October 21, 2009 By Citizen M

Probing Russian Privatization

What to make of Russia’s announcement that it will sell stakes in some of its publicly-owned companies next year?  The government has already drawn up a list of 5,500 companies that will be divested, and Bloomberg’s report suggests that the move could spur growth in companies whose remit had previously been restricted by state ownership.  Prime Minister Vladimir Putin and Finance Minister Alexei Kudrin have previously suggested that the relaxing of state controls would help the economy return to growth, although plenty of critics are questioning the government’s intentions, as the more glaringly obvious point is that the privatization is an unavoidable bid to bolster flagging public funds.  

The Moscow Times is running an interview with Steven Meehan, CEO of UBS in Russia, who is expressing some good old-fashioned skepticism about the news.  Meehan says that, whilst the announcement has been welcomed in the investing sector, question marks remain over the transparency of the offers and indeed over the solubility of the Russia economy.  Or is it a question of just how much control the government is willing to give up that is worrying potential acquirers?

[T]he status of Russian companies’ balance sheets remains a big concern for investors, Meehan said.

“I think the restructuring of assets and liabilities is a key concern for foreign investment into Russia, but it’s often less discussed,” he said. “International investors … can be uncomfortable investing with short-term liabilities that are disproportionate to long-term assets.”

Back