Putin puts brakes on Russian privatisation plans

By bne IntelliNews February 2, 2016

Russian President Vladimir Putin has intervened in new government efforts to cut state control over major enterprises and raise funds from privatisation to solve the current fiscal crunch, placing stricter conditions on the process.

"We need to take market conditions and tendencies in the account," Putin said at a February 1 government meeting about the privatisation process, adding that "we won't sell at give-away prices, without particular benefit to the budget".

While current market conditions and the ongoing sanction regime hardly make a lucrative sale of Russian assets possible, Putins set forth two more strict conditions.

"I emphasise that the controlling stake in systemic companies should remain in the hands of the state," the president said in remarks carried by newswires.

Moreover, potential buyers should belong to the "Russian legal field", have a long-term strategy for the assets in place, and raise have own funds for the purchase, without tapping into the help of Russian state banks.

The heads of a number Russian major state companies were summoned to hear Putin's new privatisation guidelines. These included the Alrosa diamond major, Rosneft and Bashneft oil companies, Russian Railways, the state bank VTB, the Aeroflot air carrier and Russia's largest shipbuilding company Sovcomflot.

Sovcomflot was the company with which the state property agency Rosimushchestvo in 2015 hoped to re-launch the privatisation program that has been falling behind and dragging since 2000. The head of the agency Olga Dergunova has since resigned.

This is not the first time Russia's president has intervened in privatisation plans. On January 29, Putin told a meeting with the heads of the Central Bank of Russia (CBR) and Ministry of Finance that plans to privatise Russia's largest lender Sberbank are "premature".

Sbebrank CEO and ex-economy minister Herman Gref has repeatedly called for the full privatisation of the bank. Current Economy Minister Aleksei Ulyukayev also backed the idea, saying this would improve the capitalisation of the financial sector.

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