RusEnergy

March 2005 Interfax news agency, Moscow -
The Russian government has decided to improve state control over the use of natural resources as oil stocks are dwindling and economic problems are looming large. The government has approved a draft law on the use of mineral resources which will replace existing licences with detailed contracts. Foreign companies are expected to register their entities and are banned from what are known as the six strategic deposits, the Russian agencies argued.
The Russian government has approved the draft federal law on mineral resources which envisages relying on domestic investors and restricting foreign participation in the use of natural resources, banning the investors from six strategically important deposits, Russian news agencies have said.
The document will be finalized by 17 April and then submitted to the State Duma, ITAR-TASS news agency quoted Prime Minister Mikhail Fradkov as saying.
Importance of resources
"The document is fairly well-written and clearly formulates proposals on using natural resources," Fradkov said.
He highlighted that importance of natural resources by saying "this is where our main resources for economic growth are at present. Setting the goal of diversifying the economy, we must understand that mineral resources will remain a source of wealth for us for many years to come," he said.
According to the agency, the government also focused on measures for running this year's spring sewing campaign smoothly. Fuel prices and the shortage of spare parts are expected to cause problems, the prime minister said, adding that "in fact, this boils down to insufficient attention to agriculture".
Privatization plans are "wishful thinking"
Fradkov also said he was not happy with privatization plans. "Our privatization plans quite often look great only on paper," he said, according to ITAR-TASS. Only two or three major projects come to fruition but most of them "are merely wishful thinking", he was quoted as saying.
Fradkov focused on the issue of taxing profits from using mineral resources. He said a decision should be made very quickly on levying differentiated taxes on the use of mineral resources, the agency said.
The agency quoted Deputy Prime Minister Aleksandr Zhukov as saying that the draft law is "a tremendous step forward in comparison with the existing law and will make it possible to gain more from using natural resources".
According to an Interfax report, Zhukov said that the tax on extracting mineral resources should be maintained for deposits that already exist, while a new system should be introduced for new deposits. This system should envisage contracts that would detail payments for using the resources.
Military view
RIA-Novosti news agency reported that Defence Minister Sergey Ivanov has asked the authors of the law to specify very clearly the procedure for prospecting resources on land that belongs to the Defence Ministry.
The minister said the ministry owns about 3m hectares of land, including land used as testing sites, and it is not interested in geologists exploring the lands without prior permission from the ministry, the agency said.
Details of new law
According to an ITAR-TASS report, Natural Resources Minister Yuriy Trutnev, who was presenting the draft law to the government, said that existing licensing practice would be replaced with signed contracts. He said the contracts could be cancelled only in three cases: in the event of missing the deadline to commission the deposit; failure to keep up with payments for using the resources; and no longer meeting the requirements of the tender previously won by the bidder. Trutnev went on to say that, in all other cases, economic sanctions will be used, the agency said.
Restrictions on foreign investors
He also said that restrictions would be introduced on the use of resources by companies in which the controlling interest belongs to foreign owners, the agency said.
"We do not intend to reduce the number of foreign companies investing in Russia but we suggest they should register their companies in Russia," the agency quoted Trutnev as saying. He also said that "it is planned to close foreign companies' access to developing strategically important deposits", the agency said.
According to Trutnev, in 2005 there will be only six such deposits, the agency said. He also said that this restriction would be in place only until 2007. "In 2006 the list will be reduced to two or three deposits and by 2007-2008 we will have nothing to add to the list as there will be no major prospected strategic deposits left," the minister said, according to the agency.
Of the six deposits, Udokan is high on the agenda, Interfax recalled at 0803 gmt. Trutnev was quoted as backing regional heads who oppose foreign investment in the deposit. "Udokan means raw copper which can be exported abroad as ore but it can be used as the basis for domestic industry," Trutnev said.
He added that there is enough capital in Russia to develop deposits without inviting in any foreigners, the agency said.
Trutnev added that there are 29 kinds of strategically important minerals, primarily precious stones, precious metals and some types of hydrocarbons, and that the "high level of monopolization of some specific segments of the market infringes on government interests", the agency said.
Sea shelf deposits
Trutnev said that the development of shelf deposits should be stepped up. "Shelf deposits contain about 23-25bn tonnes of potential fuel and work should be stepped up to extract it," the agency quoted him as saying. He added that about R2,500bn are needed as investment in Russia's mineral and raw materials industry.
The agency quoted him as saying that that there are plans to "ensure full restoration of mineral resources development levels" by 2020. He said this means Russia has enough oil to provide for its needs until 2015 but the government is hoping that by 2020 the level of stocks will be back on a par with that of 2003 which will mean full restoration, the agency said.