What is behind the presidential directive?

Movement of Russian domestic law over Sakhalin 2 July 19, 19:57

A presidential directive signed by Russian President Vladimir Putin on June 30.

We are ordering the operation of "Sakhalin 2" to be transferred to a newly established Russian company.

This time, I will introduce the contents of the presidential directive and explore the background that led to this decision.

(Keisuke Igarashi, Reporter, Ministry of Economic Affairs)

The gist of a presidential directive

◎ Several foreign companies and individuals violated the implementation of the PSA = Product Distribution Agreement signed in 1994 between the Russian government and "Sakhalin Energy" (the business entity of Sakhalin 2).

◎ The Russian government establishes a new Russian corporation.

All rights and obligations of "Sakhalin Energy" will be transferred there.

◎ The assets of "Sakhalin Energy" will be immediately transferred to the Russian government, and the right to use them free of charge will be transferred to the new company for the period specified by PSA.

◎ About the share of the capital of the new company.

"Gazprom" is acquired according to the investment ratio in "Sakhalin Energy".

Other shareholders will also acquire in proportion to the investment ratio, but the Russian government will control until the shares are delivered to these shareholders.

◎ Shareholders of "Sakhalin Energy" other than "Gazprom" submitted a notice to the Russian government within one month from the establishment of the new company, agreeing to acquire the shares of the new company at the current investment ratio. There must be.

◎ The Russian government confirmed the submitted documents within 3 days after receiving the notice.

Decide whether to deliver or refuse to deliver the shares of the new company according to the current investment ratio.

◎ The Russian government will promptly deliver the shares before the decision is made, and the control by the Russian government will end.

◎ For companies that do not acquire the shares of the new company, their shares will be assessed by the Russian government and sold to Russian companies that meet the standards according to the procedure established by the Russian government.

The valuation and sale of shares will be carried out by the Russian government within four months of the decision to refuse delivery.

◎ The cash obtained from the sale will be credited to the ruble account opened in the name of a shareholder of Sakhalin Energy.

Shareholders of Sakhalin Energy will not be able to dispose of the funds deposited in their accounts until the Russian government has determined the amount of damages through financial, environmental and technical audits and has determined who will be responsible for the damages.

Growing criticism of PSA in Russia

What you need to know when reading this presidential directive is a framework called "PSA".

It is a mechanism for foreign companies to decide the area to be developed in consultation with the Russian government, and then decide the share of crude oil and natural gas produced.

It was adopted in a large-scale development project by a method in which the content is determined by a contract between the Russian government and a company.

In 1995, it was established as a legal system in Russia called the PSA Law.

For foreign companies, it is considered that there is a merit to avoid unilateral change of conditions by the Russian government by deciding the conditions in advance in the contract, and the risk of so-called "requisition" to take up the development right is also low. rice field.

The "Sakhalin 1" and "Sakhalin 2" projects, which Japan is deeply involved in, have continued to produce oil and natural gas under this PSA.

However, inside Russia, there have been complaints that foreign companies protected by PSA contracts are procuring resources cheaply and making profits.

After Russia's military invasion, Japan's cooperation with G7 countries strengthened sanctions on Russia, further strengthening these criticisms. However, it is sanctioning Russia. Japan should withdraw from the project or change its attitude. "

Behind the issuance of the presidential directive is dissatisfaction with foreign companies that make profits from development projects in Russia, and it seems that the aim is to restrain Japan, which is tightening sanctions.

Is the revision of the "Underground Resources Law" a stepping stone for presidential directives?

On the other hand, two days before the issuance of the presidential directive (June 28), there was a movement that would serve as a stepping stone.

This is an amendment to the "Underground Resources Law", a domestic law in Russia that stipulates rules for the use of underground resources such as crude oil and natural gas.

The Underground Resources Act was enacted in 1992 after the collapse of the Soviet Union and introduced the first license system for the use of underground resources.

This amendment limits the scope of licensing to Russian corporations, and stipulates that foreign companies that are already developing must establish a Russian corporation within 90 days and then apply for a new license. ..

The current business entity of Sakhalin 2 "Sakhalin Energy" is registered as a corporation in the Bermuda Islands of the Atlantic Ocean, and is developing its business under a PSA contract with the Russian government, not under a license based on the Underground Resources Law.

Under these circumstances, what is the aim of amending the Underground Resources Law and issuing a presidential directive immediately after that?

We spoke with Daisuke Harada, Chief of the Research Division, JOGMEC = Japan Oil, Gas and Metals and Mineral Resources Organization.

JOGMEC Harada Research Division Manager

"By amending the Underground Resources Law and limiting the scope of licensing to Russian corporations, we have created a legal sword with the PSA Law, which has protected the interests of foreign corporations. It may have produced a procedural justification to transfer the business entity of "Saharin 2" to a Russian corporation by issuing a presidential decree at the top of the two laws in order to solve the problem.

In the future, the focus will be on what conditions the Russian side will show and whether it will affect the contract content that has been protected by PSA. "

Russia seems to be shaking up Japan, which continues to keep pace with Europe and the United States by strengthening its involvement in "Sakhalin 2" by making full use of presidential directives and laws.

At that time, what is the basis for taking concrete actions?

I think it is necessary to thoroughly analyze the legal system in Russia and its consistency with international rules.

Keisuke Igarashi ,

Reporter of the Ministry of Economic Affairs

Joined in 2012

After working at the Yokohama Bureau, Akita Bureau, and Sapporo Bureau, the Ministry of Economic Affairs

is currently in charge of the energy industry.