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Russia to Seize Hundreds of Leased Airliners
According to Joe Blogs, Russia has just passed a law allowing Russian airline operators to simply declare themselves the owners of commercial aircraft leased from western companies. Ireland likely hardest hit, IIRC. These are Airbus and Boeing aircraft owned by leasing companies, but the deals are off, and the planes are due to be repossessed. How? Aye, there’s the rub.
Over 500 aircraft worth over $10 Billion may simply be swiped from the western owners. This is another destruction of wealth, not just a transfer. The aircraft are no longer supported with parts and inspections from manufacturers and owners. And a great number of the planes are grounded anyway — Russian airlines don’t have as many destinations to go to these days.
This may be an expensive way to find out what can and cannot be done. We shall see.
Published in General
That could be in the courts for years to come.
And any court that disagrees, gets shelled.
You’re not making this unattractive.
Obviously, I don’t know if this report is true. If so, it raises an interesting question — did the people who advocated, and carried out, seizure of Russian assets in the West not realize that the Russians might do the same thing?
There might be a very particular Russian asset that is evading sanctions and appears to be politically connected … RCB – Russia Commercial Bank (Cyprus) RCB was … until very recently … owned by state-owned bank VTB. But as soon as sanctions were announced, VTB transferred its ownership shares to two Cypriot owned organizations – Crendaro Investments and Mitarua Limited. This means that – officially – RCB is a Cypriot-owned institution and is NOT on the list of sanctioned banks.
Now RCB has a fascinating history. Back in 2013 there were some banking issues in Cyprus. To raise money for a bailout, Cyprus wanted to impose a “haircut” on bank deposits. Basically a deposit tax. If I recall 5% or so on deposits less than 100,000 EUR and 9% or so on deposits over 100,000 EUR. The Russians went kind’a crazy. Cyprus’ FX trading regulations make it an attractive destination for European investors. Russian oligarchs are big depositors to many Cypriot banks and investment houses. But the Russians were upset about ONLY one institution – RBB. They reached out to Cyprus MPs and made it unmistakably clear that if RCB was not exempted from these plans there would be hell to pay.
To reiterate, Moscow didn’t care about deposits at any institution except RCB; even though lots of those deposits were Russian oligarchs’. Just RBC. And they just went out of their way to avoid sanctions on RCB. Is this Putin’s wallet?
The Russians will keep the planes flying, sourcing parts creatively around the world. But those planes will never be accepted back by the lessors again (if sanctions continue for another 2-3 months). Which means that the lessors have now lost them. A huge hit for aircraft lessors.
In the long run, Russian aviation becomes much less safe. And nobody will extend credit to them in the future, accelerating Russia’s decline as a country. Russia desperately needs commercial air service, or the country unknits.
For some reason due process of the law does not seem to be a thing anymore. Maye it has always been that way. All government are thugs. You only like them when they are your thugs.
From the Budapest Memorandum of 1994 signed by Bill Clinton, Boris Yeltsin, and John Major:
It would have been wholly appropriate for the civilized world to have imposed a no-fly zone the moment Russia attacked.
I wish we had. I can’t imagine what Putin is planning to do with those planes he just stole, but I’m sure whatever it is will inflict more pain on Ukraine.
Points 4 and 5, below, suggest that if Putin were to attack Ukraine with nuclear weapons, the United States and the United Kingdom would be honor bound to obliterate Russia.
I think Putin does not want to preside over the death of Russia. So I don’t think we need to worry about his using nuclear weapons as much as we do, at least that’s what I got out of the podcast with John O’Sullivan.
We should impose and enforce a no-fly zone. At least the Ukrainians would have a fighting chance.
Of course they’ll do the same thing, so long as that means abrogating contracts. The nationalization of the aircraft was likely foregone as soon as the airspace restrictions went up. Here’s the headline — looks like it’s actually happening — no longer simply foregone.
Frankly, I’m glad to see it. It should push the risk premium for dealing with dictators higher and higher. Cisco built Iran’s monstrous state monitoring infrastructure to order. Many American companies contributed vital knowledge and technology to China’s great firewall. I’d like to see less of that sort of thing. Make outfits in awful places at least put up massive collateral.
The value of those planes is plummeting (it’s currently effectively negative), and the longer this goes on, the less that value will recover upon a resumption of any normalcy. Bankrupt airliners don’t do required scheduled maintenance on airliners. Even the great grey COVID fleet gets regular maintenance in layup.
This is a recipe for Vietnam. In order to not escalate too too too much, we would have to effectively promise to not attack any Russian thing outside of Ukraine — no motherland hits. That means get ’em when they’re up, not on the ground, not in the launchers, but only on your tail.
We can argue that Poland is NATO and Russia is Russia, and only Ukraine is in play. But Russia’s position will be that Ukraine is Russia, and Poland is therefore in play.
A no-fly zone is as good as a no-kidding war in this case. If we are to no-fly them, then we should just wipe out Russia, which is famously easier said than done, even before nukes.
And consider this: If you are Putin, you will launch exactly one nuke and dare the world to retaliate. Putin wins. We will never take the shot. As a deterrent, our nukes are useless, while Putin’s are effective, because he has a way to use one.
