Russia mulls $59 billion sell-off, gives no timeline

MOSCOW (Reuters) - Russia is fine-tuning a plan to sell off $59 billion in assets, Prime Minister Vladimir Putin’s spokesman said on Thursday after officials unveiled key details of the Kremlin’s biggest privatization drive in a over a decade.

Russia's Prime Minister Vladimir Putin (C) speaks during a meeting of the advisory council for foreign investment in Moscow, October 18, 2010. REUTERS/RIA Novosti/Alexei Druzhinin/Pool THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS

Russia’s leaders need money to plug a hole in the budget and ratchet up growth ahead of the 2012 presidential election, in which former president Putin has hinted he may stand.

Putin, still seen as Russia’s paramount leader, chaired a closed meeting of senior ministers late on Wednesday at which the draft plan to raise 1.8 trillion roubles ($59 billion) by selling off 900 state stakes was discussed.

“The document requires further work and the working process is continuing,” Putin spokesman Dmitry Peskov said by telephone.

He declined to say when Putin would make a decision on the asset sales which had been expected to be discussed at a cabinet meeting on Thursday.

Putin told foreign investors on Monday that the sales would be discussed at a cabinet meeting in the near future.

Putin’s approval is essential for the plan, which could be controversial after the asset sales of the 1990s allowed a tiny group of businessmen to amass fortunes by gaining control over some of the former Soviet Union’s best companies.

Russia’s budget plunged into the red last year for the first time in a decade, but with deficits forecast for another five years and spending likely to stay high ahead of the 2012 election, Russia needs cash, or at least the option to raise it.

The government is trying to raise around $3 billion via the launch of its debut rouble-denominated sovereign Eurobond. The list of organizers will be unveiled in coming days, and state-controlled VTB Capital will be on it.

Russia returned to the sovereign Eurobond market this April after more than a decade's absence, raising some $5.5 billion with 5- and 10-year paper in a placement organized by VTB Capital VTBR.MM, Citi C.N, Barclays BARC.L and Credit Suisse CSGN.VX.


Once Putin has given his approval, the sales can move ahead, although First Deputy Prime Minister Igor Shuvalov was quoted by Russian news agencies on Wednesday as saying some of the key sales would be carried out in or after 2012.

The most valuable stakes include 15 percent of Russia's biggest oil producer, Rosneft ROSN.MM, and a quarter of the national railway company Russian Railways.

Largest lender Sberbank also said it would sell 9 percent of its shares, including 3-4 percent on the stockmarket, in a move that would raise around 200 billion roubles ($6.51 billion) at current prices.

Its shares were up 5.5 percent by 1437 GMT, while Rosneft was up more than 4 percent in an overall Moscow market .MCX up 2 percent.

The sale of a 15 percent stake in Rosneft would reduce the government’s stake to around 60 percent. The company is worth around $72.4 billion at current prices, putting the potential amount to be raised at nearly $11 billion.

Government officials hope the sales will help cover a hole in the budget and raise Russia’s profile with investors as a swiftly developing emerging market.

But confidence in the plan was tarnished by the surprise exclusion of a stake in oil pipeline monopoly Transneft TRNFp.MM, which was included in a list of potential privatisations published by the finance ministry in July.

Transneft preferred shares fell 6 percent after First Deputy Prime Minister Sergey Shmatko said the government would not consider the sale of a stake for at least five years.

He said the matter had been discussed seriously, but bond covenants preventing a change in the shareholder structure had proven an uneconomic stumbling block.

Many investors had bet a privatization of Transneft would improve management of the company, which pumps the lifeblood of Russia’s $1.2 trillion economy from oil fields in Siberia to markets in Europe and Asia.

“The exclusion of Transneft from the privatization list... may put pressure on the stock, as its preferred shares are already traded and have been a popular play among market participants expecting a share sale,” Unicredit said in a note to clients on Thursday.

(Writing by Guy Faulconbridge and John Bowker; Editing by Andrew Callus and David Cowell)

$1=30.72 Rouble