16-10-02 By the end of this year the government plans to sell its controlling share in Slavneft. Prime Minister Mikhail Kasyanov signed an order for the privatisation of the oil and gas company, one of Russia’s top 10 oil producers. Kasyanov has called for the sale of the state’s entire 74.95 % stake, which is likely to become the largest ever privatisation deal in Russia’s history.
By selling its stake in Slavneft the government hopes to fill up budget holes, while analysts assume that after the sale is made, the balance of power in Russia’s oil industry will shift substantially. Earlier the government said it was planning to sell 19.68 % of its shares in the company at an open auction. The sale would have brought some $ 300 mm to the country’s budget.
However, the Ministry for Property Relations submitted a draft plan to the government calling for the sale of the state’s entire stake in Slavneft. The document, which was reviewed and endorsed at lightening speed, was signed by the PM.

Kasyanov’sorder calls for amendments to the 2002 privatisation plan by adding Slavneft to the list of enterprises for sale this year. At the same time, Kasyanov ordered Slavneft be excluded from next year’s privatisation programme. Kasyanov instructed the Ministry for Property Relations to prepare the sale of the state’s share in Slavneft at an auction with open bidding, and to choose the buyer by December. The money raised by the sale is to be transferred to the federal budget no later than February 15, 2003.
The minimum price at which the state can sell its stake in the oil company is estimated at $ 1.3 bn. Experts assume the stake will be sold in the region of $ 1.5-$ 2 bn, making the Slavneft sell-off the largest privatisation deal in Russian history.

The sale will help the government replenish the state coffers and to solve serious budget problems. With tax revenues lower than expected and the ambiguity surrounding LUKoil’s listing on the London Stock Exchange, the government’s plans to build up a financialreserve of 197 bn roubles, which is to be used for the repayment of Russia’s enormous foreign debt in 2003, are looking fragile. The sale of Slavneft is expected to help solve that problem.
As for Russia’s oil companies, they have a chance to considerably increase their assets. Slavneft produces 13.5 mm tpy of oil. So far, Roman Abramovich’s Sibneft is considered the most likely buyer.

Sibneft has already purchased a minor stake in Slavneft and was planning to purchase the 19.68 % stake that the government was to put on sale this year. Earlier this year the company’s owner Roman Abramovich won a power struggle for control over Slavneft, which resulted in the former Sibneft executive Yuri Sukhanov being elected Slavneft’s new president.
He replaced Mikhail Gutseriyev who was fired in April amid allegations that he used his position to finance his brother's unsuccessful presidential campaign in the Russian internal republic of Ingushetia. In June Gutseriyev, with the help of armed guards, tried to claim back his office. The dramatic standoff was resolved days later after the government intervened.

However, it would be wrong to say that the results of the December auction are already pre-determined. Other oil giants, including Yukos, the Tyumen Oil and Surgutneftegaz have also expressed interest in Slavneft, and undoubtedly they will be able to raise $ 1.5–$ 2 bn, if need be.
Perhaps, the only passive participant in the forthcoming events will be the Belarusian government. It still has a 10.83 % stake in Slavneft, but Minsk is in no position to influence the company’s fate.