The meeting reviewed, among other things, the application from the China National Oil and Gas Exploration and Development Corporation regarding the acquisition of a 20% voting stake in Yamal LNG, as well the application from Swiss-based Liebherr, which intends to invest in the manufacturing of aircraft parts in Nizhny Novgorod.
Dmitry Medvedev’s opening remarks
Briefing by Head of the Federal Antimonopoly Service Igor Artemyev
Government Commission on Monitoring Foreign Investment
Dmitry Medvedev: Today we are holding a regular meeting of the Government Commission on Monitoring Foreign Investment. As usual, a number of applications regarding transactions with strategic assets will be reviewed, which nevertheless does not undermine our general commitment to drawing in as much foreign investment as possible. Investment in industries that are not viewed as strategic are not subject to any regulations or approvals, while in the so-called strategic segments we have substantially eased licensing requirements, and the government will continue moving in this direction in the future.
Dmitry Medvedev: “Investment in industries that are not viewed as strategic are not subject to any regulations or approvals, while in the so-called strategic segments we have substantially eased licensing requirements, and the government will continue moving in this direction in the future.”
Today’s meeting will also review legal amendments aimed at streamlining government oversight of foreign investors. The draft law has been approved in the first reading by the State Duma, so the time is right to agree on the amendments so the law can proceed to the second reading. I would like to remind you that these amendments deal with simplifying the procedure of investing in the development of subsoil resources that are of federal significance, exempting deals regarding companies controlled by Russia’s regions and some other changes.
I would now like to comment briefly on the applications we’ve received and focus on two of them. The first one comes from our Chinese partner, the China National Oil and Gas Exploration and Development Corporation, which intends to acquire a 20% voting stake in Yamal LNG. This company intends to participate in the project to create LNG production capacity on the Yamal peninsula. This plant is a very expensive and serious project. In addition, a seaport will be developed on the Yamal peninsula. Decisions on this were taken a long time ago and investment is expected to total some 900 billion roubles. Having recently visited China, I can tell you that our partners are eager to participate in ambitious long-term programmes and are willing to invest in joint infrastructure projects, major capital-intensive initiatives, as well as in opening new production facilities, which is especially important for us.
Dmitry Medvedev: “Our partners are eager to participate in ambitious long-term programmes and are willing to invest in joint infrastructure projects, major capital-intensive initiatives, as well as in opening new production facilities, which is especially important for us.”
The second application is in the high-tech sector. This segment often receives medium-sized investments, not necessarily high volume investments. Today, we’ll review two investment applications regarding aircraft equipment, including the one submitted by Swiss-based Liebherr, which intends to invest in the manufacturing of aircraft parts in Nizhny Novgorod over the next three years. I hope these investments will promote the creation of new high-skill jobs, expand the product range and help expand the export of aircraft parts.
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Head of the Federal Antimonopoly Service Igor Artemyev talks to journalists after the meeting of the Government Commission on Foreign Investment in Russian Strategic Companies
Igor Artemyev: The meeting of the Government Commission on Foreign Investment in Russian Strategic Companies presided over by Prime Minister Dmitry Medvedev has just finished. As usual, we discussed a number of important deals concerning investment by foreign companies into Russian strategic business companies.
We are also still working on the liberalisation of the 57th law. The law has been approved by the Russian Government and submitted to the State Duma, where it was passed in the first reading. Today we discussed a number of innovations that may be adopted in the second reading. They are targeted at making investing easier for our foreign partners.
Igor Artemyev: “I would like to mention a very important one, China National Petroleum Corporation buying into Yamal LNG for the exploration and production of oil and gas. This is the first major deal involving China’s funds for the development of Russian mineral resources, including on the Yamal Peninsula.”
As for the deals, I would like to mention a very important one, China National Petroleum Corporation buying into Yamal LNG for the exploration and production of oil and gas. This is the first major deal involving China’s funds for the development of Russian mineral resources, including on the Yamal Peninsula. We are speaking about tens of billions of dollars that will be used for the construction of the new mining infrastructure and for natural gas extraction on the Yamal Peninsula. The deal is being conducted together with Novatek, Russia’s largest independent natural gas producer.
Question: Has the deal been approved?
Igor Artemyev: It has. The second deal also concerns Chinese investment. Jilin Horoc Chinese State Company bought a blocking stake in Russia’s Geotekhnologiya, which owns major deposits in the Kamchatka Region. The deposits contain about 43,000 tonnes of nickel, 1,500 tonnes of cobalt, a lot of copper, etc. The deal was also approved.
