Russia Report: June 26, 2003

By Laura Belin

When the Media Ministry pulled the plug on TVS on 22 June, it demonstrated that arbitrary rule, rather than the rule of law, still governs the Russian media sector. The team of television journalists headed by Yevgenii Kiselev was forced off the air for the third time in three years. Different forms of legal and financial pressure helped bring about the management changes at NTV in April 2001, the shutdown of TV-6 in January 2002, and this week's action against TVS, but the underlying political dynamic has remained the same. The Media Ministry's sometimes brazen interference in the internal affairs of private broadcasters has sent a clear message: journalists who lack the trust of the Kremlin and the government will not be allowed to broadcast news on national television.

The struggle for control over NTV in 2000 and 2001 pitted the Media-MOST holding company of oligarch Vladimir Gusinskii against partly state-owned gas monopoly Gazprom, a minority shareholder in NTV and a major creditor to Media-MOST. President Vladimir Putin, Media Minister Mikhail Lesin, and other state officials denied pulling strings on behalf of Gazprom. Those denials were not convincing, especially after it emerged that Lesin had promised to have criminal charges against Gusinskii dropped if Gusinskii sold a controlling stake in his media properties to Gazprom. But there was no disputing that Media-MOST was unable to repay the huge dollar-denominated loans Gazprom had guaranteed on its behalf. Gazprom obtained a court ruling awarding it a majority stake in NTV. While some evidence pointed toward political pressure on Gazprom managers and cast doubt on the fairness of the judicial process, Gazprom's decision to replace Kiselev as NTV general director did have a legal basis.

During the final months of TV-6, it became more obvious that legal action by a shareholder was just a fig leaf for a political campaign to shut down an alternative voice. When Kiselev and hundreds of other former NTV employees joined TV-6 in the spring of 2001, their position looked promising. True, relations had soured between the Kremlin and Boris Berezovskii, the oligarch who owned a controlling stake in TV-6. But unlike Gusinskii, Berezovskii had not saddled TV-6's parent company with large debts to state-controlled banks or to the network's minority shareholders. Living in self-imposed exile, Berezovskii was out of reach for Russian prosecutors who had issued a warrant for his arrest.

TV-6's ratings and advertising revenues improved immediately upon landing some popular shows formerly aired on NTV. But the new state of affairs did not please the LUKoil-Garant pension fund, a minority shareholder in TV-6.

The pension fund, which is affiliated with partly state-owned oil company LUKoil, immediately filed lawsuits seeking to replace TV-6's new management. When those failed, LUKoil-Garant filed suit to liquidate the television network, citing a little-used point of law. Never mind that that provision, if consistently applied, would lead to the liquidation of virtually every company in Russia. Never mind that shutting down TV-6 could only hurt LUKoil-Garant's finances, since the pension fund was not a TV-6 creditor and could not profit from its liquidation. Never mind that during the autumn of 2001, Berezovskii offered to pay LUKoil for LUKoil-Garant's stake in TV-6. LUKoil managers chose to force TV-6 off the air rather than get a return on the investment in the network. LUKoil-Garant's lawsuit moved through the courts much more quickly than do typical business disputes in Russia, and in January 2002 the Supreme Arbitration Court ordered TV-6's liquidation.

The Media Ministry soon took TV-6 off the air, allowing a sports channel to broadcast in its place and scheduling a tender for the Channel 6 broadcast license. Media watchdogs rightly complained that there was no legal basis for the ministry's action, but Lesin and others could at least point to a court ruling against TV-6 and its parent company, Moscow Independent Broadcasting Company (MNVK).

While the management of MNVK challenged the Media Ministry's action in court, Kiselev quickly formed an alliance with a group of businessmen and political heavyweights who were on good terms with Putin's administration. As expected, their Media-Sotsium consortium won the March 2002 competition for the license to broadcast on Channel 6. TVS went on the air in June 2002, employing Kiselev as editor in chief and most of the journalists who had worked with Kiselev at TV-6.

TVS's revenue flow did not keep pace with its business plan. Two leading figures soon emerged among the network's shareholders -- Russian Aluminum head Oleg Deripaska and Unified Energy Systems chief executive Anatolii Chubais -- but they did not agree on a strategic plan. Their differences of opinion exacerbated the network's financial troubles in 2003. Having exhausted a $46 million loan from state-controlled Vneshekonombank, TVS fell behind on payments to television producers, several of which pulled their programs off the air in the spring. TVS staffers went without pay for months as the two main shareholders failed to reach consensus on future plans. Citing unpaid debts for signal distribution, the Moscow city authorities cut off TVS transmissions to most residents in the capital in early June. Within days, Chubais agreed to sell his stake in TVS, leaving Deripaska as the dominant shareholder.

