Russia pulls aviation into sanctions war

Russia’s threat to close Siberian airspace throws spotlight on decades-old trade battle.

Russia’s prime minister, Dmitry Medvedev, this week threatened to close Siberian airspace to European planes, warning Europe that “many” European airlines could be forced into bankruptcy if Russia carried out its threat.

Medvedev’s announcement, published on Monday (8 September), came hours before the European Union’s member states agreed on a package of sanctions intended to persuade Russia to withdraw its troops from Ukraine. The EU’s sanctions are currently on ice, to provide the EU with an opportunity to assess Russia’s response to a ceasefire in force in eastern Ukraine since Friday (5 September).

The European Commission and leading airlines have not commented on the potential impact on the profits of European airlines. For consumers, a ban would lengthen flights to the Far East, but it remains unclear whether ticket prices would rise, as airlines have consistently complained that the fees that Russia charges are excessive.

The Commission says that European airlines currently pay Russia more than €400 million for flying over Siberia, suggesting that Russia is prepared to lose over €1m a day to retaliate against measures by the EU. EU carriers also pay fees for aviation services. Several sources questioned whether Russia would be prepared to “shoot itself in the foot”, as one put it.

Closing Siberian airspace would also add to questions about the financial viability of Russia’s own national carrier, Aeroflot, in which the Russian state owns a controlling 51% stake – and which is believed to benefit habitually from subsidies funded by Siberian overflight fees.

Russia’s levy on European airlines is one of the longest-running commercial disputes in the EU’s relationship with Russia. The EU has consistently questioned the fees’ legality under the Chicago convention on civil aviation.

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Contrary to international practice, the Soviet Union charged international carriers overflight fees, rather than fees based on use of air-navigation services. In 2006, Russia agreed to phase out overflight charges by the end of 2013, switching to user fees. The drift towards a resolution of the dispute appeared to gather momentum when the EU made support for Russia’s entry to the World Trade Organization (WTO) conditional on a settlement, but Russia joined the WTO in August 2012 with differences still unresolved.

Negotiations were complicated by the EU’s effort to include Russian carriers in the EU’s emissions-trading scheme (ETS) from January 2012. In another perceived act of retaliation against the EU’s ETS plan, Russia refused in June 2012 to renew the overflight rights of the Finnish carrier Finnair.

According to the flight-tracking service Flightradar24.com, Finnair has, however, since become one of the three most frequent fliers over Siberia, behind Air France-KLM and Lufthansa.

Some of the EU’s persistent difficulties are attributed to an unwillingness on the part of EU member states to unite front in the face of Russia’s perceived divide-and-rule tactics. Aviation is regulated under bilateral agreements. The Commission has been pressing for member states to back a comprehensive air-services agreement with Russia.

The Association of European Airlines says European carriers account for half of the 285 passenger trans-Siberian flights between
Europe and the Far East, and 15 of the 45 cargo-only flights along the same route.