Diamonds Are Putin’s Best Bet to Entice Wary Investors to Russia – by Yuliya Fedorinova and Stephen Bierman (Bloomberg News – June 15, 2016)

President Vladimir Putin is trying to woo foreign investors into the battered Russian economy by offering a chunk of the world’s biggest miner of diamonds.

Russia needs cash to help fill a hole in its budget, the result of a collapse in revenue from plunging oil prices. Putin has proposed selling stakes in state-controlled companies including banks and oil producers. At a time when global money managers remain wary, the one asset that may hold the most appeal is a stake in Alrosa PJSC, valued at more than $860 million.

The company, owned 44 percent by the federal government, is the world’s largest producer of rough diamonds and had record profit of 49.2 billion rubles ($750 million) in the first quarter. The shares are up 23 percent this year. While the timing of the sale hasn’t been announced, Economy Minister Alexey Ulyukaev says Alrosa is a “good candidate” to be one of the first on the auction block.

“Alrosa is a really unique asset in the state portfolio,” said Konstantin Yuminov, an Raiffesenbank JCS analyst in Moscow. Deutsche Bank AG on June 8 recommended investors buy Alrosa, which sold a 16 percent stake in its 2013 initial public offering mostly to foreign investors. The central government plans to sell another 10.9 percent. Regional governments own 33 percent.

Other assets the government may unload include a controlling stake in oil producer Bashneft PJSC and 10.9 percent of VTB Bank, though those are less intriguing for foreign investors, according to Yuminov.

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