Still, the money to pay debts was not forthcoming. A frustrated Kiselev sent an open letter to shareholders on 17 June, warning that TVS would stop broadcasting the following week unless "normal funding" was resumed. The Media Ministry then used TVS's financial problems to justify cutting off transmissions. In a statement issued on 22 June, the ministry asserted that its decision to replace TVS broadcasts with a "socially important" state-run sports channel was "aimed at protecting the viewers' interests."

At first glance, the demise of TVS appears to be only marginally connected to state officials. Couldn't the oligarchs in charge of the network have come up with the cash to save it? Kiselev certainly seems to think so. In an interview published in the daily "Gazeta" on 18 June, he complained that "A year ago, the richest Russian people came to us and said nice words that there must be at least one independent, private TV channel in the country, and they promised to help us to make such a channel." He predicted that "the Kremlin will thank [the TVS shareholders] for eliminating a team of willful journalists who dared open their mouths against the authorities from time to time, criticize them and utter alternative opinions."

Kiselev has grounds to feel betrayed, but it is important to remember that TVS's financial situation, desperate though it was, did not provide any legal justification for what the Media Ministry did on 22 June. Russian law stipulates that broadcast media can be taken off the air only by court order. There was no such order against TVS. In addition, a double standard was evident: in recent years fully state-owned Russian Television has owed debts for signal distribution, and 51 percent state-owned Russian Public Television has been late repaying a loan from a state-controlled bank, but the Media Ministry has not taken either of those networks off the air.

A strong case can be made that the Media Ministry itself, along with an advertising firm with close ties to Lesin, helped undermine TVS's financial position. Appearing on NTV on 22 June, Deripaska's close associate Konstantin Remchukov revealed a little-known fact: in 2002 the Media Ministry issued Media-Sotsium a temporary broadcast permit for Channel 6, rather than an ordinary broadcast license with a five-year term. Remchukov noted that a temporary permit cannot appreciate or be used as collateral for a loan.

TVS's claim to the broadcast rights for Channel 6 became even more tenuous in April 2003 when a court ruled that the Media Ministry acted unlawfully when it shut down TV-6. The ministry then rescinded its order suspending the license of MNVK, TV-6's parent company. Who in their right minds would invest millions to rescue TVS when that network had only a temporary permit to broadcast, especially once a court had affirmed that the broadcast license for Channel 6 belonged to a different company?

During his 22 June appearance on NTV, Remchukov also charged that TVS's advertising revenues had been artificially depressed by Video-International's virtual monopoly on the television advertising market. Media Minister Lesin was one of the founders of Video-International, which handles the placement of commercials on the other major Russian networks. Though Lesin claims not to be involved in managing the advertising agency any longer, the consensus in the media community is that Lesin still exerts considerable influence over Video-International.

Gazprom's takeover of NTV showed that a private network was in trouble if it became financially dependent on state-controlled or parastatal entities. The failure of TV-6 showed that legal grounds can be found to shut down a network without major debts, if that network's financier is on bad terms with the Kremlin. But the failure of TVS paints an even grimmer picture of the potential for private television, because it shows how the realities of the Russian advertising market can cripple even a network with popular programs and well-financed shareholders who are not political outcasts.

Kiselev has vowed not to participate in any new auction for television broadcast rights, according to gazeta.ru on 23 June, and one can hardly blame him. The disappearance of TVS from the airwaves is not the end of private television in Russia; there is still Gazprom-backed NTV, as well as entertainment-oriented networks such as STS. But the fate of TVS will further diminish pluralism in broadcast news and will probably deter investors from funding alternative perspectives on daily events.

Since nationwide television networks are the leading source of news for most Russian citizens, and parliamentary and presidential elections are coming up soon, the Media Ministry's action against TVS could hardly be less geared toward "protecting the viewers' interests."

Laura Belin has written extensively on Russian politics and media issues since 1995.

Not so long ago, Emergency Situations Minister Sergei Shoigu was one of the most ubiquitous figures on Russian television and in the pages of central newspapers. One publication carried in July 2001 the results of a survey of the Russian media conducted by the Center for Regional Applied Research (see "RFE/RL Russian Political Weekly," 23 July 2001). The center found that of all the Russian cabinet members, Shoigu was mentioned the most often in the Russian media -- 164 times compared to 55 times for Interior Minister Boris Gryzlov. Shoigu was at the time leader of the Unity Party. This week found their roles reversed : Gryzlov, who became the leader of Unified Russia, the successor group for Unity in November of this year, was featured in a number of media outlets when he announced the number of arrests of senior Moscow police officials (see "RFE/RL Newsline," 24 and 25 June 2003). The electronic daily, gazeta.ru, speculated that "it cannot be ruled out that Boris Gryzlov's anticorruption campaign is nothing other than the start of the election campaign and an attempt to demonstrate a successful fight against police licentiousness." JAC

