More Russian privatization?

Sir — A recent issue of The Economist reports that the Russian government may aggressively privatize in Putin’s new term:

IN THE 1990s privatisation in Russia was meant to be a way to wipe clean the vestiges of the Soviet economy and to create a new class of property owners. It had some success but, by creating a class of very rich oligarchs, it both weakened the state and planted seeds of resentment among ordinary Russians. Yet when he was inaugurated as president again last May, Vladimir Putin signed a decree calling for the sale of all state holdings in firms outside the defence and energy industries by 2016.

Well, maybe. The article continues:

Talking up privatisation . . . was part of the “game of using Medvedev as a foil for the more statist Putin.” Now that the Medvedev interregnum is over, the mood has shifted back to a state-capitalist model.

October’s huge $55 billion deal under which the state-owned oil giant Rosneft is buying 100% of TNK-BP does not explicitly affect plans for privatisation. Some officials even tried to portray it as part of them, since BP will end up with a 20% stake in Rosneft. The economy minister, Andrei Belousov, has denied any rethinking of privatisation. But by moving core assets back under state ownership, the signal from Rosneft of a shifting wind is clear. . . .

. . . [D]espite the May decree, the privatisation agenda has slipped. . . . Privatisation thus risks becoming an orphan policy.

Privatization may play a part in weakening Russian state capitalism, but given the Russian government’s willingness to intervene in all sorts of other ways, it’s unclear just how much it can achieve. The Economist article finishes:

Privatisation may be a “signalling mechanism” to investors, . . . but it alone cannot solve the other factors that stand in their way. For that, the government has to do the harder work of improving property rights, the courts and the regulatory system. Privatisation . . . should be seen as an “instrument, not a goal in and of itself”.

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