Russia’s Second Wave of Privatization

by Yuri Zarakhovich

Russia has urgently launched its second wave of privatization. On the surface this is terrific news for those who missed out on the fantastic opportunities in the Wild East during the first privatization of the early 1990s and have since lamented their fate.

This also seems to answer the question of what the Russians will think of next to fund the budget once oil prices drop again.

“We are looking to boost privatization in 2010. We face two challenges, to generate additional revenue for the federal budget and attract private investors, expecting improved management efficiency,” Russian Economic Development Minister Elvira Nabiullina told journalists on October 7 after a meeting with Vladimir Putin on privatization issues.

According to the Russian daily Vedomosti, proceeds from the sale of state property in 2010 are projected in bring in some RUB 70 bln. Slightly over $2.3 billion. (Vedomosti, Oct 7).

The state intends to sell off a 13.1% stake in Rosgosstrakh and up to 20% stake in the shipping company Sovkomflot. In addition, by the end of 2010, a tender could well be announced for a concession agreement to run Sheremetyevo airport. All in all, 450 stakes are to be put up for sale in 2010, including large stakes.

The Beauty of it, however, is in the eye of the Insider.

Thus begins the final stage of the Grand Program for the Russian Insiders’ Grand Rip-of Program, launched back in the late 1980s—converting the establishment’s monopolist political power into their private wealth and economic might. To achieve that, the establishment had to throw to the public such bones, as freedom of speech and other democratic niceties. Once the establishment passed on to the second stage of its Program—converting new riches back to political power—these bones started being withdrawn. Now, try and guess who will benefit by the second privatization wave?

Oil and natural gas won’t be privatized. Because they already belong to the top echelon of the establishment; their ownership will be eventually formalized, but at that level only.

Historically, Russians have been shockingly self sufficient. We enslaved our own people as surfs rather than going through the expense of discovering new continents, such as Africa, like the Europeans did. We robbed our own country for natural resources without bothering to conserve anything, though occasionally we ran low on supply and promptly pronounced the nearest neighbor to be a part of the Empire, or a “satellite” country. Infrequently, we even made our own inventions. For instance, a home moonshine distiller was a huge hit instantly.

Winston Churchill once noted that Russia is so rich that no matter how much you steal there is still some left. I thought that he was wrong and pretty much everything has been stolen. Now, I am just delighted to learn that apparently there is still stuff left to steal! Even if it is only for those already on the take.

First, you go out and confiscate 50% of the country. Then you realize that you have no ability to run that business. So you sell it back to the previously robbed country at a fair market price. Notably, you control the fair market price, because the market price is whatever you say.

I wonder how those ministerial meetings with Putin really work. As a popular joke put it:

Putin: “You guys think only of your fat bank accounts! It’s time we started thinking of souls!”

Ministers:“Thank you, Vladimir Vladimirovich! Say, five hundred souls per person should do fine for starters.”