AFP - Russian President Dmitry Medvedev on Saturday announced he will step aside in 2012 polls and backed Prime Minister Vladimir Putin to return to the Kremlin for a new stint that could last until 2024.

Ending months of uncertainty over which of the men would run, Putin swiftly accepted Medvedev's proposal to run for president in carefully-choreographed speeches at the ruling party annual congress that dismayed liberals.

In an apparent consolation prize for the man who will go down in history as post-Soviet Russia's only one term president, Putin said Medvedev should become his prime minister in 2012 and head the party list in upcoming legislative polls.

"I think it would be correct for the congress to support the candidacy of the party chairman, Vladimir Putin, to the post of president of the country," Medvedev told the annual congress to cheers from thousands of delegates.

The Russian president, who had spearheaded a drive to modernise Russia since taking over from Putin in 2008 but always remained his shadow, said he was ready to head a Russian government under a Putin presidency.

Putin, who has dominated Russia for a decade, said he was certain that after the elections Medvedev "will be able to create a new, effective, young, energetic administration team and head the government of the Russian Federation."

The presidential elections are scheduled in March and due to the emasculated state of the Russian opposition, the candidate of the dominant United Russia is almost certain to win control of the Kremlin.

Under constitutional changes pushed forward by Medvedev and which many long suspected were aimed at further strengthening Putin, the new president will have a six-year mandate rather than four years as before.

This means that if Putin served again the two maximum consecutive terms he could stay in power until 2024 by which time he will be 72.

"This is a catastrophic scenario for Russia," said former cabinet minister Boris Nemtsov, now a member of the sidelined liberal opposition. "We should expect capital flight, immigration and dependence on natural resources."

However Chris Weafer, chief strategist at Troika Dialog investment bank in Moscow, said that Putin would work harder in a third presidential term to attract foreign investment.

"I expect Putin will establish a very pro-business and pro-reform cabinet. I do not expect any market reaction to the news -- investors are more concerned about global events and the weakening oil price."

Putin said he and Medvedev had "long ago" agreed on their future roles in Russia, despite months of suspense over who would stand in the presidential elections.

"I would like to say directly that the agreement about what should be done, what we should be doing -- that we reached a long time ago, several years ago," a smiling Putin said to applause.

Seeking to give Medvedev a big future role despite his virtual abdication, Putin unexpectedly announced that Medvedev would head the list of United Russia in December's parliamentary elections which precede the presidential polls.

"I propose that the list of United Russia for the State Duma elections on December 4 be headed by the head of state, Dmitry Medvedev," Putin said.

Defending the establishment against criticism from figures including ex-Soviet leader Mikhail Gorbachev that the scenario had been stitched-up behind the scenes, Medvedev said the decision was "well-thought out".

"I want to stress one thing: we've always told the truth... Our beloved country, our Russia should belong to free, decent and responsible people. And I am certain -- it will be this way."

Putin left the Kremlin in 2008 after serving a maximum two consecutive terms but carried on as Russia's de-facto number one as prime minister while his hand-picked successor Medvedev served as a sometimes overshadowed president.

While the first day of the United Russia congress took place in a conference centre close to the Kremlin, Medvedev and Putin spoke at the gigantic Luzhniki sports complex in a glitzy spectacle attended by thousands.

Russia's unregistered opposition People's Freedom Party, whose leaders include Nemtsov, also held a convention on Saturday but controversially is banned from taking part in the elections.

But there has been concern from United Russia in recent months due to declining poll ratings ahead of the elections.

According to the latest survey by leading Russian pollster VTsIOM, 43 percent of Russians will vote for United Russia, well down from its peak rating of 60 percent in October 2008 but still quadruple that of its nearest challenger.