Russia to relaunch privatization drive

September 23, 2009
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, MOSCOW, Sept 23 – Russia is to embark on a new programme of privatization, two-and-a-half years after its last major sale of state assets, officials were quoted as saying on Wednesday.

After the chaotic asset sales of the 1990s under the Boris Yeltsin presidency created a class of super-rich oligarchs and a major public backlash, the government has lately preferred to increase its stakes in firms.

But the financial crisis has blown a major whole in the Russian budget, with the budget deficit predicted to be around 8.0 percent of GDP in 2009 and reduced only slightly to 6.9 percent in 2010.

Finance Minister Alexei Kudrin told the Vedomosti financial daily that with the income from privatization Russia could reduce its use of reserve funds and cut the volume of planned bond issues needed to make up the budget shortfall.

"In other words the sum (from privatization) will go to reducing the deficit," he added.

But Vedomosti quoted government sources as saying that a new privatization drive would be aimed as much at improving the image of Russia, which is still criticized by the West for having excessive state control of the economy.

"It\’s clear that for the most part we are not talking about additional budget income — now is not the best economic time for sales — but about image, to show the world the liberalism of the government," a source said.

First Deputy Prime Minister Igor Shuvalov, a key ally of Prime Minister Vladimir Putin, told Bloomberg TV in an interview that "now is the time that we can return" to privatization.

He said that the government had "good assets" to offer.

Russia\’s last major asset sale was the May 2007 privatization of 22.5 percent of its second largest bank, state-owned VTB, which raised eight billion dollars.

Russia in July 2006 sold 15 percent in state-owned oil giant Rosneft which raised 10.4 billion dollars for the state coffers.

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