Russian Law on Foreign Investment Delayed to 2008

MOSCOW, Nov 8, 2007 (Dow Jones Newswires)

Russia will pass a law governing foreign investment in strategic sectors of its economy in 2008, rather than this year as originally planned, Industry and Energy Minister Viktor Khristenko said Thursday, according to the Itar-TASS news agency.

"We won't make it this year," he told Prime Minister Viktor Zubkov, citing ongoing amendments to subsoil legislation in particular.

The current draft of the long-awaited foreign investment bill sets out 39 so-called strategic sectors like energy and arms. Overseas investors seeking control of a company in any of these areas would first require state approval.

The Russian government has worked inconclusively for four years on a new law on subsoil use. However, officials have stated repeatedly foreign companies in future won't be allowed to have majority interests in oil or gas deposits over a certain size.

In that period, foreign companies have ceded control to a number of major projects in Russia which they acquired in the 1990s, most notably with Royal Dutch Shell Group PLC's (RDSA) sale of a controlling stake in the Sakhalin-2 project, and BP PLC's (BP) sale of its stake in the Kovykta gas field. Gas monopoly OAO Gazprom (GAZP.RS) was the buyer of both.

Khristenko's comments mean a new parliament will be asked to pass the foreign investment legislation following elections for the State Duma, or lower house of parliament, next month.

Observers expect the United Russia party, whose list of candidates will be headed by President Vladimir Putin, to win in a landslide.

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