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blocks of shares of joint-stock companies in construction, agriculture, chemical, petrochemical and polygraphic industries, public road system, geology, water and air transport, machine engineering, etc. (except strategic companies +JSC).

The work on establishment of integrated structures in the strategic sectors of economy using as a basis joint-stock companies which shares are in federal ownership will continue in 20102012.

The shares of 449 JSC and 56 property facilities of the Russian Federation Treasury including real estate, sea and river vessels are included in the 2010 Forecast plan of privatization approved by the RF Government.

By comparing the data describing the 2010 Forecast plan (program) of privatization and the data results of implementation of the previous Privatization plans (Table 5), one can state that in general its quantitative indicators are far from their maximum values reached in the middle of 2000es.

RUSSIAN ECONOMY IN trends and outlooks Table Benchmarking of the privatization dynamics of the federal government unitary enterprises and federal blocks of shares in 2000 Number of privatized enterprises in federal ownership (Federal Property Management Agency data, before 2004 RF Ministry of Property data) Period FGUPs privatized 1 JSC blocks of shares sold 2000 2 2001 5 2002 102 2003 5713 2004 525 2005 741 2006 2007 377 2008 213 all preparations completed and decisions on privatization terms made;

with account of stock which sale was declared in the previous year;

without FGUPs which property was contributed to OJSC RZhD share capital;

including 31 blocks of shares which sale was announced in 2004 but the sale results were summarized in 2005;

with no account of 273 blocks of shares which sale was announced in 2005 but the sale results were summarized in 2006;

estimated value based on the report data of FAUFI (Federal Agency for Federal Property Management) On privatization of federal property in 2007;

including blocks of shares of 135 JSC which sales were announced according to the 2007 Forecast privatization plan, but without 268 blocks of shares which sales were announced in 2008 with the results summarized in 2009;

Source: www.mgi.ru; Materials for the RF Government session on March 17, 2005 On measures to improve efficiency of federal property management; FAUFI report On privatization of federal property in 2005, M, 2006; FAUFI report On privatization of federal property in 2007, M, 2008; FAUFI progress report for 2008, M, 2009.

In 2010 the federal budget expects to gain RUR18 mln of privatization proceeds (out of those, RUR12 mln from major sales of the so-called budget-forming assets); in 2011 RURbln and in 2012 5 bln.

The revenues from the federal property sales can be much higher if the RF Government decides to privatize shares and other property that are highly attractive for investors.

In this context the Russian officials in their announcements made in November 2009 and related to the approval of the Privatization program for 2010 2012, mentioned more than RUR 70 bln of aggregated revenues of the federal budget from sales of federal property. Out of them, RUR 5455 bln can be gained from sales of the federal stock in 28 JSC provided they are excluded from the list of strategic companies.

As for the 2009 Privatization program, its implementation, as had been expected, ran against a sharp drop of the purchasing power of the population and expectation of investors related to reduction of the assets value. Officials of the Federal Agency for Federal Property Management noticed that investors interest began growing only by the end of summer beginning of autumn. Potential investors showed their interest for the property auctions in 10% of cases while in the previous years it was 30%.

As of November-end, the Federal Agency for Federal Property Management passed Resolutions regarding the terms of privatization of 173 blocks of shares, published 158 information notices about sales, summarized the results of 100 bids (the annual plan provided for sellSection Institutional Problems ing shares of 287 JSC)1. Major deals (over RUR100 mln) of the last year included auction sales of the governments stakes of OJSC Tobolsk River Port (25.5%, RUR188.456 mln, retenders, Tyumen region) and Gipromyasomolagroprom (100%, RUR188.380 mln, St._Petersburg), Hydrometallurgichesky zavod (HydroSteel Plant) (100%, RUR123.7 mln, Stavropolsky Krai). All the deals took place under selling and initial price parity 2.

