Behind the fog
By Mikhail Fedotov Posted Oct 1 2004
Associated Press/Petros Giannakouris
Vladimir Gusinksy, left, was released on bail from maximum security prison in Athens in 2003. He was arrested on an international interpol warrant by Russia to force the sale of his media organization to a company controlled by the state.
Much like London’s Big Ben in Claude Monet’s famous painting, the contours of modern-day Russian media can be barely seen from underneath a veil of thick fog. President Vladimir Putin’s smooth sentences about press freedom and the media’s economic independence are enveloped in smoke. Entangled ownership relations among media businesses are shrouded in clouds of mist. A haze of juridical casuistry is being used by Russian judges and prosecutors as means of legal enforcement to destroy the handful of serious and independent TV channels (NTV, TV-6, TVS) recognized by the government as sources of political opposition.
The absence of laws regulating broadcasting, as well as the lack of anti-trust rules in the Russian Media Law of 1991, has created favorable conditions for the formation of media empires, established in the mid-1990s by so-called oligarchs close to the Kremlin. The oligarchs were, and remain, part of the power status quo to the same extent that the power status quo remains part of the oligarchy. Any attempt by these oligarchs to stand in opposition to the Kremlin has resulted in authorities using their enforcement powers to take away the offending oligarch’s businesses and hand them to a new crop of more obedient oligarchs. Just look at the ruins of Vladimir Gusinsky’s media empire: On May 19, the European Court of Human Rights recognized that Gusinsky was arrested in order to force “the sale of his media organization to Gazprom, a company controlled by the State.”
Now, the former Gusinsky empire is in the hands of the government. Federal authorities hold it in two hands. Gazprom is in the first hand. Its interest in this media empire is held through Gazprom-Media, the majority shareholder of NTV, NTV Plus (satellite), TNT-Network and many other media companies. In the other hand is the Eurofinance group, established by the state-controlled Eurobank and Vnesheconombank. According to the Internet database “The Map of Property in St. Petersburg” (www.stockmap.spb.ru), Eurofinance owns 30.56 percent of shares in NTV, 21.57 percent in NTV Plus and 28.27 percent in TNT-Network. The group also holds 23.34 percent of stock in the TV channel “Petersburg.”
Eurofinance could soon be the single owner of Gazprom-Media, and after that, continue its expansion in the media business. There are a few arguments in favor of its plans.
First, the former senior manager of the Eurofinance group, Boris Boyarskov, in June was appointed chief of the new supervisory media authority, a federal service, which would be responsible for the licensing of broadcasting and the reviewing of media law compliance. Recent experience shows that a governmental agency with such powers has a real opportunity for controlling the redistribution of property in the media industry.
Second, the closeness of the Kremlin and the leadership of Eurofinance has been well known. Third, Internet portal Strana.ru and other media have reported that 49 percent of the shares in Gazprom-Media were passed from Gazprom to Eurofinance. There has been no official comment on the situation.
There is a ubiquitous lack of official information about ownership of media outlets, the profits they make and the relations among people and entities who run them.
In the case of the TV company “Channel One” (earlier “Ostankino,” “ORT”) the state owns 51 percent of the shares, and 49 percent is divided among two obscure offshore companies and one closed stock company registered in the district of Chukotka. There has been no official announcement regarding the ownership and management of these companies, but the Russian press unanimously reports that the owner of these shares is Roman Abramovich, Chukotka’s governor and the owner of the British soccer club Chelsea. Instead of official reports, Russian society has to rely on scraps of information, which emerge sporadically from the fog and the silence.
The same fog clouds RTR (VGTRK), the Russian State Television and Broadcasting Company, which has three national TV channels (“Russia,” “Culture” and “Sport”) and two radio channels (“Radio of Russia” and “Mayak”) as well as 86 regional TV and radio stations. And this is only the visible, official, part of the RTR iceberg. The company is organized as a state enterprise: The president of the RF appoints its director general who then appoints each of the thousands of employees who work for him. The company’s property is considered state property, and the federal budget contains a special line for RTR financing. It is interesting that the amount of annual budget financing for the state television varies from election to non-election years. According to the Report of the Accounts Chamber of the Russian Federation, the funding of the central office of RTR increased 28 times in the first half of 2000, the year Putin was elected to serve his first term.
According to RTR’s by-laws, approved Feb. 26 by the Russian government, the company’s objectives are those which ordinarily belong to a governmental agency, namely “informational and analytical support of internal and foreign policies of the Russian Federation; the accomplishment of the functions of the united production and technological complex of electronic mass media; development of the state television and radio broadcasting system.”
It is quite telling that the company’s official English title, unlike the Russian one, does not contain the word “state.” The reason for this convenient omission is to package RTR for “foreign consumption” as a public TV station. But make no mistake about it: RTR is a state-owned TV company entirely controlled by the state.
The future of the company, however, might be different. We may see its transformation into a true public company as a result of the adoption – under public pressure – of the federal law “On Public Broadcasting” (the draft was submitted to the State Duma in 2002), or it could become a private company. Since 2002, from time to time, different government officials have made announcements about RTR’s forthcoming transformation into a joint-stock company, but the plans get axed by other government officials within days. These contradictions show that backstage talks about RTR take place all the time. The outcome remains uncertain.
The question of RTR’s future is closely related to the financial viability of this state enterprise. Although the company receives tax-based revenues, fiscal information has not been released to the public. The above by-laws claim that RTR yields to the Federal Agency of Press and Mass Communications on questions of its financial and commercial activities, but the agency has systematically denied the data.
A financial picture formed from the bits and pieces of information contained throughout the five-year-old Report of the Accounts Chamber of the Russian Federation shows RTR deep in debt. The document shows that bank loans covered nearly 70 percent of RTR funding in 1999. Only 10 percent came from the federal budget, and revenues from advertising provided 15 percent. In the same fiscal year, 26.6 percent of RTR’s total expenses went to interest payments of bank loans. Nearly 20 percent of RTR’s budget was spent on buying broadcast rights and licenses, and only 0.01 percent was spent on its own production. At the same time, nearly 40 percent was spent on management salaries and general expenses.
The next battle for the redistribution of the media will likely be fought over the passage of a new media law. In 2002, President Putin announced that the media law of 1991 remains behind the new civil code and other codes. Immediately after that, liberal parties submitted a new version of this law to the State Duma, created by the authors of the current media law. Unfortunately, this particular draft got a red light. Meanwhile, a green light was given to a draft proposed by the Industrial Committee, a non-commercial partnership of major national media. President Putin had promised to submit a draft to the parliament, and therefore he blessed the version that was more useful to him to continue perfecting the system of “managed democracy” in Russia.