SHARES-FOR-LOANS SCHEME TO CONTINUE UNDER NEW RULES.

The Russian government plans to continue the controversial shares-for-loans scheme launched last year, but will revise some of the procedures of the process. (8) One likely change is that banks that act as agents for the State Property Committee will be barred from participating in the auctions as bidders. (This follows a controversy over the role of Menatep Bank in the auction of shares in the Yukos oil firm late last year.) Blocks of shares that did not attract bids last year will be put up again for auction, as will shares in other privatized enterprises in which the state has a stake.

At the same time, the government is planning to try to repossess some of the shares it auctioned last year. It is thought to be particularly interested in buying back the controlling interest in Norilsk Nickel, Russia’s largest producer of nickel, copper, cobalt and platinum. The government leased its controlling interest in that enterprise late last year to Oneximbank. The affair has turned into an embarrassment for the government because Norilsk Nickel’s incumbent board of directors is fiercely resisting Oneximbank’s efforts to assert control over the firm. As for how the cash-strapped government will raise the money to repay the loans, Kommersant-daily suggested this can be done by "simply manipulating the figures." The government left itself some room for this kind of maneuver when it drew up the 1996 budget and projected an improbably low level of inflation (1.9 percent a month) for the year, tying state spending in nominal terms to amounts planned on that basis. Therefore, the government can expect certain extra nominal revenues which it can use for unforeseen expenditures such as paying off miners or retiring its debts. The government did the same thing last year in a more extreme fashion.

Russia’s New Parliamentary Leaders Press CIS Agenda.