Russia scales back to keep Rosneft

Russia on Thursday unveiled a scaled-down state assets privatisation drive that is now valued at $50 billion (38 billion euros) and keeps the Rosneft oil giant under firm government control. The new three-year plan through 2016 emerged after the energy-export-driven country's top economic officials went through a list of all the big enterprises that still remain in state hands. Economists said the scale of the project is about half the size of the original plan. Privatisation is emerging as a vital source of income for Russia because of its recent economic underperformance, with many fearing that the country may slip into recession by the end of the year. But top ministers and other officials have been loath to part with industries over which they excercise control. One of the most notable revisions of the medium-term programme was the decision not to see the government's control of the Rosneft behemoth -- Russia's biggest oil company and the largest listed energy firm in the world -- fall to less than 50 percent. The firm is headed by Igor Sechin -- one of Russia's biggest powerbrokers and a close associate of President Vladimir Putin. Prime Minister Dmitry Medvedev appeared to take an open swipe at Sechin for managing to save his company from going mostly private. "We should say this out in the open," news agencies quoted Medvedev as saying. The failure of past privatisation programmes "can be traced to the pro-energy lobbying of specific government agencies and individual officials," said Medvedev. "These people are ready to kill themselves before they allow something to be sold off, seeing them lose control of the corresponding property." Medvedev never mentioned Sechin by name in the unusually frank remarks. The government currently owns a 69.5-percent stake in Russia's oil major. Rosneft had originally been expected to go mostly private as early as next year. The previous plan had pushed that date back to 2016 and the current initiative excludes Rosneft from additional private ownership altogether. Privatisation would be a serious problem for the company because Russian law only allows state-owned energy giants -- Rosneft or the gas firm Gazprom -- to exploit the natural resources of the Arctic region. Rosneft in the past two years has tied up Arctic exploration agreements with the US supermajor ExxonMobil as well as Norway's Statoil and Italy's ENI. Analysts expressed their disappointment with the government's latest initiative. Ivan Tchakarov of Renaissance Capital said the economy ministry had "significantly scaled back its ambitions for privatisation over the next couple of years." He noted that the $50 billion figure was just half of the envisioned for the period in the original privatisation effort announced by Medvedev when he was still president in 2010. "This is symptomatic of the failed original 2010 privatisation attempt," said Tchakarov. The economics ministry's "proposal does not exactly elicit bright visions about medium-term sustainable economic development in the country," he added. It was also decided to keep a blocking 25-percent stake in national flag carrier Aeroflot -- the airline that has dominated Russian skies since Soviet times. Tchakarov said the government intended to make most of its money this year from putting up for sale a stake in the Rostelecom communications firm. The key sales for 2015 and 2016 are stakes in the VTB bank and the Russian Railways company.