State Solutions LLP: A 'New Wave' of Privatisation in Russia - The
Opportunities & Risks for International Investors
LONDON -- November 7, 2013
A new wave of privatisation in Russia is set to offer foreign investors
unparalleled returns if they can successfully navigate the political
landscape, according to a new report released today.
The extensive report, produced by State Solutions LLP and the Moscow-based
Institute of Lobbying, predicts that the long-delayed privatisation programme
will be jumpstarted by replacement of current ‘political’ Prime Minister
Dmitry Medvedev by a more ‘technical’ figure early next year, with political
decisions then taken by the Kremlin.
The privatisation drive will see more than $51Bn worth of state assets put up
for sale before 2016, with more than $30Bn worth of large national companies
such as Rostelecom, VTB Bank, RZhD and Rosneft.
The report, entitled “A New Wave of Privatisation in Russia: The Political and
Economic Context and Investment Risks”, says the Russian Government will
welcome the involvement of international investors in privatisation deals. At
the same time, it acknowledges that the nature of the Russian political and
legal environment and its poor property rights protection record makes prior
approval of a deal by the country’s top-level political authorities a
necessity, if risks are to be reduced.
It identifies eight powerful figures close to the Russian Presidency with
interests across key economic sectors and suggests that “the most comfortable
scenario for foreign investors would involve taking part only in those deals
where an attempt to purchase an asset would not infringe on the interests of
the most powerful figures in Vladimir Putin’s inner circle”.
The report comes one week after the Russian Government sold a 16% stake in
state diamond miner, Alrosa, with US investors buying the bulk of shares. The
report predicts that the initial wave of privatisations is likely to include
shipping giant Sovcomflot, the national airline Aeroflot, the Archangelsk
Trawl Fleet, Novorossiysk Commercial Sea Port, Rostelecom and Transneft. Other
assets for the privatisation include over 1,500 state-owned regional companies
and land plots.
“The new ‘wave’ of the large-scale privatisation in Russia presents historic
opportunities for acquiring the government assets and stakes in
state-controlled companies across various industries”, said Pavel Morozov,
Managing Partner of State Solutions LLP. “For the investors – both foreign and
domestic – who can navigate the risks, the return on investment is likely to
be far higher than in comparable emerging markets”, he added.
“The Russo-British Chamber of Commerce is seeing a rapidly increasing level of
interest in Russia, not only from UK exporters but also from those looking to
invest into key sectors of the economy. Now is the time for a candid report
that provides objective insights into the opportunities in Russia, and this is
it - delivered by State Solutions and very readable," said Trevor Barton,
Executive Director of RBCC.
“Russia is different in the same way as every country is unique and its risks
and rewards should be analysed and accounted for in the same way as investors
do when they consider investments in other mature and developing markets”,
said Petr Medvedev, Head of CIS / UK Traderoute, Ernst & Young, who was part
of the expert panel at the briefing.
The 70-page report was prepared by experts with knowledge of earlier
privatisations in Russia was released at a joint Russo-British Chamber of
Commerce – State Solutions briefing in the City of London on the evening of 6
The full report can be accessed here:
State Solutions LLP are specialists in official government relations, lobbying
and public affairs consulting to support businesses in Russia and the CIS. Our
expert knowledge and thorough understanding of legislative, regulatory and
administrative systems in the region enable us to provide effective and
practical solutions for businesses across industries. Our practitioners in
London and Moscow are competent and trustworthy professionals. Our strategic
and practical advice enables our clients navigate markets, safeguard
investments and run effective business operations in the region. All our
services are provided in strict compliance with UK, Russian and CIS
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State Solutions LLP
Tel: 44 (0)20 3402 1707
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