By Darya Korsunskaya and Katya Golubkova
MOSCOW (Reuters) - The Russian government will sign off on the sale of a 19.5 percent stake in state oil firm Rosneft (MM:ROSN) early next week, pushing ahead with a privatisation programme as it seeks to plug holes in the state budget.
Moscow has said it aims to raise 700 billion roubles (£9.17 billion) by selling the Rosneft stake, although the company is under Western sanctions imposed over Russia's role in the Ukraine crisis, which may limit interest by Western investors.
The government has already sold stakes in diamond miner Alrosa (MM:ALRS) and oil firm Bashneft (MM:BANE) this year, raising around 380 billion roubles (£4.98 billion) in total.
The Economy Ministry said privatisations could earn around 200 billion-300 billion roubles annually over the next three years, and may include stakes in shipping firm Sovcomflot, bank VTB and Novorossiysk commercial sea port.
The government will sign a decree approving the sale of the stake in Rosneft, Russia's top oil producer, next week, a government source said.
It has not said when the sale will actually take place. However, the source told reporters on Friday that the budget should receive proceeds from the sale by Dec. 31, with funds coming via dividends from state energy holding company Rosneftegaz, a Rosneft shareholder.
"In case we don't succeed in time, we will have to simply take the funds from Rosneft. They have cash," the source said. Rosneft declined to comment.
The government is considering a scenario under which Rosneft might buy the 19.5 percent stake itself from Rosneftegaz to resell to investors afterwards. That scheme in theory would allow the budget to receive the funds faster.
"Rosneft will give us money, receive shares and transfer them (shares) to investors in the first quarter. Rosneft will get these (19.5 percent) shares for transit only," the source said, saying there were a couple of "real investors."
Rosneftegaz holds a 69.5 percent stake in Rosneft, with 19.75 held by BP (L:BP).
MORE TO COME?
The finance ministry aims to reduce Russia's budget deficit, which has been aggravated by a weak economy due to low oil prices and the impact of sanctions, by 1 percentage point a year from an estimated 3 percent of gross domestic product in 2016.
The economy ministry said the government could also consider reducing its holdings in 2017-2019 in oil pipeline monopoly Transneft (MM:TRNF_p), Russian Railways, telecoms company Rostelecom, oil company Zarubezhneft, diamond miner Alrosa and United Grain Company.
While companies such as Rosneft, Transneft and VTB are under Western sanctions, stake sales would involve existing shares with the proceeds going to the government not the company, so Western investors in theory are not banned from participation.
The sale of a 10.9 percent stake in Russia's No.2 lender VTB, initially proposed for this year, is unlikely to happen before the second or even third quarter of next year, a banking source familiar with the matter told Reuters.
The government source said the state might also sell another 10 percent stake in Rosneft in 2017 but did not elaborate. However, Finance Minister Anton Siluanov said he had not heard any discussion of a further sale as it would mean the government would no longer be the controlling shareholder.
Italian bank Intesa is the sole bank helping to arrange the sale of the 19.5 percent stake in Rosneft.
As well as selling stakes in companies, the finance ministry is looking at other options to prevent the budget deficit from widening, as it needs to stick to its social commitments.
