Page 54 - RUSRptOct18

demand that state-owned enterprises pay the requested 50% of IFRS net profit in dividends, warning the Prime Minister Dmitri Medvedev that 2018 budget will have a big hole in it if they don't.
The 2018 federal budget plans to raise RUB380bn in dividends based on 50% of IFRS net profit, most of the state majors dodge. Gazprom natural gas giant alone will save paying the state RUB78bn by paying 25% of consolidated net profit.
Rosneftegaz holding controlled by influential ally of President Vladimir Putin Igor Sechin is another long-time rival of the Ministry of Finance in the fight for dividends , and still holds half of the RUB40.6bn interim dividends for January-June 2017 from Russia's largest oil company Rosneft. Rosneftegaz does nothing other than hold shares and has less than a dozen employees. Sechin is head of both the oil company and the holding.
Also Russian oil pipeline monopoly Transneft dodged the full dividend payout for 201 7. t is unlikely that given the favourable oil prices environment the government will manage to create urgency and will to have the oil and gas giants budge.
"It is worth indicating that the amount under discussion is equivalent to around a $2/barrel increase in annual oil prices, thus the negative effect on the budget in relation to the lower-than-expected dividends payments is clearly not an issue this year given the substantial spike in oil prices," Alfa Bank commented on April 23.
In 2016 Russia faced a crisis as the hole in the budget was not RUB200bn but RUB2 trillion and had no way to finance it. In the end a 19% of Rosneft was sold in a faux privatisation that turned out to be more of a loan and the government got through the year.
Covering the dividend short fall gap will be a lot easier. The ministry could increase net domestic market borrowing by exactly RUB200bn in 2018, the RIA news agency reported on Monday, Reuters and RIA Novosti said in a separate report citing the head of the ministry's debt department Konstantin Vyshkovsky.
Another survey by RBC business portal showed that 90% of the managers of large Russian companies point to increasing presence of the state in the economy. 50% of the respondents see the state's share in the economy as "extremely high", 23% as "high", and 17% as "rather high".
Previously the Finance Ministry argued that in Central and Eastern Europe SOEs on average pay 70% dividends. It also sees uncollected dividends as representing an unjustified indirect form of state subsidy , giving state companies an unfair advantage over the private sector.
The "subsidy" for the four largest SOEs alone (Rosneft and Gazprom oil and gas giants, Sberbank and VTB bank) is estimated at RUB350bn, or 0.4% of GDP for 2016, and about RUB300bn annually in the past five years.
54 RUSSIA Country Report October 2018 www.intellinews.com