Medvedev approves Russia state asset consolidation

MOSCOW (Reuters) – Russian President Dmitry Medvedev has approved a plan to hand control of hundreds of state-owned assets to a single Kremlin corporation despite resistance from inside his government.

The Kremlin said on Monday that Medvedev, who took over the presidency from his mentor Vladimir Putin in May, signed a decree on July 10 consolidating 420 state-owned stakes into the Russian Technologies state corporation.

Sergei Chemezov, a close Putin ally who heads the state industrial group, will acquire control over stakes in companies ranging from Black Sea resorts to truck makers and the factory that manufactures Kalashnikov rifles.

Medvedev, a former corporate lawyer, came to power promising to open up the economy to private business — though he said the state would keep a role in key industries — and bring independent directors on to the boards of state firms.

Chemezov, whom local media say served in the security services at the same time as ex-KGB spy Putin, had asked the Kremlin to transfer as many as 600 stakes.

His plan was opposed by an unusual alliance of market reformers and hardliners who said Chemezov was trying to wrest too much power for Russian Technologies, already one of Russia’s top industrial groups.

Putin moved to the post of prime minister when he stepped down from the presidency. Some observers say he, not Medvedev, is the real power.

Russian Technologies is based on the assets of arms exporter Rosoboronexport.

It also has stakes in AvtoVAZ, Russia’s top carmaker in which Renault has a quarter of the shares, and VSMPO-Avisma, the world’s largest titanium producer.

Putin set up Russian Technologies while he was president to try to foster the non-resource sector of the economy.

But critics say the state corporations distort the market and have used their influence to snap up assets cheaply, boosting the state’s presence in the economy.

Chemezov, 55, worked in East Germany as the head of a little known Soviet enterprise at the same time as Putin was serving there as an intelligence officer.

STATE CAPITALISM?

Chemezov told the Vedomosti newspaper in an interview published on Monday that Russian Technologies would improve management of the stakes it had received.

Assets now controlled by his firm include a printing plant. Asked in the interview to explain the rationale for that, Chemezov said: “We need to print many corporate documents, and publish lots of brochures. We needed a printing plant.”

He acknowledged there had been strong opposition to his plans from within government.

But he said Russia needed a major corporation to compete with major international firms such as U.S.-based Boeing and European space and aviation giant EADS and Italian

“We must compete not inside the country but with other countries. Look abroad at the foreign markets where everything is consolidating — Boeing, EADS,” Chemezov told Vedomosti.

Chemezov said he would divide up Russian Technologies into 30 holdings. It is unclear how much the stakes are worth and Chemezov told local media that many firms had significant liabilities.

“Basically, we are interested in machine building. Metals and aviation is an exception to the rule,” Chemezov said.

“Energy does not interest us — it is impossible to take everything … On this principle we turned down pharmaceuticals as well, though we were offered them.”

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