02.01.08

Until now amendments prepared by Russia’s Ministry of Natural Resources to the law “On Subsoil Use” prohibited foreign-controlled companies from developing subsoil offshore deposits and/or deposits with significant reserves. Yesterday the head of that ministry suggested that such decisions might be left to a government committee.

The officer explained that when an auction is held to allocate development rights for a field, a government committee would decide whether a foreign company might qualify to develop a particular property and on what conditions. Decisions would be made on an individual basis for each field deposit and the list of criteria will be established by the government.

The ministry also suggested that it should have more control over future sales of development rights between companies. A sale of 5% of shares by a company with development rights for strategic field deposits would have to be accompanied by a notification to the government; a sale of 10% would have to be approved by the government. It has not been decided yet who would supervise this issue – a government committee or the Federal Antimonopoly Service (FAS).

Deputies in the State Duma have complained that due to incompliance with Federal Security Service (FSB) policies, the legislation on foreigners' access to other strategic industries has come to a standstill.  

The FSB demanded that they be able to evaluate the “strategic importance” of all subsoil resources and not only those from an undistributed fund which amounts to only 8% of total resources.

Experts believe that by strengthening control over the undistributed fund of subsoil resources, the Ministry of Natural Resources managed to gain easier access to subsoil deposits for foreigners. This compromise may allow further progress of the legislation as a whole.

We were not able to confirm whether the FSB approved of the new version of the new suggestion by the Ministry of Natural Resources. Experts agree that the most important aspect of the amendments is the establishment of a defined list of reasons for rejection; otherwise it won’t make the proposed draft softer, but stricter.

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