Putin Seizes Rights To St. Petersburg Airport From Foreign Investors

(Bloomberg) -- President Vladimir Putin ordered the transfer of rights to managing Russia’s second-busiest airport from foreign shareholders that include Germany’s Fraport AG and the Qatari wealth fund by shifting their stakes into a new domestic entity.

Shareholdings in the Cyprus-registered concession that runs St. Petersburg’s Pulkovo airport will be consolidated in a new Russian company under a decree published late Thursday. 

Existing investors, which also include a consortium with Abu Dhabi sovereign fund Mubadala Investment Co., will retain their stakes but won’t be able to vote because those rights will be held only by Russian shareholders in the new company.

The transfer of the shareholdings in the airport of Putin’s home city follows earlier Kremlin retaliation against “unfriendly countries” for measures taken to punish Russia for its war in Ukraine. It’s taking place as Putin asserts Russian “sovereignty” against the US and its allies ahead of a likely declaration he’ll run for a fifth presidential term in March elections.

German airport operator Fraport, the Qatar Investment Authority, and Russia’s VTB Bank each hold about 25% of Pulkovo’s concession. The remainder is controlled by a consortium of investors including Russia’s sovereign wealth fund, RDIF, Mubadala and Baring Vostok, according to the Interfax news service.

Putin told the government to create a new management body for the operator of Pulkovo, which is Russia’s busiest airport after Domodedovo in Moscow and served 17.5 million passengers through October this year. St. Petersburg also has a military airport, Levashovo.

While Germany is viewed as “unfriendly” by the Kremlin, Qatar and Abu Dhabi are not. Putin’s decree potentially left open the door for the Middle East investors to regain their voting rights by saying stakeholders could restore them “upon their application, subject to the conclusion of corporate agreements with other participants in the company and upon the assumption of obligations to comply with Russian legislation.” 

The order on Pulkovo relied on laws signed long before Putin’s February 2022 invasion of Ukraine and was based on a “threat to the national interests and economic security of the Russian Federation resulting from the violation of obligations by certain foreign legal entities.” 

That differed from earlier Kremlin takeovers of the local operations of international holdings, which were based on legislation Putin signed in April that allowed Russia to impose temporary state control over the assets of companies or individuals from “unfriendly states.”

It seized Russian plants owned by Danone SA and Carlsberg A/S in July and installed allies of Putin to run them. Russia also took control of utilities owned by Finland’s Fortum Oyj and Germany’s Uniper SE. 

Fraport is evaluating the consequences of the Kremlin’s decision, a spokesman said. The company has already written down the value of the holding to zero following the attack on Ukraine, and there’s been no interaction with Russia or any transfer of money in either direction since then, he said. 

QIA and Mubadala declined to comment. 

Pulkovo airport welcomed Putin’s order, saying it would “restore corporate governance mechanisms,” RIA Novosti reported, citing the company’s statement.

--With assistance from Benedikt Kammel and Nicolas Parasie.

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