The Russian government is close to approving a $59 billion privatization program as it seeks to cut the state's role in the economy and raise money to balance the budget.

The Kremlin aims to sell minority stakes of state-controlled companies, ranging from banks and railroads to oil producers, reversing a trend during the oil boom through 2008 and subsequent financial crisis, when Prime Minister Vladimir Putin and President Dmitry Medvedev saw the government's share of economic output top 50%.

Starting in Putin's second term, the government systematically identified strategic industries and took control of key companies, resulting in declining equity for Russia 's billionaire tycoons, even as the shares traded among small investors on exchanges remained relatively constant.

The government's stake in publicly traded equity has jumped to 52%, compared with about 27% in 2004, after Putin's first term as president, according to UralSib Capital.

Next year, the government is seeking to sell an additional 10% stake in number two bank VTB Group (VTBR.RS) and between 10% and 15% more in 2012, Deputy Prime Minister Igor Shuvalov told reporters. Another 10% stake may be sold to investors including U.S. private equity giant TPG Inc. as early as this year.

The state may reduce its 60.3% stake in Russia 's biggest bank, OAO Sberbank (SBER.RS), to a simple majority between 2011 and 2014, with the state also shedding 25% of Russian Agricultural Bank. About 3% to 4% of Sberbank shares may be sold on the open market, with the rest of the nearly 10% stake sale going to strategic or other investors, Russian newswires quoted Chief Executive German Gref as saying on Thursday.

Russia may offer investors a 15% stake in oil producer OAO Rosneft, which includes assets from the bankrupted Yukos, between 2012 and 2015. Yet the common shares of oil-pipeline operator OAO Transneft (TRNFP.RS) will stay entirely in government hands for at least five years, officials said.

Among Russia 's biggest companies, the state may also sell about 25% of OAO Russian Railways, the national rail operator, as previously announced. Hundreds of smaller companies may also be privatized.

"This is part of a government effort to improve investor perception of Russia by specifically saying the state is going to reduce its role in the economy," UralSib chief strategist Chris Weafer said. "I don't see the government actually giving up control of the most important companies, they're really just talking about relinquishing excess equity. They're getting rid of the bits that they don't want."

Bankers have said the government asset sales could put pressure on existing Russian stock prices, and the success of any equity sale will depend on capricious international investor demand for Russian equity.

After discussing the privatization program in some detail late Wednesday, the final approval is expected in coming weeks or months, government spokesmen said Thursday.

Putin's office denied that selling state enterprises represents a change of policy. "The general trend of reducing state ownership has been here before: the issue is making it as effective or profitable as possible," spokesman Peskov said.

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