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. Last Updated: 07/27/2016

Rosneft Privatization Plan Not Final

The Russian government may not see the proceeds from the privatization of state oil company Rosneft as soon as it would like, despite considerable political pressure to hold the sale quickly.

Rosneft president Yury Bespalov said Thursday that privatization plans for the company are not finalized. "It is not realistic to talk of holding the sale this year," he told the Ekho Moskvy radio station.

The government is keen to speed up the privatization of the last major oil company in state hands to help plug a gaping 1997 budget deficit -- the result of low tax collection -- and fulfill a promise to pay public-sector wage arrears this year.

"We are doing everything to ensure that the Rosneft auctions are announced very soon," First Deputy Prime Minister Boris Nemtsov told Russian news agencies Thursday.

Bespalov said proceeds from the first phase of the Rosneft privatization would go straight into state coffers.

"The desire to speed up the first Rosneft auction is connected with the fact that revenues from that sale will go straight to the budget," he said. "President Yeltsin has promised to pay off wage arrears by January 1."

A presidential decree, signed July 8, ordered the government to pay off debts of 25 trillion rubles (dollars 4.2 billion) by the end of the year. Recent government figures suggest little headway has been made, so the dollars 1 billion or so that might be raised from Rosneft is highly tempting for the government.

Bespalov's presidency at Rosneft is in doubt after the board voted this week to ask the government to remove him. Bespalov is at loggerheads with board chairman Alexander Putilov over how the company should be run and sold off.

Bespalov said he had written to Prime Minister Viktor Chernomyrdin asking him to annul the "illegal" board decision. The government has not yet responded.

Bespalov said Rosneft would be sold in two parts -- 63 percent in a special cash auction and the rest in an investment tender. The total proceeds should be at least dollars 1 billion, he said, including dollars 500 million in investments.

But some key aspects of the sale had not been finalized.

It is still unclear how the 63 percent stake will be auctioned because it cannot be sold in one block, Bespalov explained. Two or four separate sales may have to be arranged. Further technical delays are also unavoidable.

Russian legislation dictates a wait of 45 days between the tender being announced and bids being submitted.

Bids take a month to collect, followed by an unspecified period for the tender commission to draw up results, Bespalov said.