Russia should delay selling its majority stake in mid-sized oil producer Bashneft for up to five years, until it is worth more, the head of a region that holds 25 percent of the company told Reuters.

Rustem Khamitov, president of the oil-producing internal Russian Republic of Bashkortostan, said he supported the government’s decision to postpone selling its 50.08 percent stake, which was announced on Tuesday.

“In my opinion, after certain work regarding upgrading and diversifying production is done, after some economic stability is back, after that and only after that, if there is a clear need, the theoretical option of selling a federal stake may be considered,” Khamitov told Reuters in a phone interview.

The Bashneft 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.

Bashneft shares slumped as much as 13 percent on Wednesday after the announcement and ended the day 8 percent lower.

The government has valued its stake in Bashneft at about 306 billion rubles ($4.8 billion) and was planning to sell the shares this autumn to plug holes in its budget caused by a slump in oil prices and Western sanctions over Ukraine.

The government did not say until when the sale had been postponed.

“Certainly, after two to three years the company will cost more, and much more,” Khamitov, who said he had asked the government to consider postponing the deal, adding that a five-year pause would be needed.

“But of course, this is for the federal center to decide. We don’t intervene in such processes,” he said.

First Deputy Prime Minister Igor Shuvalov said on Wednesday the state would now try to sell a 19.5 percent stake in state oil company Rosneft first.

Rosneft was interested in the Bashneft privatization and this was creating tension over whether it should be allowed to buy a stake in its smaller rival. Bashneft pumps about 20 million tonnes of oil per year, or a 10th of Rosneft’s output.

ROSNEFT ROW

The prospect of Rosneft taking part had prompted criticism from some government officials who had said this would essentially involve the state transferring assets from one firm to another.

Khamitov said in his opinion, a Rosneft bid would not contravene Russian law. The state owns Rosneft through a special entity, Rosneftegas, which Rosneft says means it is not directly state controlled.

“I think that it was a professional thing by Rosneft, to show interest … The company’s management is responsibly solving tasks of increasing the firm’s capitalization – and I don’t see anything here what would go beyond our legislation.”

Khamitov, who has headed predominantly Muslim republic since 2010, said he had asked the government to consider postponing the deal as the region’s interests were not being fully taken into account during the privatization process.

He said that out of all the companies interested in Bashneft, only Rosneft and Lukoil had consulted Bashkortostan and presented proposals to maintain the current financial obligations to the regional capital Ufa.

“Yesterday’s announcement in a certain way has calmed people down. The existence of a 25 percent stake is a guarantee of economic stability in the republic,” he said, adding that it was getting more than a quarter of its revenue from Bashneft.

“By moving back the Bashneft stake sale, we are maintaining stability in the society. This is a fact,” Khamitov said.

Russia is set to hold parliamentary elections next month.

Some of those interested in buying the government’s Bashneft stake, including Lukoil, said they would be consider taking an even larger shareholding.

Asked if there was a price at which Bashkortostan would be ready to sell its 25 percent stake, Khamitov said: “We do not intend to sell, for us social calmness and prosperity is much more important than the money.”

Source: www.reuters.com