Russia moves to privatize major oil port operator amid widening budget deficit

Russia is preparing to privatize the state’s stake in Novorossiysk Commercial Sea Port (NMTP), one of the country’s largest port operators, as the government seeks to finance a widening federal budget deficit. Russia’s federal budget shortfall reached nearly 6 trillion rubles in the January-April period.

After Rosimushchestvo on Friday announced plans to sell the state’s stake in Aeroflot, a 20% government holding in NMTP was also added to the privatization program. According to Interfax, Prime Minister Mikhail Mishustin signed the relevant decree on May 23.

The entire state stake in the holding company is expected to be offered for sale during the 2026-2028 period. NMTP includes two major oil ports that together handle roughly half of Russia’s oil exports.

One of them is the Novorossiysk port on the Black Sea, with a capacity of around 500,000 barrels per day. The other is the Primorsk port on the Baltic Sea coast, with a capacity of approximately 1 million barrels per day.

The holding also includes the Baltiysk port in the Kaliningrad region. Last year, the company generated revenue of 76.5 billion rubles and net profit of 40.6 billion rubles.

State-owned pipeline operator Transneft is NMTP’s largest shareholder, holding a 60% stake.

Transneft acquired the shares in 2018 after the previous shareholder, billionaire Ziyavudin Magomedov, was arrested on charges of creating an organized criminal group.

Magomedov was later sentenced to 19 years in prison in the same case. Around 20% of NMTP is held by private investors, including stock market participants.

According to Reuters estimates, the state could raise around 33 billion rubles from the sale of its NMTP stake. That would be slightly below the estimated 45 billion ruble valuation of the Aeroflot stake slated for privatization.

Potential buyers for the 20% state stake have not yet been identified, and no official information has been released. However, Freedom Finance Global analyst Natalya Milchakova said major investors could show interest in the asset.

“The asset could attract the attention of state-linked organizations ranging from commodity and transport-logistics companies to major financial institutions. Players with more limited financial resources would neither be able to acquire the NMTP shares in question nor become strategic investors in this sector,” Milchakova said.

Revenue generated from the privatization will be transferred to the federal budget. The Russian government drafted this year’s budget with a projected deficit of 3.8 trillion rubles.

However, by the end of April, the actual budget deficit had exceeded the annual target by more than 1.5 times.

Economist Dmitry Polevoy previously said the budget could lose between 300 billion and 700 billion rubles in revenue this year because of lower economic growth forecasts.

According to Polevoy’s calculations, undercollection of non-oil budget revenues could rise to between 1.3 trillion and 1.8 trillion rubles next year.

Polevoy said that unless current conditions change, the government would be forced either to cut spending or seek additional revenue sources of a similar scale.