UPDATE 2-Russia to open $29 bln asset sales to foreigners

* Govt approves asset sales as part of 2011-2013 budgets

* EconMin says plan to go ahead regardless of revenues

* Says state share in economy must decrease

(Adds quotes, background)

By Gleb Bryanski

MOSCOW, July 29 (Reuters) - Russia will open its most ambitious privatisation programme since the 1990s to foreign investors, its economy minister said on Thursday, while the government gave its initial approval to the planned $29 billion in asset sales.

Thursday’s government meeting gave the preliminary thumbs-up to the three-year privatisation plan as part of draft budgets for 2011-2013.

“We currently have an excessive state share (in the economy) and it must gradually decrease. The privatisation is also a possibility for us to influence the structure of our economy,” Economy Minister Elvira Nabiullina told reporters.

“We will allow foreign investors to take part in privatisations,” Nabiullina said, adding that the government would also ask Russian and foreign banks to act as consultants. She said some stakes in state companies could be fully sold on the open market, while some could go to strategic investors.

“Our ministry is holding meetings with foreign investors, showing them privatisation possibilities,” Nabiullina said.

The plan will be outlined in September and finalised towards the end of the year.

The sales, if carried out, would be Russia’s most ambitious since President Boris Yeltsin’s era, when well-connected tycoons snapped up some of the biggest oil and metals firms at low prices.

During the economic crisis in 2008-2009 many assets such as a blocking stake in miner Norilsk Nickel GMKN.MM de-facto returned to the state as debt collateral after their owners sought government help in refinancing foreign loans.

Most investors have applauded the plan to sell minority stakes in major state firms but have said they are keen to see how transparent the process will be.

Nabiullina said over 200 billion roubles worth of assets will be put on sale already next year. She said that even higher-than-expected revenues were unlikely to stop the sale.

The extra revenue would help the Kremlin plug budget holes ahead of a 2012 presidential election which will encourage the authorities to maintain high vote-winning social spending.

Government officials have said sales could include minority stakes in firms such as Russia's biggest oil producer Rosneft ROSN.MM, lender VTB VTBR.MM and oil pipeline monopoly Transneft TRNF_p.MM. [ID:nLDE66P0S0]

The plan ensures Russia will keep control of the firms in a clear signal the Kremlin is not parting from the resource nationalism it has developed over the past decade of high commodity prices.

Russia has made clear that it is more interested in buy-and-hold investors such as large private equity, pension and sovereign wealth funds than speculators who fled the country’s market en masse following the oil price slump in 2008.

Prime Minister Vladimir Putin who personally oversees all large business deals in the country, has held a flurry of meetings with potential investors in recent months.

Russia will also recommend state companies to pay out 16-18 percent of net profit as dividend next year, a move that should increase their attractiveness ahead of sales, Nabiullina said.

For a factbox on the proposed asset sales, please click on [ID:nLDE66P1DU] (Reporting by Gleb Bryanski, writing by Dmitry Zhdannikov, Editing by Patrick Graham and David Brough)