Publishing, Internet and Fish Called Strategic

The government has drafted legislation to limit foreign investment in publishing houses, the Internet and fishing, expanding the list of industries in which foreigners are forbidden from acquiring companies without state permission.

The government added the industries after recalling legislation containing the original list from the State Duma last fall.

It also added subsoil surveys and the extraction of resources at fields designated as having "federal significance," the Duma's Construction and Land Policy Committee said Wednesday in an e-mailed statement.

Energy and Industry Minister Viktor Khristenko has said the bill was withdrawn specifically to include the sectors dealing with subsoil resources. The bill, which regulates foreign investment into strategic sectors deemed critical to national security, passed a first reading in the Duma before being recalled.

But the legislation has now grown to cover fishing, television, radio and Internet service providers, the Duma committee said. In addition, printing companies and publishing houses, which include newspapers, would be considered strategic if they dominated the market, it said.

The bill sets new conditions for foreign investors who want to own more than 50 percent of a company, including new rules on how to seek permission for deals and on how a government commission should rule on the requests, the committee said without elaborating.

Existing rules bar foreigners from controlling a national television channel. But the bill appears to open the door to the possibility that foreigners could acquire a controlling stake with special approval.

Under the bill, a foreigner seeking to acquire more than a 50 percent stake in a strategic company would have to win approval from a commission headed by the prime minister.

A company partially or wholly owned by a foreign government would have to apply for permission to acquire more than 25 percent.

Potential investors would have to wait three to six months for a decision.

The current law says printing and publishing companies, like any firms, are dominant if they control the supply of more than half of the goods or services on the market. As an exception, however, the Federal Anti-Monopoly Service can classify a company as dominant even if its market share is 35 percent.

Timofei Nizhegorodtsev, a senior anti-monopoly service official familiar with the bill, said there were no foreign-owned printing and publishing companies whose market share could be described as dominant at present.

In any case, the bill will not be retroactive and apply to done deals if it becomes law, he said.

The bill will require current owners of more than 5 percent in strategic companies to report to the government, Vedomosti reported Wednesday.

Leonid Makaron, publisher of the popular classifieds newspaper Iz Ruk V Ruki, shrugged off the bill, saying Russia was following the lead of countries like the United States and Britain, which restrict foreign ownership in the industries added to the bill.

"It's like the diplomats do. They expel us and we expel them," he said. "I wouldn't look for anything here except an effort to defend [Russia's] economic interests."

He predicted that Russian industries would develop even if foreign investors balked at the new rules. "Oil is expensive. We have plenty of money," he said.

But Rambler Media, one of the country's biggest Internet service providers, said the bill was an attempt to impose government control on big Internet providers.

"The idea is to place all major Internet providers as well as broadband communication facilities under state control," said Alexander Kovalyov, a spokesman for Rambler Media.

Kovalyov said the measure would hurt the capitalization and development strategies of Internet providers by making it difficult for them to attract foreign capital.

Many European countries, however, have similar restrictions on foreign investment, he said.

The country has around a dozen major Internet service providers, including Rambler, Yandex and Google. In all, there are 88 providers in Russia, according to MavicaNET, a high-tech news portal.

It was the idea of Kremlin deputy chief of staff Vladislav Surkov to include printing and publishing companies and Internet service providers in the legislation, Vedomosti said. Government officials approved the amendments at a meeting chaired by Kremlin chief of staff Sergei Sobyanin last week, the report said.

Kremlin spokesman Dmitry Peskov could not be reached for comment because he was out of his office and his cell phone was switched off Wednesday afternoon.

The bill will most likely go before the Duma for a crucial second reading on March 19, said Yekaterina Yefremova, spokeswoman for the Construction and Land Policy Committee.

The expansion of the list of strategic sectors raises concerns that that it will never end, said Chris Weafer, chief equity strategist at UralSib. "It's getting to the point where you not only need the government to say, 'These are the strategic industries,' but they also need to say 'These ones are not,'" he said.

He was particularly puzzled by the connection between fishing and national security. "It's a hard one to figure," he said. "There doesn't appear to be any obvious strategic reason for it to be on the list."

The government is unlikely to define exhaustively the strategic industries until after the formation of a new Cabinet, which President Vladimir Putin has agreed to head as prime minister after he steps down in May, said Katya Malofeyeva, chief economist at Renaissance Capital.

Putin would then be the first prime minister to head the new commission that reviews foreign requests to invest in strategic industries.