Sky. Jet. Official
A business jet for a successful entrepreneur and billionaire is a natural thing. That's why it is called business. It’s a different matter that the public servants, who recommended to "hold on, because there is no money", allow themselves ancestral homes, apartments of a size of a football field and private jets. The CrimeRussia found out which of the local officials has such good fortune.
Increased focus on the expensive planes a month ago (in Alexei Navalny’s and his Fund to Fight Corruption easy state of mind) became a thing after the Deputy Prime Minister Igor Shuvalov’s flying dogs. The cute little dogs with extravagant names fly to prestigious international exhibitions by a Canadian luxury jet Bombardier Global XRS, the average cost of which is $ 55 million.
Andvol Pinkerton, Andvol Tsesarevich, Andvol Ostap Bender and Andvol I'm Your Idol (names of the collectible Pembroke Welsh Corgis) fly to show themselves off accompanied by a personal governesses and their owner - the wife of the Deputy Prime Minister, Olga Shuvalova.
At that, each flight of a Bombardier costs a round amount of 30 to 50 thousand Euros, depending on the destination.
Navalny's Fund counted that only to Shuvalov’s villa in Salzburg, Austria the aircraft flew 18 times a year (which cost them $ 1 440 000). The dogs flying to the exhibitions in the same year cost the Shuvalovs family significantly less - about 40 million rubles.
Piece of art in the Suvalovsky Park
Of course, the news that Shuvalov’s dog fly to defend the honor of the country in the international tournaments not by low-cost airlines caused a rapid activity among the Russian taxpayers – a flashmob under the motto "I want to be the Shuvalov’s dog" spontaneously arose on the web and in the Shuvalovsky Park in St. Petersburg a piece of art on the topic of the day was placed by the artists of the Yav movement.
Igor Shuvalov visits his son Evgeny in the army. 2012
Of course, the luxury jet is not directly owned by the Russian Deputy Prime Minister, and is not declared anywhere among his property. Two weeks after the scandal in the media, it transpired that the Bombardier is the property of Shuvalov’s son, or rather, his company Altitude, registered in Bermuda.
Shuvalov Jr. owns it ever since he was discharged in 2013 from the Russian Navy, where he served in the special forces of the Pacific Fleet on the Russian island.
This moment coincided with the public campaign for the return of assets of state officials under national jurisdiction.
After the May 7, 2013, Vladimir Putin signed a package of laws (No. 79-FZ, No. 102-FZ and No. 3-FKZ), the gentlemen Shuvalovs, not poor people, moved their companies in Russia, but with Altitude and another offshore company it did not work out: the Bermuda legislation did not allow it.
The aircraft was owned by Shuvalov since 2009. It was acquired for the interest on the loan, which in 2003, the Shuvalovs family gave to their friend Suleiman Kerimov to buy Gazprom shares.
After that, Gazprom’s shares grew rapidly, and within a few years, Shuvalov’s 18 million dollars miraculously turned into 80 or even 100 (the newspaper Vedomosti which in 2012 wrote about this friendly loan found it difficult to give an exact figure). Similarly, Shuvalov successfully borrowed money to billionaire friends repeatedly.
For example, Alisher Usmanov's Gallagher, having taken a 50 million dollars loan from Olga Shuvalova’s Bahamian company Sevenkey in 2004, after a couple of years gave back $ 118 million. Why in 2004 Roman Abramovich’s offshore company Shvidler Unicast Technologies transferred Shuvalov $ 50 million, nobody knows. The Vice-Prime Minister never made any attempts to explain the transfer of this amount.
The only thing that can be assumed is that by doing so Abramovich with his partner expressed their appreciation to Shuvalov for lobbying the consolidation of Russian metallurgical industry in the hands of Chelsea owner.
Borrowed to fly
Bombardier Global XRS with onboard M-VQBI number is Yevgeny Shuvalov’s company’s property
In short, Shuvalov’s had the money, bought the plane, but there was no possibility to land it in the Russian jurisdiction.
Then, a good reason came: the demobilized son Evgeny, who has once courageously preferred service in the army over studying at Oxford. The firm Altitude with the aircraft was registered to him.
According to the assurances of the chief editor of Echo of Moscow Alexei Venediktov, since then the Shuvalov's take regularly borrow the aircraft from their son but also regularly pay all the costs. However, there is one but, and it is a significant one.
The Anti-Corruption Foundation’s lawyer Lubov Sobol completely shatters Venediktov’s version with this but: the thing is that under the jurisdiction of the offshore Isle of Man, where Bombardier Global Express with onboard M-VQBI number is in fact listed, it is impossible to register the aircraft for commercial purposes. It is simply prohibited by the laws of the island.
