MOSCOW: Russia’s improving economy has removed the main impetus for privatizations planned for this year, allowing policymakers who always doubted the wisdom of selling state assets to re-gain the upper hand, according to interviews with multiple officials.
Russia’s finance ministry initially planned to raise 138 billion roubles from privatization this year, mainly from selling a stake in the shipping company Sovcomflot and reducing its holdings further in VTB, the country’s No. 2 bank.
At the beginning of the year, the sell-offs were vital to fill state coffers, temporarily silencing those in the government and the Kremlin who do not believe the state should divest its assets.
But since then, the price of oil has risen and the finance ministry has raised around 1.4 trillion roubles ($24.2 billion) so far this year on the domestic rouble debt market via its treasury bonds.
As a result, the supporters of state ownership — who have been growing in influence during Vladimir Putin’s 17 years in charge — are back in control, according to people familiar with debates among policy-makers.
The privatization of VTB was postponed until after Western sanctions that apply to the bank are lifted, while the stake sale in Sovcomflot was postponed from the middle of the year to an unspecified time.
“The transfer of property should not be a goal in its own right. The goal should be a proper level of competition,” Russian Economy Minister Maxim Oreshkin told Reuters.
“There are almost no fiscal reasons left for privatization,” he said.
The price of Brent crude oil was over $59 per barrel on Friday, a 7 percent increase from the year-start. In March, prices were falling below $50 per barrel, hitting budget revenues.
Disposing of state assets has for years been a tough sell inside Russia’s elite.
Since Putin took power in 2001, the opposite trend has dominated, with state-owned national champions such as oil major Rosneft acquiring assets that had been privatized after the collapse of Communism.
The need to find cash for the budget, at a time when Western sanctions made it harder for Russia to raise debt on international capital markets, opened a brief window for the pro-market camp. That has now shut.
With the imperative of plugging holes in the budget gone, other arguments against privatizations have re-emerged.
They include the fact that sanctions drive down the price Russia can command for selling state assets, and a belief that state firms can be just as efficient as private companies.
A fresh package of sanctions signed into law by US President Donald Trump has added to investor uncertainty about buying Russian assets.
“We have companies which mainly are of systemic importance or have a significant influence on the markets... The state can lose the control as a result of the sale,” finance minister Anton Siluanov said in July.
“Should we do this now when the (new) sanctions have hung over Russia and the companies are clearly undervalued?”
The central bank had to bail out two of Russia’s biggest private banks, Otrkitie and B&N Bank, while state-owned banks such as Sberbank thrive, giving extra ammunition to the pro-state camp.
“The example of Sberbank compared to the private banks is clearly showing that in general, the owner is not as important as risk management,” Deputy Finance Minister Vladimir Kolychev said.
Russia’s improving economy leaves privatization out in the cold
Russia’s improving economy leaves privatization out in the cold
Closing Bell: Saudi main index closes in red at 11,167
RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Wednesday, losing 46.43 points, or 0.41 percent, to close at 11,167.54.
The total trading turnover of the benchmark index was SR4.88 billion ($1.30 billion), as 66 of the listed stocks advanced, while 192 retreated.
The MSCI Tadawul Index decreased, down 5.52 points, or 0.37 percent, to close at 1,506.55.
The Kingdom’s parallel market Nomu lost 153.40 points, or 0.65 percent, to close at 23,486.52. This comes as 32 of the listed stocks advanced, while 31 retreated.
The best-performing stock was Tourism Enterprise Co., with its share price surging 9.95 percent to SR14.36.
Other top performers included Mobile Telecommunication Co., Saudi Arabia, which saw its share price rise by 5.32 percent to SR11.48, and Al Masar Al Shamil Education Co., which saw a 4.86 percent increase to SR22.89.
On the downside, Almoosa Health Co. was the day’s weakest performer, with its share price falling 4.81 percent to SR150.40.
Dallah Healthcare Co. fell 3.81 percent to SR113.50, while Saudi Research and Media Group dropped 3.44 percent to SR100.90.
On the corporate front, Arabian Plastic Industrial Co. has signed a non-binding memorandum of understanding with K. K. Nag to explore the establishment of a specialized manufacturing facility for expanded polypropylene products.
According to a Tadawul statement, the agreement sets out initial mutual obligations and rights between the two parties as part of APICO’s broader expansion strategy to increase production capacity and meet rising industrial demand.
The company’s share price rose 1.21 percent to SR43.52 on the parallel market.
