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Russia to cap foreign control of strategic companies - extended

Russia's Cabinet approved bills to restrict foreign ownership of companies in strategic industries, including energy, metals and defense.

„Restrictions are always bad,” said Elena Savchik, an oil and gas analyst at Renaissance Capital in Moscow. They „could make Russian assets less attractive.” The bills allow the government to reject foreign bids for majority stakes in Russian companies across 40 industries that are considered essential to national security, according to a copy of Industry Minister Viktor Khristenko's speech to Cabinet today that was e-mailed to Bloomberg. The bill won't apply to fields already being developed by foreign companies, he said. The legislation comes a month after Royal Dutch Shell Plc and its partners agreed to sell a majority stake in the offshore Sakhalin-2 oil and gas project in the Russian Far East to state- controlled OAO Gazprom. After the sale, threats to cancel key permits for violations of environmental laws stopped. President Vladimir Putin ordered the government in May 2005 to draft legislation that would set out restrictions after the country's antitrust authorities rejected Siemens AG's bid for OAO Siloviye Mashiny, Russia's largest turbine-maker and a defense contractor. „We must take well-thought-out decisions that don't close promising industries to foreign investors,” Prime Minister Mikhail Fradkov told Cabinet today in remarks posted on the government's Web site. „But we must be sure to protect our interests.” He gave officials a month to clarify the review process for foreign bids before the bill goes to parliament.

Strategic resources include offshore oil and gas fields, deposits of rare minerals and those with a „strategic” amount of resources, according to the separate subsoil resources bill. This would include fields with 70 million tons of oil, 50 billion cubic meters of gas, 50 tons of gold and 500,000 tons of copper, Natural Resource Minister Yuri Trutnev said today, according to his spokesman Rinat Gizatulin. Trutnev proposed drawing up a list of 10 oil fields, 26 natural-gas fields and about 15 mineral and metal deposits, where foreign companies would be barred from holding controlling interests, Gizatulin said. The list would include Sukhoi Log, Russia's biggest gold deposit, and Udokan, its biggest copper deposit. BP Plc's Russian unit, TNK-BP, and Total SA also risk losing licenses to major fields as state companies consider taking stakes in their projects. We're interested „in having clear and understandable rules for our work and the work of our partners,” said Vladimir Buyanov, a spokesman for BP Plc in Russia. (Bloomberg)