Russian deficit hinges on oil privatization

Selling off government stake could help finance the deficit, finance minister says.

By Daniel J. Graeber

SOCHI, Russia, Sept. 30 (UPI) -- The budgetary strains dragging on the Russian economy could be relieved in part through the privatization of oil companies, a minister said Friday.

Russian Finance Minister Anton Siluanov said the government expects to carry a budget deficit next year, though the depth of the crunch may depend on how well plans to privatize Russian oil company Bashneft, and potentially Rosneft, proceed.


"The deficit in 2016 will be 3.5-3.7 percent of gross domestic product, depending on the structure of the deal with Bashneft," he was quoted by Russian news agency Tass as saying. "If it is structured as a regular transaction not associated with Rosneft, it will be a source for financing the deficit."

The Kremlin has been reviewing privatization options as the Russian economy risks lingering in recession because of the strains brought on by Western sanctions and low crude oil prices.

In early September, the Russian Central Bank said inflation was within target and external conditions were favorable for the oil-based economy. The government's monetary policy was paying off and, despite pressures on gross domestic product, "one may say that the economy picks up slowly," the bank said.


With Russia's economy on pace to shrink another 1.6 percent this year before emerging from recession next year, privatizing state oil company Rosneft could bring in up to $6.5 billion to a federal budget struggling under the strains of lower crude oil prices. No estimate was available on returns from privatizing Bashneft.

Russian President Vladimir Putin issued an executive order that permits the sale of the first 50 percent stake of the company, but has so far not pressed the issue

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