Russia state sell-offs must offer control Russia's undervalued stock market is forever waiting for a catalyst - a positive event that would prompt foreign investors to start pouring funds into it and give confidence to the queue of Russian companies waiting to issue equity. At first glance, last week's $5.2bn secondary offering by Sberbank - the state-controlled bank that is Russia's biggest - fits the bill. The fact that the Russian authorities have finally delivered on a share offer first mooted more than a year ago is an encouraging signal. It suggests there is a greater chance of pro-market reforms under Russia's new government than many investors thought - despite Vladimir Putin's return as president. More specifically, it gives reason to hope that the government can get back on track with long-awaited plans to privatise stakes in a string of state-controlled companies by 2016. Sberbank's placing came just two weeks after Megafon, Russia's second-largest mobile phone operator by subscribers, filed for permission to sell shares in London - moving it closer to a $4bn initial public offering. And the fact that Sberbank's offering of 7.6 per cent of its shares - the biggest by an emerging market company so far this year - was three times subscribed is a sign of healthy demand for Russian assets. This demand was fuelled by the bond-buying announced a few days earlier by the European Central Bank and the Federal Reserve. Other companies are already trying to follow in Sberbank's footsteps. State-owned VTB Bank lost no time in saying it was planning another $2bn share sale itself, possibly as early as next spring. And this week, Promsvyazbank, a non-state bank, said it would seek to raise up to $500m in a dual London-Moscow IPO. The potential pipeline of offerings from both state and non-state companies is now bulging. The government approved privatisation plans in June, including stakes in companies such as Rosneft, the biggest oil company; Inter RAO, the electricity utility; RusHydro, the hydroelectric power giant; and Zarubezhneft, the overseas crude oil producer. Among non-state companies, bankers say the logjam of IPOs and SPOs totals at least $20bn. As always in Russia, however, there are reasons not to get too carried away. As Eurasia Group, the political risk consultancy, points out, the Sberbank placing will have little real effect on the government's role in the bank - or its dominance of the sector as a whole. The state, via Russia's central bank, is keeping 50 per cent plus one share of Sberbank, meaning it retains effective control over the board and decision-making. And in all the other important state companies being prepared for sale, Eurasia notes, the government plans to keep either a majority stake or a golden share. So foreign investors can buy into them - but will not have much influence. Nor is it clear whether energy companies, which make up a big chunk of the privatisations, will be sold on the open market or consolidated in a state holding company chaired by Igor Sechin, the Rosneft chief executive. The Sberbank placing also highlights the dominant position state-controlled banks have come to occupy in Russia, particularly since the financial crisis. Sberbank owes its profitability, in part, to its quasi-sovereign status, keeping its borrowing costs low. Non state-owned Russian banks and international banks alike have found it difficult to compete with Sberbank and VTB. Foreign players - including HSBC, Barclays, Santander, Swedbank, Rabobank and, most recently, Handelsbanken - have all pulled out in recent years. Then, just last month, one of the few non-state banks in which foreigners could invest, Nomos, said it was being taken over in a $2bn deal by the smaller, privately owned Otkritie. Otkritie is understood to be receiving help, in the form of a $1bn loan, from VTB - which owns just under 20 per cent of Otkritie. Nomos had sold $600m of depository receipts to investors in London a little over a year earlier, promising to become a platform for new consolidation of Russia's banking sector. If its IPO goes ahead successfully, Promsvyazbank may yet take the place of Nomos as a means for foreign investors to get exposure to Russian banking outside the state lenders. But the most positive catalyst for the Russian market would be if the government signalled it was prepared to move beyond merely privatising minority stakes to selling controlling shares. That could stimulate competition and reduce the state dominance of key sectors that has been such a hallmark of Mr Putin's 12 years as Russia's paramount leader. Neil Buckley is the FT's eastern Europe Editor