Russia sells diamond stake to plug budget gap

Financial Times, 11.07.2016

Russia’s government completed the sale of a stake in diamond miner Alrosa for Rbs52bn ($800m), the first in a planned series of partial privatizations to cover a budget deficit, deputy prime minister Igor Shuvalov said.

Investors bought Alrosa shares on the Moscow Exchange last week for 65 rubles a share – a 3.7 per cent discount on the share price. Mr Shuvalov said the Russian Direct Investment Fund attracted several foreign buyers, including Middle Eastern sovereign wealth funds and investors from Europe and Asia, writes Max Seddon in Moscow. Russian investors made up a third of the purchasing pool.

American investors largely stayed away from the deal, Mr Shuvalov said, in part due to fears of falling foul of the US Treasury. Though the deal did not fall under sanctions preventing some Russian state companies from accessing US capital markets, regulators have expressed concern the funds could be used to finance sanctioned firms.

Russia is selling stakes in several other state-owned firms this year to cover a budget shortfall caused by the drop in oil prices. Mr Shuvalov said oil producers Rosneft and Bashneft and shipping company Sovcomflot would be the next to be privatized.

State-run investment banks Sberbank CIB and VTB Capital managed the deal.