RUSSIAN PARLIAMENT REJECTS BILL SEEKING TO BOOST OIL INVESTMENT.

Byline: Michael R. Gordon The New York Times

In a stinging rebuff to President Boris Yeltsin, the Communist-dominated Parliament has rejected legislation intended to encourage billions of dollars of foreign investment in the oil and gas industry.

The legislation, which would provide a legal framework for sharing oil production, has been a top priority of Western oil companies eager to develop new fields. It has also been strongly supported by the Yeltsin government, which is eager to generate badly needed revenue.

The Communists' success in blocking the legislation shows they still have the determination and power to hamper market reforms despite their lopsided defeat by Yeltsin in the presidential election July 3.

The Communists are ``extremely ideologically charged,'' said Aleksei Y. Mikhailov, chairman of the Parliamentary Committee on Natural Resources, who supported the legislation. ``They think that it is best when the state owns everything.''

But the failure to pass the law also reflects Yeltsin's slow start in getting his new policy team in place, as well as what are seen as heavy-handed efforts by Washington to help U.S. oil companies, Russian officials said.

Parliament voted down the legislation late Friday, setting off a round of recriminations, and this week Yeltsin administration officials and their parliamentary allies vowed to renew the fight.

Along with the decision by the International Monetary Fund to withhold its monthly loan disbursement because of Russia's tax-collection problems, Parliament's action raises fresh questions about the government's ability to speed reform.

Even before the election, direct foreign investment in Russia was somewhat anemic, a victim of heavy taxes, a labyrinthine bureaucracy and Western fears that the ``new Russia'' is politically unstable. ``China has attracted 25 times more Western investment than Russia,'' the government's analytical center reported in March.

Yeltsin's re-election brought hope that foreign investors would open their wallets. But for many foreign investors, Yeltsin's re-election is not enough. Major U.S. oil companies, for example, say they will not invest billions in new projects unless production-sharing laws are enacted.

Under such arrangements, Russia would forgo a multitude of taxes. In return, Russia would get a share of the oil produced by the foreign companies, a royalty based on production and taxes on the companies' profits.

U.S. officials say such an arrangement is attractive because it establishes a ceiling on tax costs.

But the issue has long been politically charged, with Communists and nationalists saying the West is out to exploit Russia's natural resources.

``Oil and gas are very political,'' said Alexander M. Knaster, the managing director of CS First Boston Corp. ``You are not dealing just with the economy. You are dealing with family silver.''

As the wrangling has continued, major multibillion-dollar projects have been put on hold.

One is the Timan Pechora project, in which a consortium of Western companies led by Texaco Inc. plans to drill in the Arctic. Other companies involved include Exxon, Amoco and Norsk Hydro, of Norway.

Other major projects that await new legislation include Amoco's development of the Priobskoye field in Siberia and three projects off Sakhalin Island in the Far East, two by Exxon and one a combined project by Mobil and Texaco. Two earlier projects off Sakhalin led by international consortiums are specifically approved by previous legislation and are going forward.

The Ministry of Fuel and Energy has estimated that more than $50 billion in long-term investment could be attracted by production-sharing agreements. Western companies say the shorter-term investment would be far less, but would still be counted in the billions.