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. Last Updated: 07/27/2016

Two Price Tags on Slavneft Oil Company

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Foreigners tend to get fleeced in Russia. They end up paying over the odds for hotel rooms, museum tickets, taxi rides -- simply because they have much more money. And oil major Slavneft, like a ticket for the Hermitage, has two price tags -- one for domestic buyers and another for the rest of the world.

The domestic price was paid last December to the state by the TNK/Sibneft consortium; the "foreigner" price will be paid to TNK by BP. The state got $1.86 billion for 75 percent of Slavneft, putting its total value at $2.5 billion. And now, one-quarter of Slavneft (half of TNK's stake) is valued at $1.35 billion (the whole company, therefore, at $5.4 billion). At least that is the price BP has agreed to pay for TNK's 50 percent stake in Slavneft to be included in the joint TNK-BP company.

You might think that the organizers of the Slavneft privatization auction would be kicking themselves, and that the Finance Ministry would be kicking the privatizers over the revenues that the exchequer missed out on. But no one is kicking anyone. The thing is, it was essentially the state's decision to scare off China's CNPC, which was said to be prepared to pay the "foreign" price, from participating in the auction. And for TNK's owners that decision proved to be extremely profitable.

Having spent $900 million on the privatization and previously about $400 million on buying up shares in Slavneft and its subsidiaries, TNK will make $1.35 billion from BP and another $175 million in share dividends this year. In other words, it has already made back its initial investment and some. And the quarter of Slavneft still owned by TNK -- worth $1.35 billion, based on the BP deal -- can be considered pure profit.

Can this be the material value of "administrative resources," which enable many oligarchs to buy on the cheap and sell on at a good mark-up but which are difficult to quantify? Or is it a measure of the effectiveness of TNK's and Sibneft's management techniques? If it is the latter, then one can put a price on the state's ineffectiveness at managing its own property. Because as the main owner of Slavneft, the state could have consolidated its stakes in Slavneft's subsidiaries, kept a closer eye on management, and as a result have sold the company for more. That's the theory anyway. However, the state as an owner always lets others make money off it. Now we know how much TNK's owners made.

Tatyana Lysova is the editor of Vedomosti, where this comment first appeared.