Russia has reportedly asked the state oil producer Rosneft to buy controlling stake in its smaller rival firm Bashneft.

The government has directed Rosneft’s board to approve the acquisition of 50.1% stake in smaller oil firm Bashneft for $5.3bn.

A deal in this regards is planned to be signed on 15 October 2016, reported Reuters.

The transaction is expected to further consolidate Rosneft’s business in the country’s oil industry.

The sale of stake in Bashneft is a part of the country’s plan to narrow budget deficit, which widened due to slump in oil price.

Recently, Russian Prime Minister Medvedev was reported by Sputnik International as saying that the government intends to privatize Rosneft and Bashneft energy companies.

As part of the privatization plan the country is looking to raise RUB800bn ($12.8bn), and earlier it had sold 10.9% stake in diamond miner Alrosa for RUB52.2bn ($837.6m).

However, opposing the recent government permission to Rosneft, consulting firm RusEnergy partner Mikhail Krutikhin was quoted by The Wall Street Journal as saying: “This is not privatization, it’s a continuation of creeping de-privatization.

“If (Rosneft) spends money on acquisitions, they will report less income and that means less revenue for the Russian budget.”

The government is also planning to privatize Rosneft by divesting a 19.5% stake for RUB700bn ($11.2bn).

Bashneft produces about 425,000 barrels a day, accounting to 4% of country’s total production capacity, reported Bloomberg.

Image: Bashneft has oil and gas production assets in Russia. Photo: courtesy of PJSOC Bashneft.