New Decree Bans the Ownership of Land by Foreigners

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Jan. 19 – A new Kremlin decree issued by President Dmitry Medvedev last week bans foreigners from buying land near federal borders.

The border zone was not clearly defined in legislation dating back to 2001. A ban on the ownership of real estate by foreigners has been in force in Russia’s border areas for some time, but the scope of the border area has not been definitively established.

The new decree lists 380 border areas in 48 regions around the country where foreign individuals and companies are not allowed to buy land.

The list incorporates mostly rural areas and small cities with the notable exception of the cities of Kaliningrad, Magadan, Murmansk, Pskov and Salekhard, the southern sea resort of Azov, and Kronstadt, a port town that is part of St. Petersburg.

Large swathes of most North Caucasus republics and the other regions in southern Russia made the list, along with parts of the Altai, Astrakhan, Primorye and Sakhalin regions and the republic of Karelia near the Finnish border.

The list also includes some territories with only sea borders, such as Dagestan’s Babayurt district and the republic’s capital, Makhachkala, both of which border Kazakhstan through the Caspian Sea.

Finland is questioning the significance of the decree. Finland and Russia share a 1,250 kilometer common border that also serves as the border between Russia and the European Union.

According to Finnish broadcasting company YLE, the list of places where sales of land to foreigners or foreign companies is forbidden includes most of the areas along Finland’s eastern border, a total of 34 cities and districts.

Finland’s Ministry for Foreign Affairs has asked Russia to clarify what the ban means for Finns who already own land in the areas listed as out of limits to foreigners, as well as what the new rules mean for the future.

“If it is possible to buy here [in Finland], then it certainly must be permissible to buy on the other side of the border,” says Alexander Stubb, Minister for Foreign Affairs.

Russia’s Foreign Minister, Sergei Lavrov, says that the ban is not in violation of international law, pointing out that many other countries have similar restrictions.
Marja Liivala, an official at the Finnish Embassy in Moscow, says that Finland is now examining the exact implications of the move.

There are several different expressions in Russia for fixed property. The decree speaks of plots of land.

Liivala does not know how much land is under Finnish ownership in the border areas. She notes that a key question is how the decree affects foreign investment in Russia.

“Our interpretation is that it does not apply to Russian legal persons – including foreign investments registered in Russia.”

The ban appears aimed at preventing possible territorial disputes between Russia and its neighbors, such as the Kuril Islands with Japan, Abkhazia and South Ossetia with Georgia, and even Alaska, Nikolai Kazansky, director for investments and consulting at the St. Petersburg office of Colliers International, said to The Moscow Times.

He added, that foreign investors anyway prefer regions “with developed infrastructure,” which most border areas are not, Kazansky said.

Some analysts said the move may harm foreign investment into the country.

“It doesn’t matter who the owner of land, the main is if he meets requirements on its operation,” Anton Danilov-Danilyan from NGO Business Russia considers.
He believes the restriction is just worsening investment climate, but didn’t strengthen national security:

“If the foreigner will start to construct a defensive facility on the border area, he can be brought to responsibility under the current legislation.”

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