FEDERATION COUNCIL APPROVES LAW ON PRODUCTION-SHARING AGREEMENTS.

Also yesterday, the Federation Council approved a law on production-sharing agreements that had been passed by the outgoing Duma. (14) The aim of this legislation is to attract western investment in the extractive industries (diamonds, timber, minerals, oil and gas) by giving legal protection to agreements between foreign and Russian entities. Production-sharing agreements are attractive to western investors since they protect the investor against changes in tax laws by laying down that the proceeds of a joint venture will be shared not in profit but in terms of output (barrels of oil, cubic meters of gas, etc.) Therefore, the western partner’s take is protected even if an anti-foreigner government passes laws limiting or heavily taxing repatriated profits. The present law has had a chequered history since its adoption in the first reading by the Duma in June; it became the object of a tug-of-war between Yabloko (one of whose members, Aleksei Melnikov, drafted the original law) and Sergei Glazyev of the Congress of Russian Communities, who said the draft ignored ignoring Russian national interests. First Deputy Prime Minister Anatoly Chubais has criticized the law in its present form, saying it is unworkable. It is therefore unclear whether passage of the law by the Federation Council will inspire enough confidence among western investors to free up the billions of dollars of foreign investments in oil production believed to be being held back pending the adoption of a workable version of the law.

Estonian Army Commander Released.