Russian infighting puts the brakes on power privatisation

• 12 years ago (2012-05-24)
• Junior Isles

Europe 1089

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Russian stocks have taken a significant hit after President Putin declared that Medvedev’s plans for privatisation in the Russian energy sector are being cancelled, reigniting worries of infighting amongst Russia’s key politicians.

The benchmark RTS index closed down 4.4 per cent this Wednesday, after news emerged that Mr Putin had signed a decree designating the FSK and MRSK power grids, and hydroelectric giant Rushydro, as ‘strategic companies’, where majority stakes cannot be sold into private hands.

Putin’s move puts short shrift to the ambitious power privatisation programme drawn up by Dmitry Medvedev, significantly undermining prospects for reform before Medvedev’s team in government even begins work.

Energy tsar Igor Sechin had clashed with Medvedev’s and his liberal team, lobbying hard for a cancellation of the plans to sell state stakes in energy companies to private investors.

The Kremlin decree, signed on Monday and announced late on Tuesday, indicated a victory for Mr Sechin despite his side-lining after being left out of the government and the Kremlin after a decade in power.

News of Mr Putin’s decree came as “a stab in the back at the 11th hour” for the new government, one official familiar with the situation has said. “Privatisation in the oil and gas sector has now been basically blocked.”

A senior banker with inside knowledge stated that the decree set out that the president, not the government, would determine if, how and when Russia’s natural resources would be privatised, and therefore does not take the asset sales completely off the agenda.

Mr Putin’s spokesman, Dmitry Peskov, had seemed to contradict this when he said the decree outlined that government stakes were “not subject to privatisation”.

Another source commented that Mr Putin’s attempts at balancing out the conservative faction, led by Mr Sechin, and the more liberal faction, headed by Mr Dvorkovich, might lead to total paralysis in enforcing policy in the energy sector.

“Everyone is baffled as to who is in charge of the energy sector. The problem is there are no institutions, only individuals,” said a further source.