Making Strategic Assets Accessible to Investors

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The Russian government has demonstrated its readiness to bolster the financial system with billions of rubles, including plans to refinance outstanding corporate loans to prevent margin call sell-offs of collateralized stocks of major Russian companies.

While these unprecedented infusions of liquidity are welcome in the desperate times of tight credit and panicky financial markets, their real impact on investor confidence will be felt over time and their cost to taxpayers could be significant. But there is one thing the government can do to improve investors' view of Russia at no cost to the federal budget and the Central Bank's reserves. It is to give a go-ahead to a few deals held up under the new federal law on government control of foreign investment in strategic sectors.

The law was one of the last pieces of legislation signed by Vladimir Putin on his last day as president, and it came into force on May 7, the day President Dmitry Medvedev took office. Its purpose was to provide a clear set of rules and transparent procedures to guide the government's decision-making on foreign investors' access to the country's strategic assets.

Foreign investors were to benefit from a transparent process and a public government-approved list of strategic industries and assets. A special government commission, chaired by Prime Minister Putin and run by First Deputy Prime Minister Igor Shuvalov was set up to review applications for deals that would be subject to control under the new law. Investors were assured that the approval process would be relatively swift.

Yet, six months after the law came into effect, not a single deal involving foreign investment into the country's strategic sectors has been approved, and the review process is as murky as it usually gets in Russia.

Government sources say there are up to 10 applications pending a review by the commission. Among them are high-profile cases such as LUKoil's deal with De Beers -- blessed by Putin himself -- to jointly develop a major diamond deposit in the Archangelsk region and Rome-based Alenia Aeronautica's acquisition of a major stake in Sukhoi Aircraft.

Going back on any of those deals would be very damaging to Russia's international reputation. The government needs to set the date and publicize as much as possible the commission's first meeting and the approval of the first applications.

This will send a clear signal that the new law is about controlling foreign investment in Russia's strategic sectors, not banning it.

Vladimir Frolov is president of LEFF Group, a government relations and PR company.