The move could cut the federal deficit in half
As part of the plan, Rosneft will buy the Russian government’s controlling stake in the refinery company Bashneft for $5 billion in cash — a premium to the firm’s current market value, according to two senior officials cited by Bloomberg.
The government would earn an additional $11 billion if or when the delayed privatization sale of 19.5 percent of Rosneft occurs, likely in the next few months.
The $16 billion generated by the financial maneuver would cut the federal deficit in half, sources said.
Russia postponed the sale of one-fifth of Rosneft earlier this month when news broke of conflict between President Vladimir Putin’s closest political allies. In response, Prime Minister Dmitry Medvedev decided, with Putin’s support, to exclude Rosneft from the national revenue generation plan.
Sechin’s new proposal comes from an analysis conducted by the Italian bank Sanpaolo SpA that was submitted to the Russian government.
The report advised Russia to sell Rosneft shares to funds and trading companies in portions that equaled no more than five percent of the company. This method would calm the government’s nerves regarding massive sales to China, India or both.
Russia has begun dumping assets in order to plug a massive national deficit caused by chronically low global oil prices, which has set off the longest domestic recession since Putin first came to power in 2000.
Last month, the government raised $802 million – a fraction of the $32 billion Russia needs to plug the deficit – by selling just over a tenth of Alrosa, a diamond mining company.
Revenues generated by the sale of Rosneft – the world’s biggest publically traded oil company by volume – would go much further in solving Russia’s financial impasse.