And there is one more deal that is very important for Russia. You all know Maersk, a major shipping company which belongs to the Moller family. Here we have a Danish company which decided to buy one of the major Russian stevedores operating in the St Petersburg port for the price of $300 mln. Maersk will also invest about $600 mln in the expansion of container terminals in the north-west of Russia, including in St Petersburg. It is very good news when a leading company in an industry invests large sums. The deal was certainly approved.
Igor Artemyev: “The deposits contain about 43,000 tonnes of nickel, 1,500 tonnes of cobalt, a lot of copper, etc.”
Question: Are they buying into NCC?
Igor Artemyev: Yes, that’s right.
Our next item is related to high-tech and pharmaceutical production in Russia. There is a well-known Indian firm Hetero FZCO, controlled by the family of renowned academician, Bandi. The company has a global presence. They intend to buy a Russian company called Makiz-Farma that produces drugs like Indapamide, Rimecor, Tagista and many others. The Indian firm plans to expand production in Russia of these and other drugs that our people are in great need of, as well. This is a good example of direct investment that our country will, without a doubt, benefit from.
Another deal concerns Liebherr Aerospace Russland, which produces home and industrial appliances. This time, the company wants to produce and maintain aircraft equipment, including dual-purpose aviation equipment, and it will naturally be producing spare parts in conjunction with our companies. So it boils down to technology production for civil and military aviation. This deal has also been approved.
Igor Artemyev: “Liebherr Aerospace Russland, which produces home and industrial appliances. This time, the company wants to produce and maintain aircraft equipment, including dual-purpose aviation equipment, and it will naturally be producing spare parts in conjunction with our companies. So it boils down to technology production for civil and military aviation.”
Question: What are they buying?
Igor Artemyev: They are buying a Russian company that produces spare parts for aviation equipment. In fact, they will have a controlling interest in the company with 75% of the voting stock. They’ll bring their own technologies, y, engineers and experience to make high-quality products. Production will take place in Nizhny Novgorod.
Question: Can you tell us the value of the transaction between Novatek and the CNPC? And the agreed upon investment figure….
Igor Artemyev: As far as Yamal LNG is concerned, the joint investment of the Chinese company and Yamal LNG’s shareholders will make up 900 billion roubles at the first stage. This is a very big project.
Question: Can you tell us about the amendments in the second Duma reading?
Igor Artemyev: “As far as Yamal LNG is concerned, the joint investment of the Chinese company and Yamal LNG’s shareholders will make up 900 billion roubles at the first stage. This is a very big project.”
Igor Artemyev: Yes, of course. The thing is we are going to make the necessary adjustments. The commission has been generally positive regarding the amendments, and there was a good, solid discussion at the meeting. So the Prime Minister has instructed Mr Shuvalov to hold a final discussion and prepare the amendments for the second Duma reading. That is, the amendments will be considered at a Government meeting before being introduced in the State Duma.
We need more openness here; we need absolute openness. The ultimate beneficiaries of any transaction, both individuals and legal entities, will have to register at a government commission. The specific, real individuals will have to be named as ultimate beneficiaries. This is an important requirement.
A number of new Government Commission requirements for investors have been added in order, for example, to sort out transactions related to fish harvesting. We know that the commission is doing much to solve these issues in the Far East. For example, it can allow foreign fish processing businesses to operate in the territory of the Russian Federation. This option will be included in the legislation. This could be a condition essential for foreigners who acquire strategic assets in the fish industry.
Then, the law should stipulate the situation in which the assets that make an entity strategic, not the legal entity itself, are transferred abroad or sold. We can imagine this to be a manufacturing complex, a rolling mill, or a production line for manufacturing civil or military aviation equipment, for example. We’ve discovered that to get around Law No. 57 (there were few attempts), the strategic assets are moved to another company, and this entity, without any strategic equipment, is sold to a foreign investor. Then, foreign investors or Russians, who are no longer citizens of Russia, organise a scheme to shift the strategic assets abroad. We are discussing different ways to deal with this issue. But it is clear when a company with strategic equipment is sold. But the strategic equipment used to meet our defence and security needs should also undergo approval procedures. This is necessary for the Government to understand what is sold and to whom it is sold, not to mention the international convention on the non-proliferation of particular items that obliges the Government to do this.
These are the major amendments. In general, the draft law will retain the form in which it was presented at the first reading. By the way, it was quite liberal. According to the draft law, there would be no need for the commission’s approval on transactions involving mineral resources made by consortiums, and the Russian regions would be able to make various transactions involving their strategic assets. For example, if a company purchased 75% of the shares, it would not need the commission’s approval on any further purchasing of shares. Well, a number of important legal details, which make the law more clear. That is why we have retained the basic framework approved in its first reading.
