Privatisation of state assets has something of a mixed history across the region. As economies in the region continue to suffer a second year of recession, with little prospect of positive growth for another year or more, governments are dusting-off long-planned privatisation plans to plug holes in the state budget and tide them over until growth returns. Private, commercially-driven organisations should be able to run companies more efficiently than the state can. Negative effects, such as the end of subsidised pricing or a rise in unemployment, should be outweighed by the positive effects, including increases in competitiveness and technology investment, as well as an injection of cash into the state budget. But investors are wary. Governments are keen to retain control in the commanding heights of their economies, and past privatisations have often ended in acrimony, disputes, and even part re-nationalisation.

In this edition of the Russia/CIS RiskWatch we take a look at three of the privatisation processes that are currently in train. In the opening podcast, Russia director of Compliance, Forensics and Investigations (CFI) Hannah Lilley interviews Nafez Zouk, lead economist for Russia at Oxford Economics, seeking to understand ‘why now’ and ‘what next’? In the first article, Hannah Lilley and Russia political risk analyst Emily Ferris analyse, among other issues, the impact of the ongoing international sanctions regimes on Russia’s privatisation plans and the potential for further economic liberalisation. In the second article, CFI consultant Alexander Batchilo and Central Asia political risk analyst Eimear O’Casey examine how a similar process is proceeding in Kazakhstan, which is struggling to balance the competing demands of retaining control of the economy while simultaneously attracting fresh foreign investment.

As always, we welcome your thoughts, comments and suggestions for future editions of the newsletter. We hope you have a chance to relax this summer, and return refreshed and revitalised for what promises to be a busy autumn (elections/referenda in Russia, Belarus and Azerbaijan in September, in Georgia and Lithuania in October, and celebrations to mark 25 years of independence celebrations in Kazakhstan, Uzbekistan, Turkmenistan between September and December).

Sincerely yours,
Tim Stanley
Senior Partner, Control Risks Russia/CIS