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. Last Updated: 07/27/2016

Privatization Delay Due to Attacks

Russia said Thursday it had altered privatization plans for a state insurer and delayed altogether an offer for shares in top oil producer LUKoil after the September attacks in the United States hit markets.

The government will go ahead with a sell-off of state-owned insurer Rosgosstrakh, but combine a planned two tenders into one big auction for 39 percent of the firm, said First Deputy Property Minister Alexander Braverman.

Braverman said the downturn in world markets after last month's attacks had cut potential interest from investors, which made it easier to sell the stake in one go. He said the ministry would offer the stake by Dec. 15 at a starting price of 1 billion rubles ($33.8 million).

"The commission that was meant to set the starting price of the second lot of shares ... sat on Sept. 11 in the first half of the day," Braverman told a news conference. "After that the world changed. It affected primarily the insurance business, aviation and tourism. We could not help but take this into account," he added. "We began to sound out the portfolio investment sector. ... Demand from portfolio investors has shrunk in a major way, therefore a new sitting of the commission was held," Braverman said. "A decision to sell 39 percent was taken."

After the sale, the state was to keep 50 percent plus one share in the firm, which has survived from Soviet days and is still the largest household insurer.

Despite the decision to go ahead with Rosgosstrakh, Braverman said a sale of shares in LUKoil would be delayed. The state had planned to offer 6.6 percent of its 15.5 percent stake this year through American Depositary Receipts on the London Stock Exchange. It wanted to raise some $700 million.

"It seems likely that due to a whole range of market factors, it would be sensible to start placing the [LUKoil] shares at the start of next year," Braverman said.

"The shares are now at $10, you all know what the price of oil is and in taking this decision we were guided by the state of the market," he added.

"If market conditions are bad, we do not sell. The [state] budget does not particularly need the money," he added.