Russian airlines to lift ban on foreign investors
Foreign investors may soon be allowed to acquire controlling stakes in Russian air carriers. Currently, the Russian Air Code expressly forbids this, but the government is already discussing related amendments. Experts and market players believe the step will give official blessing to existing shadow Turkish investments in Russian charter carriers.
The Transport Ministry, the Economic Development Ministry, the Federal Air Transport Agency (Rosaviatsia) and key security agencies are now debating changes to Article 61 of the Air Code, which puts a 49% cap on foreign capital in Russian airlines. Anatoly Golomolzin, deputy head of the Federal Anti-Monopoly Service, proposed the initiative in December 2010. The idea is to bring the Air Code in line with the federal law on foreign investment in strategic companies, which allows foreign investors to own 50% or more of a Russian business.
The Economic Development Ministry declined to comment. Deputy Transport Minister Valery Okulov told Kommersant he does not see any grounds for altering Article 61. But Sergei Gavrilov, deputy head of the State Duma’s transport committee, indicated that the discussion is being held in the context of Russia’s WTO accession and shadow Turkish capital in charter companies. Gavrilov said proposals detailing the amendments would be put before the government this summer.
Officially, foreign capital has a low presence in the Russian aviation business. Indigo Partners, a U.S. investment fund, owns a 49% stake in Avianova airlines. The Economic Bank for Reconstruction and Development had a 20% share in Sky Express before the crisis.
In fact, this share is much bigger. A source on the aviation market explained to Kommersant: “Tour operators themselves buy aircraft, register them offshore and then hand them over to airlines. As a result, Turkish capital now fully or partly controls most of the largest charter carriers, including Ifly (Tez Tour), Orenburg Airlines and NordWind (Pegas Touristik).”
Orenburg Airlines, for instance, is 100% owned by Russian Technologies and is to be transferred to Aeroflot. But Pegas Touristik financed the purchase of five Boeing 737s out of its fleet of 37.
The Turkish OTI Group (Coral Travel) tells much the same story. The source said the company “has a special relationship with the Vyborg Airlines and is rendering it financial assistance for purchasing aircraft.” The company, the source added, enjoys “exclusive rights to operate these airliners, especially for regional charter programs from Russia.” Officially, however, the company is not registered as a co-owner.
Gavrilov confirms that foreign capital “has long been active on the Russian aviation market,” though the carriers where it invests “are undercapitalized.” State Duma expert Vitaly Bordunov believes legalizing foreign capital in the Russian airlines will make the market “more transparent and stable.” Oleg Panteleyev of Aviaport think tank adds that “foreign capital penetration in the aviation business is an all-European process and Russia will not avoid it.” Gavrilov also says Russia’s airlines need to be “rejuvenated” to avoid being sold off for scrap.
Set to fail: Russia, Ukraine gas talks
Russia and Ukraine are unlikely to make any progress in the new round of gas talks next Tuesday, because they have different plans and mutually-exclusive standpoints.
Ukrainian Prime Minister Mykola Azarov made headlines in the local media Wednesday saying that he had persuaded his Russian counterpart to review the gas price, the top priority of their talks in Kiev.
Azarov’s statement was immediately followed by a damning response from Moscow.
We have not negotiated a revision to the gas pricing formula, Prime Minister Vladimir Putin said. He explained they only agreed to re-read the contracts to see if there are any discrepancies in them that might make the pricing formula ambiguous. Otherwise, he believes Ukraine’s contracts are valid and enforceable.
But officials in Ukraine are not worried about discrepancies. They believe former Prime Minister Yulia Tymoshenko betrayed the country’s national interest by signing those contracts. “I have asked Putin, how did you bewitch Tymoshenko into signing them?” Azarov said at a news conference. “No one in their right mind would have signed a contract where Ukraine has all the responsibilities but none of the rights.” He hinted it was linked with the writing-off of huge debts run up by a corporation Tymoshenko managed in the 1990s.
