International Herald Tribune: Putin warns of possible restrictions on foreign investment in response to U.S. law

The Associated Press
Published: September 10, 2007

MOSCOW: President Vladimir Putin warned Monday that Russia may impose new restrictions on foreign investment in response to the U.S. move to strengthen control over the purchases made by foreign companies in the United States.

Putin said Russia was concerned by recently passed U.S. legislation intended to tighten national security reviews of proposed foreign investment, which he described as a “step away from liberal economics.”

“We remember the time when our economic potential, including in the investment sphere, was limited and we were being told from abroad that we should open our economy as widely as possible and offer investment opportunities to foreign companies,” Putin told reporters on a trip to the United Arab Emirates in televised comments.

“Now when we have got such potential, other countries, our partners are taking steps in the opposite direction and effectively close or create conditions for closing their markets for investment,” Putin said. “Of course, that causes our concern.”

Putin specifically referred to a new bill signed by U.S. President George W. Bush in July envisaging that high-level officials, including the director of national intelligence, participate in decisions concerning the security implications of direct foreign investment. The new law extended the scope of national security to cover deals involving critical infrastructure and energy, and requires a second-stage investigation of most proposed acquisitions by state-owned companies.

 “In our opinion, that may result in certain restrictions on investment activities,” Putin said. He added that Russia long had considered a similar legislation and refrained from passing it, but that it may change its mind now after the passage of the U.S. law and as similar legislation was being considered in Europe.

“If it continues like that, we will have to take corresponding steps to protect our investment,” Putin said.

Putin’s Cabinet has worked inconclusively for four years on new legislation regulating subsoil resources. However, officials have stated repeatedly that foreign companies would be barred from having majority interests in oil or gas deposits over a certain size deemed by the government to be “strategic.”

In recent months, foreign oil companies have been forced to cede control of a number of major projects which they acquired in the 1990s, most notably with Royal Dutch Shell Group’s sale of a controlling stake in the Sakhalin-2 project, and BP PLC’s sale of its stake in the Kovykta gas field.

State-run natural gas monopoly OAO Gazprom was the buyer of both.

http://www.iht.com/articles/ap/2007/09/10/business/EU-FIN-Russia-US-Investment.php

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