Russian privatization plans shift up a gear

Russian Minister of Economic Development Andrey Belousov, center, speaks at a Government meeting in the Russian Government House, 7 June 2012. (RIA Novosti/Ekaterina Shtukina)
The Russian Government has agreed to speed up and broaden its privatization, with such giants as top lenders Sberbank and VTB, and the energy major Rosneft being on the list. This should be completed by 2016, generating $9.4bln already this year.

“Perspective plans to privatize the stakes of the biggest companies by 2016 involve a complete exit of the Russian Government from such entities as VTB Bank, where we still hold 75.5%, Rosselkhozbank, Rosagrolizing, Sovkomflot, Sheremetyevo International Airport, Aeroflot, United Grain Company, Alrosa, Rushydro, and Rosneft,” Andrey Belousov, the newly appointed Head of Russia’s Ministry for Economic Development, told the Cabinet on Thursday.

Another 200 small and medium-sized joint-stock companies will be put up for sale by September 1,2012, Belousov added.

"Overall, we plan to receive roughly $9.4 billion this year," he said at a government session on Thursday.

The privatization of Russia’s biggest lender Sberbank caused heated discussion. Given that the majority of Russians use Sberbank services every day, the issue “isn’t just an economic one, but also political, so we’ll be acting in a cautious manner,” said Igor Shuvalov, the first Deputy Minister.

In the end, it was decided that the Central Bank of Russia (CBR) should keep a controlling stake of 50% + 1 share of Sberbank in its asset portfolio. As for the widely discussed sale of the CBR’s 7.58% stake in Russia’s banking giant, it could happen in the near future, according to Belousov. "At today's stock prices, this stake will generate more than $3.12 million,” he specified.

Sergey Ignatiev, the Head of the CBR, said the day before he didn’t want to sell at the current price, although wasn’t going to abandon all together the idea of selling the 7.58% stake.

Sberbank privatization was initially scheduled for September 2011, but it was put off several times due to unfavorable market conditions. Overall, the CBR holds a 57.58% stake in Sberbank, which accounts for 60.25% of its voting shares.

Reducing a state stake in the lender and introducing more private ones should be favorable for both foreign investors and ordinary people who may get a higher interest rate, Vladimir Rozhankovsky, Head of Research at Nord Capital, told Business RT.

“Private ownership is always more efficient economically, as it creates more impetus for generating more profit, part of which will finally turn into bonuses for management,” agreed Alexey Devyatov, chief economist at Uralsib Capital.

And having the Russian Government out of some its top lenders shouldn’t affect their popularity among Russians, Devyatov added. “It needs to be understood that the Government won’t absolutely abandon the lender. The existing System for Deposit Insurance means that the State covers all deposits of up to $22,000,” he said. On top of that, turning to private ownership should involve higher interest rates for depositors, Devyatov concluded.

Vladimir Yakunin, a head of RZHD, also doubted whether a massive sale of the state stake some time soon would be reasonable. When minority shareholders come to the board, Russia’s Government won’t be able to invest enough into the company’s infrastructure, according to Yakunin.

The Russian government has decided to reserve its 'golden share' right after the privatization of such companies as RusHydro, Zarubezhneft, UGC and Alrosa. A ‘golden share’ right means the Government retains the right to have its say in the decision making process, although it doesn’t imply a voting right.