Posted on 09/08/2005 2:59:08 PM PDT by Tailgunner Joe
MOSCOW (Reuters) - As the crown jewels of Russia's oil industry are drawn back into the Kremlin's embrace after being sold into private hands in the 1990s, some analysts are concerned they may be mismanaged under state ownership.
By reclaiming firms bought for a song in a scandal-tainted sell-off of state companies in the 1990s, which made a handful of people fabulously rich and caused popular outrage, the Kremlin sees itself setting a historic grievance to rights.
But the government could also be putting in place a system akin to Italy in the 1970s and 1980s, when private capitalism rubbed shoulders with state-run industrial combines, banks and oil companies, often used as big sources of patronage.
"How can state companies be efficient in Russia if the government is inefficient?" said Yevgeny Gavrilenkov, chief economist at Moscow investment house Troika Dialog."
"State ownership has never really worked in modern Russian history. I have yet to see a successful government-owned company."
Kremlin policy-makers were unlikely to see any relevance for Russia in Italy's experience with state-run enterprises, which were regularly shaken by corruption scandals in their heyday.
"I don't think people who implement policy even know about what went on in Italy," said an aide to a cabinet minister who asked not to be named.
Roman Abramovich, owner of English soccer club Chelsea, is reported to be in talks to sell a 72 percent stake that he holds with partners in oil company Sibneft to state gas monopoly Gazprom for more than $10 billion (5.4 billion pounds).
The deal would be the latest Kremlin move to repossess oil assets after the renationalisation in December of the main operating arm of oil company YUKOS.
MAMMOTH BUREAUCRACY
But economists and other experts are wondering how lean and efficient companies like Sibneft will fare under the ownership of a lumbering state goliath like Gazprom, which is operated more like an overblown bureaucracy than a modern firm.
Yukos's former unit Yuganskneftegaz is now controlled by state oil firm Rosneft after its forced sale in an auction last December, seen by market watchers as having been rigged.
But as the government extends its grip on the oil industry, which unusually for an emerging oil-producing economy fell almost entirely into private hands after the Soviet collapse, issues of control rather than efficiency appear to be uppermost in the minds of Kremlin policy-makers.
"What we see has little to do with long-term competitiveness and efficiency," said the minister's aide.
"Sibneft's managers are better than Rosneft or Gazprom managers but with so much (oil) money around, efficiency is not the issue. It's about control by the Kremlin of the main cash flows in the country," the adviser added.
State-owned companies rarely have the freedom to carry out the swift restructurings and course corrections that are a constant of private enterprise.
"When you are a civil servant you cannot hire the best managers in the world to run state assets," said a retired senior politician from a former Soviet state, who asked not to be named.
TIME AND MONEY
If Gazprom does close a deal with Sibneft, market analysts say more firms could emerge as potential targets for state takeover.
Some say one of them could be Norilsk Nickel, the world's largest nickel and platinum producer, controlled by billionaire Vladimir Potanin. Already there is speculation that it could eventually be bought out by a government-controlled entity.
"Ever since the "YUKOS affair" began there have been doubts over the duration of Potanin's ownership of the company (Norilsk)..." Al Breach, an economist in UBS's Moscow office, wrote in a recent research note.
"It's a matter of time and money," said the ministerial aide. "Eventually logic points in the direction of (the state) acquiring Norilsk."
While oil prices stay high and money floods into Russia, few will notice if there is indeed a steady deterioration in the quality of management of these assets under state ownership.
"It looks as if as long as oil prices stay high enough, the whole system is sustainable," said Sergei Gureyev, an economist at Moscow-based economic think tank CEFIR. "We think it's unlikely that productivity in the state sector will rise."
"But when they fall hard there will be big infighting and the system could collapse. They may even have to privatise again."
"State ownership has never really worked in modern Russian history. I have yet to see a successful government-owned company."
Someone use a bullhorn to annouce this into Hillary's ear.
The Russians still don't get it - after all this they still don't get it.
Oh well, shave your sheckels for when it sells for $.02 on the dollar again.
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