Anastasia Savinykh
Foreign companies buy into LUKoil subsidiary and Sukhoi Civil Aircraft
On Friday, the Government of Russia approved the purchase of two strategic companies by foreign investors. Diamond giant De Beers will acquire a 49.99% stake in a diamond subsidiary controlled by oil giant LUKoil, and World's Wings of Switzerland will buy a 25% blocking stake in Sukhoi Civil Aircraft.
Both pilot deals were closed under the new foreign investment law; and the Government is preparing to examine 10 more requests.
This May, Russia enacted a law limiting foreign investment in strategic sectors. Foreign investors were concerned because they thought Moscow would close the doors to foreign investment. However, the Kremlin did not want to lose foreign capital.
Prime Minister Vladimir Putin later said the Government was concerned about the well-being of its Western partners. Russian legislators listed 42 strategic sectors requiring foreign companies to acquire the consent of the Government's foreign investment commission. Any foreign investor wishing to buy a 5% stake must only notify the concerned agencies, while special consent is necessary to acquire 10% or more.
Friday, the foreign investment commission headed by Vladimir Putin met at his Novo-Ogaryovo residence near Moscow to consider the two requests.
Global diamond giant De Beers wanted to buy a 49.99% stake in Arkhangelskgeoldobycha, a diamond-mining subsidiary of LUKoil. Switzerland's World's Wing S. A. was offering a purchase of a 25% stake (plus one share) in Sukhoi Civil Aircraft.
At the beginning of the meeting, Putin stressed that the approval procedure aimed to ensure any potential investor's reliability and credibility, and that no deal involving strategic assets could impair Russia's defence capability or security.
Putin told the commission that many other countries had similar legislation, and that Russian investors unfailingly abided by such laws. "We regard this with understanding, unless this implies biased and politically motivated decisions to close foreign markets to Russian companies," Putin said.
The commission eventually approved both requests. De Beers, which has been buying diamonds from Russia-Sakha Diamonds Company (Alrosa) for the last 50 years, received access to national diamond-mining facilities for the first time.
Italian aerospace engineering corporation Alenia Aeronautica will buy a stake in Sukhoi Civil Aircraft through its subsidiary, World's Wing S. A. of Switzerland.
Commission members heeded Putin's advice by informing the buyers that they must process all raw materials on Russian territory, retain all jobs, completely fulfil their business plans and maintain state secrets.
After the meeting, Igor Artemyev, head of the Federal Anti-Monopoly Service (FAS), said 10 other companies wanted to buy into strategic Russian enterprises. This means that the foreign investment commission will have to meet on a regular basis.
Banks not covered by foreign investment law
After the first meeting of the Government's foreign investment commission, Igor Artemyev, head of the Federal Anti-Monopoly Service (FAS), said foreign companies could buy into Russian banks without official consent.
The Russian foreign investment law, passed in May 2008, included no restrictions for the purchase of Russian banks by foreigners. Technically, banking systems are covered by the law because they use encrypted data.
The commission has now decided not to include credit institutions in strategic sectors covered by specific restrictions. Consequently, the above-said deals do not require consent.
"We regard this with understanding, unless this implies biased and politically motivated decisions to close foreign markets to Russian companies"