5.1.3. Influence of the government presence in property on the government structural policy in various sectors, issues of strengthening of the government position After stormy events and intensive processes in 2007 and 2008, where in mergers and acquisitions companies with the government interest in their capital domineered as buyers of assets, integrated structures were actively built up, six state corporations (GK)3 were established, and RAO EES was liquidated, all Russias economy has been hit by the world financial and economic crisis, and special government programs of urgent assistance to some Russian companies and banks has come to the forefront. Besides the issue of sourcing such programs (the budget system, off-budget funds, and Central Bank funds) and the terms of programs delivery in terms of their influence on the property relations, of importance was whether the state would elect acting directly or using agents (such as banks and development institutions).

If to take the period before the Anti-Crisis Action Program of the RF Government for was announced early April at the State Duma, decisions on increasing charter capitals of the following JSC received the highest resonance: OJSC Agency for Mortgage Housing Crediting (by RUR60 bln, November 2008), Russian Railway Roads (by RUR41.5 bln, December 2008), Risslkhpzbank (by RUR45 bln, February 2009), Rosagroleasing (by 25 bln, February 2009)4.

The content of the 2009 Federal Anti-Crisis Program, namely, the priority given to subsidizing interest rates and state guarantees for credits may suggest (with caution) a minimal probability of direct expansion of the government when the government stake in some problematic companies may increase at the expense of the budget funds.

However, this Program among other actions to retain and increase the industrial and technological potential proposed allocation of considerable budget funds to additional capitalization of leading companies of the defense-industrial complex; examples are the buyout by the government of additional issue of stock of OJSC RSK Mig for RUr150 bln, respective decisions for FGUP GKNPC named after M. V. Khrunichev for RUR8 bln, OJSC KAPO named after S. P. Gorbunov for RUR 4.128 bln, OJSC MMP named after V. V. Chernyshev for RUR2.9 bln; this follows the trend to increase share capitals. The Program provides for addi Interview of Deputy Head of the Federal Agency for Federal Property Management E. L. Adashkin, RIA Novosti, www.rosim.ru, 25.11.2009.

www.rosim.ru.

Federal Foundation for Assisting Housing Construction Development created in pursuit of Federal Law of July 24, 2008 No 161-FZ formally has a restricted form of incorporation (foundation) but in reality is very close to state corporations established earlier, since the Foundation and these corporations are considered noncommercial organizations..

The assessment of the anti-crisis actions to support the producitng sector of the Russian aconomy. GU-VShE and MATs report for the 10th International scientific conference of GU-VShE on the issues of development of the economics and the society, Moscow, 7-9 April 2009. M, GU-VShE Publishing House, 2009.

RUSSIAN ECONOMY IN trends and outlooks tional issue of shares and bonds of certain strategic enterprises with their further buyout by the authorized agencies for RUR52 bln.

In addition separate items reflect compensation (as the increase of the charter capital of OJSC RZhD) of under-received revenues due to reduced pace of railway tariff indexation for 2009 by 8% (against 14% in the plan) for goods and passenger traffic tariffs (privileged categories)(total of RUR52.3 bln); increase of the charter capital of the Agency for Mortgage Housing Crediting (by RUR 20 bln), an interest-free loan to OJSC AVTOVAZ from the federal funds designated for property contribution to GK Rostechnology ( RUR25 bln) 1; another contribution to this company (RUR 2 bln) was declared as a state support to the air lines.

New examples of expansion of the state business include a decision to establish a state leasing company in the transportation complex on the basis of OJSC State Transportation Leasing Company (100% voting shares belong to the government)2, which share capital was increased by RUR10 bln, and announcement of the establishment of an integrated leasing company to support coal mining enterprises with mining equipment (in this case the status and the level of government involvement has not been announced yet).

The available and announced cases of additional capitalization refer mainly to those companies where the government is the sole shareholder (e.g. Agency for Mortgage Housing Crediting, Russian Railways, Rosselkhozbank, Rosagroleasing), and the process of mergers and acquisitions is not affected. In principle the same can be said about a possible buyout of an additional issuance of shares by separate strategic enterprises of the defense-industry complex, though private shareholders are also present in some of these enterprises.

