Photographer: Alexander Zemlianichenko Jr./Bloomberg

Putin Promises ‘Real’ Privatization as Rosneft May Buy Shares

  • Russia needs money from Rosneft stake sale this year
  • Rosneft may buy back its shares from state, for resale later

Russia’s largest oil producer may help the state by buying back shares from the government this year and reselling them later, a step that would finally make privatization of the company “real,” President Vladimir Putin said.

If Rosneft PJSC buys the shares, it’ll be “an intermediate step toward the genuine privatization,” the president told reporters at the BRICS summit in Goa, India, on Sunday. While the nation needs money this year amid a slump in oil prices, Rosneft may offer the shares later in a sale to be supervised by the state, including possibly to foreign investors, Putin said.

“We are not going to build the state capitalism,” Putin said. “We will go on the privatization path, but not in a falling market."

Russia is returning to asset sales after a collapse in crude prices to 12-year lows in January saw petrodollars dwindle, helping to create the widest budget deficit in six years. Earlier this month, the Moscow government received 329.7 billion rubles ($5.2 billion) from the sale of its stake in regional oil producer Bashneft PJSC to the state-run Rosneft even though Putin acknowledged that such an acquisition was probably “not the best option.”

Russia plans to sell 19.5 percent of Rosneft this year for about 700 billion rubles, keeping control by holding 50 percent plus one share after the deal. The state expects bidders on the sale starting this month, aiming to agree on the transaction in November to December, Russia’s Economy Minister Alexei Ulyukayev told reporters in Goa on Saturday.

If there is no agreement with the bidders, Rosneft’s buy back can’t be ruled out as a first step in the process, Putin said.

Financial institutions, oil traders, Indian and Japanese investors showed interest in Rosneft shares, although “offers aren’t being made,” according to Ulyukayev. China expressed its interest publicly earlier this year without making a formal bid yet.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE