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Russia's economy minister said on April 30 that he expects the state to manage to raise less than 25% of the RUB1.2 trillion target for privatisation revenue in 2012. State company managers are hardly helping the state's efforts.

The government has been trying to burnish Russia's investment image, but in the biggest deal this year it immediately proposed to screw minority shareholders over. Following state-owned oil major Rosneft's $28bn deal to buy out the majority shareholders in Russo-British joint venture TNK-BP, minority shareholders in the traded TNK-BP Holding were hoping to cash in on the deal. The JV is sitting on a huge cash pile and tying up with the state offers a potentially lucrative future.

However, when Rosneft CEO Igor Sechin said he will not pay out dividends and instead organise a complicated debt deal that in effect would give Rosneft access to the cash pile without cutting in minorities, they were outraged. The share price dropped 40%.

The government has put some RUB1.2 trillion worth of state-owned company shares on the privatisation list for just this year, and is entirely dependent on international investors' good will to sell this much stock. In an admission of the scale of the challenge, Economic Development Minister Andrei Belousov said on April 30 that he expects no more than RUB320bn, with sales to include a 5% stake in oil major Rosneft.

As things stand, even that lowered target appears to be wishful thinking. Other estimates anticipate Russia will sell no more than RUB60bn worth of shares. Even the VTB SPO that went off this week sold the bulk of the $3.3bn raised not to the market, but to three sovereign wealth funds. It was less of an SPO than a private placement.

Given the high stakes, it seems the Kremlin has now lent on Sechin to calm Rosneft's minority investors. According to reports, he told fund managers in New York last week that Rosneft will pay out 25% of 2012 net profit according to IFRS accounting as dividends. That will be worth around RUB65bn, according to Vedomosti.

"The process hasn't been completed so far, but we hope that a decision in respect of dividends, a buyback or other ways of returning the value of TNK-BP Holding will made within the next month or even earlier," Mark Mobius of Templeton Asset Management, told Bloomberg.

The level of payout matches the minimum it Rosneft required to pay under a new government rule, although most state-owned companies calculate profits according to Russian standard accounts which gives a far lower figure. At RUB65bn, the level of pay out will be three-times smaller than in 2011, when the RUB206bn distributed equalled 85% of net profits under Russian accounting standards.