Business Week cites reports

that Russia's Vneshtorgbank (VTB) has laid out $1 billion for nearly 5% of the European Aeronautic Defence & Space Co. (EADS), which owns Airbus. Neither VTB nor EADS would comment.

This news comes directly on the heels of news that

British Aerospace's (BAE) board of directors has agreed to sell the company's 20% stake in Airbus to EADS in a deal that will reap the British company a little over ₤1.2 billion ($2.3 billion).

The board's support of the sale, which requires BAE shareholder approval, comes after the UK company undertook an independent review of the European aerospace manufacturer's commercial unit.

If the numbers reported are correct, then the Russain bank is paying roughly 75% more per share than BAE is to receive. That company's board of directors may well wish to reconsider the sale of its shares, or perhaps offer its shares directly to Vneshtorgbank.

But the issues involved in this reported sale are far more significant than mere euros, rubles or dollars. EADS is a technological powerhouse, and in fact is competing for major United States military contracts, including a massive order for tankers for in—flight refueling.

Business Week notes:

... state—owned VTB works closely with the Kremlin, and Russia's own aviation industry is about to launch a major restructuring. Under a Kremlin—approved plan, eight aircraft plants and five design bureaus are to be merged into a giant holding called United Aircraft Corp. The company, which will be 75% state—owned and boast close to $3 billion in revenues, could benefit from links to Western aerospace outfits. Indeed, EADS will own about 2.5% of United Aircraft through its 2004 purchase of 10% of Irkut Corp., a unit of the holding company.

One alternative explanation offered in the Business Week article is that

Russia is "a potential source of lower—cost components for Airbus, which needs to address its lack of competitiveness," says Nick Cunningham, an analyst at London brokerage Panmure Gordon.

However, others are not so sure it is all about business. Our national security correspondent Douglas Hanson writes:

This is simply a continuation of Putin's operations to obtain Western technology via "legitimate" business dealings or outright acquisitions of companies.  Now that the Cold War is over (which is arguable, in my view), he can give it the appearance of an above board deal, while taking advantage of his old KGB spy network and European covert business connections.

Former German Chancellor Gerhard Schroeder stubbornly opposed the US and the UK on the war in Iraq, and was the last true leftist to govern the country.  Once out of office, he promptly went to work for the Russian energy conglomerate, Gazprom in order grease the skids on oil and natural gas deals with Western Europe.  Such behavior from a former leader of a NATO member raises suspicions on whose alliance he was actually putting first — NATO or Putin's business network?

As the EADs arrangement develops, it will be interesting to see who the Western prime movers and shakers are, and if their dealings during the Cold War and their recent actions merit further scrutiny.

Indeed this whole set of transactions bears close scrutiny from financial, technological, and national security perspectives. The tectonic plates in the world aerospace industry appear to be moving.

Hat tip: Ed Lasky

Thomas Lifson   9 10 06