The Wall Street Journal: Russian Bear Lumbers Into U.S. Marketplace

December 16, 2006; Page A11

Your Dec. 12 editorial “Shell Gets Poloniumed” aptly summarized Vladimir Putin’s mission to “put natural resources in the hands of his cronies” via nationalization, expropriation and other nefarious schemes. But at the same time the Russian bear “mauls” yet another foreign energy investor, adding another trophy to the list of former private sector energy enterprises within Russia now under the control of the state, Mr. Putin is preparing to extend the pernicious influence of government-owned Gazprom beyond Russia, to Western Europe, Asia, Latin America — and yes, to the U.S. Gazprom has established a subsidiary in Houston and has expressed its intention to purchase key U.S. gas infrastructural assets such as pipelines and re-gasification terminals with the stated goal of ultimately controlling 20% of the U.S. gas market.

The Ukraine, Lithuania, Poland and Georgia have already been victimized by Russian policies to use its vast supplies of gas and oil as weapons to further its political and economic goals by dramatically increasing prices or turning off the tap altogether, inspiring fear and trepidation in the rest of Europe. In the U.S., in the wake of the Dubai Ports World episode earlier this year, Congress considered strengthening the law that governs foreign investment in key U.S. strategic assets including energy infrastructure, in particular by government-controlled entities. Both the House and Senate passed bills, but efforts to reconcile differences between the versions to better define the criteria by which the multi-agency Committee on Foreign Investment in the United States (CFIUS) decides whether to ban a proposed investment in strategic U.S. assets ran out of time as the 109th Congress adjourned.

Importantly, while both the House (H.R. 5337) and Senate (S. 3549) versions attempted to update the statutory factors that the CFIUS must consider to ensure that the security of the U.S. is protected, neither version required a review of the actions of a foreign government to use its energy assets as a weapon to coerce other countries to advance its own political and economic agenda. In view of Russia’s recent history of flouting the rule of law within its own borders to steal energy assets from Western investors — starting with the Yukos expropriation — and using these and other energy assets as weapons against the West, it is critical this key criterion be included in any CFIUS reform legislation that is enacted by the new Congress that convenes in January.

Russia should be held accountable for its actions, and should clearly not have been allowed into the leading industrial democracies in the G-8, as your final question implies, nor should a country that shows such little regard for property rights be allowed into the World Trade Organization.

E. Michael Hunter
Director
Yukos Minority Shareholder Coalition
Short Hills, N.J.

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