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The Return of “Prikhvatizatsiya”

The Financial Times Lex Column comments on the recent announcement by Igor Shuvalov that Russia will undergo a new wave of privatizations of state shares in companies such as Rosneft in order to lure reluctant investors back.

Officials talk, too, of using new privatisations to bolster the government’s liberal economic credentials and strengthen property rights. If they are serious, they must do things properly this time. Privatisations should be carefully planned, conducted transparently by internationally recognised banks, and open to foreign investors in a non-discriminatory way. Moscow attempted to draw a line under its insider-dominated 1990s privatisations with the initial public offerings of Rosneft in 2006 and VTB in 2007. But the Rosneft IPO was tarnished by controversy over its biggest asset having been acquired via a forced sale from Mikhail Khodorkovsky’s Yukos. Auctions of remaining Yukos assets in 2007 were a dubious spectacle.

The privatisation talk seems part of a broader attempt by Moscow to woo foreign investors again; Vladimir Putin is hosting oil executives in the Russian Arctic this week. That is welcome, but restoring confidence will be challenging. Investors are, for example, monitoring a legal challenge to Telenor that could force the sale of a $2bn investment by the Norwegian group. If that happens, attempts to convince investors Russia is safe will be dead in the water.