The realization that it is sitting on billions of dollars of equity assets is likely to prompt Russia to release more stakes in blue chip firms, a senior privatization official said.


"It's been quite a surprise for the government to realize it has assets worth billions of dollars," Maxim Boiko, chairman of the Russian Privatization Center and adviser to Deputy Prime Minister Anatoly Chubais, said this week.


"The government is now thinking seriously about share issues and how to make use of equity markets," he said.


Boiko said growing foreign portfolio investments in emerging share markets, which Chubais puts at $2 billion in the first half of 1994, proved that outsiders were now prepared to take the Russian risk. "Portfolio investors are sending a clear message to corporate investors: They are willing to take our country risk," Boiko said. "This will stimulate direct foreign investment."


Boiko said the government still held chunks of shares in blue chips from oil giant Lukoil to telecommunications firms. One move which surprised the market was an order this month by President Boris Yeltsin for the state to sell its remaining 40 percent stake in gas conglomerate Gazprom ahead of schedule.


This amended an earlier government decision to keep the state shareholding for at least three years.


Under Russia's voucher-based privatization campaign, 15,000 state enterprises representing more than 70 percent of the industrial workforce have been privatized since late 1992.


Boiko said government efforts would now focus on promoting newly privatized enterprises outside the most-actively traded firms such as Lukoil, the Far Eastern Shipping Company, Rostelekom telecommunications giant and GUM department stores.


"The market has had spectacular growth," Boiko said. "Now the interest is focused on 30 to 40 prime stocks. Now the question is to expand equity trading to second-tier companies."


"Prime stocks make up almost all of market capitalization. This cannot last. We would like to see more money coming into industrial companies," he said.


Under voucher privatization, which expired on July 1, all of Russia's industry was valued at a mere $5 to $7 billion.


But market capitalization based on real prices has surged. The total market capitalization of the 30 stocks listed in the Moscow Times Index reached $26.6 billion this week at the current exchange rate, up from $23.5 billion on Sept. 1.


One example is Surgutneftegaz, producer of about 2 percent of the world's oil. Its shares have jumped to the equivalent of $27 from $3 earlier this year.


Boiko acknowledged the market expected a correction in prices, but he said this may not happen. He said there were still bargains among non-blue chips for investors who missed the first wave.


"Russia is unique," he said. "There are 15,000 companies out there. More and more companies are being absorbed by the market. If this trend continues, a correction may not happen."


A number of big Russian companies plan to tap equity markets through share issues. Lukoil has announced plans to sell a 15 percent stake to foreigners and hopes to raise over $3 billion.