Aeroflot Investor Hopes to Salvage Boeing Deal

MOSCOW, Sept. 19 -- A Russian billionaire put up $40 million Tuesday to stave off the collapse of a $2.5 billion deal between the state-controlled Russian airline Aeroflot and Boeing Co. that had become ensnared in the deteriorating U.S.-Russia relationship.

The board of Aeroflot decided Friday to indefinitely postpone the purchase of 22 long-haul 787 Dreamliners. Many analysts saw the move as meant in part to protest U.S. slowness in approving Russian membership in the World Trade Organization and the imposition of U.S. sanctions against two Russian companies.

Alexander Lebedev, who owns 30 percent of Aeroflot, said one of his companies had agreed to meet the contract's early terms on behalf of Aeroflot, in order to keep the planes on reserve and prevent them from going to other airlines that are ready to take the Russian carrier's place in Boeing's delivery schedule.

"We are hurting ourselves much more as a country by damaging Aeroflot than anything we gain by snubbing the Americans, if this is the purpose," said Lebedev, who is also a member of parliament for the ruling United Russia party. "This is a very, very attractive contract for Aeroflot, and if it goes away, then Aeroflot will have to find long-range aircraft from somewhere, maybe leasing companies, and it will cost not less than an extra $800 million."

Big business and government have become increasingly intertwined in Russia under President Vladimir Putin, with the state exercising control in major enterprises, particularly industries regarded by the Kremlin as strategic assets. But state involvement has also led to complaints that business decisions are often dictated by political calculations, not shareholder value.

Russian officials are smarting from delays in securing an agreement with the United States on membership in the World Trade Organization and the recent U.S. decision to impose sanctions on two large major Russian companies, the Sukhoi aviation firm and the state arms trader, Rosoboronexport, for allegedly helping Iran develop nuclear weapons. Both companies denied the accusation.

Russian officials have recently been talking up the possibility of a strategic partnership with EADS, the Netherlands-based aerospace consortium that is the parent company of Airbus. They may have thought that directing the entire order of 44 planes to Airbus would increase Russia's leverage as it seeks to buy its way into the consortium, according to Ilya Makarov, an analyst at Antanta Capital, an investment firm in Moscow.

Over the summer a Russian state-controlled bank purchased nearly 5 percent of EADS. Russian officials said they wanted a place on its board and could expand their shareholding to 25 percent. European officials rebuffed the overture.

The issue is likely to be discussed at a summit this Saturday among Putin, French President Jacques Chirac and German Chancellor Angela Merkel in Paris.

At a meeting of the Aeroflot board Friday night, Chairman Viktor Ivanov, also a deputy chief of staff in the Kremlin, said the company could not make a decision on the Boeing purchase because no official directive had arrived from the government of Prime Minister Mikhail Fradkov.

The government provided no explanation for its inaction. But diplomats and analysts here said they suspected the Kremlin did not want to approve a multibillion-dollar purchase from an American company when the United States is perceived here as playing hardball on other economic issues and while the potential for a partnership with EADS remained unclear.

"It was a political decision," Makarov said.

"It is hard to see how the decision could be viewed as logical in a commercial framework," said a Western diplomat.

Lebedev said he believes that there was not any instruction from the president and that Fradkov was "reading the wrong signals." He noted that Boeing had agreed separately on a long-term joint venture with a Russian company to supply titanium to the aircraft manufacturer, a deal blessed by Putin. The president met with Boeing executives at his vacation residence outside Moscow last month.