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Rosneft share sale draws Russians eager to forget past losses

Russians are setting aside memories of lost savings and buying shares in state oil company OAO Rosneft, the nation's biggest stock offering ever. OAO Sberbank branches from St. Petersburg to Vladivostok received 10,000 orders in the first 3 1/2 days of the sale last week, said the government-run bank, the manager of the deal. Sberbank expects to raise as much as $500 million through retail branches, Deputy Chief Executive Officer Bella Zlatkis said. “It could all be a scam -- sell shares one day, take them back the next, yet on the other hand they could do well,'' said Valentin Natalokha, 72, a translator who was filling out forms to order Rosneft shares at a Sberbank branch in central Moscow. President Boris Yeltsin's government earned the mistrust of its citizens when people's savings were wiped out on at least three occasions by inflation and currency devaluations, most recently in 1998. Under successor Vladimir Putin, the economy isin its eighth straight year of growth, driven by record oil prices, and the RTS stock index  has doubled in the past year. Sberbank, Russia's former monopoly savings bank, started accepting orders of at least 15,000 rubles ($558) a week ago for the IPO, which aims to raise as much as $11.6 billion from foreign and Russian investors. The offer concludes July 10. “The level of interest is good, and is growing with every day,'' Zlatkis said in a telephone interview from Moscow on June 29. “We may extend branch working hours if we see we're not coping with the high level of demand.'' Russia, a country of 143 million, is the world's second-biggest energy producer after Saudi Arabia. The government built Rosneft into the country's third-biggest oil company using assets seized in 2004 from OAO Yukos Oil Co., once led by now-jailed Mikhail Khodorkovsky.

Putin is seeking endorsement for the state's role in the industry by turning ordinary Russians into shareholders using advertising campaigns such as those pioneered by British privatizations in the 1980s under Prime Minister Margaret Thatcher. Former communist states such as Poland and Hungary have organized similar sales, though they were a fraction of the size. The biggest IPO in Poland to date was PKO Bank Polski in 2004, which raised 6.2 billion zloty ($1.9 billion). The sale values Rosneft at between $60 billion and $80 billion, compared with about $71 billion for larger rival OAO Lukoil. The shares are being offered for between $5.85 and $7.85 each, and Rosneft CEO Sergei Bogdanchikov has said the company wants more than 30% of the offering to go to Russian investors. The Russian government is marketing Rosneft as a safer, potentially more lucrative bet than savings accounts. Rosneft has been running full-page advertisements in daily newspapers such as Vedomosti and Kommersant, two of Russia's most widely read business dailies, as well as television and billboard ads. Sberbank Chief Executive Officer Andrei Kazmin on June 26 promoted the share sale on national television as a “good way to protect your savings from devaluation, from inflation.'' Some Russians remain skeptical. “There's no point playing cards with the state because they will always win,'' said Mikhail Truchkov, 57, a former engineer. “This isn't for the people, their aim is to line their pockets.'' Ivan Firsov, a retired accountant gathering information about Rosneft shares this week in a Sberbank branch in central Moscow, said the marketing has convinced him to buy stock. “I am buying shares for one simple reason: I should get more than by putting my money in a savings account,'' Firsov, 75, said. “I learnt about this from the commercials. They are everywhere so it's hard to avoid them.'' “It's owned by the state, so it's more trustworthy than some private company,'' said Olga Prokopenko, 56, a museum curator at a branch in southwest Moscow who plans to invest 20,000 rubles. A decade ago the story would have been different. Russians were outraged in the 1990s by the state asset sales organized by Privatization Minister Anatoly Chubais, which gave out vouchers that few citizens profited from and then sold off the biggest companies to favored businessmen at knockdown prices. Chubais, now CEO at national power utility OAO Unified Energy System, remains the least-trusted figure in Russia, the Moscow-based Levada Institute said June 5, citing two polls it carried out across Russia in May. “We got hit over the head last time with Chubais in the 1990s,'' said Natalokha, who plans to buy 20,000 rubles worth of shares. “Let's hope this time it works out.” (Bloombreg)