Kremlin Takes on Lufthansa

♠ Posted by Emmanuel in at 11/03/2007 04:01:00 PM
Russian President Vladmir Putin is famed for using strong-armed tactics to get neighboring countries to see Russia's way--witness the cutoff of natural gas supplies to former Soviet satellites in the dead of winter. Now, Russia is taking on an even bigger foe in Lufthansa, the second-largest carrier here in Europe. Though it has already backed down, Russia for a while suspended the carrier's rights to go through Russian airspace as part of a ploy to get it to relocate a refueling hub from the central Asian republic of Kazakhstan to one in Siberia. Germany temporarily banned Aeroflot flights from passing German aerospace in retaliation according to Der Spiegel, though it seems both sides have calmed down somewhat. (As an aside, there's a feature in Der Spiegel on the Nashi youth cult of Putin.)

This latest spat is part of an ongoing conflict between the EU and Russia over rights to go through Russian airspace. The EU seeks to abolish payments for these rights, though Russia lets the matter drag on as doing so is lucrative:
According to one EU report, European airlines pay roughly €300 million ($433 million) annually for the right to fly through Russian airspace. A debate between the EU and Russia over these fees has been dragging on for almost 20 years. In a compromise reached by both sides in 2006, but which Moscow has yet to ratify, Russia agreed to abolish the fee by the end of 2013. Legal experts say that fees levied for flyover rights can only be applied to flight safety and must not exceed these expenses.

"For decades, EU airlines have been required to pay fees to the Russian company Aeroflot for the right to use Russian airspace between the EU and Japan, China and South Korea. These are in addition to the standard flight navigation fees," states a European Union paper. Airlines from the EU are thus obliged to enter into a commercial contract with Aeroflot. According to the authorities in Brussels, this practice contravenes international law and, in particular, the Chicago Convention of 1944, which guarantees air carriers flyover rights at no or limited expense.

The European Commission made the abolition of the fees a pre-condition to Russia's entry into the World Trade Organization (WTO). And, in May 2004, Moscow committed to eliminating the fee. Starting in 2010, the rate is to be steadily reduced and airlines will no longer be required to enter into contractual agreements with Aeroflot.

With that backgrounder in mind, on to the (temporary?) resolution of the current row from the International Herald Tribune:
In an effort to defuse an escalating diplomatic dispute with Germany, the Russian authorities agreed Friday to allow Lufthansa to temporarily resume cargo flights over Russian airspace while negotiations continue over the location of one of the German flag carrier's main refueling hubs.

Moscow abruptly suspended Lufthansa's overflight rights on Sunday, claiming a temporary permit had expired. That permit allowed Lufthansa cargo jets flying between Europe and Asia to use Russian airspace to reach a refueling station in the Kazakh capital of Astana.

The action - coming just weeks before an important meeting between the European Union and Russia on transport issues - has raised concerns that Russia may again be resorting to strong-arm negotiating tactics similar to those it has used with Ukraine and Belarus in disputes over natural gas and oil prices. Russia shut off pipelines briefly during the past two winters, disrupting fuel supplies to Western Europe.

The dispute began Oct. 22, when the Russian Transport Ministry sent a letter to Lufthansa and the German Transport Ministry, asking that the airline move its cargo hub from Kazakhstan to an airport in the Siberian city of Krasnoyarsk - about 1,500 kilometers, or 900 miles, east of Astana.

"We have refused this demand because the infrastructure and technical equipment in Krasnoyarsk is not sufficient to operate an international air cargo hub," said Peter Schneckenleitner, a spokesman for Lufthansa. He added that weather conditions at the Siberian site were unreliable and prone to thick fog.

Russia's overflight ban has forced Lufthansa to reroute its 49 weekly flights between Europe and Asia, the airline said. This adds approximately three extra hours of flight time, for example, on round trips between Frankfurt and Tokyo, consuming an additional 600,000 liters, or 160,000 gallons, of jet fuel per week.

In a statement Friday, the Russian Transport Ministry said it had decided to extend until Nov. 15 "temporary permission for flights by Lufthansa Cargo until the official confirmation by the German side of the selection of an airport for transit landings."

It also said the German authorities had agreed to consider having Lufthansa cargo flights make transit stops at Krasnoyarsk and would notify Moscow of their decision by next Wednesday.

Germany has so far sought to resolve the dispute on a bilateral basis. But a government spokesman told the Reuters news agency that it was considering approaching the European Commission for help.

Jacques Barrot, the EU transport commissioner, is due to meet with his Russian counterpart, Igor Levitin, at a meeting in Moscow Nov. 16-17. Among the items on the agenda for that meeting is the formalization of a tentative agreement by Russia to phase out, by 2014, overflight fees it charges for passenger planes flying between Europe and Asia. European airlines spend about €300 million, or $435 million, a year on such fees, according to the Association of European Airlines.

While Russia does not charge such fees for cargo flights, some speculated that the timing of the dispute with Lufthansa could be linked to the deal on passenger overflight fees.

"This may be Russia trying to establish a position of strength" before its meeting with the EU, said David Henderson, a spokesman for the airline association, which represents 31 of the region's carriers, including Lufthansa...

Russia, which stretches across 11 time zones, is a major transport route for cargo flying between Asia and Europe. "This is a situation that is unique in the world," Henderson said. "No other country straddles as much airspace as Russia."