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CFIUS, Reciprocity, and Asymmetry

Writing for RCW, Daniel McGroarty takes a look Atomredmetzoloto (part of state-owned company Rosatom) and its controversial asset swap to take majority control of the Canadian mining company Uranium One – including its properties in the United States.  We suspect this won’t be the last we hear about this one.

There’s a step short of that, written into U.S. law: Review of the proposed purchase by CFIUS – the Committee on Foreign Investment in the United States – created to vet foreign investments for national security implications adverse to the U.S. Thus far, however, there’s no indication CFIUS plans to put Russia’s U.S. uranium purchase on its docket.

It should, if for no other reason than to raise the issue of reciprocity in the context of Russian resource policy. Reverse the roles of buyer and seller, and a majority acquisition of a Russian uranium asset – whether by a U.S. company or one from any other nation – simply would not happen. Under Russian law, uranium mines are classified as “Strategic/National Defense assets.” For “deposits of uranium, diamonds, high-purity raw quartz, the yttrium group of rare earths, nickel, cobalt, tantalum, niobium, beryllium, lithium, and metals of the platinum group,” the permissible percentage of foreign investment in a Russian mining enterprise is capped at 10 percent.

If we grant Russian state agencies carte blanche, we’re tacitly acquiescing in a Russian resource policy under which what’s mine is mine – and what’s yours is acquirable.

And for the free marketers among us, let’s quell any qualms that conducting such a review amounts to interfering with free play of private markets. Atomredmetzoloto is a wholly-owned subsidiary of Russia’s state atomic energy agency, Rosatom. It’s akin to the U.S. Department of Energy or Nuclear Regulatory Commission announcing the intent to buy a majority stake in a Russian uranium mine. But the parallel doesn’t pertain, because the U.S. Government does not put the power of the state behind resource ownership. Russia does – which is why the U.S. neglects such asymmetry at its own peril.