Russia employs Soviet methods to combat rising food prices on eve of elections

A sudden surge in food prices in Russia ahead of elections has the government digging deep into its bag of tricks, including a few from Soviet days, to prevent popular discontent from resonating in the voting booth. ...

In a throwback to the Soviet era, when the economy was planned and prices set with no regard for supply and demand, some regions have started to set price controls on staples.

Middlemen have been singled out with a ferocity that plays on deep-seated suspicions about "spekulanty" — the speculators who bought and sold scarce goods during Soviet times and got rich in the process.

The federal antitrust agency has started cracking down on food cartels, and the country's neglected farmers have found a patron in Russia's new prime minister, who spent 18 years managing Soviet collective farms. ...

The new prime minister, Viktor Zubkov, seems to regard the country's food production as a matter of personal pride.

Shortly after his appointment last month, he toured a farm in Penza, 500 kilometers (300 miles) east of Moscow and instructed his agriculture minister to do everything possible so that Russia could rely on its own food output.

But with prices climbing fast, the prime minister is now backtracking. On Wednesday, for instance, the government reduced import duties on milk and dairy products from 15 percent to 5 percent for six months to put more milk on store shelves.

But most of the government's stop-gap measures hark back to the best traditions of the Soviet era and run counter to the spirit of the market economy that Russia has embraced.

Some regional governors have begun an arm-twisting campaign to get producers to put a lid on further price hikes.

Communism never ended. The whole breakup of the USSR was just a ploy to get financial backing to prop up their faltered economy. They are resorting back to those old tricks of manipulation that solidifies the government control.

We have been very stupid in diplomacy by trusting the Soviets. The bad eggs never went away. They just reinvented their images.

Snippet:
Thanks largely to a poor harvest in many exporting countries and rising demand for biofuels, prices for food are up sharply around the world. The increase is amplified in Russia because of a weak market system that allows cartels to form and middlemen to set exorbitant prices.

President Vladimir Putin addressed the rising food prices Thursday in his three-hour televised question-and-answer session with Russians across the vast country. The question came from a farmer in a southern village who complained that the liter (quart) of milk he sells for 8 rubles (US 30 cents) costs 30 rubles (US$1.25) once it hits the shelf in local stores.

Putin blamed the severe markups on middlemen who have a lock on supplies in many regions and the corrupt officials who share the profits.

"In a large part this is happening — and it's not pleasant for me to talk about this — because regional leaders cooperate with these monopolies and even consider them their own," he said.

Snippet:
"Igor Artemyev, head of the Federal Anti-Monopoly Service, has said that one-fourth of the country's food inflation is the result of cartel arrangements. For instance, six dairies account for more than 60 percent of Russia's total milk production, an astounding situation in a country stretching across 11 time zones, the antitrust agency said.

The agency has opened investigations into three sectors of the market — bread, milk and cooking oil — and in recent days has uncovered 15 antitrust violations in the food industry."

Is the issue that the market system in Russia still needs to be developed and it is currently not working? Keep in mind that many pensioners, who make up 38.2 mn of Russia's population, lost their entire life savings in the 90's during run on the currency. You'll note in the papers that Putin recently told the Government to increase the base pension of 1,260 ($50) by 300 rubles ($12) on December 1, which is the day before elections. Hint: This is a large voting block.
On a personal note, the milk that I normally purchase went from 24 rubles to 46 rubles in the past two months. Housing is another huge issue. Many of my expat friends' rent went up $500 a month or more in one year. Ouch!

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