MOSCOW (Mineweb.com) --The $2.35 billion bid by Russia's leading steelmaking group, Evraz, to take over Oregon Steel Mills (OSM), has been cleared to proceed by the US Government, after a 30-day review by the inter-agency group known as the Committee on Foreign Investment in the US (CFIUS).

The takeover -- the largest to date by a Russian company for a US asset -- has followed the purchase of a 41% stake in Evraz itself by Roman Abramovich and his London-based holding, Millhouse. Speculation that Abramovich's move into Evraz is part of a longer-term Kremlin plan to create a state steel champion has raised questions in the US that behind Evraz's bid for OSM stands a state company now entering the Russian steel industry, Rosoboronexport ("Russian Defence Export"), the state's arms export agency.

Last year, Rosoboronexport (ROE) bought out private shareholders to take control of VSMPO, Russia's titanium miner, and one of the world's leading sources of titanium metal. ROE has also begun a takeover of specialty steel producer, Krasny Octyabr (''Red October'), which has been owned by the Midland Resources group of London. Currently, ROE is on a US Government sanctions list for allegedly selling banned military goods to Iran.

In an announcement issued from Luxembourg, where Evraz Group SA is registered, Evraz said ""the Committee on Foreign Investment in the United States (CFIUS) has concluded its review relating to Evraz's proposed acquisition of Oregon Steel Mills, Inc. (NYSE: OS) without the need for further investigation under the Exon-Florio Amendment. Accordingly, the condition to Evraz's pending cash tender offer relating to the review of the proposed acquisition by CFIUS has been satisfied."

A US Treasury spokesman, Brookly McLaughlin, told Mineweb: ''CFIUS completed a thorough interagency review of the acquisition and determined that there were no unresolved issues".

CFIUS, which includes representatives of US financial and military intelligence groups, is empowered to negotiate directly with parties to a foreign investment deal under review, and short of banning or reversing a transaction, it may impose special conditions, including divestment of units with sensitive technologies. In December, CFIUS forced a Venezuelan company to sell off a US manufacturer of voting-machines, which it had acquired several months before. This action was triggered by US concerns that there were shareholding links between the Veneuelans and the government of President Hugo Chavez, who is viewed in Washington as hostile to the Bush Administration.

Evraz launched its bid for OSM on November 20, with an initial deadline of December 28 for OSM shareholders to tender their shares. That deadline was then extended to January 9, in order to allow CFIUS to conduct its 30-day review. Evraz declined to say if, during that time, there had been negotiations between the company and US officials; or whether Evraz has agreed to any US security conditions.

Sources in the US have told Mineweb the focus of concern on the part of security officials in Washington has been a combination of factors -- military technology which OSM uses to manufacture armour plate for tanks; and shareholder links between Evraz's owners and the Kremlin.The office of Senator Ron Wyden, one of Oregon's two representatives in the US Senate, had said earlier "our staff has undertaken a review and we are not aware of any security concerns.

At the December 28 deadline, about 27% of OSM shares had been tendered to Evraz. OSM shares moved up during Tuesday trading and ahead of the CFIUS announcement, the price was $63.07, 18 cents below Evraz's offer of $63.25. At the close on January 9, Evraz says it had bought 36.6% of OSM's shares
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Evraz announced overnight that it is giving OSM shareholders more time to sell, setting a new offer deadline at 5 pm, New York time, on January 12. The company announcement also noted "'it was waiving the condition to the tender offer requiring the expiration or termination of the International Traffic in Arms Regulations (ITAR) notification period. Following a careful review of the existing facts and circumstances, including the results of the CFIUS review of the transaction, Evraz determined that the review being made pursuant to ITAR should not further impact the structure of the transaction or the timing of its closure."

Sentiment towards the takeover has been mixed in Portland, Oregon, which has a big Russian-speaking community. A Portland investment advisor with links to OSM, Bill Parish, told Mineweb he had concerns with the multi-million dollar reward arrangements that would be triggered for OSM senior executives, if the deal went through.

Regarding the CFIUS review of possible security concerns, Parish said: "We can't really blame the Russian government for being economically astute and making strategic long term decisions that will benefit the Russian people, like creating Gazprom, a dominating firm in the energy field. Clearly, the smart move now is to create similar dominating firms in other key industries, especially those that are energy dependent, like steel. Who knows, perhaps the Oregon Steel employees would be better off being managed by a Russian state entity than a small group of top executives lining their pockets. If there is a loser in this deal it is likely long term oriented shareholders who will see future gains from holding a quality stock in a strategic industry vanish."