are all lies."
Luzhkov's star began falling sharply in July when an ill-conceived repair project on the main highway to Moscow's Sheremetyevo international airport created backups that left drivers taking up to six hours to get there. Anger against the mayor then soared when he stayed on vacation in Austria in August even as Moscow suffered through weeks of heavy, suffocating smog from nearby forest and peat-bog fires.
But the final blow was an open spat with Medvedev over plans to build a highway through a forest just outside of Moscow that environmentalists wanted to protect. Medvedev in August ordered the project suspended, a decision that Luzhkov criticized in a newspaper article.
While many Muscovites have watched their city's feverish changes with pride, Luzhkov was despised by preservationists for bulldozing historic buildings in prime locations. In some cases, including the iconic Moskva Hotel, the buildings were demolished only to be replaced by clumsy replicas.
He also inflicted a tacky aura by promoting the gargantuan works of sculptor Zurab Tsereteli, including a 370-foot (94-meter) statue of Peter the Great on a man-made island in the Moscow River that ranks in some surveys as one of the world's ugliest structures.
Luzhkov appalled human rights activists by his frequent denunciation of gay rights activists - at one point calling them "satanic" - and vehemently blocking their attempts to rally. For this year's observance of the end of World War II in Europe, he wanted to allow billboards portraying Soviet dictator Josef Stalin, but the initiative met strong resistance from the Kremlin.
On the streets of Moscow, the mood was mixed Tuesday.
"Of course, he is a rich man, and his wife is even richer, and, of course, they did take something for themselves," businessman Alexei Gorlo said. "But despite all the talk about them stealing, for me personally, for my family living in Moscow, they have done much more. I live in an almost-European city."
Yet others were more critical.
"We've been waiting for this decision for a long time," said Olga Savelieva, an architecture preservationist. "He shouldn't have had such an attitude to the city, to the historical heritage, to Muscovites. He shouldn't have thought only about his own wife and the family pockets that need to be filled."
Associated Press writers Mansur Mirovalev, Nataliya Vasilyeva and Vladimir Isachenkov contributed to this article.
Caption: Moscow Mayor Yuri Luzhkov reacts during the Unesco's early childhood care conference in Moscow, Russia, on Monday, Sept. 27, 2010. Yuri Luzhkov, who has been Moscow's mayor for the last 18 years, is back from his vacation and said he wouldn't resign despite a widely reported public power struggle with Russian President Dmitry Medvedev. Ivan Sekretarev / AP Photo