World Economy

Asset Buyers Should Be Russian-Based

Asset Buyers Should Be Russian-Based Asset Buyers Should Be Russian-Based

 President Vladimir Putin said that only investors based in Russia can buy stakes in state companies that may be privatized.

Buyers won’t be able to finance deals with loans from state-run banks, Putin said at a Kremlin meeting on Monday to discuss privatization with the heads of state companies including Rosneft OJSC, VTB Bank PJSC, Aeroflot PJSC, Alrosa PAO, Bashneft PAO and Russian Railways JSC. The state must retain control of strategic and systemically important entities, he said, Bloomberg reported.

State-asset sales play “an important role in changing the structure of the Russian economy and stimulate private investment,” Putin said. “The new owners of privatized assets must have Russian jurisdiction.”

The government has announced plans to offer stakes in state-owned companies over two years to earn about one trillion rubles ($13 billion) as it seeks to cover a second year of budget deficits after the collapse of oil prices. The budget deficit, already at a five-year high in 2015, risks swelling to as much as 6% of GDP this year unless the government takes measures that may include a 10% cut in spending, Finance Minister Anton Siluanov said Jan. 13.

Herman Gref, the head of Sberbank PJSC, Russia’s biggest lender, which was excluded from the possible privatization program by Putin last week, did not attend the meeting. The heads of state-run Transneft OAO and Rostelecom PJSC were also absent.

The sale of state property should be “economically viable” and “must take account of market conditions,” Putin said. “Shares shouldn’t be sold for nothing, at a knockdown price,” he said.