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Capital Markets

Russia’s bite-sized sell-off

Regional airports, tanker operators and river shipping lines – the list of assets up for grabs in the latest privatization round is unlikely to send foreign investors into a frenzy. But fatter prey may be about. Angus McDowall reports.

FROM THE ENTHUSIASTIC tones of Russia’s leaders, the eager investor might have been forgiven for expecting the crown jewels of the country’s state industries to be put on sale. In September the prime minister, Vladimir Putin, told a cabinet meeting that privatization was "a key instrument for structural reform in the real sector of the economy". At a keynote speech in November, president Dmitry Medvedev pledged to reverse a recent tendency towards nationalization and to back a more liberal economy.

Ministers spoke about the biggest privatization drive since the 1990s. Names bandied about included the energy company Rosneft, Gazprom Neft, Aeroflot, VTB Bank, the rail monopoly Russian Railways and Sberbank, the country’s largest lender. Several thousand companies were to be sold off, the government originally said, with the privatization of the first 450 in 2010 helping to finance a projected budget deficit of $40 billion.

So at first it came as something of a disappointment that the largest names were left firmly off the list of companies for sale and that only Rb70 billion-odd ($2.4 billion) worth of assets were on the table. As the Russian economy began to recover on the back of buoyant oil prices, investors feared that Kremlin officials might be losing their appetite for serious reform.

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