MOSCOW (Reuters) - The Russian parliament moved a step closer on Wednesday to adopting a law that would allow for foreign assets inside the country to be seized and for the state to pay compensation for the loss of property due to Western sanctions.
The pro-Kremlin deputy who submitted the draft law says the bill would protect the interests of ordinary people. Critics say it would shield Russian billionaires and officials from the impact of sanctions imposed over Russia's annexation of Ukraine's Crimea region and its support for rebels in eastern Ukraine.
The draft law passed its first reading in the Duma, Russia's lower house of parliament.
Three readings are required before the Duma could propose it as law. It then goes for approval to the Federation Council, the upper house of parliament, and needs President Vladimir Putin's signature to come into effect.
The law, dubbed the "Rotenberg law" after Putin's sanctions-hit judo partner Arkady Rotenberg whose four villas were seized in September by Italian authorities, would allow compensation for Russians who suffer because of an "unlawful act" in foreign jurisdiction.
The bill also clears the way for foreign state assets in Russia to be seized as a response to Western sanctions, even if they are subject to international immunity.
Sanctions imposed by the European Union and the United States have hit a number of Putin's colleagues and friends, including Rotenberg and Yuri Kovalchuk, one of the largest shareholders in Bank Rossiya.
But for now the bill has received only limited support from the government and Economy Minister Alexei Ulyukayev warned it could cause further capital outflow. The sanctions and the rapid weakening of the rouble have spurred more than $75 billion in capital flight this year.
"Basically, we encourage the outflow of capital from the country in different forms, that is not the objective of our economic policy," Ulyukayev, who spoke in the Duma before the bill's reading, said. "From my point of view (the law) would be counterproductive."
Kremlin critic Alexei Navalny, who is under house-arrest, wrote on his blog: "Now we will pay for the (billionaires') villas twice. Once when they steal everything to build them, and the second time when we compensate them when their assets are seized."
(Removes reference to Gennady Timchenko)
(Reporting by Maria Tsvetkova; Writing by Lidia Kelly; Editing by Janet Lawrence)