06MOSCOW11686, STRATEGIC SECTORS LAW SUBMITTED TO GOVERNMENT

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Reference ID Created Released Classification Origin
06MOSCOW11686 2006-10-18 13:47 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO2932
PP RUEHAG RUEHROV
DE RUEHMO #1686 2911347
ZNY CCCCC ZZH
P 181347Z OCT 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 4128
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 011686 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/RUS; EB/ESC 
DOE FOR HARBERT 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR GRAHAM AND MCKIBBON 
TREASURY FOR LEE, COX, AND BAKER 
 
E.O. 12958: DECL: 10/18/2016 
TAGS: ECON EIND ENRG PREL RS
SUBJECT: STRATEGIC SECTORS LAW SUBMITTED TO GOVERNMENT 
 
REF: A. 05MOSCOW3511 
 
     B. 05MOSCOW12258 
     C. 05MOSCOW15602 
     D. 06MOSCOW3523 
 
1. (C) Summary. The Ministry of Industry and Energy (MIE) on 
October 13 submitted the draft law on Foreign Investment in 
the Strategic Sectors for government review. Contrary to 
press reports that the new draft reduces the number of 
strategic sectors that would be regulated by the new 
legislation from 39 TO 7, contacts at the MIE and the 
Ministry of Economic Development and Trade (MEDT) say that 
the draft law has not changed from previous versions (see 
reftels) and the 39 types of economic activity governed by 
the new legislation have just been grouped into 7 categories. 
On other key sticking points, the definition of what 
constitutes a strategic deposit and the level of foreign 
equity that would trigger review of a particular project have 
not yet been decided.  End summary. 
 
2. (C) The business newspaper Kommersant reported October 16 
that the Ministry of Industry and Energy (MIE) submitted the 
draft law on Foreign Investment in Strategic Sectors to the 
government on October 13 and claimed the new draft reduced 
the number of economic activities that would be governed by 
the new law from 19 to 7 (comment: the 19 appears to be an 
error because previous drafts list 39 activities considered 
"strategic"). Emboffs discussed the article with both MEDT 
Deputy Minister Kiril Androsov and the MIE Director for Legal 
Affairs Vladimir Teraskin, who indicated that the draft 
remains virtually unchanged from the version released earlier 
this year.  Teraskin explained that the 39 sectors have just 
been grouped into 7 categories. 
 
3. (C) Teraskin confirmed that the draft has been finalized 
and Deputy Premier Zhukov would send it to an 
inter-ministerial commission for review on October 19 or 20. 
He said that differences between the MIE and FSB remain on 
the level of foreign equity stake in a deal that would 
trigger a review, with the MIE sticking to 50 percent and the 
FSB insisting on 30. MEDT Deputy Minister Androsov said that 
the interagency commission would review the draft in the next 
two to three weeks and then submit it for government 
approval. Duma review would then follow. According to 
Androsov, the definition of strategic deposits is still under 
review by the respective ministries. He said that the MEDT 
position on strategic deposits has not changed and continues 
to include only the 7 largest deposits. 
 
4. (C) Comment: This week's submission of the draft law to 
the inter-ministerial commission is the first sign of real 
life since the draft was sent back to the government late 
last year for further review, but the continued lack of 
consensus over key issues illustrates the sensitivity 
surrounding this proposal.  Putin will probably have to 
intervene and break the impasse if this law is going to be 
passed before the end of 2006. 
BURNS

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