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. Last Updated: 07/27/2016

Foreign investment under threat

President Boris Yeltsin's administration has drafted a decree that would severely limit foreign investment in Russia, according to local press reports.

The reported move, which follows an uproar in the foreign community over the government's taxation plans, could not be immediately confirmed. Senior officials said they had no knowledge that such a decree was in the works, despite publication of a photocopy of the document by Nezavisimaya Gazeta.

If approved by Yeltsin, the decree would allow the government to ban or limit foreign investment in a wide range of areas, including real estate,

mass media, telecommunications and land use (see box).

Details of how the prohibition would work were not immediately available.

But no matter how applied, the ban would signify a return to the ultraprotectionist trade policies of the Soviet past, a policy reversal that would cast serious doubt on the government's intention to decentralize the economy and open business to foreign capital.

Reports of the draft document sparked new confusion and disbelief in Moscow's foreign business community.

"What do they think is going to happen, that foreigners are going to come over here and buy up Russia? " said Ben Schwartz, president of U. S. -based United Seed Alliance, Inc. "Any attempts to dominate enterprise by government regulation are going to hurt Russia, not help Russia".

According to the newspaper Komsomolskaya Pravda, the draft of the decree was prepared by aides of First Deputy Prime Minister Vladimir Shumeiko, who was appointed to the post last week, and of Economics Minister Andrei Nechayev.

Shumeiko is thought to favor more gradual reform than Yegor Gaidar, the architect of Yeltsin's economic reform program. Since his appointment, Shumeiko, who has close ties with heavy industry, has made clear his desire to slow down the government's privatization plans. His potential involvement in the preparation of the decree feeds fears that the government's new position is to remain a monopolist in the most important sectors, while paying lip service to the idea of continued free market reform.

But the inclusion of Nechayev in the report baffled many familiar with the economics minister's reformist positions.

"These measures do not match the picture we have of the officials involved", said a Western diplomat, who spoke on condition of anonymity.

A top Nechayev aide denied such a decree was in the works.

"I do not know anything about it", Yuri Olkhovnikov, deputy minister of foreign economic relations, said Monday. "Andrei Nechayev has no expert who could prepare such a draft without my knowing about it".