Non-commercial use of business jets is also clearly regulated: if there is a person who has no relation to the company for which the aircraft is registered on the plane during a flight, it is a violation of the law. Along with him in the air, at least, there should be a head of the company or its employees. But not the dogs of the owner's mother and their governesses. And the fact that Igor Shuvalov pays for the use of the jet, also violates the rules of private aviation of the Isle of Man, said the lawyer of the FBK.
650 hours – flying high
Igor Sechin’s new aircraft
But other Igor Ivanovich, the Head of Rosneft Igor Sechin, does not violate any rules. His new jet, owned by the offshore daughter of Rosneft, is used by Sechin himself.
As for the rest, the head of the state corporation Rosneft, apart from the patronimic, has surprisingly a lot in common with the Deputy Prime Minister Shuvalov.
For example, they definitely share love for Canadian Bombardier airplanes. In late August, it transpired that the Cyprus company Shelf Support Shiphold Limited (SSSL) acquired a luxury Bombardier BD-700-1A10 Global 6000. As well as Shuvalov’s Bombardier, the aircraft with the tail number M-YOIL is registered under the jurisdiction of the Isle of Man.
According to media reports, the offshore company is headed by some Alexander Sokolov, the full namesake of the Head of Rosneft Finance Department. Therefore, detection of SSSL on the Rosneft’s website in the list of persons and companies affiliated with the Russian oil giant from 30.06.2016 is quite natural, although this is the daughter of Rosneft, which, according to the documents, manages the property, whereas for aviation another offshore company named Skyline Asset Management Ltd is responsible for.
Despite the crisis, the purchase of the aircraft by Rosneft’s auxiliary offshore company for more than $ 55 million from the moral and ethical point of view, would seem justified: the average price of oil has increased in comparison with the beginning of the year by 20% in ruble terms, while net profit in the second quarter of 2016, according to the August report, reached 89 billion rubles, which 6.4-fold exceeds the results of I quarter. Earned well - updated the fleet.
All the more, Sechin, to whom media often refer to as the second most influential Russian politician after Putin, in his words, spends significant part of his life in an airplane. Well, he definitely will not fly by low-cost charters.
"During the last year, for the organization of our subsidiaries, export contracts, negotiations with partners, I spent 650 hours in the aircraft. We have remote sites. If someone wants to spend 650 hours on the plane – you are welcome", complained the head of Rosneft about his life in August, explaining to the shareholders why the company's management during the difficult times for the country, has such an odd salary with lots of zeros at the end.
Basic interior of Bombardier Global 6000, in which Igor Sechin has to spend 650 hours each year.
The top-manager of the world-class company must make global money, says Sechin. Otherwise, he will be tempted away by foreign competitors. For example, Sechin’s income for 2015 is estimated in the range of 459 to 612 million rubles.
First thing is the planes
However, one cannot blame the Head of Rosneft in the fact that he does not think about the country. Otherwise, why would he ask the President Vladimir Putin to zero the import duties and VAT for the purchase of business jets?
Customs duties on the business class jets currently make up 30% of the cost of the aircraft. Plus 18% VAT. Therefore, the business jet imported to Russia instantly becomes 1,5 times more expensive. Taking into account the average cost of Gulfstream, Embraer, Bombardier and Falcon, which cost $ 25-30 million and are popular among the elite, the difference is impressive. Maintenance costs are expensive as well: annually, the owner spends on his winged transport from 1 to 2 million dollars depending on the model.
According to the Ministry of Economic Development, there are at least 500 business jets affiliated with the Russian business and private business owners in the country, and only 72 of them have Russian registration. It is easy to calculate how much money the 500 Gulfstreams, Boeings, and Falcons registered in the country can contribute to the Russian treasury. From 700 million to a billion dollars annually.
Authorities enthusiastically supported Sechin’s initiative. The Ministry for Development of Russian Far East considered that such a change would lead to the expansion of the national network of airports and the Transport Ministry saw the prospect of new jobs and additional cash flows in the budget in it. The head of the state, who in August gave the order to authorities to develop a procedure for liberation the business aviation from the customs duties for a period and to report on the progress of its implementation until 14 October, liked the idea as well.
Meanwhile, for Rosneft the initiative has lost relevance as it was put forward in relation to specific tasks. The company planned to buy several aircrafts with ski landing gear for the flight to the northern fields. In the end, it opted for the relatively inexpensive Canadian DHC-6 Twin Otter Series 400 ($ 6.5 million) entrusting their maintenance to a Krasnoyarsk Company AeroGeo. The rest of Rosneft’s fleet is still in the offshore, where the property of her subsidiaries includes not less than 20 business jets.
