Publication: Monitor Volume: 5 Issue: 26

As the Monitor has reported, the Moscow Arbitration Court recently placed Russian Public Television (ORT)–which is 51 percent state owned but widely thought to be controlled by CIS Executive Secretary Boris Berezovsky–under outside management. The court rendered its verdict despite the fact that President Boris Yeltsin ordered the government to extend a US$100 million loan to the heavily indebted channel, which is seen across the Russian Federation and in much of the CIS. Many observers said that Prime Minister Yevgeny Primakov, who is in an increasingly open power struggle with Berezovsky, was behind the court’s move. Berezovsky, however, is rumored to have enlisted a foreign ally in the battle for ORT–namely, Rupert Murdoch.

Murdoch has reportedly held talks, going as far back as 1990, with various Russian media outlets about buying into the domestic market. None of these projects, however, came to fruition. Last fall, rumors cropped up that the Australian-born media tycoon was again eyeing the Russian market. In December he reportedly made a low-profile visit to Moscow. According to some media reports, Murdoch’s News Corporation has agreed to become Berezovsky’s partner in a new company which will sell television advertising in Russia and abroad (Expert, February 1).

Berezovsky’s and Murdoch’s plans, however, may go much farther: Russian media reported last week that the two are negotiating the sale of a stake in ORT. The 49 percent not owned by the state is officially shared by Berezovsky’s LogoVAZ (11 percent) and the banking consortium ORT-KB (38 percent). Berezovsky, however, reportedly has effective control over the entire 49-percent private stake, and may be trying to hand over part of the state’s stake to Murdoch, using a tactic similar to the infamous 1995 loans-for-shares scheme. One newspaper reported last week that ORT will give the government, as collateral for its US$100 million loan, 5 percent of the state’s ORT shares and 5 percent of the privately held stake in the company. According to this version, the channel’s management, unable to repay the loan, will urge the government to sell part of the state’s 51 percent stake. Murdoch will be the purchaser, giving the Berezovsky-Murdoch joint venture a controlling share in the company (Moskovskie novosti, January 31-February 7).

Another newspaper gave a similar report: that ORT will hand over 20 percent of its shares to the government as collateral for the loan. In this scenario, because ORT will be unable to repay the loan, the 20 percent stake will have to be sold, and Berezovsky is trying to convince Murdoch to buy it. The newspaper quoted Murdoch as saying he would not comment “before an official announcement of a deal,” but as not denying that he is negotiating with Berezovsky (Kommersant daily, February 6).

The newspaper reporting the Murdoch rumors noted that domestic media companies, most of which are in dire financial straits, are less than thrilled at the prospect of having to compete with Murdoch’s News Corporation. Russian politicians are also less than pleased about Murdoch’s potential arrival. The State Duma recently rushed through legislation which would, first, forbid the government from selling or transferring any of its 51-percent of ORT shares without a special law, and, second, prevent any ORT shareholder from transferring its shares to a foreign individual or corporation. The draft legislation has been sent to the government for consideration, and Primakov will probably approve it (Kommersant daily, February 6).

A magazine, however, suggested that Berezovsky may not really intend to sell part of ORT to Murdoch. Instead, he may be using the Western media tycoon’s specter as a way, first, to scare the government out of taking sanctions against ORT and, second, to make it cough up further financial infusions (Expert, February 1).