Kremlin Considers Privatizing Sovkomflot

Sovcomflot Tanker SCF Baltica
An OAO Sovcomflot tanker, the SCF Baltica as seen in the Laptev Sea in the Arctic Ocean near Siberia, Russia. Photographer: Emerov Sergey/OAO Sovcomflot via Bloomberg

ReutersBy Denis Dyomkin and Lidia Kelly (Reuters) The Kremlin is considering reducing state stakes in shipping firm Sovkomflot as well as the oil company Rosneft and state-controlled bank VTB as part of the country’s new privatisation drive.

With the country facing a second straight year of recession and with sanctions impeding Western investment, Russian oligarchs are the most likely buyers in companies that President Vladimir Putin wants to sell to boost state coffers.

Until now, they have said little on the issue, with sources only saying that oil major Lukoil has told the Russian government it wants to buy smaller rival Bashneft, one of the firms slated for the privatisation.

Andrei Kostin, VTB’s chief executive officer, said on Saturday current market conditions do not support a sale.

Falling oil prices and sanctions imposed in 2014 for Moscow’s role in the Ukraine crisis has slashed the value of Russian assets.

“If sanctions are lifted, for example … then definitely our price will be higher,” Kostin told the state-run Rossiya-24 television channel.

“And that is also a very important factor that needs to be looked into, to wait until the summer to see if there are signals that there could be such move (lifting sanctions).”

He said if the European Union and the United States were to lift their restrictions, shares of the companies released from sanctions could rise 50 percent.

Billionaire Viktor Vekselberg, , one of Russia’s richest men with assets ranging from construction to aluminium, said however, that current prices for Russian assets are “reasonable”.

Kostin said it was a misconception that oligarchs are lining up to snap up Russian assets cheaply.

“The task to sell all of this is quite complicated and it is some sort of an illusion that there are some people who would buy right now, today,” he said.

“The economic situation is very difficult, the outlook also anything but simple, that’s why the sale will definitely be transparent and honest. To find a buyer today is not easy.”

Sovkomflot is a Russian maritime shipping company specializing in petroleum and LNG shipping, a 100% state-owned corporation founded in 1995. Since December 5, 2006, its headquarters are located in Saint Petersburg. It is headed by Director General Sergei Frank. In 2007-2008 Sovcomflot absorbed the assets of state-owned, Novorossiysk-based Novoship and thus became the largest shipping company in Russia.

(Reporting by Denis Dyomkin and Lidia Kelly; Writing by Lidia Kelly; Editing by Toby Chopra and David Evans)

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