As Russia's recession drags on thanks to the slumping oil price, sanctions and capital outflows, there has been widespread talk that the Russian state could sell off stakes in state companies to plug gaps in the budget.
But Russian President Vladimir Putin poured cold water on the speculation Tuesday, saying the timing was not right and that there would be no giveaways of state assets at "bargain basement" prices.
"There should be no sale of shares cheaply, at giveaway prices. This won't bring particular benefit to the budget," Putin said at a meeting focusing on privatization in Russia in the coming year.
Majority state-owned banks Sberbank and VTB Bank, as well as oil giant Rosneft, have been targeted by analysts as possible candidates for a sell-off. However, the timing of such a move has raised eyebrows in the investment community -- particularly when Russian markets are witnessing investor nervousness about the macro-economic situation.
Speaking to officials and the heads of state firms on Tuesday, Putin said that while the privatization process played "an important part in changing the Russian economy's structure and stimulating an inflow of private investment… it must not lead to the state losing control of strategically important companies," the transcript on the Kremlin's website showed.
"I stress the point that controlling stakes in state-owned enterprises of fundamental importance to their sectors should remain in state hands for now," he said.
Despite Putin's reluctance to sell off state assets, desperate times require desperate measures. In a sign that the government is searching everywhere for more money, Russia's state property agency proposed to increase the dividend payments by state firms (already at 25 percent) this year to raise at least 110 billion rubles ($1.4 billion) in extra budget revenues, agency head Olga Dergunova said, according to Reuters.
Russia's federal budget projects revenues of 13.738 trillion rubles (about $196 billion) and expenditures of 16.099 trillion rubles with a budget deficit of 2.36 trillion rubles or 3 percent of the country's gross domestic product, according to TASS news agency.
Privatization on our terms
Any privatization program would offer an immediate, if temporary, boost to government coffers at a time of economic upheaval in Russia, but the Kremlin signaled it was keen to keep a close eye on where those assets go and to whom.
Putin said that privatization had to be not just a budget measure but a way to bring about structural change in the economy, whose growth had been largely down to oil prices, until recently. In 2014, a steady decline in oil prices to around $33 a barrel today coincided with international sanctions placed on Russia for its annexation of Crimea and role in the pro-Russian uprising in Ukraine in 2014.
Both sanctions and the oil price slump are still having a deep impact on Russia, largely isolating it politically and economically. In 2016, its economy is expected to remain in recession, contracting by 1 percent according to the International Monetary Fund.
If privatization was pursued, Putin said, it had to be conducted in a legal and transparent way and had to be "justified and expedient from an economic point of view." He also stated that state bank funds could not be used by investors and buyers to buy privatized assets.
"We need to take the current circumstances and market trends into account…We must not sell shares at bargain basement prices. This will not benefit the budget and, what's more, this practice can lead to the risk of competing companies taking over enterprises, which is ultimately also not the best thing for the market. These are things we need to avoid," he said.
Putin added that the new owners of privatized assets' "should be located in Russia's jurisdiction" with no one putting assets in offshore zones. "It would be the wrong course to undertake new privatizations while at the same time leaving open the possibility of further Russian assets being taken offshore," he warned.
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow CNBC International on Twitter and Facebook.