Russia to Sell Rosneft Stock in $59 Billion Plan to Cut Deficit

Russia plans to sell as much as 15 percent ofOAO Rosneft, its biggest oil producer, as the government seeks to raise 1.8 trillion rubles ($59 billion) in asset sales in the next five years to help balance the budget.

Prime MinisterVladimir Putin’s government approved the plan to sell stakes in about 900 companies, including lenders OAO Sberbank and VTB Group, First Deputy Prime MinisterIgor Shuvalovsaid late yesterday. The comments, initially reported by Interfax, were confirmed by Shuvalov’s spokesman.

The government will use some of the revenue to narrow its budget gapto 1.8 trillion rubles, or 3.6 percent of gross domestic product, in 2011 from an estimated 5.3 percent this year. Russia had a shortfall of 5.9 percent last year, its first deficit in a decade, after theeconomyposted its biggest contraction on record. Putin said Oct. 5 that the country will balance the budget by 2015.

“If the president agrees with this plan, we will translate it into concrete actions by the ministries in order to begin immediately,” Shuvalov said. PresidentDmitry Medvedevmust approve the privatization plan before it comes into force.

The Finance Ministry in July proposed selling minority stakes in 10 companies, including Rosneft, Sberbank and VTB, as part of a three-year privatization plan. The government last year earmarked about 5,500 enterprises for divestment and pledged to sell shares in companies that are already publicly traded to help cut the deficit.

The government plans to reduce its holding in Sberbank , Russia ’s biggest lender, to a controlling stake between 2011 and 2014, Shuvalov said.

VTB Control

Russia will “try to complete” the sale of a 10 percent stake in VTB Group, the country’s second-biggest lender, this year and may sell an additional 10 percent in 2011 and 10 percent to 15 percent in 2012, according to Shuvalov. The government is ready to “discuss the possibility” of cutting its holding to less than a controlling stake of 50 percent plus one share within three years, he said.

The government owns 60.3 percent of Sberbank and 85.5 percent ofVTB Group, according to data compiled by Bloomberg.

In the energy industry, Russia may sell as much as 15 percent of Rosneft from 2012 to 2015 and cut its interest to less than control if “all that’s planned for Rosneft up to 2015” is fulfilled, Shuvalov said. Russia owns more than 75 percent of Rosneft, Bloomberg data shows.

Sberbank Jumps

Sberbank, which has a 14 percent weighting in the 30-stock Micex Index, surged to its highest since January 2008, adding 3.6 percent to 101 rubles at 12:54 p.m. in Moscow . VTB rose 1.8 percent to 9.53 kopeks for a fifth day of gains. Rosneft advanced 1.6 percent to 212.91 rubles, its biggest intraday gain in more than a week.

The government isn’t considering selling stakes in pipeline operator OAO Transneft, included in the Finance Ministry’s July list, or oil producer OAO Zarubezhneft, mentioned by Finance MinisterAlexei Kudrinon Oct. 19, at the moment, Shuvalov said.

Transneft slumped by the most since May 25, falling 6.5 percent to 36,193.18 rubles.

Russia may sell 25 percent minus one share of OAO Russian Railways, the state-owned rail monopoly, from 2013 to 2015 and 50 percent minus one share in OAO Sovcomflot, Russia ’s biggest shipper, by 2013, Shuvalov said.

The government may also reduce its holding inOAO Aeroflot, the national carrier, to a controlling stake. Russia owns about 51.2 percent of Aeroflot according to Bloomberg data.

Support for Ruble

In addition, the government is “ready to immediately prepare” for the sale of a 4.11 percent stake in Federal Grid Co., in which it holds 79.11 percent.

Officials are considering selling part of the government’s stake inOAO Rostelecomafter the restructuring of OAO Svyazinvest, the national telephone holding, Shuvalov said.

Aeroflot snapped four days of gains, retreating 1 percent to 74.10 rubles. Federal Grid gained 1.7 percent to 36.8 kopeks for its second advance this week. Rostelecom slid for a second day, falling 0.2 percent to 138.61 rubles.

The privatization process will provide “medium-term” support for the ruble and may bolster Russian stocks during the next year, Royal Bank of Canada analysts led byNick Chamie, global head of emerging markets, wrote in a research note e- mailed late yesterday. “ Russia is one of the few emerging markets globally undertaking a privatization drive during these volatile times,” he said.

Russia ’s ruble strengthened 0.7 percent to 30.67 per dollar. TheMicex stock indexapproached a yearly high, rising 1.1 percent to 1,510.41 in Moscow .

In addition, the government is “ready to immediately prepare” for the sale of a 4.11 percent stake in Federal Grid Co., in which it holds 79.11 percent.

Officials are considering selling part of the government’s stake inOAO Rostelecomafter the restructuring of OAO Svyazinvest, the national telephone holding, Shuvalov said.

Aeroflot snapped four days of gains, retreating 1 percent to 74.10 rubles. Federal Grid gained 1.7 percent to 36.8 kopeks for its second advance this week. Rostelecom slid for a second day, falling 0.2 percent to 138.61 rubles.

The privatization process will provide “medium-term” support for the ruble and may bolster Russian stocks during the next year, Royal Bank of Canada analysts led byNick Chamie, global head of emerging markets, wrote in a research note e- mailed late yesterday. “Russia is one of the few emerging markets globally undertaking a privatization drive during these volatile times,” he said.

Russia’s ruble strengthened 0.7 percent to 30.67 per dollar. TheMicex stock indexapproached a yearly high, rising 1.1 percent to 1,510.41 in Moscow.