Number of bills that the State Duma rejected during its 2003 spring session: 701

Number of bills sponsored by the presidential administration that the Duma rejected: 0

Number of bills sponsored by the presidential administration that the Duma approved: 89

Number of ballots by which the recent vote of no confidence in the government fell short: 52

Number of deputies who did not participate in that vote: 109

Number of abstentions: 6

Source: State Duma First Deputy Speaker Lyubov Sliska as quoted by RosBalt on 20 June, Interfax on 18 June.

The State Duma decided on 21 June to disband its Elections Commission, which was headed by Deputy Aleksandr Salii, a member of the Agro-Industrial Group who was elected from the Communist Party list, regions.ru reported on 23 June. The decision was made with 228 votes in favor -- just two more than the required minimum. According to the website, news of the commission's demise was greeted with enthusiasm in the regions "since in recent years not one regional election had occurred without 'troops' from the commission." Aleksandr Shemelev, executive director of the Moscow Bureau for Jurisprudence, told the website that the "many lawyers who practice in the sphere of election law evaluate the Duma's decision to dissolve the commission positively." The website also reported that Salii had incurred the wrath of a number of political consultants and members of regional election commissions. Analyst Ivan Preobrazhenskii wrote on politcom.ru on 23 June that Salii's commission participated as consultants in a number of scandalous elections, including in Bashkortostan and Norilsk. The commission was also responsible for documenting alleged fraud that occurred in the 2000 presidential election. It asserted that about 700,000 votes in Daghestan must have been wrongly awarded to President Putin (see "RFE/RL Newsline," 9 June 2003). JAC

The State Duma on 21 June closed its spring session in a deadlock over filling the post of human rights ombudsman, Russian media reported. The term of incumbent Ombudsman Oleg Mironov expired on 22 June, but he agreed to stay on until the fall session when legislators will hold another vote. According to TVS, there were eight candidates for the post, including Mironov, Legislation Committee Chairman Pavel Krasheninnikov (Union of Rightist Forces), and State-Building Committee Chairman Valerii Grebennikov (Fatherland-All Russia). According to Ekho Moskvy, none of the candidates got the required 300 votes. Krasheninnikov was closest with 283. Mironov came in second with 167, according to RosBalt. Liberal Democratic Party leader Vladimir Zhirinovskii suggested that the human rights office be closed since it duplicates the work of the Prosecutor-General's Office and Justice Ministry, TVS reported. Both Zhirinovskii and Deputy Aleksandr Fedulov (independent) tried to drown out Duma Speaker Gennadii Seleznev's closing remarks with their own observations, and according to Duma First Deputy Speaker Lyubov Sliska the issue of depriving Zhirinovskii of his deputy's mandate will be considered yet again by the Duma when it starts up in the fall, RIA-Novosti reported. JAC

Despite the theatrics, deputies managed to pass a number of bills on 20-21 June, Russian media reported. A bill amending the Tax Code to reduce the VAT rate from 20 percent to 18 percent was passed in its third and final reading on 21 June with 314 votes in favor, RosBalt reported. The bill also cancelled the excise tax on natural gas, but increased the tax on the extraction of oil and gas and raised the export duty on natural gas from 5 percent to 20 percent. As of 1 January, regions will receive an additional 1 percent of the proceeds from the profit tax. On 20 June, legislators approved in its third reading a law establishing a new scheme for the single-mandate districts for the 7 December State Duma elections, ITAR-TASS reported. Due to population growth, some regions, such as Krasnodar Krai and Daghestan, will gain an additional district, while others, such as Murmansk Oblast, will lose one, as two districts are combined. The vote was 355 in favor, with 12 against and no abstentions. JAC

Also passed on 20 June in its third reading was one of the presidential bills reforming local government, ITAR-TASS reported. Amendments to the law on general principles for organizing legislative and executive organs in the regions were approved with 250 votes in favor. This was just 24 votes more than the minimum required. According to "Kommersant-Daily" on 21 June, the bill introduces norms for recalling elected governors or regional presidents and establishes a scheme for redistributing the various types of government property that are located in the regions. The bill was part of the larger initiative drafted by the presidential commission on delineating the responsibilities of the federal, regional, and municipal levels of government that was headed by deputy presidential administration head Dmitrii Kozak. JAC

Legislation

Name of law_________________Date approved__________# of reading

Tax Code______________________20 June________________3rd
(VAT, natural gas, oil)

On general principles_____________20 June________________3rd
for organizing legislative and
executive bodies in the Russian regions

On the election of State Duma______20 June_______________3rd
deputies (single-mandate districts)

IN: Prime Minister Mikhail Kasyanov has appointed Natalya Malysheva first deputy labor minister, replacing Galina Karelova, who was appointed deputy prime minister in charge of social issues last month, "Kommersant-Daily" reported on 23 June. On the same day, President Putin named presidential envoy to the Northwest Federal District Valentina Matvienko a member of the Security Council, RIA-Novosti reported. All presidential envoys to the seven federal districts are members of the Security Council.

