Russia's privatisation road ahead

With Russia looking to expand State privatisation program boosting economic growth, RT spoke with Ben Aris, Editor in Chief at Business New Europe Magazine

RT: Why are we seeing more companies on the state privatization list?

BA: "I think, this is the third list or the third time they have expanded the list in as many months and they are coming up with more and more. The idea of the privatization was floated last year, with initially ten companies, but now I think we will have twenty companies and the amount of money they are going to raise is going from the sum of 30 billion to 120 billion – that is 10% of GDP. But this isn’t about the money, necessarily, I mean of course Russia has a budget deficit, it needs the money. It’s more about modernization of taking companies – inefficient companies away from state managers and putting them into the private sector. And I believe very much this is where Russia is now – in the early stages of privatization transition. The state plays a crucial role in pushing the economy forward as the only able economic agent. But now Russia has reached the point where more state involvement is going to be detrimental. And so it’s about efficiency, it's about productivity gains and they have gone as far as they can with the big state owned and state led economic initiatives. Now we have reached the point when they need to withdraw from the economy, the state needs to get out and hand it over to private managers. And it is very encouraging that not only the Kremlin who realizes that they are staying to push harder and harder with this privatization process, I am sure other senior government officials who have come out to push this program and emphasize it is going to go ahead and moreover not just sell bits of the company but sell completely out of the most attractive companies in the country."

RT: Are all the companies that are on the list are happy with this privatization scheme?

BA: "No indeed, I mean you can divide the companies into two very distinct groups. I mean there are various companies professionals who are interested in creating world class multinational companies. I think, VTB and Aeroflot probably the examples of those. And then there are other companies where you have got  state operating chief sitting in a very comfortable jobs not facing any kind of competition and they are quite happy that the state is growing they are doing very nicely and say all their  friends "Thank you very much" and they don’t want to be privatized and they will resist. There are also people in the government.  I mean you going to have this to be in any government between what is the appropriate level of state ownership in the economy and of course in Russia you have the circled seal of a key the power of action who are quite keen to see the state led economy- communist mentality if you like.

I think another aspect of seeing all these lists is the liberal fraction and the Kremlin are trying to make it clear that the fact is on and they are going to push really hard to see this through and will see again and some of companies sending letters to the Prime Minister saying that we're special case, we should go slowly. To take enough time and not do it quickly."

RT: Where is the dividing line between what companies can be sold and which can not?

BA:"It is a difficult appraisal. I should say it is quite unusual in Russia to be having such a debate as this. I mean in old days it was just trying to get a control of the company and stop them being robbed by their owners. It is about what is a natural monopoly, what should be controlled by the state. In Britain we privatized the National railway which hasn’t worked very well. And Russia, should I say it again today, the railway here will not be privatized and that is probably a good idea that railways are natural monopoly. The same goes for Transneft which is the pipeline network it doesn’t make sense that two companies in competition. But with other companies like the banks it’s a lot more difficult. I think VTB the second biggest bank will be fully privatized, but Sberbank will probably not be because it plays crucial social role, I mean everybody relies on its pension system, everybody relies on it. That is one with which they will be more careful.”