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Squeezed by low oil prices and Western sanctions, Russia's fiscal position is crumbling fast, forcing the government to take drastic measures to contain the budget deficit's growth.The good news is that Russia's government seems to recognize this.More important, the government will try to raise another 1.5 percent of GDP – $13 billion – by privatizing state-owned firms, including "crown jewels" such as Rosneft (Russia's largest oil company), the diamond monopoly Alrosa, and Aeroflot.Nonetheless, this plan could be an important step toward reining in excessive state ownership in Russia, where the government controls the commanding heights of the economy in energy, mining, manufacturing, electricity generation, financial services, and transportation.Russia has talked about a new round of privatization before. The constraints on foreign ownership and lending by state-owned banks (which dominate Russia's financial system) could drive privatization revenues even lower.Russia stands to gain much from privatization.
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