The incident sparked a diplomatic spat over the tropical island south of India, which relies heavily on Russia for tourism revenue and, lately, for fuel. First, Aeroflot halted all flights to the island, blocking the flow of leisure travelers. Then, in private talks, according to a European official familiar with what happened, Moscow also threatened to cut off energy supplies – which would have deepened an economic crisis that was already causing food and fuel shortages. and general disturbances.
Within days, the court, acting on the request of the government, issued a new decision clearing the plane to fly, and it was off to Russia, where it is now. flies regularly between Moscow and Kyrgyzstan.
For Sri Lanka, the battle over the Irish-owned jetliner was just one moment in a long series of developments that led to chaos last week as protesters stormed homes of the President and the Prime Minister, forcing them both to promise to resign. But for Russia, it was a victory in a bitter campaign against a four-month Western sanctions campaign, demonstrating how far Moscow is willing to go to defend its economy, especially in vulnerable countries where it has influence.
There are signs that the sanctions are starting to bite. Russian government statistics show that car production dropped 96.7% in May compared to a year ago, threatening a sector that employs 600,000 people. Economists say this reflects a widespread collapse of manufacturing as foreign-owned factories close and domestic factories struggle to import Western components.
Hundreds of foreign companies have ceased operations in Russia, inflation is at 16% and the country’s gross domestic product will contract by 8.5% this year, according to the International Monetary Fund. predicted. Economists say Russia’s long-term outlook remains dire. “The potential for decline is far from exhausted,” Sergey Aleksashenko, a former senior Russian finance ministry and central bank official who now lives in the United States, wrote in a June 30 newsletter.
But some factors continue to work in Russia’s favor, including lucrative oil and gas exports that fund the military and social safety net. Russia earned about 93 billion euros – around 93 billion dollars, or $1 billion a day – in revenue from fossil fuel exports in the first 100 days of the war, according the Energy and Clean Air Research Center, a non-profit organization in Finland.
And Moscow is fighting hard where it can to soften the impact of the sanctions. Aviation is one such sector.
To date, Russian airlines are refusing to return more than 400 planes and a slew of plane parts they leased to Western companies, forcing the leasing companies to file $10 billion insurance claims , according to data and research provider Cirium.
“Sanctions can serve the long-term goal of isolating Russia,” said Risto Maeots, managing director of an aviation services company in Estonia that was unable to recover several engines in Russia. “But in the short term, they weren’t as painful as they were supposed to be.”
For all the attention given to the seizure of yachts belonging to Russian oligarchs, what happens with the plane is of far greater importance, he added.
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“What is the West going to do with the yachts – go fishing? The Russians can do a lot more with the jets,” he said. “So in the short term, they got a pretty good deal.”
Asked to comment, the Russian Embassy in Washington, DC, did not respond to questions about the Sri Lanka case, but referred to the Foreign Office’s June 8 remarks calling the sanctions illegal.
“International civil aviation has become a tool of political and economic pressure. This is nothing but a flagrant abuse of international air law,” spokeswoman Maria Zakharova said at the time, adding that the sanctions would “harm flight safety.”
The Sri Lankan Foreign Ministry called the incident a commercial dispute and said the government had done everything not to turn it into a diplomatic dispute.
The aviation sanctions were designed to target one of Russia’s main vulnerabilities – it relies on foreign-made Boeing and Airbus planes owned by Western leasing companies. Of the 968 planes in the Russian commercial fleet on the eve of the Ukrainian war, 515 belonged to non-Russian leasing companies, according to Rob Morris, global head of consulting at Cirium.
Even aircraft made in Russia, such as the Sukhoi Superjet, a regional aircraft, and the Irkut The MC-21, intended to compete with the Airbus A320 and Boeing 737, uses engines, avionics and software sourced from the United States and Europe. A Russian state-owned company is trying to develop an all-domestic engine for the MC-21, but it will take time, analysts say.
The sanctions forced Western companies to terminate their leases and recall their planes. And an unprecedented set of export controls imposed by a coalition of 37 countries across Europe, North America and Asia has also banned companies from selling new planes, parts or software to Russia. servicing Russian-operated aircraft or providing them with software updates online. Even the refueling of a Boeing aircraft leased by a Russian entity was prohibited.
But in March, Russian President Vladimir Putin delayed some of the pain by sign a law allowing airlines to retain foreign aircraft for use on domestic flights. So far, Western companies have only picked up about 80 of the 515 planes leased from Russia, according to Cirium.
“The lessor community as a whole has come to terms with the fact that most of the planes they have placed in Russia will not be taken back,” said Mike Stengel, a consultant with Michigan-based AeroDynamic Advisory.
AerCap’s tortured pursuit of the jet that escaped seizure in Sri Lanka shows just how poor recovery efforts have been. The Irish airline, the world’s largest commercial aircraft lessor, said it alone has more than 100 aircraft stranded in Russia, for which it has submitted $3.5 billion in insurance claims.
According to court documents in Sri Lanka, AerCap wrote to Aeroflot demanding the return of the Airbus A330-300 two days after Russia invaded Ukraine in February. He followed with five more letters in mid-April, but Aeroflot continued to use the plane, worth an estimated $17.3 million, to ferry tourists to and from Sri Lanka, providing the almost bankrupt nation a scarce source of income.
When AerCap won the court order that grounded the plane on June 2, Aeroflot protested, canceling all flights to the country and claiming that Sri Lanka had given Russia a “state guarantee” that his planes could fly and depart unhindered. The Moscow Foreign Ministry warned the Sri Lankan ambassador of a “negative impact” on bilateral relations.
One of Moscow’s threats, according to the European official, was to cut off energy supplies. These had proved crucial on at least one occasion in late May, when a shipment of Russian oil allowed Sri Lanka’s only refinery to restart for the first time in more than two months. Bloomberg News reported.
In an interview with a local journal published on June 5, Sri Lanka’s justice minister said he had instructed the attorney general to “deal with the matter because there are consequences beyond the law.” Our country may be adversely affected by such orders.
The next day, Sri Lankan government lawyers representing the public airport joined Aeroflot in asking the court to overturn the grounding order. The court agreed, saying the order had been served improperly, and the plane quickly took off for Moscow.
Last week, a month after the plane left Sri Lanka, the country’s president, Gotabaya Rajapaksa, tweeted about a phone call with Putin.
“Whilst thanking him for all the support his govt has provided in overcoming past challenges, I have requested an offer of credit support to import fuel to #lka to overcome the current economic challenges,” he said. tweetedusing an abbreviation for Sri Lanka.
AerCap is not the only leasing company affected. Maeots, the managing director of the Estonian company Magnetic MRO, said that before the invasion he had four Boeing engines leased from Russian airlines. With the imposition of EU export controls, he had a month to get them back. The Russian airline simply refused to return them. “My assets are still there,” he said.
Even if the companies end up getting the planes back, that’s not the end of their worries, said Jason Dickstein, general counsel for the Aviation Suppliers Association, a U.S.-based group representing parts distributors. ‘plane. Since Russian companies have been allowed to try to produce spare parts for the planes, it is likely that the planes will contain parts that have not been subjected to rigorous inspection by Western agencies.
“There is a fear among leasing companies that if and when they ever recover [their planes] they won’t be able to use them because they won’t be able to verify their airworthiness,” he said.
Farisz reported from Colombo, Sri Lanka.