Bloomberg News

Russian Economy Ministry Opposes Delay in State Asset Sales

February 02, 2012

(Updates with Uvarov comments from second paragraph.)

Feb. 2 (Bloomberg) -- Russia’s Economy Ministry said it will submit a report to the government next week opposing Deputy Prime Minister Igor Sechin’s call for delays in the planned privatization of state energy assets.

“We don’t see the sense in delaying the timetable for starting to prepare these companies for privatization,” Alexei Uvarov, head of the ministry’s property department, told reporters in Moscow today.

Sechin, a close ally of Prime Minister Vladimir Putin who oversees the energy industry and was chairman of OAO Rosneft until last year, proposed withdrawing oil companies OAO Transneft, OAO Zarubezhneft and Rosneft and power companies OAO Federal Grid and OAO Rushydro from the 2012 divestment plan, citing low market valuations, Kommersant reported Jan. 11.

President Dmitry Medvedev promised to relinquish government control of some of the biggest state companies at the St. Petersburg International Economic Forum last June, saying it was time to reverse the policy of strengthening the state’s presence. Putin, who’s seeking to reclaim the presidency in elections next month after Medvedev agreed to step aside, pledged Jan. 30 to loosen the reins on the economy by selling assets and scaling back regulation.

‘New Economy’

“We need a new economy,” Putin wrote in a Jan. 30 article in the Vedomosti newspaper. He said the government will divest stakes in major non-commodity companies and lower its holdings in some commodity producers by 2016, excluding utilities and defense enterprises.

Russia plans to raise 300 billion rubles ($9.9 billion) this year by selling stakes in state companies, including 15 percent of Rosneft, the country’s biggest oil producer, and 10 percent in VTB Group, its second-biggest lender, Uvarov said in September. Russia may also offer stakes in energy shipper OAO Sovcomflot and diamond miner OAO Alrosa, he said.

Sovcomflot will probably be among the first major companies in which a stake will be sold as it’s ready for privatization, Uvarov said today. A 50-percent holding in the shipper may be offered for sale this year in two stages, he said.

7% Stakes

Russia’s federal government and the Siberian region of Yakutia may also each sell 7 percent of Alrosa, he said. The Economy Ministry must first overcome the objections of the local authorities, which believe the world’s largest diamond producer isn’t ready for privatization, Uvarov said.

Russia aims to raise a total of 1.16 trillion rubles from state asset sales between 2012 and 2014, the Economy Ministry official said in September. Taking into account the current volatility in financial markets, sales may generate 380 billion rubles in 2013 and 475 billion rubles in 2014, he said.

The government may cut its stake in Rosneft, which produces almost a quarter of Russian oil, to below 50 percent, Arkady Dvorkovich, Medvedev’s economic adviser, has said. Russia may also sell its entire holding in VTB in three to five years, according to Dvorkovich.

--Editors: Paul Abelsky, Andrew Langley

To contact the reporters on this story: Ekaterina Shatalova in Moscow at eshatalova@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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