Volume 3-12 Abstract


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	"Introductory Note: The 1996 Russian Production-Sharing Law", By THOMAS W. WAELDE and MARTIN FRIEDRICH The Russian Production-Sharing Law, signed by President Yeltsin on 30 December 1995 and effective upon publication on 11 January 1996, constitutes one of the most significant legal instruments marking the major ex-socialist countries long march from Communism towards the - envisaged - market economy, in its major industrial and foreign exchange earning sector - oil and gas - dealing with the core political issue - the entrance of (Western) international oil companies as foreign investors. While this law is neither the beginning nor the end of a long story, which continues to unfold, its enactment marks a major milestone. The evolution of the law, and the content and controversy surrounding the law, bear witness to fundamentally conflicting forces - economic nationalism versus search for foreign capital and expertise, state-centred command-control of the economy versus opening towards private sector actors, commercial enterprise versus bureaucracy, centralising versus regional forces, legal and contractual security versus public control and intervention powers, Russian strategic versus Western, primarily US, commercial and strategic interests, Russian civil-law tradition versus the all-encompassing contract/lease model prevailing in the international oil industry, originating from dominant initial experiences in the US, particularly Texas. These forces have dominated the emergence of this law - and they are likely to continue to influence now required amendments resolving major legislative and institutional contradictions and further follow-up legislation. Similarly, the law is closely related to major issues of international law relating to foreign investment, as evidenced by the - as yet unratified - 1992 US/Russia investment treaty and the 1994 Energy Charter Treaty with the EU and Russia as the major treaty signatories. The Soviet Union was the world's largest oil and gas producer. With the collapse, its oil industry in particular suffered a sharp decline in production which continues as of this date. The oil and gas industry arguably now constitutes the major Russian (and Kazakh, Azeri and Turkmen) industry with considerable political and economic influence. The industry was, and is and is likely to remain for long, Russia's major export and foreign exchange earner. If there is a strategic industry in Russia, it is this one. It is undisputed that the industry requires major injection of capital - to the order of many billions of US $ per annum for years to come, but also an adaptation to the new industry structure where contractual relationships take the place of the former command/central planning structure. Foreign investment has appealed to the economic reformers in Russia (less so to Russian nationalists, Communists and the new Russian gas and oil companies) as a rapid way to generate capital and expertise to rehabilitate and modernise the Russian petroleum industry. International oil companies, cut off from the world's major reserves in the Middle East in the 1970s and facing, particularly in the US, dwindling reserves with a growing import dependency, were keen, sometimes very keen, to restore their reserves by acquiring control over Russia's large - and completely self-explored and developed - petroleum reserves. This is the core issue of the 1996 Production-Sharing Law. Note: This publication is available for sale from the CEPMLP Information Service, look here: CP2/98