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Last Updated: Friday, 11 February, 2005, 11:29 GMT
Oil companies get Russian setback
Oil rig
Russia has vast untapped natural resources worth trillions of dollars
International oil and mining companies have reacted cautiously to Russia's decision to bar foreign firms from natural resource tenders in 2005.

US oil giant Exxon said it did not plan to take part in a new tender on a project for which it had previously signed a preliminary agreement.

Miner Highland Gold said it regretted any limit on privatisation while BP, a big investor, declined to comment.

Only firms at least 51% Russian-owned will be permitted to bid.


The Federal Natural Resources Agency said "the government is interested in letting Russian companies develop strategic resources".

The foreign ownership issue will be dealt with according to Russia's competition law, natural resources minister Yuri Trutnev was quoted as saying by the Interfax news agency.

No further details were given, with Mr Trutnev suggesting that Russia may decide on a case-by-case basis.

Observers said that the move may represent a shift in policy, as the administration of Vladimir Putin puts the protection of national interests above free market dynamics.

Russia recently wrested back control of a large chunk of its oil industry from stock-market listed company Yukos, a move that prompted calls of outrage from many investors.

No panic

Analysts warned that it was still too early to draw too many conclusions from this new set of proposals.

It's not good. But it is very understandable
Al Breach, UBS Brunswick

Companies echoed this sentiment, saying that they would require more information before ringing the alarm bells.

"It's not good. But it is very understandable," said Al Breach, an economist at UBS Brunswick. "But if the investment climate is stable - that's much more important.

"Foreigners of course would like to have free entry but... this is not the end of the world."

A number of other nations, including Mexico, Saudi Arabia and Kuwait, protect their national resources from foreign firms.

What has surprised observers is that since the collapse of communism Russia has been courting foreign investment.


BP spent $7.5bn to create Russian-registered oil company TNK-BP, and has a partnership to develop the Sakhalin 5 petroleum field with state-owned Rosneft.

Exxon, the world's largest oil company, has signed preliminary agreements to develop the Sakhalin 3 field.

Company spokesman Glenn Waller said Exxon still considered the deal valid, despite Russia inviting new offers for the land block.

According to Mr Waller, Exxon "were not planning to bid at a new tender anyway".

"We regret the ministry has taken such a decision," said Ivan Kulakov, deputy chairman of Highland Gold - a mining firm that has the motto "Bringing Russia's Gold to Market".

"It would be a shame if that has a negative impact on the investment climate."

Other firms that have been linked with investment in Russia include France's Total, the US-based ChevronTexaco, and miner Barrick Gold.

Yukos owner sues Russia for $28bn
09 Feb 05 |  Business
Putin backs state grab for Yukos
23 Dec 04 |  Business
Yukos and the geopolitics of oil
17 Dec 04 |  Business

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