Will breaching EU sanctions be the end for Kremlin media in Baltics?

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An alleged breach of EU sanctions, and a possible fine of up to 10 million euros, casts doubt on the future of Baltic Media Alliance, one of the largest media holdings in the Baltic countries focusing on local Russian-speaking audiences.

“Today we are saying goodbye to our viewers. Every evening for 16 years, you were with us, between 50 and 200 thousand people. I, Julia Plyen, having spent 16 years with you, would like to thank you in the name of the 33 people who have worked on the programme recently.”

Those were the  departing words   of the news anchor of the most popular Russian-language TV channel in the Baltics, Perviy Baltijskij Kanal (PBK), on March 19, when it aired locally produced news for the last time.

Since 2014, when Russia annexed Crimea and the war in Ukraine followed, Baltic Media Alliance (BMA), which  holds the broadcasting rights   for PBK, Ren TV, NTV Mir and other popular Russian TV channels in the Baltics, has weathered many storms.

It has regularly been accused of being a propaganda tool of the Kremlin, while Russia-friendly Baltic politicians have used it for self-promotion, paying BMA handsome sums of money to help them hang on to power.

This February, the UK media regulator ruled that BMA had  breached the impartial coverage regulations six times   when reporting on events in Ukraine and the Baltics, and on the poisoning of a former secret agent’s family in Great Britain, and imposed a fine of 20,000 British pounds.

On several occasions and for similar reasons, Latvian and Lithuanian media regulators have also temporarily banned the broadcasting of several TV channels that BMA re-broadcasted.

But the fateful moment for the Baltic-Russian media powerhouse (which also has an advertising agency, popular weekly newspaper MK in Estonia and Latvia, and other side businesses) came on February 4, 2020, when the Latvian and Estonian security services carried out simultaneous searches in BMA offices in Riga and Tallinn.

PBK is the offspring of the similarly named television network in Russia which is co-owned by Yuriy Kovalchuk, the oligarch from Vladimir Putin’s circle whom the EU has put under sanctions for supporting the Kremlin’s policy to destabilise Ukraine. In December 2019, the Latvian State Security Service started a criminal investigation into a possible breach of EU sanctions by people closely related to BMA.

One of them is Oleg Solodov,  a scrutiny-averse local media baron   who owns half of BMA (the other 50 percent being owned by the little-known Russian businessman Aleksei Plyasunov). Re:Baltica is the first to report that the other suspect is an Estonian, Margus Merima, who has been closely related to BMA in the past.

Both Solodov and Merima are facing a personal indictment for their role in arranging the illegal flow of money. Neither Solodov nor Merima agreed to talk to Re:Baltica/Delfi for this story.

PBK’s decision to stop producing local news in the Baltics, and the future prospects of the media house in general, may have a geopolitical impact which fundamentally changes who controls what the large Baltic Russian population sees on their TV screens.

This happens at a time when the  EU diplomatic service has voiced concerns   over disinformation on the Covid-19 pandemic and the role of Russia in it. Disinformation about the virus originated in China, Iran and the US far-right, but it is the Russian media which amplified it and which may become the main source of information for the Baltic Russian-speaking audience.

Who is who

There are many parts to the BMA media holding, with legal entities registered in each of the Baltic countries as well as the UK. This is the first attempt to reveal the web of complex financial transactions that underpins the looming charges which have so far been accompanied by deafening silence, despite there being much at stake for the players involved.

At the centre of the case for breaching EU sanctions is the Russian oligarch Yuriy Kovalchuk. The EU has put him, along with tens of other Russian top officials and businessmen, on the  sanctions list   because of Russia’s annexation of Crimea.

The EU has described Kovalchuk as a long-time acquaintance of Putin and said the businessman was “benefiting from his links with Russian decision-makers”.

Kovalchuk is the chairman and the largest shareholder of Bank Rossiya which, according to the EU document, “has important stakes in the National Media Group” (NMG). NMG in turn “controls television stations which actively support the Russian government’s policies of destabilisation of Ukraine”.

Solodov, who grew up in the Russian city of Ufa, but moved to Latvia shortly after he finished secondary school there, has made a business out of broadcasting Russian TV channels in the Baltic countries since the mid-1990s.

