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Federal Security Service gets veto on foreign investors in strategic companies - Russia

The disagreement within the government over limitations on foreign companies investing in strategic companies is over. A bill has been introduced by the government that was under development since 2005.

The Federal Security Service (FSB) blocked the relatively liberal proposal of the Ministry of Industry and Energy, but was unable to include the heating and electric complex on the list of strategic sectors. It did receive the right to veto deals that would transfer controlling packages in companies in 39 sectors of the economy to foreigners, however.

Drafting began on the law “On the Procedure for Implementing Foreign Investments in Commercial Organizations Having Strategic Significance for the National Security of the Russian Federation” after the unsuccessful attempt by Siemens to buy a controlling share in Power Machines in 2005. In January of this year, the bill was sent back for further development by the government due to the objects of the FSB. It was expected to be corrected quickly, but it took until now to reach an agreement.

The strategic areas of the economy identified fall into five groups: special equipment, arms, aviation, space and the atomic industry. The text of the draft law had not been released yesterday, but a Ministry of Industry and Energy spokesman said that a government commission would give permission for the deals in question “in the absence of objections from the federal organ of executive power in the area of security.” The commission will have the right to set conditions on such deals as well.

At the insistence of Western companies, the new law will not be retroactive. (