Moscow approves $32bn sale of state assets

The Russian government has approved a plan to sell about $32bn in state assets over the next three years, in the biggest state sell-off since the 1990s.

The disposals, which will include minority stakes in state banks Sberbank and VTB and the state railways monopoly, is aimed at raising funds to help cover Russia’s budget deficit and improve the country’s investment image.

Elvira Nabiullina, Russia’s economic minister, said the cabinet, chaired by Vladimir Putin, prime minister, had signed off on a programme on Wednesday to raise 1,000bn roubles between 2011 and 2013 by selling off stakes in 10 big state companies, such as a 15 per cent stake in Rosneft, the state-controlled oil producer, as well as in more than 850 lesser-known companies.

The government is pitching the sell-off as a signal to investors that it is burnishing its investment credentials and loosening its grip on the economy. Russia wants to attract investment to boost economic growth, which at an expected 4 per cent this year trails behind Brazil, India and China, the other Bric nations.

Analysts warned Russia still faced a battle to convince investors it was improving the climate as they flock in greater numbers to other emerging markets. Russia is experiencing capital outflows, which have expanded to about $3bn a week.

Yevgeny Gavrilenkov, chief economist at Troika Dialog, the Moscow investment bank, said investors were increasingly worried about the country’s macroeconomic outlook. State spending increases have pushed the break-even point for next year’s budget up to $109 per barrel of oil, while property rights protection and rule of law remain weak. The latest corruption perception index from Transparency International put Russia 154th out of 178 nations, its lowest ever ranking.

“This is a sale of minority stakes which will not significantly change corporate governance in these companies,” Mr Gavrilenkov said. “It is more of a fiscal measure [aimed at raising cash] than an institutional one aimed at improving the quality of management.”

Steven Dashevsky, head of a Russia-focused fund, said Russia would have little trouble selling stakes in the big corporate names such as VTB, Sberbank and Rosneft, especially at their current discounted market value. But he added Russia would have to do more to improve corporate governance if it wanted to sell the assets at the highest possible price.