Foreigners fear Russia investment law may stall

MOSCOW Oct 15 (Reuters) - Russia's parliament on Monday asked for clarification of a draft law that would set ground rules for foreign investors in strategic industries, raising concerns that adoption of the law could be postponed.

"It is necessary to clarify the list of activities deemed 'strategic'. At the moment, such clarification is de-facto lacking," Martin Shakkum, head of the parliament's industry committee, said during a hearing.

The parliament has also asked the government to submit amendments to the existing subsoil law, which should define "strategic" natural resource deposits. The new investment law would then apply curbs to exploration of such deposits. The cabinet has promised the investment law would be passed by parliament this year but, with six weeks left before parliamentary elections, investors are increasingly worried the law could be shelved or changed.

Foreign companies face uncertainty as an increasingly self-confident Russia, its economy boosted by high commodities and energy prices, has sought to regain control over strategic assets.

Notably, gas export monopoly Gazprom (GAZP.MM) was able to buy half of the Sakhalin-2 offshore project from Royal Dutch Shell (RDSa.L) and partners last year after months of pressure from state environmental officials. President Vladimir Putin exacerbated investors' worries last month, saying Russia may retaliate if the United States and European countries limit foreign investment in their economies.

The parliament in September passed the draft at a first reading, more than two years after Putin ordered officials to draw up legislation to define rules on foreign investment more clearly.

Foreign investors welcomed the draft, saying it sets clear ground rules for the first time and defines sectors, such as space and aviation, where foreign investment should be limited.

NUMEROUS AMENDMENTS

Investors now fear the draft could be substantially changed under pressure from industry lobby groups, defence and security agencies, falling victim to the parliamentary election campaign.

"As there were numerous amendments proposed, the timing for the second and the third reading (in parliament) has not been scheduled," a note from the Foreign Investment Advisory Council's working group on state regulation said.

The council, a grouping of foreign investors working in Russia, asked Prime Minister Viktor Zubkov at an annual meeting on Monday to speed up adoption of the draft law.

Industry sources told Reuters the government could not agree with the Federal Security Service on whether the new rules should apply to newly discovered deposits or only concern deposits already assigned.

At the meeting with Zubkov, investors also asked to have more say over the draft legislation. The council has been lobbying for an entirely new law on subsoil resource use, but the cabinet has opted for amendments to the existing law.

"Investors are concerned they did not have a chance to present to the Russian government any arguments for consideration," said Neil Duffin, head of U.S. oil major Exxon Mobil's (XOM.N) Russian office.

The draft amendments to the existing subsoil law would exclude international oil majors from auctions and tenders for strategic deposits and bar them from holding controlling stakes in these deposits. (Additional reporting by Anastasia Onegina)