The Great Russian Selloff

Daddy Putin is selling off the furniture to keep the family out of the poorhouse. The Moscow Times reports:

The government plans to raise 70 billion rubles ($2.34 billion) next year by selling stakes in more than 450 companies, Economic Development Minister Elvira Nabiullina said Tuesday.

Prime Minister Vladimir Putin reiterated his support for the major sell-off of government property, saying the efforts would help fill the federal budget.

The forecast revenues from the privatizations would be dwarfed by the anticipated budget deficit of 3 trillion rubles. The government previously wanted to collect 7 billion rubles through sell-offs.

The assets to go on the block will include 13.1 percent of the government’s blocking stake in insurance industry leader Rosgosstrakh, Nabiullina said. President Dmitry Medvedev excluded the company from a list of strategic companies last month, removing a hurdle for its privatization or an additional share offer.

Nabiullina, speaking after a Putin-chaired government meeting on privatizations, reiterated plans to sell up to 20 percent in shipper Sovkomflot through an initial public offering or a sale to a single investor either at the end of next year or in early 2011.

Most of the privatization money will come from selling government stakes in ports and airports, Nabiullina said, without naming them.

Nabiullina said the government dropped plans to privatize Sheremetyevo Airport, saying it would instead invite bids to manage the airport.

The government will not offer stakes in Rosneft, Sberbank, Aeroflot, VTB, Gazprom Neft or Russian Railways next year, Nabiullina said. (Related story on Rosneft, Page 7.)

In offering stakes, the government will scrutinize national security consequences, especially when it comes to selling assets in strategic industries, which include oil and gas production, Putin said. Also, bidders should promise to invest in the companies that are being privatized, Putin said.

Bidders must offer a fair price to help plug the federal budget deficits that are projected for the next three years, Putin said.

“Some federal property may have to be sold, but it has to be sold only at real market prices, without any discounts,” he said.

The government annually drafts plans to sell stakes in various companies, Putin said, but the plan for next year will be special because the state has increased its corporate holdings countrywide as part of its efforts to bail out crisis-stricken enterprises. Putin ordered next year’s plan to be completed in the near future.

Putin previously raised the issue of the privatizations at an investment conference last week, saying the government would support the sell-offs. First Deputy Prime Minister Igor Shuvalov first announced the government’s extensive privatization plans when he accompanied Medvedev on a U.S. trip at the end of last month.

Despite the weakened economy, sales of government stakes would likely attract interest, said Nadezhda Timokhova, an analyst at the investment bank Metropol.

Southern seaports would be most sought-after because they handle grain exports, she said. Potential buyers would include the companies that own the grain or other commodities handled by the ports, she said.

The government will probably not offer to sell its stake in the strategic Novorossiisk port, she said.

Airport sales would generate less enthusiasm because air passenger traffic has been contracting, she said.