Putin disavows, but won’t ditch, state capitalism

June 24, 2012

By Douglas Busvine, Reuters

ST PETERSBURG, Russia | “State capitalism is not our goal,” Vladimir Putin said in his first big speech on the economy since his return to the Kremlin, managing to leave investors at Russia’s premier business forum little wiser as to how serious he is about selling state assets.

Privatisation has come to the fore as Russia’s most divisive policy issue since Putin, elected in March to a third term as president after four years as prime minister, named a new government last month.

Although dire markets preclude major deals that would reduce the state’s 50 percent share in Russia’s $1.8 trillion economy at the moment, the privatisation debate has caused a power realignment that could have far-reaching consequences.

The kicker to Putin’s state capitalism quote was that private-sector monopolies should not replace state ones – a dig at the rushed sell-offs of the 1990s that handed the Soviet Union’s industrial legacy to a new breed of industrial oligarch.

“Without healthy competition, a market economy shows a tendency to decay that is no less pronounced than the command-administrative system,” Putin said on Thursday.

Despite that skepticism, Prime Minister Dmitry Medvedev has committed to a string of sell-offs that, starting small, that would see the state exit entirely as owner of major firms such as oil major Rosneft within four years.

Igor Sechin, the energy ‘tsar’ in Putin’s last government and recently named chief executive of Rosneft, has other ideas.

Sechin has lobbied to create an energy commission subordinate to Putin that, sources said, may evolve into a separate centre of power that would further his goal of building a state energy champion.

Oil bosses outnumbered bank CEOs at the St Petersburg forum, and it was they who were granted an audience with Putin, who himself has blessed recent oil exploration deals between Rosneft and Eni, Exxon Mobil and Statoil.

To read more, visit:  http://www.reuters.com/article/2012/06/23/us-russia-privatisation-idUSBRE85M0BG20120623

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