Jul 21st 2014

Malaysia Airlines Flight 17 Was Shot Down for Money

by Daniel Wagner

 

Daniel Wagner is the founder and CEO of Country Risk Solutions and a widely published author on current affairs and risk management.

Daniel Wagner began his career at AIG in New York and subsequently spent five years as Guarantee Officer for the Asia Region at the World Bank Group's Multilateral Investment Guarantee Agency in Washington, D.C. After then serving as Regional Manager for Political Risks for Southeast Asia and Greater China for AIG in Singapore, Daniel moved to Manila, Philippines where he held several positions - including as Senior Guarantees and Syndications Specialist - for the Asian Development Bank's Office of Co-financing Operations. Prior to forming CRS he was Senior Vice President of Country Risk at GE Energy Financial Services. He also served as senior consultant for the African Development Bank on institutional investment.

Daniel Wagner is the author of seven books: The America-China Divide, China Vision, AI Supremacy, Virtual Terror, Global Risk Agility and Decision Making, Managing Country Risk, and Political Risk Insurance Guide. He has also published more than 700 articles on risk management and current affairs and is a regular contributor to the South China Morning Post, Sunday Guardian, and The National Interest, among many others. (For a full listing of his publications  and media interviews please see www.countryrisksolutions.com).

Daniel Wagner holds master's degrees in International Relations from the University of Chicago and in International Management from the Thunderbird School of Global Management in Phoenix. He received his bachelor's degree in Political Science from Richmond College in London.

Daniel Wagner can be reached at: daniel.wagner@countryrisksolutions.com.

Malaysia Airlines Flight 17 was shot down in Ukraine last week because three crucial actors all played a role, and they all had something in common -- a desire for money. If any one of them had not contributed to the perfect storm in the manner they did, the crash would never have happened. In spite of all the collective finger-pointing, Malaysia, Russia and the Ukraine all bear culpability.

First, the rebels have, since June, proven their ability to shoot down high-flying aircraft, having shot down a Ukrainian military transport plane, a cargo plane and numerous helicopters, among other aircraft. On June 29 the rebels raided a Ukrainian missile facility near Donetsk and may have obtained 'Buk' anti-aircraft missile systems, capable of reaching in excess of 30,000 feet. Whether the rebels obtained the Buk missiles through their own efforts, or were provided them by the Russian government, it seems clear that the missile(s) which brought down MH17 were shot from rebel-held territory.

Either directly, or indirectly, Russia bears part of the blame for this development, since the Russian government has overtly and covertly supported the rebels following the annexation of Crimea earlier this year. For the Russian government to deny any culpability in either providing the Buk missiles, or training to use the weapons, appears to be disingenuous. Russian assistance would have been required to operate the Buk missiles correctly, unless former Ukrainian air defense specialists were among the ranks of the rebels, which seems unlikely.

Second, the Ukrainian government had failed to close eastern regions of the country with active rebel activity to commercial air traffic, which was obviously a mistake, and appears to have been based on money. Up to 150 flights per day were traversing Ukrainian airspace before MH17 was shot down. While the amount the Ukrainian government charges airlines for overflight rights is not public information, at just $1,000 per flight, the government stood to lose in excess of $50 million per year if international commercial airlines stopped using Ukrainian airspace, and possibly a lot more. It is not hard to imagine the government wanting to avoid having to do that for as long as possible, given its funding requirements.

Third, Malaysian Airlines had the option of selecting alternative routes between Amsterdam and Kuala Lumpur, which could have taken MH17 either well north or south of the conflict zone. The airline chose not to do so, even though a variety of international airlines have been doing just that since the conflict began. Here again, the reason appears to be money. The most direct -- and therefore the most fuel and cost efficient -- air route between Amsterdam and Kuala Lumpur is over Ukraine. The airline appears to have chosen cost savings over safety, which was a grave error. One has to wonder if the airline can now survive, given two tragedies in the space of a few months.

So, money appears to have played a central role in why MH17 was blown out of the sky. Ukraine wanted overflight fees to continue for as long as possible (why else would the government not have closed the air space to commercial traffic?). Malaysia Airlines wanted to save money, and appears to have placed saving money above safety concerns (why else would it not have chosen an alternative route?). And given that eastern Ukraine is the wealthiest part of the country, money also appears to have played a role vis-à-vis Russia. If eastern Ukraine was the poorest part of the country, Mr. Putin may not have been acting quite so aggressively in supporting secession movements among ethnic Russians. It is less noted, but in annexing Crimea, Russia obtained mineral rights to large oil and gas deposits off Crimea's coast.

It is indeed sad to have to acknowledge that nearly 300 innocent lives were lost, in the end, because of the pursuit of revenue, but that appears to be the case here. It should not take a terrible tragedy like this for common sense to prevail among governments and commercial airlines regarding uniform standards for operating in conflict zones. If MH17's demise ends up changing required protocol among airlines and governments alike in that regard, at least some good may come of it.



Daniel Wagner is CEO of Country Risk Solutions, senior advisor with Gnarus Advisors, and author of the book "Managing Country Risk." - pictured first in the text.


You can follow Daniel Wagner on Twitter: www.twitter.com/countryriskmgmt




 


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