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You're reading: Kremlin tightens rules on Russian firms operating abroad

Moscow - Russia tightened its oversight on Tuesday of "strategic" domestic companies operating abroad, such as Gazprom, requiring them to seek approval to disclose information to foreign regulators, alter contracts or sell property abroad.

The move follows the state-controlled gas export monopoly Gazprom’s warning to the European Commission that an EU investigation of its business in Europe affected the interests of a strategic Russian company.

Russian President Vladimir Putin on Tuesday signed the decree, which covers foreign subsidiaries of Russian companies defined by the government as strategic.

“The decree establishes the obligation of a federal executive body to refuse permission to conduct the aforementioned activities if they are capable of damaging the economic interests of the Russian Federation,” said the text of the decree, distributed by the Kremlin.

While the decree will help the state support Gazprom in the EU investigation, it will also enable it to tighten its grip on the company — a key taxpayer — as well as on other state-run companies.

“On the one hand, the government is now trying to show that Gazprom is only subject to Russian laws, but on the other the Kremlin has long nurtured plans to increase its sway over Gazprom,” said an analyst at a major Russian bank who asked not to be named as the bank does not comment officially on political issues.

Putin on Sunday ruled out a trade war over the European Commission’s anti-trust investigation, which focused on Gazprom’s policy of linking contract gas prices to oil prices, suspicions that Gazprom was hindering the free flow of gas in Europe and preventing supply diversification.

The EU’s move marks the formal launch of an investigation that began with raids of Gazprom subsidiaries in Europe a year ago. Since then, the company has made substantial price concessions in its oil-linked contracts to most of its major European customers.

A Brussels-based antitrust lawyer who spoke on condition of anonymity said it would complicate the EU investigation — not prevent it.

“The Commission could come to a decision independently of any information provided by Gazprom. It could still construct a case from evidence from third parties,” he said.

He said even if EU regulators can’t force Gazprom to amend its long-term contracts, they still have a powerful tool in the form of hefty fines.

Antoine Colombani, spokesman for EU antitrust chief Joaquin Almunia, declined to comment immediately on the decree.

ASIA SHIFT

Gazprom called an urgent press-briefing after the decree was signed, where gas monopoly spokesman Sergei Kupriyanov said that the EU investigation was meant to pressure the giant to review its prices to European consumers.

“The actions of the European Commission, the start of a formal investigation of Gazprom, like last year’s searches of Gazprom affiliates, can be viewed as pressure by the European Commission on Gazprom with the aim of influencing prices and the results of commercial negotiations,” he said.

Earlier, Putin linked the recent investigation to the European debt crisis, blaming some of the European Commision officials of a desire to shift internal problems to Russia.

Kupriyanov reiterated Gazprom’s long-standing pricing policy, which ties export gas price to the average market crude price.

“Gazprom in the future will base its work on long term contracts tied to an oil price basket,” he said.

The gas monopoly said it might speed up plans to sell gas to Asia, which could ultimately consume more Russian gas than Europe, Gazprom’s main export market and key revenue generator.

“In the future gas supplies eastwards could exceed European supplies,” he said without detailing on the terms.

The remarks are part of a broader shift outlined by Putin last week during the Asia-Pacific Economic Cooperation summit in Vladivostok. Putin said Russia should bolster economic ties with the East at a time when Europe is battling a debt crisis. (Reporting by Melissa Akin and Vladimir Soldatkin, Writing by Melissa Akin and Alexei Anishchuk, additional reporting by Yun Chee Foo in Brussels; Editing by Steve Gutterman and Hugh Lawson)

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