Install

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

. Last Updated: 07/27/2016

Subsoil Law Unlikely This Year

The government said Tuesday that its landmark new subsoil law might not come into force this year, but that it still planned to achieve the key goal of barring foreigners from certain mineral assets by amending existing laws.

Deputy Natural Resources Minister Valentin Stepankov said Russia could amend existing legislation to achieve the same effect until the introduction of the new law, which parliament would not have time to approve before the end of 2005.

"There is a threat that we are not going to get the new law before Jan 1. So we will submit amendments to existing legislation which would regulate the procedure of foreign access to our resources," he told an industry conference.

Russia has long been planning to change its outdated mineral resources or subsoil use law, and investors have welcomed many changes in the draft, such as the automatic allocation of a production license to the firm that discovers a deposit.

But optimism faded after President Vladimir Putin demanded limits to foreign access to strategic deposits to protect the state's defense and security. Analysts said that was a clear sign of the Kremlin tightening its grip over the economy.

Foreign investors -- from oil majors BP and Royal Dutch/Shell to mining giants Barrick and Rio Tinto -- are keen to know how quickly the bill is likely to become law so they have enough time to adjust to a new business environment.

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

But economists say the foreign ban contradicts market principles, damages business confidence and could further harm faltering economic growth.

Analysts say the chief reason for the delay in approving the new law is Russia's ever-present red tape, spiced up with clashes among state officials, regional institutions, members of parliament and lobby groups over which deposits the law should cover.

Stepankov said that since Putin ordered the government to set new rules for foreigners before the end of this year, the only option would be to amend existing legislation while waiting for parliament to approve the new law.

Natalya Komarova, the head of the State Duma's Natural Resources Committee, said the new law would go to the first of the three required readings in mid-November.

She said the main reason for the delay in approval was the need to give the regions a chance to comment on the draft, including contentious areas such as how it would coexist with current tax legislation.

The government has said it wants the law to apply to many 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.