Russian Prime Minister Dmitry Medvedev has postponed the privatization of mid-sized oil producer Bashneft, his spokeswoman said on Tuesday, a decision she said was approved by President Vladimir Putin.
The privatization of Bashneft was meant to help plug gaps in Russia’s budget caused by an oil price slump and Western sanctions imposed over the country’s actions in Ukraine.
The sale was considered one of the crown jewels of the country’s privatization program and was set to pit some of Russia’s most powerful businessmen and officials against each other.
Three sources close to the arrangers of the sale, close to Bashneft and close to Russia’s economy ministry said the postponement was a surprise.
Natalia Timakova, Medvedev’s spokeswoman, said that the stake sale was postponed for unspecified period of time. The sale was earlier planned for autumn this year, with the government valuing a 50.08 percent stake at around 306 billion rubles ($4.8 billion).
In recent weeks, tensions had risen over the Bashneft sale, with Igor Sechin, head of state oil company Rosneft, appealing to the Russian government to allow his company to participate in the privatization.
The prospect of Rosneft taking part prompted criticism from some government officials who had said this would essentially involve the state transferring assets from one firm to another.
Rosneft has said its involvement would boost competition and the price the government could get for Bashneft.
According to a letter seen by Reuters on Monday, Russia’s Economy Ministry advised Medvedev he would have to issue a special decree if he wanted to bar oil major Rosneft from the privatization of Bashneft.
Two sources familiar with the deal suggested the government has decided to pause the Bashneft sale as “there was too much noise” around the deal.
Gazeta.ru reported on Tuesday that one of the bidders, a little-known firm Tatneftegaz, had asked the state to sell a 75 percent stake in Bashneft, including a 25 percent owned by the republic of Bashkortostan which was originally not included.
An industry source close to the deal and a government source said that the state would instead now first try to sell a 19.5 percent stake in Rosneft, Russia’ top oil producer, to finance the budget deficit.
Rosneft declined to comment.
Russia’s RBC news organization reported earlier on Tuesday that among the reasons for Medvedev’s decision was a letter by Rustem Khamitov, the head of the internal Russian republic of Bashkortostan, who proposed a postponement.
Khamitov’s spokesman was not immediately available to comment. VTB Capital, which is arranging the deal, declined to comment. Bashneft also declined to comment. The Russian economy ministry, which is arranging the privatization, was not immediately available for a comment.
Aside from Rosneft, whose head Sechin is a close ally of Putin, potential buyers for the Bashneft stake included Vagit Alekperov, one of Russia’s richest men who heads private oil firm Lukoil.
