New Privatization Instead of State Capitalism. Asset Sale to Begin by Autumn

Elena Petrova, Tatyana Sviridova

The Russian authorities are preparing a new privatization for a reason. The Finance Ministry is particularly concerned about the budget deficit, the loss of export revenues, and the excessively strong ruble. Each of these challenges, taken separately, does not pose a major threat to the stability of the country's financial system. Together, they are capable of rocking the economic boat.

The Ministry of Finance has already submitted a draft law to the State Duma on increasing the federal budget deficit. From half a percent of GDP, the "hole" has grown to 1.7% - more than three times. Now the minus is 3.8 trillion rubles . In the new Russia, they have never liked a deficit budget, although it was not difficult to get loans on world markets. After 2022, the situation has changed dramatically: they have to collect within the country.

— This amount, in theory, should be provided by the fact that 447 billion rubles from the National Welfare Fund will go to finance the budget and about 3.4 billion rubles is net compensation taking into account the repayment of previous years of government borrowing. But OFZ is a rather capricious thing. You can attract, or it may happen that the Ministry of Finance does not want to pay increased yield for the placement, — says economist Nikita Maslennikov.

To strengthen the system, it is much safer to sell off some of the state assets than to devalue the ruble and accelerate the inflation that had calmed down. New privatization is needed, and quickly.

The extent to which the state lacks money can be judged by the reaction of all branches of Russian government.

The Ministry of Finance confirmed that it plans to sell state-owned shares and exceed the 2025 plan. It provides for receiving 100 billion rubles from property transactions. It is obvious that the plan will be exceeded.

The State Duma is ready to quickly consider the necessary laws.

And even the Constitutional Court last week recognized that deprivatization, or taking businesses away from their owners, according to the rules of the Prosecutor General's Office, is legal. The statute of limitations for past privatization deals has been abolished, and prosecutors can begin the process of returning assets to state ownership at any time. It is obvious that the Ministry of Finance will not "sit" on the new property for long and will try to transfer it as quickly as possible for good money.

- These are, naturally, packages of those companies that are under state control or with state participation. What was done at one time was the privatization of Sberbank and so on. There are thoughts about how to attract Russian Railways and Russian Post as part of such shares, but there are no final decisions yet, - says Nikita Maslennikov.

Investment analyst Alexander Razuvaev believes that both public companies traded on the stock exchange and non-public companies will be sold:

— It is very likely that we are talking about both IPOs of non-public issuers (Initial Public Offering. — NI) and SPOs (Secondary Sale of Shares. — NI) of those already traded. SPOs could be conducted by ALROSA, Transneft or Rostelecom . New names? Possibly Russian Railways, Rostec or Rosatom.

The second direction is the sale of enterprises that have been deprivatized over the past two years, from Makfa and RusAgro to Domodedovo Airport.

The third group of assets are small and medium-sized high-tech enterprises that want to go public. The Central Bank insists on selling such industrial enterprises. The state currently provides them with preferential loans. Instead, bankers propose paying for the companies' public placement, which costs up to 10% of all shares sold on the stock exchange. Businessmen also asked President Putin about this at a meeting with Delovaya Rossiya a week ago.

There are no obstacles to the sale of state property packages and deprivatized enterprises. According to Alexander Razuvaev, the new cycle will begin in June.

The authorities see non-state pension funds among the buyers of shares. The state is creating a long-term savings program and motivating entrepreneurs to invest in it and finance a "second pension" for their employees. As soon as the draft law on the PDS passes the Duma, this group of buyers will also be actively offered to participate in privatization.

Who will buy all these riches?

Experts doubt that the new sell-off will affect the population, and the hypothesis of the head of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, that 55 trillion rubles that the population keeps in bank accounts can be used to buy shares is called “non-scientific fiction.”

— I doubt that individuals will buy with great enthusiasm. Professional market participants, of course, this is their life. When Shokhin talks about 55 trillion, he means not only professional market participants, but also broad layers of the population. Or those layers of the population that have savings, — Igor Nikolaev believes.