However, regardless of the significant influence of the federal budget policy on the property relations development, banks and development institutions as agents of support of the federal government have always played a more serious role in providing support to the companies.

In the context of the absence of officially announced plans of further comprehensive expansion of the state entrepreneurship sector, the scale and the format of the government support and the selected priorities in crediting the real economy and participation in the stock exchange market transactions have proved to be decisive factors.

The most urgent issue was that of the policy of Vnesheconombank (VEB) which began refinancing the external debts of the major Russian private companies in autumn 2008. Since VEB granted mainly short-term loans (for one year), in 4Q 2009 the issue of repayment of the granted loans emerged, and if no repayment, the issue of choice between granting new loans, restructuring the debts (de-facto it was renewal of the granted loans), initiation of bankruptcy procedures or obtaining property rights on the pledged assets. Formally this should not be deemed nationalization since the federal treasury is not going to receive any additional property, and VEB as a state corporation is a non-commercial entity.

Major banks with government stakes that received the government financial support face a similar choice. Mechel company, e.g. that was attacked by the federal government officials in Late 2009 MinPromTorg approved the Rules for granting subsidies from the federal budget to GK RosTechnologies in the form of a property contribution to provide financial support to OJSC AVTOVAZ by way of an interest-free loan for AVTOVAZ to execute the obligations before the suppliers, intermediary entities, crediting companies and other agents with a following increase of the GK RosTechnologies share in the AVTOVAZ charter capital.

Converted from CJSC Leasing Company of Civil Aviation in Section Institutional Problems July 2008 who were displeased by the companys failure to pay taxes in full volume and the use of transfer pricing mechanism disrupted the terms of 78.9% credit agreements (the loan value) in 2008 and early 2009. Among the Mechel creditors were: Gazprombank (under a $1.5 bln loan 35% of shares of the coal mining companies Yakutugol and Yuzhny Kuzbass were pledged); VTB (under a RUR15 bln loan part of the assets of Yuzhny Kuzbass and Chelyabinsk metal works were pledged) and Sberbank (RUR3.3 bln loan)1. The latter is also a creditor of the united chemical company Uralkhim having received for security against $mln loan the control stakes of OJSC Azot (Berezniki city, Perm region) and OJSC KirovoChepetsk khimcombinat (chemical plant) (Kirov region).

Possible transition of the property rights to the state-owned companies and major banks with government stakes would have obviously marked a new stage of the state property expansion.

In real life, however, the government would tend to meet the business interests by following the previous practice of debt restructuring. In the first half of October 2009 the VEB Supervisory Board extended for another year the loans issues for repayment of external debts to such companies as Gazpromneft, Citroniks, Evraz Group, Rusal, GK PIK and Altimo. The prolongation was made without revision of the main parameters of the deals earlier recorded in the loan agreements (including the size of the security) except interest rates 2.

If such approach continues to be followed, the potential of possible expansion of the public sector would remain unrealized in large; however such situation would imply a certain revision of the principles of financial accountability, refusal from soft budget limitations in business entities activities and consistency in application of the bankruptcy procedures which was implemented in the Russian economy from early 90es with great difficulties and tremendous cost efforts.

The preliminary data for 2009-end results allows us making a cautious conclusion that the state has been less active in implementing the policy of integration of separate state-owned assets into holdings. An indirect sign of this is the lower number of clarifications in the list of strategic unitary enterprises and joint-stock companies vs two previous years: 12 clarifications vs 22 in 2008 and 42 in 2007 (for comparison: three clarifications were made as of end results, four in 2005 and 12 in 2006). The bigger number of the clarifications was connected with building up integrated structures where initially the enterprises and the companies to be integrated are excluded from the list and later a newly-formed holding is re-included. As a result of this, 22 unitary enterprises and 16 joint-stock companies were excluded and 4 integrated companies were included in the list.

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