(Reuters) - Egypt´s Muslim Brotherhood, in a policy U-turn, said on Saturday it would back its deputy leader for president, an endorsement that guarantees Khairat al-Shater a place among the frontrunners after the group initially said it would not field a candidate.

The Brotherhood said it changed tack after reviewing other candidates in the race and after parliament, where its Freedom and Justice Party controls the biggest bloc, was unable to meet "the demands of the revolution", a reference to its mounting criticism of the ruling army´s handling of the transition.

Given the Brotherhood´s strong showing in the parliamentary election and its broad grass-roots network, the group´s backing for a candidate could prove a decisive factor. However, analysts say name recognition may also play a role in the race that could help others such as former Arab League chief Amr Moussa.

Analysts said the move suggested the Brotherhood, on the brink of power for the first time in its 84-year history, was worried it could have that power snatched away after decades of repression at the hands Hosni Mubarak, who was ousted last year.

"We have witnessed obstacles standing in the way of parliament to take decisions to achieve the demands of the revolution," said Mohamed Morsy, head of the Freedom and Justice Party.

"We have therefore chosen the path of the presidency not because we are greedy for power but because we have a majority in parliament which is unable to fulfill its duties in parliament," he said announcing the decision to back Shater.

The move will worry liberals and others who fret about the rising influence of Islamists after they swept parliament and now dominate an assembly writing the new constitution.

Shater, 61, one of the group´s three deputy leaders and a businessman who runs a computer firm, will be competing against several other Islamists who have declared their plans to run.

He has played a key role in the Brotherhood´s economic policy and met the International Monetary Fund team which is negotiating a $3.2 billion loan facility with the government. The IMF has said it wants broad political backing for the deal.

SPLITTING THE VOTE?

Shater´s nomination could further split the Islamist vote, as at least three other Islamists are campaigning, including one who was expelled from the Brotherhood when he defied their earlier decision not to field a candidate.

But the Brotherhood, the oldest and most well-established Islamist group, could use its political clout to encourage Islamist politicians and voters to unite around Shater.

Like many members of the Brotherhood that was banned under Mubarak, Shater spent years in and out of jail. He was most recently freed shortly after Mubarak was toppled.

The Brotherhood had met twice before Saturday´s gathering to debate a change in policy but did not reach a decision, highlighting divisions about whether to change course on fielding a candidate and about who to back.

A Brotherhood member told Reuters that 56 of 108 members of the Brotherhood´s shura, or advisory, council voted to pick Shater as the group´s candidate and 52 voted against it.

"Those who went against the candidacy of Shater at first changed their minds and supported him afterwards," said Mohamed Badie, the Brotherhood´s leader.

The group previously said it did not want one of its members in the top office, so it did not appear to be hogging power and alienating those who did not back the group in post-Mubarak Egypt. "We do not have the desire to monopolize power," the FJP´s Morsy said after Shater´s candidacy was announced.

"BREACHING A PROMISE"

But the decision to field Shater could draw criticism, particularly after the group expelled another member, Abdel Moneim Abol Fotouh, when he said he would run in spite of the Brotherhood´s pledge not to seek the presidency.

"This is not only a breach of their promise, but deliberate defiance of the (ruling) Supreme Council of the Armed Forces," said a Western diplomat, adding the U-turn suggested the group was worried others could disrupt its rise to power.

"The Brotherhood are so close to power they can smell it, but they are so scared that someone else will snatch it from them," the diplomat said.

The ruling army council has pledged to hand power to civilians by July 1 after a new president is elected, although analysts expect the generals to hold influence from behind the scenes long after that.

The Brotherhood has become increasingly critical of the army- appointed Prime Minister Kamal al-Ganzouri and of the army for continuing to support the ministers. The group wants the cabinet to quit and to lead the formation of a new government, based on their dominance of parliament.

But the army has rejected this. Under the existing constitution, the ruling army or the next president will have the power to form the cabinet. A new constitution is unlikely to be agreed until after the next president is in place, leaving those powers with the presidential office for now.

"The truth is that they are proving each day that power is their only goal," Ahmed Said, head of the liberal Free Egyptians Party told CBC TV, saying the Brotherhood appeared to have acted when it found "that they can´t control the government".

Shater was arrested in 2006, along with other senior members of the group, and jailed in 2007 by a military court on charges including supplying students with weapons and military training.

Jail terms can bar access to elected office for a period but the Brotherhood said this would not derail his candidacy. "When Shater´s name was considered, our lawyers said there is no legal obstacles facing his candidacy," Badie said. (Additional reporting by Ahmed Tolba, Yasmine Saleh and Tamim Elyan; Writing by Edmund Blair) (© Thomson Reuters 2012. 03/31/12)