Dmitry Medvedev’s opening remarks:

Good afternoon. So many people have met to discuss such a minor issue! Anyway, as we agreed, we will discuss the outlook for the privatisation of federal property.

When I addressed the recent business meetings attended by foreign business people, I spoke about the importance of privatisation, not only for replenishing the federal budget, although this is of great important for us, but also in order to understand what kind of economy we are creating. This provides for enhancing the efficiency of management at enterprises, and other goals.

In May, when we discussed plans for the next six months, we agreed to conclude privatisation deals in accordance with target figures, the market situation and the approved list, but we changed the timeframe. It should be said that despite the current macroeconomic difficulties, and some other circumstances, stakes in several large companies have been sold during that period, possibly for the first time recently. In particular, 7.6% of Sberbank shares were sold to a private investor for more than $5.2 billion in September. This is one of the largest transactions involving state property in the last ten years. It involved different funds and portfolio investors who had never before invested in Sberbank or Russia in general. At the least, this is indirect evidence of their faith in our economy and the processes underway in it. I would like to repeat that our goal is not only to replenish the budget, and that we need an efficient economy based on private property, which is why we are privatising state property.

Regarding the rate of privatisation, we should proceed in accordance with the market situation – this is the first condition. Second, we should certainly proceed from the need to divest surplus state property. Let’s discuss the preparation of state companies for privatisation and the relevant procedures, which should be reviewed and changed from time to time, just like any other procedure. In general, let’s talk about the efficiency of decision making. Furthermore, we should also streamline the structure of state property. We have discussed the issue of state unitary enterprises many times. Everyone is in agreement that their number should be reduced to a minimum, but this should be done in accordance with the plan, without stopping their work. We should understand that this form of ownership, which is inefficient from the administrative and legal viewpoints, should be replaced with other forms of government and the involvement of other players in business.

By the way, I believe that we should once again discuss the issue of state corporations. I have said that some of them should be transformed into joint stock companies quickly – or not so quickly, depending on their goals and tasks. The process has begun: some of them have been restructured as joint stock companies and others will cease to exist when they fulfil their mission. We proceeded from the idea that some corporations were created to fulfil this specific quality of work, and that they should close down when they complete it. However, this has nothing to do with the corporations that are involved, for a variety of reasons, in state governance. In fact, they combine two functions – commercial and management – and have been working quite efficiently so far.

At the next Government meeting we will discuss the forecast plan for the privatisation of federal property in 2011-2013. Its preparation has reached the final stage. Let’s get to work.

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First Deputy Prime Minister Igor Shuvalov holds a news conference following a meeting

Igor Shuvalov:  Next week, the Government is going to review progress in the current privatisation campaign as well as its prospects. At long last, we’ve got the deal ball rolling this year. As you know, we expected big proceeds in preceding years, but it’s only in 2012 that the market situation has become favourable enough for us to get more than $200 billion from the selloff of federal assets.

This isn’t to say, though, that we weren’t prepared to sell until this year. Yes, we were, and we began working with advisors long beforehand. We announced earlier, and are now reaffirming, that we won’t rush any deals, but will instead wait for favourable market conditions, which could bring us bigger returns while also letting us negotiate with quality investors.  We need quality investors to improve corporate governance. And, of course, we need more revenue to finance various programmes, including social programmes.

Next year, we’ll try to maintain the same pace. I hope next year’s yield will surpass this year’s. At a Government Presidium meeting, we’re going to consider legislative measures aimed at regulating state corporations’ activities in the acquisition and management of private assets.

We believe public companies’ access to privatisation deals should be restricted. We’ve already had precedents of state-run companies bidding for assets up for privatisation. This is wrong, and should be qualified as such under the law.

Also, we are preparing special resolutions to make it possible for companies where the state holds a stake to draw up a roadmap for their work with investment advisors. This would ensure greater transparency and better corporate governance, greater transparency of financial management, while also allowing us to continue presale work together with the Government. We’ll discuss all these issues next Thursday.

Getting back to today’s meeting, we are satisfied with the progress of the current privatisation campaign and its results so far. We’ve got several deals we expect to close before this year’s end and we hope the market situation will let us translate our plans into reality.

Question: The TNK-BP Board is examining Rosneft’s proposal today. How do you see…

Igor Shuvalov: We’ve contemplated selling off the Rosneft shares next year, and also in 2014. And we believe that when the moment is right for putting the stake up for sale, we’ll do so and have it sold. The company’s top management and the Prime Minister agree with us on that. So we’ll be working with quality investors to attract them to Rosneft.

Question: How do you feel about Rosneft’s plans to consolidate TNK-BP, that is, to acquire a BP stake first and to then supplement it with TNK shares?

Igor Shuvalov: No comment. I don’t think your question reflects all the factors related to the negotiations and the deal. You need the complete picture. Because if you look at how Rosneft’s offer is taken by TNK-BP shareholders, you will see that this deal is complex and multi-layered. This isn’t the type of deal where a state-run company buys a private asset. It has some other implications, including actions by such private shareholders. I don’t want to comment, as I’m sure you know what I’m referring to. This is far more difficult than just picturing a state-run company expand its outreach.

We know perfectly that whatever Rosneft may do to buy more assets, our strategic goal to privatise it will remain and that we’ll continue moving forward, acting prudently. And, in line with what the President has told us, since this is an energy asset, we are going to act very cautiously, looking for quality investors and trying to get the best possible price for such stakes. On Rosneft, we’ll be working hand in hand with its top management. Both the Government and the Presidential Executive Office will be working hard to secure a quality privatisation deal for Rosneft.

Question: Will TransKonteiner be put on sale, too, Mr Shuvalov?

Igor Shuvalov: You know, there are proposals from its top management and we’ve got an assignment to examine, in the troika format, the possibility of setting up a carrier company to service all the three countries (with Russian, Kazakh and Belarusian capital). Advisors are now working on a report. I think we should wait for them to deliver. Anyway, I thought such a privatisation deal should be considered by the Government and the RZhD national railway operator as a priority, quite frankly. Any other arguments should take precedence if we decide to transfer these assets to some new holding or to a company buying subsidiaries for itself. I’d advise the Government to regard the selloff as a priority, though.

But if some weighty arguments in favour of a different decision emerge, we’ll analyse those in-depth.

Question: In SG-Trans’ case, might the Government propose a pre-judicial settlement?

Igor Shuvalov: And what would this be about? And then again, it’s not the Government that has lodged the claim, right?

Remark: And yet…

Igor Shuvalov: No, this would be tantamount to profiteering. The Government should act within the law. In keeping with applicable legislative procedure, all necessary measures and decisions have been taken. We’ve had an agent working on the basis of the agreement; that person operated within the Government’s mandate. Each side – the Government and the agent – had its own part of the job to attend to, and both have got their respective bits done by now. The claim filed is against our agent, actually. But I believe there’s been no breach of law and I don’t think it was a good idea to try to settle this in court. But, once again, we have legal statements ascertaining the lawfulness of our actions, their legitimacy. How will this problem be handled further on? Should negotiations take place, they will involve the parties to the dispute only. And the Russian Government is not a party to this dispute, as you know.