The question of the use of natural resources, oil in particular, is at the focus of the president's attention. "Some of our companies have resources that will last them 10-15, 25, or even 30 years. Some of them are already prepared to sell these resources, boosting their capitalization at the nation's expense," Vladimir Putin said in his address to the Federal Assembly. The president suggested that the problem should be solved at the legislative level but without undue haste "in order not to drive our companies into a corner".
It turns out that the solution without undue haste was found by the presidential commission on the distribution of powers between the federal government and the regions. In order not to drive oil and gas companies into a tight corner before the time is ripe, the appropriate amendment to the law "On natural resources" was forwarded to the Cabinet in a package with approximately 190 other bills prepared by the same commission. The amendment comes down to this: all natural resources will be property of the state.
"When the extracted natural resources are sold, the company is compensated for the expenses involved in extraction, storage, and sale. It also gets the dividends as specified by a special treaty," states a memo accompanying the bill. Existing licenses are to be revoked, to be replaced with concession agreements. Dmitry Kozak, Deputy Director of the Presidential Administration and commission chairman, says that the concession agreement will only be signed if the license agreement has been honored scrupulously.
A source in the government says that the Cabinet is perplexed by the Kremlin's new initiative. Yesterday, Prime Minister Mikhail Kasianov met with his ministers and instructed them to study the bills. The government is expected to eventually come up with its consolidated position in order to have the bill finalized by November. Natural Resources Minister Viktor Artyukhov declined to comment.
Companies are much more talkative. "Kozak has gone even further than the Russian communists, who merely dream of nationalizing natural resources scheduled for export... If this is not nationalization, I don't know what is," said Interros Vice President Sergei Aleksashenko.
A senior executive with a large oil company, who asked not to be identified, considers that even discussion of such amendments affects the nation's image. "We are sold the same thing three times: first the company, then the license, and now the oil we ourselves are producing. This is a serious blow at businesses," he said.
David Hearne of Brunswick Capital Management: I guarantee that as soon as the government tried to push this through, capital will flee from Russia en masse... Essentially, this is a text-book example of asset-stripping: licenses are the companies' major assets. Russian companies' shares will plummet.
Yevgeny Gavrilenko of Troika-Dialog: In Arab states, where the state owns the produced raw materials and companies are just concessionaires, shares of these companies are not listed on stock exchanges, and the securities market is not viewed as an instrument of attracting investment. If the government implements Kozak's proposals (and I do not think it will) it will mean more that bidding farewell to the securities market. We will have to build an entirely different economy. Dmitry Kozak considers that relations between the state and companies handling natural resources will become only more civilized.
Question: Why the decision to replace licenses with concession agreements?
Dmitry Kozak: Because a license is a purely administrative act. A concession moves relations between the state and the company onto a legal basis. This is an agreement between the state and the private company which offers better guarantees to both signatories.
Question: Who will calculate the "dividends"?
Dmitry Kozak: This is a technicality, to be handled by specialists.
Question: When will the amendment be submitted to the Duma? And who will do it?
Dmitry Kozak: We are supposed to have the bill ready for the president by November 1. The decision on whose legislative initiative it is going to be will be made afterwards.