Azarov believes Ukraine pays the highest price anywhere in Europe for Russian gas. It was $264/1,000 cu m in the first quarter with a $100 discount and is expected to exceed $300 by yearend. Adjusted for transportation and storage costs, Ukraine pays Gazprom as much as Germany, while other European countries have negotiated privileges, an analyst said.
With Russia reluctant to heed Ukraine’s demands for cheaper gas, Ukraine is growing increasingly mistrustful of Russia’s calls to join the three-party customs union, which should, allegedly, change the situation. Gazprom had said that, if it joined, Ukraine could be entitled to buy gas at $150-$160, but Ukraine was reluctant to take the bait.
Mikhail Gonchar, from the Ukraine-based Nomos Center, reasonably pointed out that Belarus, which is part of every single post-Soviet integration scheme, actually buys Russian gas at $245, not $160.
Ukraine is now focusing on the non-transparent circumstances of the contracts’ signing in January 2009 in the hope of invalidating or altering them in court. According to Ukrainian lawmaker Inna Bogoslovskaya, proving that Russian officials were aware of Tymoshenko’s illegal decisions, would mean they could demand the contracts are changed.
Analysts do not believe the gas price dispute will be resolved soon. The deputy prime ministers might not touch upon this highly sensitive issue at all on Tuesday, independent energy expert Valentin Zemlyansky said.
“The Ukrainian government has assumed a strong position defending its interests,” said Ukraine-based political analyst Konstantin Bondarenko. “Perhaps Putin did not expect that.” However, he does not believe Kiev has lost yet, expecting the conflict to be resolved in June at a meeting between President Dmitry Medvedev and Ukraine’s Viktor Yanukovych.
Putin’s idea of democracy, or why Russia needs elections
Putin’s recent statement after the National Medical Congress is worthy of a place in the treasury of Russian political thought.
Legendary French diplomat Charles Maurice de Talleyrand once told the Spanish ambassador that diplomats were given the power of speech in order to conceal their thoughts. We have to admit that politicians, though they are no diplomats, live by this principle 90% of the time.
When politicians stumble, their masks slip and people learn what their democratic representatives really think of them.
On most occasions, Prime Minister Putin is an avid proponent of Western-style democracy, opposing only the interference of foreign powers in Russia’s domestic affairs and the use of democratic slogans to attain their own goals.
Although from time to time Putin slips and betrays his anger about “helmeted liberals” who should “get their beards shaved off.”
But what he presented to us on particular occasion was not just an emotional outburst or a vivid turn of phrase: we had a glimpse of the complete picture of the world as it should be according to Putin.
Journalists asked Putin about recent disagreements between him and President Dmitry Medvedev, which have become more frequent of late. Putin was obviously relishing their discomfort.
When asked to comment on Medvedev’s interview with the Chinese media, Putin inquired what part was unclear. The journalist wanted to know Putin’s views on the 2012 Russian presidential election.
With a condescending smile, as though pitying the journalist’s limited mental acuity, Putin answered that this was a trite question, and that both he and Medvedev had been asked it no less than a hundred times in the past few years.
Russians have no business thinking about the country’s leadership, it seems. What they should do, to quote Putin, is keep their heads down, tilling their plots like St Francis of Assisi, and when the time comes, their new leader will be revealed to them.
“Of course, the decision will have to be made eventually,” Putin added. “But we still have a year before the election, and all this fuss makes work impossible.”
It seems Putin does not quite grasp the concept of elections.
In most countries, when the election is only a year away, there is the very real sense that there is hardly any time left. After all, elections are more than just casting the ballot. They imply an intense struggle of opinions, the selection of candidates and their mutual rivalry, and the actual voting is only the culmination of the process. In Russia, however, we get the culmination without the process. According to Putin’s vision, the electorate should mind its own business until the big day, and then do what it is told.
Putin’s idea of an ideal Russia is quite bleak and mirthless.
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