Russian privatization and the markets

At the Troika Dialog Russia Forum 2011 Business RT spoke with Boris Jordan, president of the Renaissance Insurance Group, about the importance and impact of the Russian government’s planned privatization agenda.

RT:Do you agree that privatization should go at a larger scale?

BJ:  “Yes, absolutely, the more the government sells down its stakes in Russian companies, the more competition there will be between Russian companies, and the State will therefore have much less influence and competition in business. It is our view that it solves two issues, one is competitiveness, and number two is that it raises much needed money for the Russian government to further its investment programmes."

RT:  What are the assets that you think will be most attractive which will be privatized?

BJ:  “I think most of the large companies, Russia’s government will be privatizing will be very attractive.We are talking about Sberbank, we are talking about VTB, in terms of the banking sector.We are talking about Rosneft in terms of the oil and gas sector. So most of the large Russian companies that are one, well run, and two, are very attractive for investment.”

RT:  Russian companies seem to have this trend to not only place shares in Moscow, but also abroad. Do you think that is the right approach?

BJ:  “I think most international governments the size of Russia, with large assets, have to place shares internationally.A large company like Rosneft, which is in the top ten oil producing companies in the world, has to be traded, not only in Russia, but also London, New York, and Hong Kong.So I think it is absolutely the right strategy, plus Russia’s economy doesn’t have enough resources today to handle privatizations of tens and twenty billion dollars, so they have to diversify and take these issues abroad.”

RT:  We have heard it said that it is not right for Russian companies to place their shares abroad if we want to promote Russia as a global financial centre. Do you agree?

BJ:  “I agree but I think that what will really make Russia a financial centre is resolving the issue of rule of law. That is the biggest issue concerning global investors today. Once we resolve the issue of rule of law in Russia, and protection of shareholder rights, most of the issues will end, investors will flood into the country. So I think that’s the main issue. It’s not where we place the shares today. The other problem with what Mr Vardanyan is saying is that we just don’t have enough long term money in the domestic economy to handle issues of this size.

So I agree with him, it would be nice to have larger issues placed in Russia, but the fact is they need international markets to place these size of privatizations.”