Kremlin almost doubles privatization

Russia’s government is eager to curb a budget deficit by selling key assets in the economy, but does it have the poltiical will?

The Russian government has doubled the target to be raised from selling off state assets over the next five years to $50bn, said deputy prime minister and finance minister Alexei Kudrin.

The list of companies on sale has been lengthened and the total value increased from the $29bn that was supposed to be raised by 2013, although new companies to be privatised have not yet been named. The original list included Rosneft, Russian Railways, the Federal Grid Company and RusHydro.

Yury Solovyov, head of state-run VTB Capital investment bank and likely organiser of the deals, told Moscow Times that two privatisation transactions could happen this year, in the infrastructure and financial sectors.

There has also been an increasing amount of noise surrounding the possible sale of stakes in the state’s two biggest banks, Sberbank and VTB Bank. Deputy finance minister Alexei Savatyugin said in September that the possibility of selling 10pc of VTB Group before the end of 2010 was being considered. The government has already sold 25pc less one share in the bank in a disastrous IPO. And German Gref, chief executive of Sberbank, said the state may sell a 9.3pc stake in Sberbank next year to help cut budget deficit. Sberbank has a market capitalisation of $58bn and it and VTB were both included in the original privatisation programme that runs to 2013.

The privatisations will be a key test of the government’s resolve to carry out President Dmitry Medvedev’s modernisation campaign. Nearly one in two Russians now work for the state or state-dependent companies following the crisis, where the state increased its stakes in many large enterprises to prevent them closing. The Kremlin has said from the beginning that these positions were temporary and that it wants to wind down its ownership as the market recovers.

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