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. Last Updated: 07/27/2016

Trutnev Sets New Rules on Equity Investments

Natural Resources Minister Yury Trutnev said his ministry would propose easing access to state auctions of large oil, gas and metal deposits by foreign companies but would tighten control over large-equity deals.

Analysts said the measure, if approved, would bring clarity to rules by which the Kremlin treats foreign investors. Investors have repeatedly called on Moscow to introduce a legal framework to policies often driven by resource nationalism.

"If before, foreigners were not allowed to participate in strategic field auctions, now the mechanism of access has substantially eased," Trutnev, who has previously advocated caps on foreign majors, told reporters Monday.

Foreign firms "will now have a chance to access strategic fields by applying for permission from a government commission," said Trutnev, who added that his ministry was working on changes to the existing legislation.

He gave no further details, but he said the ministry was also reviewing proposals on legal changes that would tighten equity deals involving firms that already control large deposits or fields of so-called strategic importance.

Under the proposals, the government should simply be notified about any equity deal involving a foreign-led firm buying a stake of less than 10 percent in a Russian firm with a strategic deposit.

The government should clear any deal involving more than 10 percent of a project, Trutnev said. No such clearance is required at the moment, as the ministry has yet to submit, and the parliament to approve, a law defining a strategic deposit.

Trutnev's ministry has been working on a new text of the subsoil law for several years but has recently decided to amend existing legislation to speed up work.

Ministries and security services have repeatedly clashed on the subject with proposals including total bans on deals with strategic deposits, including those already in private hands.

Ronald Smith, chief strategist at Alfa Bank, said the new proposal seemed to be a softening of tone for him, as proposals could have been much tougher.

"The government was always talking about control, control, control. They always wanted a Russian company in control. For the big assets they had problems with foreigners. ... At worst this is neutral," he said.

Trutnev has previously said any field containing 70 million tons of oil, 50 billion cubic meters of gas, 50 tons of gold or 500,000 tons of copper should qualify as strategic. On Monday, he said those criteria would not change.

Earlier in the month, the ministry identified strategic fields in several sectors, including 31 gas fields, that can be distributed only to Russian majority-owned companies.

The Sakha republic hosts most of the deposits on the list, including the Chayandinskoye field, which Gazprom had previously asked the government to give it out-of-competition rights to develop.

Gazprom has asked ExxonMobil to give up the idea of exporting gas to China from its Sakhalin-1 project, as it would leave the domestic market short.