By John Helmer, Moscow
Alrosa’s state-owned shares will not be privatized until 2017, if then, a Kremlin document reveals this week.
The document  is a 35-page briefing paper compiled by the Ministry of Economic Development, and presented by the Minister, Elvira Nabiullina, to President Dmitry Medvedev on January 24. In a tabulation of the government’s latest privatization schedule, at page 11 of the brief, a 50.9% stake in Alrosa is identified as subject to sale by 2017. The ministry declined to respond to a request for clarification.
The Alrosa line in the ministry’s paper indicates  that for planning purposes the Russian government has abandoned the accelerated timetable for sale of Alrosa shares in an initial public offering (IPO) proposed by Alrosa’s chief executive, Fyodor Andreyev. The federal ministry also appears to be proposing to leave unaffected the 40% stake in Alrosa controlled by the republic of Sakha and eight of its uluses (municipal districts). This in turn confirms the successful resistance which regional interests have put up against Andreyev’s campaign to reduce their stake and influence in the company.
In mid-October, Kommersant reported what was apparently the intention of Andreyev and his allies in the ministries of Economic Development and Finance to start with the privatization of a small bloc of shares in a initial public offering (IPO) this year or next, as the prelude to selling out completely by 2017. A source close to Alrosa believes this is what the company wants, and the sooner the better. “The government can privatize Alrosa,” he says, “but still retain the controlling stake, like it did with VTB or Sberbank. The company can hold an IPO as well to raise its value.”
But on December 9, Andreyev met Prime Minister Vladimir Putin for his first-ever one-on-one session with the head of government. While Putin meets from time to time with heads of the Sakha republic, where Alrosa’s mines are concentrated – the last of those was on January 18, 2011 — Putin has not met solo with a chief executive of the company since 2004. Andreyev told Putin he was optimistic for Alrosa’s privatization and was keen to start. “We have arranged a meeting,” Andreyev said, “which was attended by representatives of the Moscow stock exchange and leading banks such as VTB, JP Morgan, and Morgan Stanley. As it turned out, there are no limitations, except for mental barriers, to the full scale placement of shares in Russia. That is why I wanted to share my opinion with you and ask for your support.”
Putin replied: “We will have an opportunity to discuss this in more detail.” The official transcript goes on to record Putin as saying next to nothing else.
Asked whether he and Andreyev had discussed a target date for the sale of government shares in Alrosa, the size of the share bloc to be privatized, or the valuation for Alrosa’s IPO, Andreyev refused to say.
The January 24 session between Nabiullina and Medvedev retrospectively confirms that Putin turned down Andreyev’s request to sell Alrosa shares this year. A second source close to Alrosa says this decision is the sensible one. “It was a bad idea to privatize Alrosa, because those who know the company well wouldn’t bid for it; and those who would could lose their money. This is because of the company’s numerous peculiarities.”
As for Andreyev’s word to Putin last month about there are being “no limitations, except for mental barriers”, that is what is known in the paparazzi trade as an oops moment; not least of all for JP Morgan and Morgan Stanley.