Russian Duma backs law restricting foreign ownership of media

By bne IntelliNews September 24, 2014

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Russia's State Duma has backed a bill with an overwhelming majority to restrict foreign ownership of mass media to 20%, in a blow to a number of the country's leading independent publications and freedom of speech. Only one deputy voted against the bill, which was supported in the first reading by 434 out of a total of 450 deputies. 

The bill imposes a blanket bank on all forms of direct and indirect foreign ownership, to be implemented by January 1 2017. It thus tightens an existing restriction that limits foreign ownership of broadcast media covering over half of the country, as well as of print media with more than a 1m print run, to 50%.

The deputy who voted against the bill is believed to be opposition MP Dmitry Gudkov. During the parliamentary debate, Gudkov said that the bill would hurt major Russian media holdings registered via offshore entities, such as Gazprom Media and TV station STV. Gudkov also pointed out that it would hurt quality papers with foreign ownership such as Vedomosti, which is partly owned by the  Financial Times and Wall Street Journal. “What are you afraid of?” asked Gudkov. “Vedomosti? But you read the paper yourself. In the presidential administration, which is behind this bill, they read Vedomosti to understand what is going on in the economy.”

Foreign investors likely to be hit under the terms of the bill include Condé Nast with  Vogue Russia and GQ, Disney, Bauer, Burda and Axel Springer of Germany. But bne sources say that business daily Vedomosti may be the real target of the bill – the paper is both influential and respected, regularly interviewing top Kremlin and government officials, such as Prime Minister Dmitry Medvedev two weeks ago. 

The paper has also conducted a series of respected investigations into corruption in the highest echelons of power, describing the meteoric rise in fortune of close associates of President Vladimir Putin, such as Arkady Rotenberg and Gennady Tymchenko. It is on the basis of such investigations that the US and EU have imposed sanctions precisely on Rotenberg and Tymchenko, freezing their foreign assets. Italian media reported on September 22 that Italian tax police  had seized a number of villas and a hotel belonging to Rotenberg. Forbes, another respected publication conducting investigation into Russian corruption and organised crime, also falls under the sweep of the new bill. Increasingly the Russian editions of international glossy brands such as Esquire have also run investigative reporting on Russia.

bne sources say that both publications may continue in their current stance under Russian ownership. Specifically oligarch Mikhail Prokhorov, who in the past has played the role of liberal opponent of the Kremlin, running against Putin in presidential elections in 2012 and taking 8% of the vote, is reported to be bidding to acquire Vedomosti. Prokhorov already owns the popular Slon.ru magazine and site, which is frequently critical of the Kremlin from a liberal point of view. Prokhorov is regarded as ultimately loyal to the Kremlin, but is used as a channel for liberal opposition, so under his ownership publications such as Vedomosti may be allowed to publish investigations that do not go to the heart of the Kremlin and attack the president himself.

Finland’s Sanoma group is currently looking to sell its stake in the publication. Other sources on the market believe the bills may also help Gazprom Media gain control over liberal radio station Ekho Moskvy, which is frequently critical of the Kremlin.

At the same time as reigning in foreign ownership of Russian media, the Kremlin is planning to boost funding of Russia's controversial state-owned domestic and international media presence, that have been accused of propaganda and war-mongering in their Ukraine coverage. Proposals contained in Russia's budget for 2015 include a threefold increase in original plans for funding Rossiya Segodnya, the Kremlin-owned holding based on the former RIA Novosti , and international English-language broadcaster Russia Today. Total funding for Rossiya Segodnya in 2015 could now hit $170m, according to the proposals, while funding for Russia Today could also soar to $400m from $310 in 2015, according to RBC news agency. The extra funding might be directed towards development of French and German channels, RBC reported. 

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