* Minister's detention announced in early hours
* Case linked to Rosneft's $5 bln acquisition
* Highest-ranking official arrested since 1991
* Arrest could expose fault lines in Putin circle

Russian investigators said on Tuesday they had detained Economy Minister Alexei Ulyukayev in a bribery case linked to a $5 billion acquisition by state oil giant Rosneft, a surprise move that may expose fault lines in Vladimir Putin's inner circle.

Ulyukayev, a 60-year-old technocrat whose ministry has been overseeing a sell-off of state assets, is the highest-ranking Russian official to be detained while in office since the collapse of the Soviet Union in 1991.

State television was quick to present his detention as part of the authorities' fight against corruption. It may also be evidence of infighting at the highest levels of power and may herald a wider shake-up before the 2018 presidential election.

The Investigative Committee, the state agency that investigates major crimes, said Ulyukayev had extorted a $2 million bribe from Rosneft in exchange for signing off its purchase of a stake in mid-sized oil producer Bashneft .

‘The minister is detained,’ the Committee said in a statement in the early hours, adding that it had opened a criminal case against him. ‘In the near future, investigators plan to bring charges against Alexei Ulyukayev.’

Law enforcement sources told Russian media the minister's phones had been tapped and his electronic communications monitored. Investigators set up a sting operation in which the alleged bribe was handed over on Monday, the reports said.

President Putin was informed about the case when the investigation was first launched, Kremlin spokesman Dmitry Peskov told reporters. ‘These are serious allegations,’ Peskov said. ‘Only a court can deliver a verdict.’

He said he did not know whether the detention meant that Rosneft's purchase of Bashneft could be reviewed.

TURF WAR

Rosneft's acquisition of Bashneft was the focus of a major turf war between rival Kremlin camps, sources close to the deal and in the government have told Reuters.

Rosneft's chief Igor Sechin, who is also one of Russia's most powerful men and a close Putin lieutenant, lobbied hard for the green light to buy Bashneft.

But the deal was fiercely opposed by economic liberals in the government, some with ties to Prime Minister Dmitry Medvedev, who believed Bashneft should go to private investors.

Ulyukayev initially opposed Rosneft buying Bashneft, one of the most lucrative state assets to be privatised in years, but eventually signed off on the deal.

Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, said he was sceptical about the veracity and logic of the accusations against Ulyukayev.

There had been a widespread consensus that the Bashneft stake had been sold to Rosneft for a market price, so it was strange that a bribe would be given for a valuation that everyone agreed on anyway, he said.

‘This could trigger a serious government shake-up,’ Shokhin told the Gazeta.ru online news portal.

Medvedev and Putin spoke about the detention, Medvedev's office said, adding: ‘The prime minister believes that the most painstaking investigation of this case is required.’

A Rosneft spokesman, Mikhail Leontyev, was quoted as saying by the TASS news agency that the company saw no risk to the Bashneft deal. ‘The deal is absolutely above board,’ he said.

The minister has been in his job since June 2013. He is not part of Putin's inner circle, which is dominated by people who favour a commanding role for the state in the economy, but neither is he a part of the rival camp of economic liberals.

Ulyukayev is close to Andrei Kostin, the influential head of Russia's second-biggest lender, state-owned VTB, and chairs VTB's supervisory board.