I don’t know how Putin would react. It could go as you predict, or it could end it.
John O’Sullivan made so many interesting points on this particular aspect of this war, but among them he said that the Ukrainians are doing really well, and he predicts they will prevail. “The Russian soldiers are just normal people. They aren’t ten feet tall,” or words to that effect.
That made me realize that we–the civilized world–are falling into the trap that family and friends fall into when dealing with alcohol- or drug-addicted friends and family members. The addicted person’s explosions create a larger-than-life image, and it incapacitates the family and friends.
I think John is onto to something important in our dealings with Putin. He is an ordinary person and we should be dealing with him the way we would deal with any other ordinary person who is having a temper tantrum. Our nukes are just as big as his.
This larger-than-life image is how all dictators get and keep power. We’ve gotta stop giving it to them.
I think people know this instinctively after a while. It’s probably why it served humanity’s purposes to show Saddam Hussein in a hole in the ground and Mussolini hanging from a post in the public square.
a) Western governments have more ability to compensate the owners. $10 billion is a drop in the bucket if it’s divided up between the budgets of multiple Western governments.
b) We’d have to see the countries-of-ownership for all 500 airplanes, but I wonder if all of them are from countries that have imposed sanctions on Russia or if Russia is punishing all Western countries indiscriminately.
Been expecting this thanks to Mentour pilot
Apparently hundreds of billions of Russia’s foreign exchange reserves were held outside of the country and have been frozen. I’d expect the aircraft lessors to file claims against those assets, since this is clearly a state-sponsored action.
It also means the Russian airlines holding those plans are domestic carriers only for the duration, since any planes or other asset they move outside Russia will be seized.
Random thoughts on the Russian nukes:
Soviet doctrine was to use battlefield nukes to blow a hole in NATO’s defense through which to advance armored columns. That doesn’t make much sense in Ukraine, where Russia’s logistics are having trouble supporting their existing positions, let alone a deep advance. (I’ve seen estimates by those who seem to know their business that Russian troops are effectively on half-supply once they are over 100 miles from a rail head, due to lack/inefficiency of truck transport.)
Putin could always order such a nuke used to make a point, but operationally it wouldn’t make much sense, while creating a real risk of escalation. An anti-city/population attack would seem to make even less sense, since it would wreck a transportation nexus that Russia would need for further advances (remember they are stuck on roads during the mud season), while further upping the escalation risk.
If a nuke does go off, I wouldn’t necessarily expect NATO/the US to respond in kind. Russia has other assets that can be put at risk much more easily. For instance, destroying the Russian Navy in the Med and Black Sea could probably be done with little or no US/NATO loss, given Russia’s lack of naval aviation.
Should have built missle defense. Imagine if we had been working on it non stop since SDI.
The challenge is that Russian divisions between people, corporations and the state are not the same as in the US. So I’d wager most of the Russian assets are behind multiple smokescreens, and not in “The Government of Russia.” So in order to snag any of those assets, you would have to prove, without proof, who the Ultimate Beneficial Owner is – and that it is, in fact, The State.
Lawyers will get rich.
Don’t they always? One way or another.
Russia seems to want Ukraine for its farmland and its fresh water. If that’s accurate, then irradiating the place wouldn’t make sense.
It’s sorta kinda why I haven’t been too worried about China invading Taiwan, because such an invasion would destroy the very assets that make Taiwan a valuable prize.
But let’s remember what Hamlet respected in Fortinbras: He was willing to go to war and sacrifice many lives on a point of honor. No economic or military advantage. Nothing but honor. If some point of honor, mere pride, or some sense of national heritage or destiny requires control of a bit of land, economic or strategic advantage may take a backseat.
Perhaps we’re watching governments figure out that the most efficient way to wage war in the 21st century is to wage financial war. We saw the small-scale version last month when the Canadian government used financial warfare to shut down dissent within its own borders. Some European countries and then the United States used financial warfare to try to bring down Russia. And now Russia is using financial warfare in retaliation. Maybe World War III will be a financial war rather than a war of physical weapons.
Maybe, but financial war can only really stop someone from building things they don’t already have. Russia has already built the nukes, they exist. I doubt that it costs very much to use them.
if they have been skimming money from the rest of the military I wonder how much has been skimmed from the maintenance budget for those nukes.
Or we could test in the ocean off the shores of Alaska. Our nuke, our land, our point.
Yes, but for some reason a defensive shield is a dirty word for some.
Lives are cheap to a warlord, but there’s no point destroying the very soil you seek to annex. Rome wouldn’t have salted Carthage if Rome had wanted the land for itself. Is Putin’s goal to destroy Ukraine or to annex it?
We assume that they’ve had the resources to keep their nukes in good working order. Given the state of the Russian military assets deployed in this invasion, one starts to wonder how many of their missiles still work. It’s not worth taking the risk, of course, but it’s still something to wonder about.
It’s certainly a bigger deal than if they hadn’t built them before, and couldn’t afford to now due to financial pressures.
I don’t know. Annexation is better than destruction, but I’m not sure it matters to him as long as he achieves control.