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. Last Updated: 07/27/2016

Top Official: Invalidate Unfair Sell-Off Deals




Adding a new voice to a rising chorus in the government of Prime Minister Yevgeny Primakov, an Interior Ministry official Tuesday called for the reprivatization of some companies in cases where the Russian state had been shortchanged in insider deals.


"The renationalization of some companies that went private at the start of the 1990s cannot be excluded," said deputy head of economic crimes department Iskander Galimov, adding that the companies should then be sold off again at market prices.


The first target for renationalization is the port of Novorossiisk, Galimov said. The port, initially privatized in a loans-for-shares scheme in 1995, has been plagued by corruption. The port's director general, the director of local Mosbiznesbank, the deputy head of Novorossiisk tax office and the head of the local pension fund were all put in prison after criminal charges related to the operation of the port were brought against them at the end of last year.


Galimov said the state now has a 20 percent stake in Novorossiisk. He did not say when the proposed renationalization would take place.


Most of Russia's biggest assets were sold off at bargain prices in rigged privatization auctions in the mid-1990s. In the past, the government had always defended these auctions as being necessary for the dismantling of the Soviet monolith. Primakov's arrival in power has seen a shift in government attitudes, with more and more criticism of them coming from official quarters.


Analysts said the renationalization of the mess that is Novorossiisk would probably be a positive step, but warned that the effect on confidence in ownership rights that further such moves would have would do more harm than good.


"Things will get worse if any kind of nationalization [in the oil sector] takes place," said Ivan Mazalov, an oil and gas analyst with Troika Dialog. He also questioned that even poorly run companies would be better handled by the state.


"The government can neither sell companies it still owns nor manage them properly," he said.


Another privatization deal that came under fire from Galimov was that of Tyumen Oil Co., which was acquired by a company close to Alfa Group for $800 million in 1997. Galimov claimed Tyumen's reserves were not taken into account when the company was privatized.


Mazalov, however, said this was untrue. "Tyumen Oil was, to say the least, fairly priced," he said.


There are plenty of signs that the talk of nationalization is just that - talk. Even an Interior Ministry official interviewed by telephone Tuesday seemed to confirm this, saying the ministry's focus would be "on the personal responsibility of certain managers."


Bribes and embezzlements were the typical features of the privatization saga and leave a lot of room for criminal charges, the official said.


Analysts said the threat of nationalization could also be a useful tool in pressuring companies not to obstruct investigations and hide offenders.


At the news conference, Galimov took the opportunity to list a number of investigations the Interior Ministry is currently working on.


He said criminal charges could be brought against Boris Brevnov, the former head of Unified Energy Systems, for the alleged misappropriation of $2 million from the company.


Galimov said that 18 people at the oil transport company Transneft were under criminal investigation for the illegal acquisition of 1.55 million preferred company shares.


He also said the ministry was investigating allegations that the recent bankruptcy of the Sidanko oil company had been initiated by the firm itself to protect assets from creditors.