Russia locks up resources

IN the midst of a global resources boom and rising energy prices, Russia is moving to tighten its grip over its energy and mineral assets with new rules proposed for limiting foreign ownership of strategic deposits.
The Industry & Energy Ministry has submitted amendments to the Government that identify seven industry sectors to be declared "strategic" and which would limit foreign ownership to 50 per cent.

According to government documents, the sectors include the development of mineral deposits deemed to be of strategic importance.

The amendments change existing subsoil laws, lowering the threshold on what constitutes a strategic deposit.

Under the proposed changes, 30 more oil fields and 40 more gas fields will be deemed strategic.

The threshold on strategic copper deposits has been slashed from 10 million tonnes to 500,000 tonnes, and for gold from 700 tonnes to 50 tonnes.

In addition to mineral deposits, the other sectors deemed strategic are the production of special equipment, arms and military equipment, aerospace, space, atomic energy and activities involving monopolies.

Earlier this year, BHP Billiton and Rio Tinto moved to make the plunge into resource-rich Russia, forming separate exploration alliances with Russian nickel and palladium giant Norilsk. Under both alliances, BHP and Rio are limited to investments of just under 50 per cent in individual projects.

The alliances are focusing exploration efforts on the under-explored region of Siberia, as well as eastern and northwestern Russia.

Russia has substantial mineral resources. In 2003 it was estimated to host 40 per cent of the world's diamond reserves, one-third of the world's palladium-platinum and a quarter of the world's gold, coal and iron ore.

Last week Russia's two largest aluminium companies, Rusal and Sual, merged in a $US30 billion ($40 billion) deal, which, along with the aluminium and alumina assets of Swiss commodity trader Glencore, created the world's largest aluminium company.