Russian Economy General News: #6

Kremlin to finalize list of state-owned firms for privatization

The Russian government expects to get more than a trillion rubles ($12.8 billion) from the first round of state enterprise privatizations, reports business daily Vedomosti, citing unnamed federal officials.

State-owned shares in Rostelecom, Transneft, Aeroflot, Rosneft, Sovcomflot and several other companies are among the possible assets for sale.

The privatization plan assumes realizing assets worth 33 billion rubles ($424 million). However, the government is ready for a bigger sale as a result of problems with the budget, which could be reduced by 10 percent due to falling oil prices.

The decision might be taken this week at the meeting with Russian President Vladimir Putin. Vedomosti reports that the Economic Development Ministry’s plan put forward at the end of 2015 has the President's support.

"The final decision has not been made, specific companies or shares in these companies were not determined. The president instructed the government to finalize the list after the criteria was set, so that there would be an opportunity to once again meet with him in more substantive terms in some format," said Kremlin spokesman Dmitry Peskov.

On Monday, President Putin said all the privatization deals should be fully transparent with assets sold at realistic, not discount prices. He also said the state should retain control over strategic enterprises to prevent privatized assets leaving Russian jurisdiction.

The privatization plan was approved by the government two years ago and assumed the state exiting such enterprises as Rosnano, Rostelecom, Rosspirtprom, the United Grain Company, Sheremetyevo International airport and several others. It also suggested a significant reduction in the government holding in Alrosa, Aeroflot, Russian Railways, RusHydro, Transneft and VTB.

The government could also sell shares in oil majors Rosneft and Bashneft, according to Vedomosti.

According to Economic Development Minister Aleksey Ulyukaev Russia should kick-off privatization as soon as possible.

“The budget situation is very critical; the general turbulence of the financial markets does not give reasons to expect some rebound, recovery. Now the challenge is to make… efficient and transparent deals, when the market is extremely unfavorable," he said.

In November, Finance Minister Anton Siluanov said he was considering the possibility of Rosneft’s privatization in 2016 as a source of covering the additional costs of the Reserve Fund.

"The trends that emerged in the financial account balance of payments in 2015, should be strengthened in 2016. They should lead to a further significant reduction in net capital outflows in absolute terms - to about 30-45 billion dollars in 2016. Moreover, in the risk scenario the net capital outflows may be even less than in the base "- the study says.

PapaDragon wrote:
''Khamenei's top aide says Tehran, Moscow ink $40 billion in projects: agencies''

http://news.yahoo.com/khameneis-top-aide-says-tehran-moscow-ink-40-133515863.html

Karl Haushofer wrote:

PapaDragon wrote:
''Khamenei's top aide says Tehran, Moscow ink $40 billion in projects: agencies''

http://news.yahoo.com/khameneis-top-aide-says-tehran-moscow-ink-40-133515863.html

All I see is that Russia loans Iran $40 billion and Iran will use this money to purchase Western goods.

MOSCOW, February 5. /TASS/. Russia’s foreign trade surplus decreased by 33% ($48.9 bln) in 2015 to $161.4 bln, according to the documents published by the Federal Customs Service.

Russia’s export dropped by 31.1% to $345.9 bln in 2015 compared with 2014 while import went down by 36.7% to $184.5 bln in the reporting period.

In 2015, Russia’s external turnover totaled $530.4 bln, a 33.2% decrease compared with 2014.

The European Union (EU) is still Russia’s leading economic partner as it accounted for 44.8% of Russia’s trade turnover (48.1% in 2014) while the CIS countries - for 12.5% (12.3%), the Eurasian Economic Union member-states - for 7.8% (7.1%) and the APEC member-states - for 28.1% (26.9%).

sepheronx wrote:So where did they get this 3% drop this year? Worst we heard was 1%.

Regardless, the article brings very little to the table.  Statistically, I believe it was mentiomed on sdelanounas that out of 4mil new business in 2014, about half of them survived (due to competition and lack of funds from bad loans or no loans).  That would indicate a total of 2mil new small companies started in Russia in 2014.  I cant find data for last year but I assume it is same.  That would indicate real competition.

And here is another point, many industries were illegally acquired back in the 90's.  So corporate raiding, a lot of it will have to do with government taking back what is theirs and not owned by a foreign agency.  Nof saying that there malpractice, as it exists everywhere, but due to using one anecdotal evidence with a bit of smearing a name (while providing no evidence) doesnt do the article justice and just comes off as poorly written.  Kudrin of course will try to make a name for himself through unscrupulous groups of course.

sepheronx wrote:Agreed.

On another token, I am generally against the privatization of the various state run companies.  I am not even 100% sure if they will give up all stocks or just resort having lower stocks than 50%+1 share?  I think if the company has value to it but greatly underperforming, sure, sell it to someone who may do better.  But Aeroflot? No... just no.  It will make things worst as new owner may simply not purchase any SSJ and wont support domestic cause he/she can easily be bought out.  As well, the short term gain will be easily gone by next year and that means far less money into budget.

sepheronx wrote:Anyone and KVS: 

Finance Ministry proposes to halve the deduction for severance tax on oil

I am not sure about what is being mentioned? Halving it, wont it effect budget negatively due to less money from oil companies? Or what am I missing from this?

Militarov wrote:

So apparently Russia and Serbia are 2nd and 3rd on Misery index

kvs wrote:

sepheronx wrote:Anyone and KVS: 

Finance Ministry proposes to halve the deduction for severance tax on oil

I am not sure about what is being mentioned? Halving it, wont it effect budget negatively due to less money from oil companies? Or what am I missing from this?

They are talking about a tax discount that was balanced for the old, high oil prices.   This is a measure to get more tax income and a very good
one since corporate welfare is a world wide phenomenon.

Two years ago, Russian officials discussed plans to privatize a group of national enterprises headed by the oil producer Rosneft, the VTB Bank, Aeroflot, and Russian Railways. The stated objective was to streamline management of these companies, and also to induce oligarchs to begin bringing their two decades of capital flight back to invest in the Russia economy. Foreign participation was sought in cases where Western technology transfer and management techniques would be likely to help the economy.

However, the Russian economic outlook deteriorated as the United States pushed Western governments to impose economic sanctions against Russia and oil prices declined. This has made the Russian economy less attractive to foreign investors. So sale of these companies will bring much lower prices today than would have been likely in 2014.

Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. We warn against Russia being so gullible as to accept this dangerous neoliberal argument. Privatization will not help re-industrialize Russia’s economy, but will aggravate its turn into a rentier economy from which profits are extracted for the benefit of foreign owners.