The island where one can find anything
Will the situation where the majority of business aviation aircrafts are registered in offshores with the introduction of zero tariffs change is an open question. The tradition to hold private aviation in tax-free zones is not new. The absolute leader in the number of registered business jets among them is the Isle of Man, the dominium of the British Crown in the Irish Sea which is not the part of the EU. Officially, it is in the British jurisdiction, but in fact it has the status of an autonomy.
The first private aircraft was registered here not so long ago - in 2007, and in 2014, their number exceeded 700. The annual growth rate of 100 aircrafts is due to the unique tax climate created by the island's authorities for the owners of private aircrafts.
Even compared to other offshore companies, Man is the most favorable place for the aircraft owners to register their property. The are many reasons for that: the island provides with zero corporate tax rate to income for most activities, except banking, there is no tax on the insurance premium and there are no strict requirements to where the aircraft is normally based.
Registration of an aircraft and registration of all necessary documents takes minimum time and costs symbolic (as compared to the average income of the aircraft owner) amount of money.
As the FBK lawyer Lubov Sobol notes, the main feature of offshore territory is that not being the part of the EU, the island is still included in its customs and fiscal space and the aircraft registered there can safely fly in the EU airspace.
In addition, the territory provides with the lowest prices for maintenance and hiring flight personnel in Europe. For the Russian officials and businessmen, a special charm of the island is the possibility to register a luxury aircraft without unnecessary publicity.
The planes assigned to Man can be determined by first the character «M» in the tail number, which consists of a short alphanumeric combination. And then, it all depends on the owner's imagination. For example, several aircrafts listed on Oleg Deripaska’s air squadron on the island fly under the numbers M-ALAY, M-UGIC, M-UKHA, and the new Bombardier belonging to the banker Oleg Tinkoff has inherited the same number that was on the last of his Falcon jets - M-TINK.
According to the sectorial social resource Aviaforum.ru, on which professionals pilots and aviation fans share information with each other, the Isle of Man as the place of registration of their aircraft registered in affiliated offshore companies is chosen by many representatives of the Russian business elite, companies and government officials.
Here is an incomplete list of them:
M-RCCG Embraer Legacy 600 - the RMK founder Igor Altushkin; M-URUS Boeing BBJ - the private investor Rustem Teregulov; M-HHHH Airbus A318 Elite - the former co-owner of the Cherkizovsky market Zarakh Iliev; M-JIGG Gulfstream G550 and M-ESGR Embraer Legacy 600 - the Russian-Ukrainian billionaire Konstantin Grigorishin put on the wanted list in Russia; M-UNIS Bombardier Global Express XRS - Petropavlovsk CEO Paul Maslovski; M-ISRK Dassault Falcon 900LX - the former vice-president of LUKOIL Iskender Khalilov; M-ANTA - Kamil Yusupov (VTB Tatarstan); M-VANG - Andrey Goncharenko; M-ARJJ - Arkady Rothenberg; M-AFAJ - Marina Mamontova (Moskapstroy); M-OSPB - the owner of the bank Uralsib Vladimir Kogan; M-KATE -Dmitry Rybolovlev; M-YORK Falcon 7X - the former owner of the OJSC Bank Mosvky Andrey Borodin, who is wanted internationally. The board number is registered to a company Lead Universal Limited which is affiliated with the Bank Moskvy.
Russian companies and banks also often register their aircrafts on the island which is favorable in all respects:
M-ATPS Gulfstream G550 - TPS Nedvizhimost; M-HAWK Bombardier Global 6000 and M-YBST Challenger 604 – the offshore subsidiary of Genetechma Finance Limited owned by Vnesheconombank; M-ABDL Hawker 4000 stands in the name of Sberbank subsidiary SB Leasing Ireland; M-AVOS Gulfstream G450 - Helter Management Limited affiliated with the VTB.
Some board numbers at this point may be incorrect if the plane’s registration jurisdiction has been changed, or it has been sold by the owner.
Winged Presidential Envoy
It is proved that flying business jets to and using them for the needs of one’s family can be achieved quite hassle-free and without registering them on one’s offshore companies: the state will pay for everything.
To do this, however, one needs an appropriate status, which, according to the habit to use exclusively jets, such as Bombardier, Gulf Stream or Falcon, to navigate through the vast country, was achieved by the Deputy Prime Minister and the Presidential Envoy to the Far Eastern Federal District Yuri Trutnev.
According to the tender data of the FSUE Enterprise of Product Management Department of the President of the Russian Federation on the website of state purchases, in 2016, on Trutnev’s official business flights 33.4 million rubles will be spent. The order will be performed by the company Gazpromavia which in 2015 for flying the Presidential Envoy in the Far East received 20 and 23 million rubles from the state budget for the two contracts.
