Airport IPO Fails To Take Off

moscow_domodedovo_jun08.jpgJoe Nocera of the New York Times has followed up last week’s op-ed on how the Khodorkovsky trial typifies legal nihilism in Russia, with an equally damning piece on the collapsed IPO of Moscow’s privately owned Domodedovo airport, which Nocera claims is far more to do with an unashamed abuse of power than ‘unfavorable‘ market conditions.  Russia’s vaunted spate of IPOs has hit a fair few hurdles.  Nocera argues that given the investment climate in Russia, this is no major surprise.  He explains:

In mid-May, days before the airport announced its plans to go public, the prosecutor general lowered the boom. His report concluded that the airport’s offshore ownership structure was “unacceptable,” because it allowed Domodedovo, as he put it, “to hide the real owners and those making the management decisions at the airport.”

As is always the case when the plutocrats are getting ready to pull afast one, the charge has a surface plausibility. The East Line Group’sownership is byzantine, involving several companies registered in theIsle of Man. Yet somehow that never mattered while it was spending allthat money to build a more profitable airport. Besides, offshoreownership is almost as common in Russia as the corporate structure is inAmerica; even state-owned companies often use an offshore structure.Why do companies go this route? In part, at least, to keep assets awayfrom the grasping hands of the plutocrats.

Sure enough, a few days after the report, the news leaked out that a mannamed Igor Yusufov was putting together a group that hoped to buy a $1billion stake in Domodedovo. Who is Yusufov? He’s a former energyminister who served under the Russian strongman Vladimir Putin.According to The Financial Times, until a few months ago, he was also aspecial deputy to Medvedev. The Russian business newspaper Vedomostidescribed him as a potential “peacemaker” between the government and theairport’s owners.

Well, yes, that’s one way of describing him. Here’s another way, the waymost foreign investors saw it. He was using the report to squeeze theairport’s owners and get a piece of a thriving company at a shamefullylow price. Is it any wonder the I.P.O. was soon called off? How cananyone invest in a Russian company that is being shaken down by thegovernment? That threat, which looms over every private venture inRussia, had become all too real for the owners of the Domodedovoairport.

Read all here.