Skip to main content

A worker checks the valve of an oil pipe at the Imilorskoye oil field in Kogalym, Russia, Jan. 25, 2016.Sergei Karpukhin/Reuters

As their vital oil revenues sink to intolerable levels, hard-pressed governments from Riyadh to Moscow are looking to peddle some of the family jewels to fill gaping holes in their budgets. Most of the proposed deals should come with flashing signs reading: Beware of autocrats who embrace capitalism when the cash stops pouring in from their usual channels.

The Saudi royals are weighing whether to list shares in the joint refining ventures of the family's giant oil producer, Aramco. Abu Dhabi is reviewing various options for its energy sector, including asset and share sales. Kuwait is setting up a state fund to manage up to $100-billion (U.S.) in domestic utilities and other companies as part of a plan to privatize them in five to seven years.

In battered Kazakhstan, foreign investors will be able to acquire stakes in several dozen state companies operating in energy, mining, banking, shipping, railways, airlines and airports, among others – with eventual stock market listings after they are restructured.

Even the Iranian government is embracing the idea, signalling a wave of privatizations and renewed efforts to lure foreign investment into the oil sector now that some key economic sanctions have been lifted. Privatization of oil production is banned. But officials hope to attract up to $250-billion in outside capital to modernize the country's antiquated infrastructure in exchange for rights to a fixed percentage of petroleum over two decades or longer.

Fears of an influx of foreign oil interests have already prompted public protests by regime hard-liners and their student supporters.

That won't be a problem in Russia, where the Kremlin is poised to sell off chunks of big-name state companies to bolster a depleted treasury.

The candidates include oil giant OAO Rosneft, Aeroflot, hydroelectric utility RusHydro, diamond-mining group Alrosa, VTB banking group, shipping heavyweight Sovcomflot, Russian Railways and mid-level oil player Bashneft.

Their respective chiefs were called to a meeting at the Kremlin on Monday, where Russian President Vladimir Putin reportedly emphasized that strategically important companies would remain under government control and that nothing would be sold at bargain-basement prices just because market conditions happen to be dreadful, the economy is in dire straits and the ruble is testing new lows.

But senior Russian officials have been explicit in voicing their concerns about the worsening cash crunch.

"The Russians aren't desperate, but they don't want to take all the pain of low oil prices through fiscal tightening and a new tax regime," said political risk consultant Ian Bremmer, president of Eurasia Group. "It wouldn't surprise me if they do at least some partial privatizations."

Not coincidentally, Mr. Putin's latest open-for-business drive comes along with indications that Western sanctions may be softened or lifted, Mr. Bremmer said. "The sanctions regime isn't likely to stay in place for long."

The Kremlin confirmed that the welcome mat would be out for foreign investors. But given the less-than-stellar treatment of investor rights before and during the Putin years – not to mention continuing concerns about the deteriorating economy – it seems more likely that the usual small bunch of oligarchs still loyal to Mr. Putin will be asked to dig into their deep pockets to help Mother Russia in its hour of need.

And if Russia isn't safe for foreign money, it's hard to see the Saudis and their opaque business practices or other authoritarian petrocrats attracting anyone but serious risk-takers at a time when emerging markets in general are looking pretty dicey.