He seems to have made a good money out of it. Four people described to Re:Baltica/Delfi a chess set made of gold in his office in Riga. “Imagine making a move with a pawn if you’re used to the regular weight of the pieces,” said a source who has played a match against Solodov.

Many of the 25 channels which BMA broadcasts in the Baltics belong to the Russian-registered Perviy Kanal, a minority stake of which is indirectly owned by Kovalchuk through NMG. That is how Solodov is connected with the Russian oligarch.

It is not clear why the Latvian authorities have made the move now, since Kovalchuk has been on the sanctions list since 2014. The Latvian media regulator has said that the Kovalchuk connection was established just recently, because the chain of the ownership is complicated.

The Latvian authorities have not disclosed details of how Solodov and Merima have breached the EU sanctions, apart from quoting the article of the criminal code under which the case was initiated (sanctions breach in an organised group with prior intention, which is punishable by up to eight years in prison).

However, information gathered from various sources in Riga and Tallinn leads to the conclusion that the Latvian authorities suspect Solodov of breaching EU sanctions against Kovalchuk by paying the fees for the distribution of Russian TV channels via a complex network of companies registered in Latvia, Estonia and Great Britain. The estimated sum of the fees paid is close to 10 million euros.

According to estimates provided to Re:Baltica/Delfi by several media market experts, the annual rebroadcasting fee for Perviy Kanal itself could be more than 1.5 million euros. As this TV channel is popular among the locals in Latvia and Estonia, it has attracted plenty of advertisers.

In addition to Perviy Kanal, BMA also airs smaller TV channels such as Dom Kino, Muzika Pervogo or Peterburg – 5 Kanal, the latter of which the Estonian security service has routinely described as a notorious propaganda channel; all of these channels belong to the Russian-registered Perviy Kanal group.

At least some of these channels’ broadcasting rights in the Baltics belong to another company in the complex structure, the British-registered BMA Ltd, which in turn has assigned the distribution rights to a Latvian company, TEM LV.

Taken at face value, the British company doesn’t appear to have anything else but its name in common with the Latvian BMA. The sole shareholder and board member is Merima. A person with direct knowledge of Solodov’s businesses, but willing to talk only on the condition of confidentiality, has said that Merima acts as a proxy for Solodov and does only what he is told to do.

Approximately a week before the police search, Merima and BMA’s lawyer Sergejs Kārītis met with the Latvian electronic media regulator. “We had legitimate doubts as to whether this person [Merima] is really the ultimate beneficiary of the business. He didn’t leave an impression that he knew the business he represented. He wasn’t able to answer questions,” said the head of the regulator, Ivars Āboliņš.

Using all means

Dark clouds appeared on the horizon for BMA already back in November 2019, when the Latvian TV regulator forced nine channels off air. Eight of them were broadcasted by BMA, which had acquired licenses for their rebroadcasting from the Russian company ZAO Perviy Kanal. Vsemirnaja Set.

The regulator argued that broadcasting the channels violated the EU sanctions imposed against Kovalchuk. Cable operators switched the channels off. BMA challenged the ban in the court, where the case is still ongoing.

The EU sanctions against Kovalchuk are interpreted differently in Latvia and Estonia – at least five of the nine channels banned in Latvia last November are still aired in Estonia.

When asked why Estonia hadn’t taken the same steps, the country’s Financial Intelligence Unit responsible for the implementation of financial sanctions said that they “don’t possess information that would lead to coercive measures in this case”.

Public data from Russian business registries, provided to Re:Baltica/Delfi by Investigative Dashboard, suggest that Kovalchuk is a minority shareholder of both Perviy Kanal and its daughter company Perviy Kanal. Vsemirnaja Set. Fifty-one percent of the Perviy Kanal’s shares belong to the Russian state, a quarter to NMG, in which Kovalchuk is a shareholder, and another 24 percent to the famous Russian billionaire Roman Abramovich.

Frozen accounts, unpaid salaries

Soon after the search at BMA’s offices in Riga and Tallinn this February, the Latvian authorities restricted BMA’s use of its bank accounts: money could be paid in, but BMA could not make any transfers out of them. For weeks, BMA employees were unable to receive their salaries.

