Russian Energy Law

Constitutional and Federal Structure

The energy sector in the Russian Federation is governed by a complex federal legal framework that allocates jurisdiction between the federal government and the constituent entities (subyekty) of the Federation. Article 71 of the Constitution of the Russian Federation places federal energy systems and nuclear energy within the exclusive jurisdiction of the federal government. The Constitutional Court has affirmed the primacy of federal regulation in energy matters in decisions concerning the delimitation of powers between the centre and regions. Russia’s energy law draws on the Civil Code, which governs property rights, contracts, and concessions in the energy sector, including connection contracts for electricity and gas supply.

Federal Law No. 35-FZ on Electric Power Industry

The Federal Law “On the Electric Power Industry” (No. 35-FZ of 26 March 2003) is the foundational statute of the Russian electricity sector, enacted as part of the RAO UES restructuring that dismantled the vertically integrated monopoly. The law established the legal framework for: the wholesale electricity and capacity market (WECM) — the two-market model in which electricity is traded at competitive prices while capacity is remunerated through regulated payments; the retail electricity markets; the system operator (SO UPS) responsible for operational dispatch; and the Federal Grid Company (FGC Rosseti) for transmission. The law also introduced the Capacity Supply Agreements (CSA, DPM) mechanism, under which generators receive guaranteed capacity payments in exchange for constructing new generation — primarily gas-fired and nuclear units — with the costs socialised through the wholesale market. The DPM programme was extended in 2017 (DPM-2) to modernise aging thermal capacity.

Federal Law No. 69-FZ on Gas Supply

The Federal Law “On Gas Supply in the Russian Federation” (No. 69-FZ of 31 March 1999) establishes the legal regime for the natural gas sector. The law defines the gas supply system as a federal energy system and designates PJSC Gazprom as the dominant entity in the Unified Gas Supply System (UGSS). Article 6 of Law No. 69-FZ vests Gazprom with ownership and operational control of the UGSS’s trunk pipelines and underground storage facilities. The law grants Gazmark pipeline infrastructure and the right of first access to new gas fields, effectively preserving Gazprom’s export monopoly. Regulatory authority over the gas sector is divided between the Federal Anti-Monopoly Service (FAS) , which regulates regulated gas prices for industrial consumers and population, and the Ministry of Energy, which formulates gas industry policy. The Yamal LNG and Power of Siberia projects involved special federal legislation — including the LNG Export Law (Decree No. 1029 of 2013) — that liberalised LNG exports for non-Gazprom entities from certain fields and routes.

Subsoil Law (Law No. 2395-1)

The Law “On Subsoil” (No. 2395-1 of 21 February 1992, as amended) governs the exploration and production of minerals, including oil, natural gas, and coal. The Subsoil Law establishes: the licensing system under which subsoil use rights (licences) are granted through tenders and auctions conducted by the Federal Agency for Subsoil Use (Rosnedra) ; the categories of subsoil plots (federal, regional, and local); and the mandatory requirements for work programmes and production levels. The law was substantially amended in 2008 to introduce the distinction between strategic subsoil plots (участки недр федерального значения) and non-strategic plots, with foreign investment restrictions (see Strategic Sectors Law below). The PSA regime (see below) operates as a special contractual framework within the Subsoil Law’s general regime.

Production Sharing Agreements (PSA) Law

The Federal Law “On Production Sharing Agreements” (No. 225-FZ of 30 December 1995) provides a special contractual framework for investment in oil and gas upstream projects, primarily used during the 1990s and early 2000s for major projects — Sakhalin-1, Sakhalin-2, and Kharyaga. Under a PSA, the investor bears exploration and production costs and receives a share of the production volume (cost oil and profit oil), with the PSA establishing a stable legal regime (stabilisation clause) protecting the investor from adverse changes in tax and customs legislation. The Sakhalin-2 PSDA renegotiation in 2006–2007, in which the Russian government compelled Shell to sell a controlling stake to Gazprom, illustrated the legal risks associated with the PSA regime. No new PSAs have been concluded since 2010, with the regime being effectively replaced by the standard licensing system under the Subsoil Law.

Rosneftegaz Regulation

Rosneftegaz is a state-owned holding company that manages the Russian government’s shareholdings in energy companies, primarily PJSC Rosneft and PJSC Gazprom. Rosneftegaz was established by Presidential Decree No. 1403 of 17 December 1993 and holds controlling or blocking stakes in the largest Russian oil and gas companies. Its governance is determined by shareholder agreements and the Federal Law on Joint-Stock Companies. The appointment of Rosneftegaz management and the distribution of its dividends are matters of high federal policy, with dividends from Rosneft and Gazprom constituting a significant revenue source for the federal budget. The tax regime for the oil and gas sector includes the mineral extraction tax (MET, NDPI) , the export customs duty (phased out in the tax manoeuvre of 2014–2024), and the profit-based tax introduced in the tax manoeuvre 2.0 (2021–2024) for new fields.

Gazprom Legal Monopoly

The legal monopoly of Gazprom over the UGSS is codified in the Gas Supply Law and the Presidential Decree No. 529 of 8 May 1992, which created Gazprom as the sole owner and operator of the trunk gas pipeline network. The monopoly extends to: transmission through the UGSS — third-party access is legally available but practically limited; export of pipeline gas — Gazprom holds the exclusive right to export natural gas via pipeline under the Federal Law on Gas Export (No. 117-FZ of 18 July 2006); and LNG export from certain fields. The third-party access regime under Article 25 of the Gas Supply Law requires Gazprom to provide non-discriminatory access to the UGSS to independent gas producers (Novatek, Rosneft), but the terms and capacity allocation are subject to FAS regulation. The Ukraine gas transit disputes (2006, 2009, 2014–2019) resulted in arbitration proceedings under the Stockholm Chamber of Commerce, raising complex questions under Russian and EU law.

Strategic Sectors Law

The Federal Law “On Procedures for Foreign Investments in Business Entities of Strategic Importance for National Defence and State Security” (No. 57-FZ of 29 April 2008) imposes mandatory approval requirements for foreign investments that would give a foreign investor control over a Russian company engaged in strategic activities, including subsoil use on federal plots. The law established a government commission chaired by the Prime Minister, with the Federal Anti-Monopoly Service (FAS) as the reviewing authority. Strategic energy assets expressly covered include: subsoil plots with reserves exceeding specified thresholds (oil: 70 million tonnes, gas: 50 billion cubic metres); nuclear energy installations; and natural monopoly infrastructure (pipelines, transmission grids). The law has been applied to block or condition foreign investments in energy projects, including restricting Chinese investment in strategic fields and conditioning TotalEnergies’ participation in the Arctic LNG 2 project.