Meanwhile, the amount of money allocated for Envoys’ air travels in other federal districts are much more modest. For example, flights of the Presidential Envoy in the Northwestern Federal District Nikolay Tsukanov in 2016 will cost the state at 6.27 million rubles, and the air travels of the Envoy in the Urals Federal District, the third-largest among the Russian federal districts, Igor Kholmanskikh will be only 5.7 million rubles.
According Znak.com, unlike Trutnev, unpretentious Kholmanskikh uses an aircraft Uktus, L-410 and AN-74 which are fairly low cost in a class of business aircraft.
On the one hand, such differentiation of expenses seems logical: the Far Eastern Federal District is the largest area in Russia (occupies 36.4% of the entire territory of the Russian Federation). But then, another logical question arises: why can the Presidential Envoy in the Siberian Federal District Sergei Menyailo cost 14 million rubles a year, and his predecessor, Nikolai Rogozhkin, cost only 13 million in the past year?
Assuming the Siberian Federal District is 1100 km² smaller than FEFD and is the second largest one (29.95% of the territory of the Russian Federation), the difference of 20 million rubles between spending on Envoys’ flights looks strange.
Overall, on the Presidential Envoys’ flights in 2016 about 148 million rubles will be spent. In the past year, the amount was even more - 167.4 million rubles. However, details regarding the distribution of the budget for the Envoys’ air travel and types of the aircraft they use is classified. Besides the "Notice of purchases from a single supplier (contractor, executor)" on the public procurements web-site, there is no information about the competition.
Meanwhile, earlier, such information was published. Until the journalist Oleg Lurye widely publicized the information about Yuri Trutnev’s air travels in 2013, information of which was backed by the documents found on the public domains.
Lurye found out that all the PEs, except Trutnev, are happy with the standard Boeings and domestic Tu-154 and Yak-40. Whereas for the EP in the FEFD the Administrative Department of the President orders the flights on the most prestigious business jets Gulfstream G550, Bombardier Global Express 5000, Bombardier Challenger 600 and Falcon 2000. Only in 2013, on Trutnev’s flights 49 million rubles was spent.
According to the
Sobesednik, except for the EP himself, who recently proposed as a measure to combat corruption in the public service not take children and grandchildren of the corrupt officials, the aircrafts chartered for him for the budget money are also used by his family.
Gulfstream G550 is one of Yuri Trutnev’s favorite aircrafts for business trips.
As evidenced by the recent history with Shuvalov’s dogs, the use of the corporate leased air transport by the relatives and friends of the officials and businessmen is a common occurrence in Russia.
Information about this is usually carefully hidden, sometimes the aircraft are registered in offshore areas through a string of companies, and tracking them is only possible with a private board transponder type ADS-B via Flightradar24 service and its analogs.
For fairness’ sake, it should be noted that not all the Russian officials and especially their relatives fly the business jets paid by people's money. According to the Novaya Gazeta, the former Interior Minister Rashid Nurgaliyev took only scheduled flights for his official trips, he did not allow himself the luxury, as well as the Head of ROSNANO Anatoly Chubais, as well as a number of other state officials of lower rank. However, the overall situation remains the same.
In the West, the public’s and government’s attitude to such cases is quite different. There are plenty of examples. The Head of the Hollinger International holding, the media tycoon Conrad Black in 2007, was sentenced to 6.5 years in prison for stealing $ 6 million from the shareholders and one of the charges included the use of a Hollinger corporate jet to fly on vacation to the island of Bora Bora by Black and his wife.
In 2010 in France, the Secretary of State for Cooperation and Francophonie Alain Zhuayande resigned from his post after a scandal. He left because he once flew on a mission to the Antilles on a private plane flight which cost taxpayers 116 thousand Euros. After that, the Prime Minister Francois Fillon forbade the ministers to use private jets without special permission, advising them to pay attention to rail links and regular airlines.
In Russia these days, no one takes the possibility of similar restrictions seriously. In July, the State Duma Deputy from the faction Spravedlivaya Rossiya Oleg Shein has officially appealed to Dmitry Medvedev with a request to verify the information about Igor Shuvalov’s plane, noting that the use of a private jet for $ 55 million does not meet the provisions of the Code of Ethics and official conduct of public officials, but no response from the Head of the Government has followed so far.
Preliminary hearings of the case pertaining to embezzlements committed during the construction of notorious Zenit Arena haven’t commenced yet – but the trial of Marat Oganesyan already ceased to be monotonous. The former Deputy Head of the St. Petersburg Municipal Administration has directly hinted at the involvement of his successor – current Vice Governor Albin – in the embezzlement of billions of rubles.