Rosneft favourites to buy Bashneft as Moscow bows to financial pressures

Russia’s state-run Rosneft is in pole position to gain control of the Bashneft oil enterprise, it emerged this week, as Moscow bows to pressure to plug a budget deficit that is forecast to hit $48bn this year. Having firstly revoked its decision to postpone the privatisation of Bashneft until market conditions improved, it has also let it be known that it will allow Rosneft to participate in the sale after all, despite a storm of protests from pro-market groups within the Kremlin elite  – led by Prime Minister Dmitry Medvedev – who do not see the benefit of one state-owned company acquiring another.
Now, according to reports in Kommersant, Rosneft’s board of directors has unanimously approved the company’s participation in the sale and is preparing to buy Bashneft at a premium to the market of 35%. 
If it goes ahead,  the Bashneft privatisation would be  the most significant sell-off of Russian state assets in years, just two months after it had been postponed indefinitely because of the very public row between Medvedev and Rosneft CEO Igor Sechin. Last Friday, however, Deputy Prime Minister Igor Shuvalov announced that steps to resume the privatisation would be taken immediately and that Rosneft would be free to take part.
“After a further study of the Rosneft and Bashneft privatisation issues by the government, and after a presentation to the president, it was decided to resume the preparations for selling a controlling stake in Bashneft and immediately proceed to prepare the sale of 19.5% stake,” he said.”The money …from the sale of Bashneft (will go towards) covering the federal budget deficit,” he said.
“Money is needed urgently,”  a government  source said.
With low oil prices pushing Russia into its second year of economic recession, the government is struggling to find funds to cover its growing budget deficit, and Shuvalov’s announcement coincided with the  finance ministry predicting that it could  hit between 3.5% and 3.7% of GDP rather than the 3% it was forecasting a few months ago.