Fradkov Rolls Out the (Un)Welcome Mat for Foreign Investors

Today during a cabinet meeting, Prime Minister (and presidential hopeful) Mikhail Fradkov laid down some tough words for foreign investors regarding foreign stock holdings in so-called strategic assets. Prime Minister Fradkov singles out British investors From Kommersant:

“The government may refuse a Mister X, who is the BOD member of some state company and a Britain’s citizen, for instance, but only when it finds out that he has acquired 49 percent already,” Fradkov explained, grudging the transfer of “50 percent in our company to a man who came here and claims he is the best manager in the field.” “What’s the good of giving? Are we some simpletons?” It is not just the risk of disclosing state secrets, it is rather the need of foreseeing all possible risks related to such purchase of stocks, Fradkov said.

These comments were preceeded by the cabinet’s tentative approval of an aggressive draft bill on foreign investment approval. From Forbes:

Supported by President Vladimir Putin, the draft of the bill has been floating around the Kremlin for the last two years. Assuming though that it finally gets through the Dumas and made law by midsummer, as some analysts expect, it’ll be the first time rules for outside investment in Russia have been clarified. Until now, the Russian government has had to find other, more informal means of discouraging foreign involvement in strategic sectors, using the likes of regulatory pressure and behind-the-scenes discussions. A recent example: Russia effectively strongarmed Royal Dutch Shell and Mitsubishi Corporation into giving up big portions of their stakes in the massive Sakhalin 2 oil field project. Russia was once hungry for foreign investors to come and help it develop its energy reserves. But thanks to an increase in oil prices and production since the 1990s, energy has grown in importance to make up a quarter of the country’s gross domestic product, and the Kremlin increasingly now wants go it alone. Foreign investment in Russian energy has also fallen to 60% of total investment in the country from around 85% in 1996. And that number will probably fall even lower thanks to the new law, says Denis Maslov of Eurasia Group, a New York-based consultancy that specializes in Russia and the other members of the former Soviet Union. … The law on strategic sectors might stifle the ambitions of a few oil giants like BP, who’s 50%-owned TNK-BP project has already felt the heavy hand of the Kremlin in the form of a government investigation.