Economist Maslennikov sees the same buyers:

— I think we will be talking about some large investors, even from some investment syndicates, so the conditions of this privatization are still extremely unclear, as is the list of these assets.

Older Russians remember well the voucher privatization of 1992-1994, because of which one of its ideologists, Anatoly Chubais , continues to bear the stigma of a "privatizer." The second wave of state property sales in 1996, which accompanied the election of President Yeltsin and gave birth to the oligarch class, is not called anything other than a robbery of the country, either in Russia or in the world. But the people's IPOs of Sberbank and Rosneft in the early 2000s have not been forgotten either.

— In general, people's attitude to privatization is, to put it mildly, not very good. There are associations with the privatization of the 90s, which was dirty and unfair, whether it was the mass first stage, or the stage of pledge auctions. People will evaluate that privatization is something that can be deceived, you can be deceived. When making a decision, people will evaluate the situation in principle, the economic situation, — Igor Nikolaev doubts the active participation of citizens.

Experts are not sure that the state will be able to easily sell its shares to the population and even investors.

— Russians have had unsuccessful experience investing in state structures. The “people’s” IPO of VTB Bank, the current state of the once great Gazprom. Plus, financial literacy has grown significantly in recent years. That is, investors are interested not only in a cool brand, but also in financial statements, dividends, etc., — Aleksandr Razuvaev reminds new privatizers.

Even if banks themselves become buyers of shares of "newcomers", there is no point for them to "let go" of clients. After all, client deposits are loans, on which bankers are now earning super profits. And there is no point in counting on the fact that money will flow from deposits to the stock market like a river. What kind of idiot would withdraw money from a deposit that today gives 20% per annum and invest it in shares with an unclear yield, says Nikita Maslennikov. The answer is obvious - there are none.

— From 5 to 7 trillion today is the placement of all securities in total. This is another cash flow. Of course, they can increase it, but for this, the Russian stock market must show successful results. So far, we cannot boast of this, — the expert states.

The Russian president has set the task of increasing the capitalization of the stock market in five years from 26 to 66% of GDP. But to achieve this ambitious goal, shares worth 7-9 trillion rubles must be placed. Over the past ten years, such a jump has not occurred, and the stock market has grown by only 1 trillion. It is unlikely that in five years something that could not be improved in 30 years will be able to change. This is as long as the stock exchange has existed in the Russian Federation.

— Some of the most cautious investors will probably decide to hold off on buying shares until the end of the SVO. If the new wave of privatization fails, it will undermine citizens' confidence in the market , — believes Alexander Razuvaev.

The state, of course, will try to organize the sale of shares taking into account all the technologies of mass communication. People will be told that these are serious investments, the state guarantees and there is no need to worry. Verbal interventions work on those who decide to enter this river for the first, second or even third time.

— Considering that many people believe what they say on TV, this will be enough for many. Professionals will evaluate the prospects from the point of view of the time horizon. It is clear that no one will quickly play back. The probability of this is low, — Igor Nikolaev believes.

The new offer will attract professionals who want to earn money "in the short term". In a few months, they will be able to buy, sell, buy again and submit again, especially if they have administrative resources, the expert says. After all, people invest in order to earn money. If someone is made an offer, it is very difficult to refuse:

— We may simply be given an offer we cannot refuse. To participate in this privatization. This has happened before, and I think it may happen now. They will simply offer to participate. There will be those who want it themselves, and there will be those who will be offered it. Like in the 90s, when you could buy something and become a billionaire in a short time. Perhaps these are the same times now. When they will happen again is unknown. They will think so. There will be those who want to take the risk. But these are precisely professional participants. The same banks. But as for the “physicals”, I have serious doubts.

Supplementing the well-known proverb: to Caesar what is Caesar's, to the mechanic what is the mechanic's, to the oligarch what is the oligarch's. Especially since 92% of all bank deposits belong to less than 1% of the population. As some observers on Telegram suggest , lists of those wishing to participate have already been compiled. Or are being compiled.