Build Russia a boom before it breaks down
Fund plugs into power sector reforms
Little more than a decade ago, Domodedovo was faced with the real prospect of closure after safety officials condemned it as dangerously outdated.
But after privatization and a reported $1 billion-plus investment by new owner East Line, the airport is now the most popular gateway into Moscow, outstripping Sheremetyevo as the country’s busiest airport. It is now firmly established as the airport of choice for foreign carriers and regularly services more than 100,000 passengers a day.
But what should be a showpiece for a country looking to attract billions of dollars of private capital to help upgrade its creaking infrastructure has been making all the wrong headlines because of a long-running dispute between East Line and the Federal Property Management Agency.
In a double-headed assault, the FPMA is seeking to renationalize airport property that East Line owns and is disputing the legality of the company’s lease agreement with the state for the use of the runways. East Line has successfully fought off a series of legal challenges from the FPMA in recent years but the authority’s dogged attempts to seize back control of the airport are casting a shadow over plans for a new terminal needed to cope with rising demand.
Over the past seven years, air travel has almost doubled in Russia and commentators suspect that given higher-than-expected passenger volumes the FPMA is seeking to force East Line into paying higher rents for its use of the airport.
It’s a measure of the concern about the case that Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, the country’s leading business lobby, was moved to raise the issue of Domodedovo with president-elect Dmitry Medvedev as part of an appeal to the government to safeguard property rights and protect companies from potential abuse of power by regulatory agencies.
In a year when several landmark public-private partnership contracts are set to be signed, the fight over Domodedovo could hardly have come at a worse time for a government looking to attract foreign investment into much-needed infrastructure development.