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* Russia aiming to sell 19.5 pct stake this year
* Will retain 50 percent plus one share in Rosneft
* Sale will be complicated by sanctions, volatile markets (Adds details, quotes, background)
By Denis Pinchuk and Dmitry Zhdannikov
VLADIVOSTOK, Russia, Sept 2 (Reuters) - Russia hopes tofetch more than $11 billion for a minority stake in theKremlin's flagship oil producer Rosneft before the endof the year to plug budget holes caused by low crude prices, anindustry source told Reuters on Friday.
The sale will be complicated by sanctions imposed on Moscowover its actions in Ukraine and by many investors' wariness ofputting money into Russia as well as volatile commodity markets.
But Russia is hoping to repeat the success of Rosneft'sinitial share offering a decade ago when it raised $11 billionin one of the world's biggest such sales, despite concerns thatinvestors would be spooked by Rosneft's purchase of most of theassets of oil firm YUKOS, bankrupted by the Kremlin.
On Friday, Economy Minister Alexei Ulyukayev said hisministry had received documents needed to kick start the sale of19.5 percent in Rosneft, including a valuation and proposals onterms of sale.
An industry source familiar with the sale process said thestake had been valued at over $11 billion. The documents weresubmitted this week by Rosneftegas, which controls Rosneft onbehalf of the government. Italian bank Intesa is advisingRosneftegas on the sale.
In comments to Russian news agencies later on Friday,Ulyukayev said estimates the stake would be valued at around $11billion were close to reality.
After privatisation, the government will keep 50 percentplus one share in Rosneft, the world's largest oil firm byreserves among listed companies.
Rosneft produces over a third of Russia's total output of10.7 million barrels per day - a figure making Russia theworld's biggest producer on a par with Saudi Arabia and theUnited States.
Russian President Vladimir Putin said the sale of the stakeshould take place before the end of the year and should involvestrategic investors.
"I think we should be aiming precisely for that type ofinvestment. We are getting ready and are planning to do it thisyear," Putin told Bloomberg News.
Oil major BP owns just under 20 percent in Rosneftfollowing the purchase of BP's Russian joint venture TNK-BP byRosneft for $50 billion in 2013.
Rosneft's own market value has fallen to $55 billion sincethen as a result of low oil prices and sanctions imposed onRussia, Rosneft and its chief executive Igor Sechin, one ofPutin's closest allies.
At its initial public offering (IPO), Rosneft was worthnearly $80 billion. Western majors will find it difficult toinvest in Rosneft due to sanctions but their place could betaken by Asian investors, including from China and India, whichhave been seeking to develop resources in Russia.
Russia is effectively competing with many other resourcerich countries for money from investors to compensate for lowcommodities prices.
The world's largest non-listed oil firm by reserves andoutput, Saudi Aramco, is planning to list up to a 5 percentstake in the next two years, seeking an overall valuation ofover $2 trillion.
The industry source said Rosneftegas was asking thegovernment to issue a decree guaranteeing a stable tax regimeduring the sale of the stake and beyond.
"You cannot attract solid investors if the tax regime keepschanging," the source said. (Reporting by Dmitry Zhdannikov; additional reporting by DaryaKorsunskaya; Editing by Katya Golubkova and Mark Potter)
