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Ministry of Industry and Energy (Minpromenergo)

In 2004 President Putin disbanded the Ministry of Energy (which was known as the Ministry of Fuel and Energy until May 2000) and formed the Ministry of Industry and Energy (Minpromenergo). The Ministry brings together the two main sectors - energy and weapons - in which Russia has a strong export position. The Ministry is a federal executive body with policy-making and regulatory functions regarding civil and defense industries and the energy sector. One of the main tasks of the Ministry is to promote development and competitive capacity in the industrial and energy sectors. It also participates in aviation technology development, technical standardization and metrology, and mineral exploration.

Victor B. Khristenko was appointed Minister of the Minpromenergo on March 9, 2004. As of July 2007 the three Deputy Ministers of the Minpromenergo were Andrei Dementiev, Ivan Materov, and Andrei Reus.

There are three main agencies that are subordinate to the Ministry: The Federal Agency for Technical Regulation and Metrology, the Federal Industry Agency, and the Federal Energy Agency. As of July 2007 the heads of these agencies (in the order mentioned above) were Grigory Elkin, Boris Alyoshin, and Sergei Oganesyan.

The Government Commission for Integration of Aircraft Building Enterprises in the Russian Federation, chaired by Viktor Khristenko, at its meeting on November 2 took the decision to establish an open joint stock company "United Aircraft Building Corporation" (OAO OAK). The aviation industry is one of the key sectors which the government keeps under constant review. Last year's discussion of the paths of its development has shown that the domestic market capacity is not enough to support an effective functioning of the sector. Therefore the royal road for the development of the sector is for the aviation industry to break into the world market in which only big players can hope to be successful.

Throughout 2005 and 2006 the Russian Ministry of Industry and Energy has been developing and consistently implementing a long-term strategy of the aviation industry development. The Russian government took a series of key measures, including: increasing the funding of new developments as part of the Federal Targeted Program "The Development of Civil Aviation Technology in Russia in 2002-2010 and in the Period to 2015"; continued state participation in increasing the capitalization of Russian aviation leasing companies; use of federal budget money to compensate the aviation companies for part of the lease pay and interest on credits obtained from Russian lending institutions to purchase new aviation technology; and providing state guarantees to support the export of Russian-made planes and to ensure internal borrowing for the implementation of the project to build a new-generation Russian regional plane.

Federal targeted programs "The Development of the Defense Industry Complex of the Russian Federation in 2007-2010 and in the Period to 2015 and "The National Technological Base" are being launched in 2007. They envisage the funding of comprehensive projects to develop new generations of science-intensive products. Programmatic solution of the problem of renewing the aviation industry's production and technological base will also be addressed. As a result, the federal budget financing of the civil sector of the aviation industry increased five-fold in 2005 compared with 2004. In 2006 the total volume of allocations out of the federal budget for state support of aircraft building through the channels of the Ministry of Industry and Energy and Rosprom exceeded the 2005 level by about 1.4 times. The draft 2007 budget envisages further growth of state support.

To ensure that civilian ship-building is competitive in the context of a ship-building boom in the world and the full loading of the world's leading shipyards, the Russian Ministry of Industry and Energy has launched an effort to organize public-private partnership in modernizing the existing production capacity. The work with the business community which has an interest in the ship-building industry and marine transport has been tentatively named "VIP projects." Analysis shows that if Russia is to be competitive in building large vessels (tankers, bulk-carriers and gas carriers with a deadweight of 80,000 tons plus) it needs to modernize and build new shipyards in the regions where ship-building is well-developed. The Ministry of Industry and Energy assumes that the State will be ready to share the risks connected with such pilot projects. Such projects may become the main drivers of further consolidation of the efforts of the state and private business in this field.

The new Executive Order On the Development of Production Capacity in the Ship-Building Industry solicits proposals on February 27, 2007 from companies on the creation of modern shipyards. Interested enterprises and organizations were to develop and submit to the Russian Ministry of Industry and Energy proposals on projects of modern ship-building complexes in the Western, Far Eastern and Northern regions with a status of tentative feasibility studies. As a guide to the development of the projects the Ministry will send tentative requests for proposal to the organizations concerned. The projects were to be reviewed before March 30, 2007. "One of the main parts of the ship-building development strategy is the creation of three major modern shipyards in each of the regions on the basis of public-private partnership," stresses Yuri Koptev, the head of the Defense Industry Complex Department. "These shipyards will be cleansed of other activities, they will not build ship engines, but will be major assembly complexes like those that have been created in Europe, Korea and Japan."

By the end of 2006 the government seemed intent on pushing through the Law on Strategic Sectors that would usefully clarify for investors the rules for foreign investment in "strategic sectors." In November 2006, the Ministry of Industry and Energy (MIE) submitted a draft of this law to the government. It designated 39 types of business in the aviation, nuclear energy, military-industrial complex, natural resource and natural monopolies sectors where transactions that would give foreign investors more than a 50 percent equity stake would be reviewed by the Anti-Monopoly Service.

Previously, prior approval by the relevant government authority (e.g., State Property Committee, Ministry of Industry and Energy, Ministry of Natural Resources) was required for foreign investment in new enterprises using assets of existing Russian enterprises, defense industries (which may be prohibited in some cases), and the exploitation of natural resources. Approval was also required for all investments over 50 million rubles, investment ventures in which the foreign share exceeds 50 percent, or investment to take over incomplete housing and construction projects.

Additional registration requirements exist for investments exceeding 100 million rubles. Projects involving large-scale construction or modernization may also be subject to expert examination for environmental considerations. In sectors that require licensing (e.g. banking, mining, oil and gas extraction, and telecommunications), procedures often can be lengthy and non-transparent.



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