Slavneft Oil Company Privatization Doubtful

Foreign competitors make Russian candidacies leave

The long-expected privatization of the Russian-Belarussian oil company Slavneft turned out to be undecided. Foreign competitors - the Chinese company CNPC and the British company British Petroleum - became a serious concern both for Russian oil oligarchs and for the Russian government. Oligarchs lose their interest to participate in the auction for the company. Yet, the government of the country hopes to get more money for the budget.

Vagit Alekperov, the head of the Russian oil giant LUKOIL, has already announced about his unwillingness to acquire 74.95% of stocks. As it is expected, more statements like that will follow from other candidacies as well. The Russian government is concerned about the price that was set for Slavneft. It is an open secret that the next year will be a very hard one to survive for Russia in terms of financial problems. Various state organizations try to find an opportunity to raise the money level of the auction. The Russian Clearing House said to RIA Novosti that the sale cost of Slavneft stocks could be higher than three billion dollars. The initial price for the stock of 74.95% of Slavneft shares was fixed on the level of $1.7 billion. However, the Russian Fund for Federal Property later bethought the figure and ordered to study the Slavneft cost. Experts came to conclusion that the initial price for the company’s stocks could not be less than $2.5 billion. In connection with that, the Clearing House does not exclude that the share cost might fluctuate during the auction between $3-3.2 billion.

It seems that the Russian government has not learned a lesson from the Belarussian experience. The Belarussian State Property Ministry failed to sell its shareholding of the company Slavneft at a more expensive price. There was no one to buy that shareholding, so Belarus had to prolong the sales term for the stocks. However, this does not guarantee any success either. Both Russian and foreign oil producers are likely to say no to purchasing the basic stock of shares of the company Slavneft, if this stock becomes more expensive.

If this happens, then the Russian auction will have to be adjourned as well. This implies no scheduled revenues for the budget. Is there any sense from the whole issue then? There definitely is, if there is a certain buyer to purchase Slavneft stocks. In this case it would make sense to let him have the stocks at a more expensive price. Experts say that it would probably be the company Sibneft.

Dmitry Slobodanuk

Translated by Dmitry Sudakov

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Author`s name Olga Savka