As it often happens in movies, a multi-episode crime thriller entitled Bashneft that began in September 2014 with the arrest of the once-mighty Vladimir Yevtushenkov, head of the Sistema corporation, has ended in a prosaic finale that we had predicted from the very beginning: Bashneft has been expropriated from private owners and is being transferred to the state-run Rosneft. Read More “Privatization, Sechin-style”
According to the recent statistics provided by the Russian Federal Statistics Service, foreign direct investments (FDI) in Russia have dropped in the first half of 2016 by 4.3% APR. In fact, shallowing of the investment inflow has continued for more than two years. Hunger for superprofits sharks of capitalism perceive the expropriation of Yukos in the mid-2000s as an isolated case, which does not affect the overall investment climate in the country. They continued actively flirting with the Putin’s regime, and only economic sanctions, entered by the Western governments in 2014 in response to the annexation of Crimea and support of separatists in Donbass, have forced transnational corporations to slow down its expansion on the Russian market.
Russia’s overall investment climate quickly turned from positive to negative. Russia was among the top three recipients of FDI with a record US$94 billion in 2013. This precipitously fell to only US$21 billion in 2014 and US$4.8 billion in 2015.
In 2014 just 178 new foreign investment projects worth US$13 billion were launched, compared to 396 projects worth US$23bn in 2011. Russia’s second biggest European investor (after Cyprus), the Netherlands, decreased its investment from US$5.7bn to US$1.23bn in 2014. Even though weak currency usually attracts foreign investors, as ruble weakened, FDI kept collapsing.
Ernst & Young sees the following issues negatively influencing the investment climate: inconsistent and selective law enforcement, non-transparent decision-making procedures, and corruption.
Historically, the main industries for FDI inflows in Russia have been wholesale and retail trade, banking, manufacturing, and the mining sector (mostly extraction of oil and gas). Surprisingly Read More “SHOALING CREEK OF FDI”
The Kremlin finally decided to approve the privatization of Russia’s major oil company Bashneft that had belonged to privately-owned AFK Sistema until its shares have recently been literally robbed while its owner Vladimir Yevtushenkov was being held under house arrest. Bashneft shares that used to belong to Yevtushenkov have been returned to the state, and the government now hopes that the sale of Bashneft will bring the much-needed money to replenish the Russian budget. However, the way the Russian authorities are preparing the sale of this valuable oil asset makes one think of yet another shady transaction.
On May 16, President Putin excluded 50 percent plus one share of Bashneft from the list of strategically important companies thus paving the way for the sale of the state’s majority stake. Today, the Russian Federation owns 60.16 percent of Bashneft’s voting shares (or 50.08 percent of its authorized capital). The regional government of the Republic of Bashkortostan, which is a federal subject of the Russian Federation, owns an additional 25.79 percent of the company’s voting shares (or 25 percent of its authorized capital).
The first question that comes to mind: What exactly is being sold? The Russian Federation is currently considering whether to sell a stake of 25, 50 or 75 percent together with the stake of the Republic of Bashkortostan. The regional government of Bashkortostan, however, does not support the idea of selling its stake in the company. The republic expects to at least keep the blocking stake (25 percent plus one share) in Read More “The Privatization of Bashneft: An Exercise in Futility”
