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. Last Updated: 07/27/2016

Minister: Duma's Law On Privatization Illegal

The government and the State Duma continue to be at odds over who should approve the list of state enterprises to be privatized, First Deputy Property Minister Alexander Braverman said Friday.

In March, the Duma approved a special article in the 2001 budget that forbids the sale of any stake in a state enterprise — including subsidiaries and affiliated companies — with assets of more than 50 million minimal salaries, or $350 million.

Currently there are two versions of the new privatization law before the Duma, one written by lawmakers, and the other by Braverman, who called the Duma's attempts to have the final say on privatizations unconstitutional. "The Constitution has an Article 114 that vests the government of the Russian Federation with the function of managing federal property," Braverman told a breakfast meeting with the American Chamber of Commerce.

Braverman said his draft law "will significantly reduce the possibilities of lobbyists." All 450 deputies have a lot of possibilities "to lobby either the speeding up of privatization or, on the contrary, of delaying it," he said.

"There are many deputies insisting that the Duma approves the list," Duma Deputy Grigory Tomchin, author of the Braverman alternative, said in a telephone interview Friday. "Among them are Communists, Fatherland-All Russia deputies and the Agrarians," said Tomchin, the deputy head of Duma property committee and a Union of Right Forces member.

Tomchin said he and Braverman agree that there is a strong temptation to want to participate in the lucrative privatization process.

Braverman said the Duma "can always control the privatization process through the law, the Audit Chamber and special committees."

Prime Minister Mikhail Kasyanov last week signed off on a list of state companies the Cabinet wants privatized in the first half of this year and fall below the threshold needed for Duma approval.

Included in that list is a 50 percent minus one stake in insurer Rosgosstrakh, for which Braverman said the government was counting on foreign strategic investors. "When we prepare Rosgosstrakh for the sale, we certainly mean the participation of foreign investors," Braverman said.

Rosgosstrakh has 78 subsidiaries, 2,354 affiliates and more than 65,000 employees, Braverman told AmCham.

Before the stake is sold, Braverman said Rosgosstrakh's accounts would be released under international accounting standards.

The government may be disappointed, however. Analysts polled Friday said foreign investors just aren't interested.

"[Russia has] a bad investment environment, a very low stock market and the problem is that no foreign companies want to buy Russian companies at the moment," said Roland Nash, chief economist at Renaissance Capital.