MOSCOW—Russian billionaire Mikhail Prokhorov said he plans to challenge Vladimir Putin in the March presidential elections, a long-shot bid that opposition leaders denounced as a Kremlin-inspired effort to drain support from a wave of antigovernment demonstrations.

Mr. Prokhorov's bid could tap into growing dissatisfaction with the Kremlin, which arose after reports of massive fraud in the Dec. 4 parliamentary election and have grown into the most serious challenge to Mr. Putin's control in his 12-year rule.

But by giving protestors a political outlet for their discontent without actually presenting a threat to his re-election, observers said his campaign could help Mr. Putin.

"Prokhorov's task is to accumulate protest voters and help Putin get elected," Boris Nemtsov, an opposition leader and Prokhorov friend, told the Interfax news agency. Communist leader Gennady Zyuganov, who also is running for president, echoed that view.