Transcript:
Igor Artemyev: Good afternoon, colleagues. Today, a meeting was held of the Government Commission on Monitoring Foreign Investment in Russian strategic enterprises led by Dmitry Medvedev, at which several important and significant transactions were reviewed.
I’d like to start off with the biggest transaction, which involves the purchase by the US-French Schlumberger company of Eurasia Drilling Company, a major Russian company providing various oil production and geological prospecting services. The amount of this transaction – $1.7 billion – speaks for itself. This transaction has been discussed in detail from all angles, and the following decision was made: the government commission has come up with certain boundary conditions that cover about four pages of text that now need to be discussed with Schlumberger to see whether they are acceptable for the company. That is, as it reviewed this transaction, the commission assumed that in principle it is possible that this transaction would be approved, but it also came up with certain boundary conditions, since we are talking about a very sensitive area in the Russian economy. I’m talking about contracts related to drilling for oil, petroleum products, other ways to develop mineral resources, geophysics and other things that are important for our country.
The commission thought it was unethical to take any particular decisions regarding approval or disapproval of this transaction without discussing these boundary conditions – 10 in all – with the company first. Some of these conditions are fairly standard, and you may be familiar with them from other transactions. They include non-disclosure of state secrets, or appointing a Russian citizen to the position of CEO who will ensure proper access to such state secrets and a variety of other standard and special terms and conditions that were developed specifically for this transaction. We need to discuss them with Schlumberger.
Thus, the commission has done a lot in terms of legal and economic work, and has formulated its proposals officially on behalf of the Russian Government for Schlumberger to consider. Within the next 10 days, we will meet with Schlumberger and go over these conditions with their legal and economic advisers. If the company finds these conditions acceptable – which I believe it will, since there’s nothing unusual about them, these are standard conditions seeking to ensure the national interests of the Russian Federation in this kind of business, and other countries have much more stringent requirements than the ones that the government commission has for Schlumberger – therefore, if they agree with our approaches (we have set aside 10 days for them to complete this work), the commission will resume its activities on this issue based on what Schlumberger has to say about our proposals. I believe that we have acted with proper respect for this large investor, which has been working in Russia for a long time now. We see it, and I personally see it, as a positive development and good news.
Other transactions were
smaller, but they are still worth mentioning. In particular, the Swiss public
company Phoenix Mecano owned by Swiss citizen Benedict Goldkamp planned to take
over (and now has obtained the necessary permit) the Russian company
Elektroshchit-K located in the Kaluga Region.
This company, Elektroshchit, holds licenses for designing and manufacturing equipment for nuclear power plants. It’s a major designer with a market share in Russia of about 10 to 15 per cent. In other words, it’s a lucrative asset, which will be run from now on by a foreign operator.
There’s also a transaction that is part of a global transaction on the global capital markets. General Electric is taking over Alstom, also a large company, internationally. Both are major international players in mechanical engineering. Russia is home to Alstom Grid, a division of Alstom. The commission discussed whether it can approve the takeover of this Russian subsidiary of Alstom, and whether General Electric could gain control over Alstom in Russia now. The deal was postponed and will be considered within the next two months, as the Russia-based Alstom Grid owns and controls a number of companies that work for the Russian nuclear industry. Therefore, in conjunction with Rosatom, Alstom must provide a detailed account of the possible consequences of such a deal. Here, too, we will need to hold additional talks. No particular concerns about this transaction have been voiced. We just need to examine the possible fallout of this transaction for the Russian nuclear industry. General Electric should also comply with certain obligations and then, I think, the deal will get the green light.
One other deal was put off as well, although it was discussed fairly extensively. I’m talking about Hearst Communications, a major international media company. This American company owns about 200 magazines and 38 weekly newspapers around the world. It reaches 18 per cent of the US audience, which makes it a major US company. They wanted to buy from the Finnish company Sanoma several magazines published in Russia, such as Cosmopolitan, Esquire, Hearth and Home, Popular Mechanics, Harper's Bazaar and others. Shkulyov, a Russian citizen, was a partner in this deal and, accordingly, it was assumed that he would have a controlling interest in these magazines, while Hearst would retain its current 20 per cent. The decision was made to look deeper into this deal, and it was therefore postponed. Actually, the relevant ministries, in particular the Ministry of Communications, should consider several issues related to this transaction, in order to better prepare it for consideration by the commission, since we are talking about the media and US capital, and, unfortunately, we have to discuss these issues keeping politics in mind.
Another transaction worth mentioning is the sale of Roshchino Airport in the city of Tyumen to Russian and Kazakh investors, which the commission agreed to. It is part of a series of transactions to privatise airports. Even though this is a natural monopoly, auctions to sell airports are being held. Moscow airports are privately owned, meaning that the Russian Government has long since made a positive decision about privatising Russian airports. In this particular case, the decision was positive regarding companies that wish to acquire it. Russian and Kazakh citizens are involved in this transaction, which causes no controversy in view of the integration of our two countries. These are the most important things that happened during the government commission’s work today.
Question: What about Glencore?
Igor Artemyev: That deal never happened, because Glencore is busy putting together an application to the government commission. They haven’t filed it yet. As soon as we get it from them, in accordance with the established procedure, we will consider it.
Question: Can you disclose conditions, other than the requirement for a company to be headed by a Russian citizen?
Igor Artemyev: We will discuss it with them in detail. There are standard terms and conditions, such as the mobilisation capacity. Of course, we are concerned first and foremost with a very simple issue. Suppose the government of a particular foreign country introduces sanctions regarding such and such activities and companies. What will the foreign investors operating in Russia have to do in this case? They will find themselves in a tough spot. We admit that one such requirement... If the sanctions are imposed, and the company is unable to continue to go about its business, then it will have to sell its interest to a Russian investor.
Question: Is that one of your conditions?
Igor Artemyev: This is one of the conditions that we are discussing, but we're going to discuss it with the company. I reiterate: it's not the sanctions, but the situation in which the company's operations will be impossible due to sanctions. These are different things, because, in general, foreign companies, both American and French, need to operate under US national law. As you may be aware, recently, the government commission allowed the US company Abbott to buy Veropharm, one of the leaders of the pharmaceutical business. The French company Schneider got the opportunity to buy a number of Russian companies that engage in delicate defence-related operations. Nevertheless, it was granted access, and the decision was made. This is the way for the Russian Government to show its goodwill in dealing with foreign partners. Despite everything, despite sanctions and aggravation of international relations, investors from Europe and the United States have been invited to work in Russia. The tact of this decision lies in the fact that, before making a decision (what if these conditions are unacceptable for Schlumberger?), it was decided to first meet with the company to discuss these issues and agree on matters before moving ahead with the decision.
