Publication: Monitor Volume: 4 Issue: 147

At a meeting yesterday with some seventy leading western investment bankers, Prime Minister Sergei Kirienko promised that Russia would open its markets more widely to foreign investment. He said the government plans new legislation to bring fiscal, legal and regulatory mechanisms into line with international standards. The number of sectors closed to foreign investment and of restrictions on direct foreign investment would be sharply reduced, and rulings by international courts would become binding on Russian territory. As a start, foreigners may be allowed to bid for the 5 percent of shares in the gas monopoly, Gazprom, that the government plans to sell later this year. Until now, foreigners have been able to own Gazprom shares only through ADRs (American Depositary Receipts), with ADR-traded shares fetching three times the price of domestically traded ones. (Financial Times, July 31) Kirienko said the terms for the Gazprom sale will be announced next week. The promised sale of 25 percent minus two shares in the Svyazinvest telecoms holding company may also be opened to foreign buyers, Kirienko said. The government also intends to sell some of its stock in LUKoil, possibly in October. These sales are intended to raise badly needed revenue for the cash-strapped government. (Russian agencies, July 30)

Also yesterday, Kirienko ordered Tax Service chief Boris Fedorov both to give Gazprom a two-month respite and to lift his threat of sanctions until the government and the gas giant agree on the precise amount of their mutual debts. Energy Minister Sergei Generalov said he hoped the Gazprom deal would be signed on August 3, the same day the government expects to announce terms for the sale of Gazprom shares. (Itar-Tass, July 30) This should prevent a repetition of the government’s earlier embarrassment when Gazprom was ordered to pay its tax arrears or face expropriation of its property, only for it to turn out that the state owed the company more in unpaid bills than Gazprom owed in unpaid taxes.