Saturday, February 12, 2005
Russia keeps foreigners off resources
Govt's move indicates reassertion of control over strategic areas of the economy
Arkady Ostrovsky & Kevin Morrison / Moscow February 12, 2005
Russia will bar foreign-owned companies from bidding for the country’s most lucrative natural resources this year in the most explicit and sweeping manifestation of a nationalistic state policy developed under the presidency of Vladimir Putin.
The Ministry for Natural Resources said companies would have to be at least 51 per cent Russian-owned to take part in this year’s tenders for strategic oil and metals deposits.
The rule may prevent oil companies such as ExxonMobil and ChevronTexaco from developing new Russian oil reserves, and also stymie TNK-BP, a pioneering 50-50 owned Anglo-Russian oil company.
The ban is part of an increasingly clear trend by the Russian government to reassert control over strategic areas of the country’s economy and keep foreigners out of the most lucrative assets.
It comes days after Russian officials suggested that Siemens should not be allowed to buy Russia’s engineering company Power Machines, which is also considered a strategic asset.
The Russian move comes after an extended period of high oil prices. This may signal that a 20-year stretch of oil surpluses has come to an end and that power in the energy markets has once again shifted back to those countries with large reserves.
The tender list for this year’s oil and gas projects includes Sakhalin 3, a giant offshore oil field in Russia’s far east, which Exxon was hoping to develop as well as ready-to-produce onshore fields in the north of Russia with reserves of 250 million tonnes of oil, which TNK-BP, Chevron and Total are believed to be interested in.
The exclusion also includes one of Russia’s biggest gold deposits, which Fleming Family and Partners, in London, wanted to develop, and copper mines that interested Chinese companies.
Analysts said that if new rules were applied to other fields in future years it could deal a heavy blow to BP, which paid $7.5 billion for a 50 per cent stake of TNK-BP.
Steven O’Sullivan, head of research at United Financial Group, a Moscow investment bank, said: “When BP made its investment they must have factored in some upside from new lucrative fields. Now it looks like these fields could be put out of their reach.” Analysts said the latest move is an extension of recent Kremlin policy and is likely to reduce investment opportunities in the country and hold back foreign capital.
O’Sullivan said: “There are a lot of countries in the world such as Venezuela, Mexico, Saudi Arabia, Kuwait that do not allow foreign oil companies to develop their reserves. Russia has always been somewhat unusual from this point of view.”
A person close to the Ministry of Natural Resources said the decision defended Russia’s national interests.
“Foreign companies often accumulate reserves simply to increase their market capitalisation, rather than developing them and as far as metals are concerned, we want them to be processed in Russia, rather than been taken out as ore.” A person close to TNK-BP said the ban was regrettable.