Nothing More Than Plugging a Budget Hole

Writing in the Financial Post, Tim Shufelt takes a look at Russia’s recently-announced plan to sell off minority shares in some of the country’s biggest companies. He argues the move doesn’t represent any significant trend toward a more democratic business climate:

Markets welcomed the Russian finance ministry’s apparent shift toward privatization. However, the prospects of a fundamental change in economic governance in Russia are slim. And even if the sale occurs, the Kremlin’s clutch on industry — although slightly less white-knuckled ­– will remain firm.

“It could be seen as part of a renewed emphasis on a more liberal policymaking agenda — if you’re being very, very optimistic,” said Neil Shearing at Capital Economics in London. The move merely represents the most painless way to replenish coffers pillaged by the oil market, he said.

The companies reported to be on the block span a number of sectors including banking, hydro power, transportation and power infrastructure. Most notably, the list also includes Rosneft, the country’s biggest oil producer, as well as Transneft, which controls the biggest oil pipeline network in the world.

At face value, the move answers calls for economic reform andliberalization. After all, Russia’s economy is highly dependent on oilrevenues and has been characterized even by Russian President DmitryMedvedev as inefficient, uncompetitive and corrupt.

But Russia has in the past loosened its economy only to the minimalextent required to maintain political control, said Aurel Braun,professor of international relations and political science at theUniversity of Toronto.

True economic reform would require legislative change, he said.