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. Last Updated: 07/27/2016

Gazprom Sell-Off Terms Set

Russia said Wednesday that it would auction off a 2.5 percent share in natural gas giant Gazprom and set the starting price at $651 million.

The bidding is expected to begin at the end of this week with the winner to be announced before the year's end, Interfax cited government sources as saying.

The price tag is about 20 percent lower than what the company was valued at before Russia's finances collapsed in August, but analysts voiced skepticism that foreign majors would be interested in risking so much money on the gas monopoly.

President Boris Yeltsin this week authorized the sale of 5 percent of Russia's largest company - which is 40.9 percent state-owned - in an effort to help fill an estimated $4 billion budget deficit this year.

The share sale will be open to Russian and foreign investors, but the eventual buyer must promise to retain the stake for five years and not to use it for any derivative issues.

If a foreign company buys the stake, the threshold of foreign participation in Gazprom will be raised from 9 percent to 14 percent.

Before the crisis, the 5 percent stake was valued at 10.3 billion rubles (then $1.65 billion) - a figure many analysts had said was too high given the collapse of world energy prices and the chaos in Russia's financial markets.

Some analysts said Russia was making the move out of "desperation" following the collapse of two other privatization sales this year - one of oil major Rosneft and the other of state communications holding company Svyazinvest.