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Kudrin: Russia’s state assets cost hugely less today than prior to 2008 crisis

According to Alexey Kudrin, there is still big scope for privatization in the oil sector, in the financial sector, in the telecommunications sector, and in the transport sector
Russian Finance Minister Alexey Kudrin  Stanislav Krasilnikov/TASS
Russian Finance Minister Alexey Kudrin
© Stanislav Krasilnikov/TASS

MOSCOW, October 19. /TASS/. The price of state-owned assets that may be privatized is hugely lower than that prior to 2008 crisis, Head of Russia’s Center for Strategic Research (CSR) and ex-Finance Minister Alexey Kudrin said Wednesday.

"There are more than eight thousand enterprises with state-owned shares. The first ten (companies) account for 80% in terms of valuation. As for the price, it changes all the time and it was hugely higher before the crisis of 2008. But I think there is big scope for privatization," he said.

Meanwhile, no privatization proceeds are included in Russia’s federal budget for 2017-2019 though the Finance Minister Anton Siluanov and Economic Development Minister Alexey Ulyukayev have said it is necessary to get back to the issue of an ambitious privatization program in the next three years.

According to Siluanov, the ministry has no big privatization plans so far, though "the issue will be considered" for next budget cycles.

Ulyukayev earlier said that he considers it possible to raise 200-300 bln rubles per year on privatization deals.

Bashneft stake sale to Rosneft was not privatization

Kudrin said that sales of a stake in Russian oil producer Bashneft to Rosneft cannot be considered privatization but this was consolidation of government property.

"There was no privatization of Bashneft. It simply passed from government property to another state-owned company. Consolidation of government assets occurred in this sense, rather than privatization," Kudrin said.

Rosneft closed the deal of buying 50.08% of shares in Bashneft and transferred 329.7 bln rubles ($5.3 bln) to the state budget on October 12.

Big scope for privatization in oil sector

Kudrin believes there is still big scope for privatization in Russia’s oil sector.

"There is still big scope for privatization in the oil sector, in the financial sector, in the telecommunications sector, and in the transport sector. All those sectors are on the market. We always have alternative services provided by private companies, and there is no need to keep them state-owned," he said.

According to Kudrin, state-owned companies are not needed in a number of sectors now. State companies are only needed in certain sectors connected with state security and fulfillment of separate functions, which cannot be fully passed on to the market, he added.

Specific infrastructure facilities

Kudrin went on to say that specific infrastructure facilities may be privatized in Russia.

"I think that we should make a step forward in terms of privatization of specific infrastructure facilities simply by managing them in a different way," he said.

For this purpose special rules for regulation of infrastructure facilities should be formed, he said.

"We can expand and increase investments in those branches by creating a more diverse infrastructure. That is why we think seriously on making those state facilities more attractive for investors by privatizing them," he said.

De-offshorization of business

Kudrin also expects that withdrawal of Russian business from offshore jurisdictions will be painful because Russian business does not trust government authorities.

"De-offshorization is a global trend and we should also follow it. We are to reduce the outflow to offshores and non-transparency of particular operations… Certainly, it will be painful in Russia, particularly because our business does not trust certain law enforcement agencies," Kudrin said.

Offshores are not the main challenge for the Russian economy and are not highly complicating for business, the expert said. "Other matters of structural and institutional nature are more serious and significant in supporting attractiveness for the Russian business," Kudrin added.