WSJ(7/29) Russia To Sell Assets, But Maintain Control

   (From THE WALL STREET JOURNAL)
   By Ira Iosebashvili

MOSCOW -- The Russian government, facing several more years of budget deficits, outlined plans that will slightly loosen state control over the economy, aiming to raise as much as $29 billion by selling minority stakes in state companies.

"We will sell significant stakes in state companies on the market. We plan to keep controlling stakes," Finance Minister Alexei Kudrin said Wednesday, ahead of a cabinet meeting Thursday on budget and privatization plans, local news agencies reported.

The sales, slated to take place over the next three years, would be the biggest unloading of Russian state assets since the mass privatizations of the 1990s.

But unlike those sales, which were aimed at slashing state control and creating a new class of private owners, the current plans envision selling only minority stakes, officials said.

The government also pledged to avoid a repeat of the controversies that plagued the 1990s sales, which were criticized as rigged in favor of powerful local tycoons.

The assets "will be valued publicly, in line with market prices, and tenders will be open," Mr. Kudrin said. "We are completely ruling out a situation when somebody sells something to someone at an artificially low price."

The government hasn't made a final decision on what stakes to sell and when, officials said. The list of candidates includes stakes in state oil champion OAO Rosneft, national savings bank OAO Sberbank, No. 2 lender VTB Group, farm bank Rosselkhozbank, hydroelectric utility OAO RusHydro and pipeline monopoly Transneft.

An Economy Ministry spokesman said the government's stake in Transneft shouldn't fall below 75%.

For most of the past decade, the Kremlin has been reasserting control over assets originally privatized in the 1990s. But the global financial crisis battered Russia's economy, and the Russian budget, which had been running large surpluses, is expected to be in deficit for years, officials said.

Big tax increases and spending cuts are politically difficult with a national election cycle beginning next year.

Mr. Kudrin said the government aims to raise about 300 billion rubles ($9.9 billion) a year from asset sales for the next three years.

In addition to the sales plans, the government is also considering tax increases that it said could bring in $33 billion over the next three years to help close the deficit.

This year, the deficit is expected to run just over 5% of gross domestic product, officials said.

Mr. Kudrin said the shortfall would shrink to 3.6% in 2011 and reach 2.9% in 2013. Prime Minister Vladimir Putin has called on the government to balance the budget by 2015.

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(END) Dow Jones Newswires

July 28, 2010 19:35 ET (23:35 GMT)

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