This led to the decision to stop producing local content in Latvia and Estonia. “Due to disproportionate economic pressure from the state and law enforcement authorities on BMA companies, the board of the media group is forced to make a decision to suspend the daily broadcast Estonian News,” said BMA Estonia. A similar statement was released in Latvia.

At the beginning of March, the bank accounts were unblocked, but Swedbank, afraid of violating sanctions, refused to transfer salaries to BMA employees.

Apart from the possibility of a real jail term, there are another two bleak scenarios which the BMA owners may have to face. The first stems from the words of the Latvian Security Service to Re:Baltica/Delfi that the legal entity under investigation may face harsh consequences such as liquidation or a request to repay to the state the money which was paid in breach of EU sanctions.

That would most likely mean that either the Latvian- or the UK-registered BMA would have to be wound up. If it had to repay the money, then the fine might amount to roughly 10 million euros, which could send the company bankrupt.

One further concern is that the Latvian regulator could try to strip BMA’s flagship channel PBK of its broadcasting licence and force it off the air altogether.

According to the Latvian regulator’s interpretation of the  conditions   of the channel’s licence, locally produced news needs to make up at least 5 percent of a week’s total broadcast time, or just over 8 hours of PBK’s schedule every week. With its news desk closed down, it would be difficult to meet this condition, but the regulator insists that PBK can buy the local news from independent producers.

BMA spokesperson Sindija Fridenberga rebuffs this concern and argues that under the licence not only locally produced news, but also sports, weather and similar news may make up the 5 percent of air time. “We are planning to meet that requirement,” she said.

What next?

PBK, being one of the most popular TV channels, has been an important source of information for the Russian-speaking residents of Estonia and Latvia. With the closure of its local news desk and shadows looming over its future, there is a growing concern about where PBK’s current viewers will go to get their news and entertainment.

“The [Latvian] state doesn’t care where Russian speakers will get info. For them it’s important that there is one official channel of information. We don’t have a democracy or freedom of speech,” said a former PBK employee who gave an interview to Re:Baltica on condition of anonymity.

The head of Latvia’s Advertising Association, Baiba Liepiņa, believes that if PBK were closed down, a part of its audience would move to pirate channels that are available for two euros a month, while wealthier and technologically more advanced viewers might switch to Russian channels on YouTube.

“All of these scenarios lead to the audience moving into another information space and out of control, and the worst part is that the advertising money follows the audience, in these cases abroad and / or to pirates,” said Liepiņa.

“Some [cable] operators have asked us to distribute Perviy Kanal, so that it would not leave the Baltic cable market, but we are not ready to discuss it yet,” said Ljubov Domanina, whose family’s Baltic Media Union holds the broadcasting rights for TV channels such as RTR-Planeta, which are owned by the Russian state-owned media conglomerate VGTRK.

All Media Baltics (AMB), the US hedge-fund-owned media house that airs TV3, is also negotiating to get the permissions in their hands. This was confirmed to the authors by the head of AMB’s business in Estonia, Priit Leito, before he passed away in March.

The public broadcasters are seeing the closure of PBK’s news desk as an opportunity to increase the number of viewers for their Russian-language programmes, whose ratings have been very low in comparison to PBK’s.

The Estonian public broadcaster ERR is planning to launch a marketing campaign for its Russian-language channel ETV . “We’ve invested a lot of effort [into Russian-language news] and the ratings have been steadily growing,” said the editor-in-chief of ERR’s news, Anvar Samost.

According to him, in a similar situation a year ago, when PBK had put its news temporarily on hold, ETV managed to double its news programme’s ratings. Now, the Estonian broadcaster hopes to seize the opportunity which is laid before it.

The Latvian public broadcaster LTV is also eyeing an opening, but thus far it has always run into political objections and a lack of money.

“We have developed a concept for a multimedia platform in Russian, which would cater for the wired, economically active part of the Russian-speaking audience. It would have a multimedia studio for breaking news and interviews, features, long-reads, lifestyle content, children’s and culture,” said LTV’s program director Rita Ruduša.

While the concept for the platform has been submitted to the Latvian media regulator several times, the funding for the one-time investment into the technologies needed for the launch hasn’t been provided.  This story originally  appeared   on Re:Baltica.

LRT.LT

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