Russia Withholds EU Air Traffic Rights in Growing CO2 Trade Spat

--Russia move breaches its WTO commitments says the European Commission

--Finnish government says Russia withholds new over flight rights over Siberia due to EU's emission trading scheme

--Nordic-Russian air-traffic talks complicated by trade spat

--Finnair alters summer schedule as it received fewer rights to fly over Siberia than expected

 
   By Christina Zander 
 

STOCKHOLM--Russia is withholding new "free of charge" rights for European Union-based airlines to fly over Siberia in breach of its free-trade commitments in protest against the inclusion of international airlines in the EU's carbon-dioxide emissions trading scheme, the European Commission said Thursday.

Russia and the EU had agreed in principle that all new over flight rights issued to European airlines from January 2012 should be free of charge, a condition of Russia's joining the World Trade Organization in December last year.

"Unfortunately Russia so far has not lived up to its commitments under the agreement," said Dale Kidd, a spokesman for Transport Commissioner Siim Kallas.

Russia, along the U.S., China and India, is among the most vocal critics of the EU's ETS. Under the EU program, any airline operating at an EU airport must hold special credits to offset its carbon-dioxide emissions since the start of this year. Airlines have said their inclusion in the ETS, which already covered many EU industries, will cost them billions of dollars annually.

In retaliation, China has already delayed approving Chinese airlines' purchases of multimillion-dollar jetliners made by Franco-German aircraft maker Airbus.

Russia has cited the dispute over the ETS as reason to ignore granting airlines free over flight rights, said Silja Ruokola at the Finnish ministry of Transport.

"That is how we gather the situation," Ms. Ruokola said. "You can see that [the ETS] has an effect," she said.

In a further sign the trade spat is having a direct impact on EU companies, Finland's state-controlled airline Finnair Oyj (FIA1S.HE) confirmed it has had to alter its summer schedule because it received fewer rights to fly over Siberia than it had expected.

Rival Scandinavian airline SAS AB (SAS.SK) said while it hasn't immediately been affected, there are doubts whether it will able to save on yearly Siberian over flight fees of 100 million kronor ($14 million) a year in the future.

"As long as the ETS remains a problem, discussions about over flight rights are not likely to move forward," said SAS spokesman Hans Ollongren.

In addition, Russia's anger over the ETS has snarled up negotiations between Moscow and the governments of Sweden, Denmark and Norway about revising an air-traffic pact signed with the Soviet government in 1957.

Talks about reworking the accord which regulates which airlines are allowed to fly from Scandinavia to Russian destinations ended last month without agreement partly because of Russia's frustration over the ETS and will resume at the earliest in November, people familiar with the situation said.

Russian government officials weren't immediately available for comment.

Russia's WTO commitments include lifting the charges European airlines for flights over Siberia completely by January 2014. European airlines currently pay about 300 million euro a year for the right to fly over Siberia, according to the European Commission.

The Russian decision over over flight rights is particularly painful for Finnair and SAS airlines which have counting on growing their long-haul business to Asia, flying over Siberia, to help counter intense competitive pressure on their operations in Europe.

Finnair had expected to increase the number of its flights to Asia. "We had hoped for another four [over flight rights] for the summer season," said Finnair spokeswoman Arja Souminen. The airline currently as 60 over-flight rights.

"There is very little that Scandinavian countries can do, seeing as this (ETS) is something that has been decided on an EU level," said SAS's Mr. Ollongren.

Top executives from the world's leading airlines are meeting this weekend in the Chinese capital Beijing under the auspices of their industry body, the International Air Transport Association.

IATA Director General Tony Tyler said earlier Thursday that the escalating row over emissions trading won't be resolved in the near term.

"I'd like to see good progress this year, but being realistic, it's going to take a while," he said.

The EU said last month that a total of 10 airlines from China and India failed to meet a March 31 deadline to report their 2011 carbon dioxide emission data, raising the possibility of penalties or a ban from flying to Europe if they miss the next deadline in mid June.

Write to Christina Zander at [e-mail]

Joanne Chiu contributed to this article.