IN: Legislators in Nenets Autonomous Okrug confirmed on 25 June Aleksandr Sabadash as the representative for the okrug's executive branch in the Federation Council, "Kommersant-Daily" reported on 26 June. According to the daily, Sabadash is a "scandalously famous" entrepreneur from St. Petersburg.

IN: Federation Council members confirmed on 25 June Petr Serkov as deputy chairman of the Supreme Court, regions.ru reported. Serkov, 47, most recently served as chairman of the Ulyanovsk Oblast court. He has also served as a member of the presidium of the Council of Judges, according to "Vremya MN" on 17 April 2001.

EXTENDED: Human Rights Ombudsman Oleg Mironov's term expired this month, but he agreed to stay on until the State Duma's fall session when legislators will hold another vote on his successor (see item above).

27 June: Gazprom will hold annual shareholders meeting

27-28 June: Date by which National Bolshevik Party leader Eduard Limonov will be released on parole

28 June: 3,500 delegates will attend a Unified Russia party forum called "Together with the President" in Moscow

28 June: Plenum meeting of the Communist Party's Central Committee will be held in Moscow

28 June: President Putin will meet with Polish President Aleksandr Kwasniewski in Kaliningrad

28 June: Second All-Russia Festival of National Culture will be held in Petrozavodsk

July: Month by which a working group of European and Russian legislators wants to create a "road map" for implementation of the joint Russian-EU accord on Kaliningrad of 11 November 2002, ITAR-TASS reported on 3 March

1 July: Date by which the new State Committee on Drug Trafficking will be created and new Federal Service for Economic and Tax Crimes will be formed, according to the committee's head, Viktor Cherkesov, on 8 April and ITAR-TASS on 10 April

1 July: The trial of scientist Vladimir Shchurov, accused of divulging state secrets, will resume in Primorskii Krai

1 July: United Arab Emirates national airline will begin regular flights from Moscow's Domodedovo Airport

7 July: The working group on Russia's accession to the WTO will meet in Geneva to discuss a draft of its final report

13-16 July: Great Britain's Prince Charles will visit Russia

14 July: Deadline set by President Putin for Russian regions to bring their laws into compliance with federal regulations

14 July: Federal law on basic guarantees of electoral rights will come into effect, requiring 50 percent of regional legislatures to be elected from party lists

15 July: Government will consider draft bill on mineral resources, Prime-TASS reported on 28 May

15 July: Deadline for new company, Russian Railways, to be registered

1 August: Deadline for Russian peacekeeping troops to withdraw from Kosova

12 August: Third anniversary of the sinking of the "Kursk" submarine

13 August: Air-traffic controllers will hold a national protest

15 August: Date by which Duma should approve new map of single-mandate districts; if it fails to do so, the Central Election Commission will have the right to confirm the map

17 August: Karachaevo-Cherkessia will hold presidential elections

Late August: Campaign officially begins for State Duma elections

September: Second Russian-U.S. Commercial Energy Summit will take place in Moscow

September: Gennadii Seleznev's Party for Russia's Revival will hold a congress in Moscow

1 September: Date by which government commission will have drafted 2004 budget

7 September: Sverdlovsk, Novgorod, and Omsk oblasts will hold gubernatorial elections

7 September: Murmansk will hold mayoral elections

21 September: Leningrad Oblast will hold gubernatorial elections

23 September: The first European-Pacific Ocean Conference will take place in Vladivostok devoted to improving dialogue among intellectuals in European countries and the Pacific region, regions.ru reported on 6 March

30 September-2 October: The Second All-Russian Sociological Congress will take place at Moscow State University

1 October: 33 percent salary hike for budget-sector workers to go into effect

6 October: British court to consider Russia's request to extradite Boris Berezovskii

October: President Putin and German Chancellor Gerhard Schroeder will meet in Yekaterinburg, Novyi region reported on 14 April

23-26 October: First anniversary of the Moscow-theater hostage crisis

25-26 October: Russian Forum on the development of civil society will be held in Nizhnii Novgorod

29 October: 85th anniversary of the founding of the Komsomol

7 December: State Duma elections will be held.