Putin Hammers Another Nail In The Coffin Of The Russian Economy

Paul Roderick Gregory 

As a regular visitor to the USSR and Russia in the late 1980s and 1990s, I remember the utter disaster commercial aviation was back then. Moscow’s three airports seemed deliberately designed to torture ordinary passengers, whereas the elite were escorted to their flights from exclusive lounges. 

The path from airport entrance to the plane was a confusing maze for uninitiated Westerners.  #Domodedovo (DME), from which flights to the East originated, was a forbidding hulk of steel located in the middle of nowhere. I recall waiting for a flight from DME to Siberia in a dimly-lit terminal, having no idea when the plane might take off. Moscow’s Sheremetova earned the title of the world’s second worst international airport behind that of Manila.

Putin’s elite inner circle made their fortunes not by growing businesses that created value but by receiving grants of state assets and state contracts. The economic literature speaks of rent seekers who lobby to get monopoly rights. Putin’s inner-circle members are more aptly called “rent receivers” owing to their closeness to power. 

Among Putin’s instant billionaires are childhood judo buddies the Rotenberg brothers (owners of the Kremlin’s bank, SMP), Putin intimate Gennady Timchenko (cofounder of the Gunvor Group), and close Putin ally Igor Sechin, the head of Rosneft, the Russian national oil company.

The success of Dmitry Kamenshik

Dmitry Kamenshik, ranked No.452 among the world’s billionaires, began his aviation career in 1992 while a student at Moscow State University, chartering the cargo planes that flew in cheap consumer goods from China to DME. He went on to build a cargo terminal at DME, acquired East Line (the DME operating company), and became president of Domodedova Airport, Moscow’s sole privately-owned airport. DME had become Russia’s largest airport by passenger count in 2005.

Kamenshik’s success rested on making DME a Western-style, customer-oriented airport with convenient check-in, short lines, a rail connection to the city, and even friendly customs agents. Delighted by a Western-style airport for their Moscow flights, most major international carriers moved their operations to DME, forcing even the stodgy Sheremetovo to improve its customer service.

Thanks to Kamenshik, Muscovites could begin and end their trips to Turkey, Egypt or other cheap destinations in reasonable comfort. As much as any of Russia’s billionaires, Kamenshik can be credited with improving living conditions in Russia, which does not mean he succeeded because of a superior business model. Russian businesses leave even the most able with unclean hands, but his success in keeping Moscow’s biggest airport in private hands borders on the miraculous.

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