Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Draft of Subsoil Law Submitted to Duma

The government has submitted to parliament the draft of a new natural resources law that seeks to bar foreign companies from developing some of the country's most lucrative mineral assets.

The focus of lengthy amendments to the so-called subsoil law, unveiled by the Natural Resources Ministry late Wednesday, is a ban on bids by foreign-controlled companies in tenders for strategic oil and metals deposits.

The 150-page document said the move would help "guarantee the state's defense and security, including economic security."

The draft, posted on the ministry's web site, said the ban would specifically affect firms where foreigners owned more than 50 percent of shares, dominated the board of directors or executive bodies, or controlled more than half of voting shares.

Over the past year, President Vladimir Putin's government has introduced a number of radical changes -- from a shakeup of the electoral system, to curbs on foreign direct investment -- due to what officials say is the need to boost the country's security in the face of growing terrorist and economic threats.

But economists have criticized those measures, saying the foreign ban contradicts market economy principles and is another sign of the deterioration in business confidence that could further harm Russia's faltering economic growth.

A Natural Resources Ministry spokeswoman said the law was submitted to the State Duma earlier this week.

After passing through the Duma, the draft has to be approved by the Federation Council and signed into law by Putin in a process that could drag on until the end of the year.

The new law does not specify the key point that foreign investors -- such as oil major BP or gold giant Barrick -- want to know: which strategic deposits the law would affect.

The ministry has said it wants the rule to apply to many of Russia's prize natural assets, including a list of oil fields in the Barents Sea, the Timan-Pechora area and the Yamal-Nenets autonomous district, and the Sakhalin-3 project in the Far East -- as well as Sukhoi Log, Eurasia's biggest gold deposit, and the Udokan copper field.

Russia argues that similar protective laws are being applied in many mineral-rich countries, such as Canada and South Africa.

"This law's concept is to create conditions to attract private investment into the natural resources sector, including foreign investment, on the basis of strict regulation of activities within the sector to protect state and corporate interests," the ministry said in a separate note to the draft.

Analysts have praised some of the law's new points, such as a decision to let companies develop deposits they discovered themselves without having to auction them, which should boost much-needed investment in the exploration of undeveloped oil and gold fields in Siberia and the Far East.