Newsroom Blog
Sovcomflot: privatise it all
By Lloyds List Comment
Wednesday 25 November 2009
HERE is a lesson in the declension of English irregular adjectives for Russian speakers, especially those involved in tanker shipping.
Moscow’s decision to sell 25% of Sovcomflot is good; the sale of a majority stake would be better; and eventual 100% flotation would be best, even if political considerations rule that out for years to come.
We say this despite the knowledge that the battle between privatisation and state ownership - the defining ideological conflict of the 1980s - has increasingly blurred over the last two years.
Now that a popular wisecrack has it that GM stands for Government Motors, Royal Bank of Scotland is a nationalised industry, and major shipping concerns are forming an orderly queue for government subventions, probably the only country in the world where capitalism works without extensive state intervention is Fairyland.
In the tanker market, operators owned by governments - either directly, or indirectly if they are the shipping division of a state-owned oil company - have played a significant role for as long as the sector has existed.
Independent players such as Frontline, Mitsui OSK Lines, Teekay and OSG account for 83% of all tanker tonnage, according to the most recent figures available. But without the Velas and the China Shippings of this world, the global distribution of oil would simply seize up.
The Russian government’s announcement that it will next year seek a listing for a quarter of Sovcomflot shares marks a first step along the path pioneered by the National Iranian Tanker Company, which is also offering shares to the private sector.
The obvious motivation for the Medvedev administration is the $1bn cash that will be raised. Sovcomflot will welcome the opportunity to hit equity markets for funding as it diversifies into gas, offshore and terminals. Nevertheless, the move raises one obvious question: why not go the whole hog?
The short answer is that the Kremlin clings to the notion that it needs to retain control of a traditional national champion. That is a pity, because left to its own devices, Sovcomflot could become a world beater instead.
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