MOSCOW, January 28 (RIA Novosti)
Russian Government to Sell Assets on Domestic Trading Floors
President Vladimir Putin has ordered the privatization of government assets to be limited to Russian stock markets. This year, at least 10% of VTB Bank and 14% of Alrosa will be offered on the Moscow Exchange.
“These privatization deals must take place on our trading floors,” he said at a meeting, according to the official website kremlin.ru. In his words, carrying out the privatization policy here at home is a sign that Russia is serious about building a competitive financial market and creating an international financial centre in Moscow.
At the same time, Putin advised against sacrificing the interests of those companies that believe they can attract more money on well-known foreign exchanges. A decision was made, following the meeting, that major privatization deals arranged as initial public offerings should take place on the Moscow Exchange, several federal officials said, adding that Russia’s second largest bank, VTB, and the country’s largest diamond producer, Alrosa, will float 10% and 14% of their stock, respectively, this year.
While Alrosa initially planned to sell shares in Russia, VTB believes that listing on a Moscow exchange takes longer than elsewhere, something that could lead to losses of up to 10% of the price.
“We have met with the MICEX and the banks. The banks do not see any problem with investor interest if we sell shares in Moscow,” an Alrosa executive said.
Most of the problems that had hampered stock offerings in Russia were dealt with after a law simplifying stock issuance took effect on January 1, a Kremlin source said. The law streamlined the procedure and shortened the pre-emption right from 20 to seven days. The remaining problems could be eliminated by amendments to the financial market regulations. These could cancel the mandatory advance cash deposit for transactions.
No decisions have been made on other privatization deals planned for 2013, the source said. This year, state controlled shipping company Sovcomflot will offer 25% of its stock to the public. However, if the offering takes place on the Moscow Exchange, the company cannot expect to raise any premium in its market value, a source close to Sovcomflot management said.
Transactions without advance deposits are crucial for foreign investors, as they otherwise discount the price by 15%-20%, said the Moscow Exchange’s managing director Yekaterina Novokreshchenykh. “Once there is a central depository, and no pre-deposits, there will no longer be any justification for discounts,” said Andrei Kuznetsov, a strategist at Citibank in Moscow.
However, foreign investors need to conduct due diligence on the new depository before the international community recognizes the improvements, said Sberbank’s Anton Rakhmanov.
To avoid a revenue shortfall from privatization, the government must concentrate on improving the investment climate, a government official said.
Luzhkov to Support Prokhorov’s Moscow City Duma Candidacy
Last week, former Moscow Mayor Yury Luzhkov and Civic Platform leader Mikhail Prokhorov discussed possible cooperation in the 2014 Moscow City Duma election, Prokhorov’s spokesperson told Izvestia.
Mikhail Prokhorov described Luzhkov as an old friend. Starting as an adviser, Luzhkov may later be more involved in the election campaign.
Luzhkov refused to discuss his role in the campaign as there is still a long time to go before the election and “there is no point wasting time on this nonsense.”
The former mayor is, however, willing to support Prokhorov as a candidate for the city parliament.
“We have a very good relationship, and it is not in my nature to let my friends down.”
Prokhorov has decided to run in an election for single-member electoral districts, in particular naming the Northeastern Administrative Area. Luzhkov says the businessman’s changes are quite good.
“He’s a very popular political figure, and not only because of his height.”
Political and social scientists are less confident that any such partnership between Prokhorov and Luzhkov would be a great success. Mikhail Vinogradov, Head of the St. Petersburg Politics Foundation calls the potential alliance “an experiment in plastic surgery.”
“Luzhkov has been absent from the political horizon and will soon be forgotten. In any case, Prokhorov and Luzhkov have little in common. They are from different generations and prefer different management styles.”
“It’s been two years since Luzhkov left politics. It’s hard to say he has much influence now,” says Alexei Grazhdankin, Deputy Head of the Levada Center pollster. “There may be some positive effect but not necessarily a lot.”
Indeed, Yury Luzkov, while in office, supported completely different political movements. He established a centrist political group and later became one of the leaders of United Russia. He also expressed his support for the Yabloko party that now criticizes Prokhorov and Civic Platform.
On the other hand, Luzhkov and Prokhorov have both been popular in the capital. Luzhkov has been elected mayor three times. Among Moscow voters, Prokhorov was the runner-up in the 2012 presidential election.
The first rumors about the connection between the two politicians emerged last week when Mikhail Vyshegorodtsev, a member of Luzhkov’s former team, was appointed head of Civic Platform’s Moscow branch. Vyshegorodtsev is currently rumored to be in charge of the election campaign, which makes it likely that he should seek to involve some of his former colleagues.
Ex-minister Serdyukov Could Face Criminal Investigation
The Main Military Investigative Directorate filed retroactive criminal charges on one count of malfeasance against “unidentified officials in the Ministry of Defense” over the construction of a road to an exclusive country residence owned by Valery Puzikov, who is former Defense Minister Anatoly Serdyukov’s brother-in-law.
However, the Main Military Prosecutor’s Office may rescind the order to initiate criminal proceedings since the investigation has revealed Serdyukov’s alleged personal interest in the government-funded project. The Prosecutor’s Office maintains that charges cannot be brought after the fact because, among other reasons, this deprives Serdyukov of his right to defense as a suspect.
The exclusive facility in question, Zhitnoye, is located in the Volga delta, an ideal location for an avid fisherman and hunter like Serdyukov. Puzikov arranged for Serdyukov to use a three-storey lodge there, and in August 2011 President Dmitry Medvedev and Prime Minister Vladimir Putin visited him there.
But aside from fishing and hunting, the Investigative Directorate documents indicate, Serdyukov ordered a nearby long-range aviation regiment to plant greenery on the premises and used a Railway Troops battalion as a labor force to build an eight-kilometer asphalt road to the facility at a cost of about 100 million rubles. He ordered the Ministry of Defense to pay the bill.
The Main Military Investigative Directorate has filed malfeasance charges on both counts, but on the former count Serdyukov is said to have only endorsed an order issued by a deputy. In the road construction case, however, he signed the construction documents (design, cost-sheet and schedule).
The Prosecutor’s Office’s main rationale for returning the order on initiating criminal proceedings to the Investigative Directorate is based on a Supreme Court ruling of February 28, 2006 which states that retroactive charges in malfeasance cases are inadmissible because the duties of office can be exceeded or abused only by a named official or officials and not by “unidentified officials in the Defense Ministry.”
Incidentally, the phrase ex post facto (retroactively) reportedly appeared in the “road case” file after Serdyukov’s alleged personal visit to the Main Military Investigative Directorate on January 24. Accompanied by several high-ranking federal law enforcement officials, he negotiated for an hour with Investigative Directorate officials, spouting quotes from Putin speeches in which he recommends that journalists refrain from jumping to hasty conclusions about the ex-minister’s role in the criminal case, in which he is still just a witness.
No officials in the bodies named in this article were willing to comment on the likelihood of the former defense minister facing criminal charges.
(Note: this is a shortened version of the article that originally appeared in Russian)
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