Although western and international financial institutions’
assistance for reform in Russia is "on hold", there has been remarkably swift
action in assuring that programmes of food aid, including $600 million for the purchase of
food, from the United States,1 and a package2 of some $500 million from the EU, will be available to help the
Russian people overcome any winter food shortages.
There have been conflicting reports from Russia on the issue of
possible food shortages in the coming winter, and no one wishes to be complacent about
disaster warnings, even if they are hotly disputed within the country itself.3 The problem, however,
would appear to be overwhelmingly one of distribution, especially to remote and depressed
regions, or to low income groups of the population, not one of overall supply as it is
often presented. It is clear, however, that the offers of aid from the United States and
the EU are also motivated by the desire to assist their own domestic farmers and food
producers. Both have large surplus stocks of food, and both had been expanding their
exports to the growing Russian market.
The United States and EU shipments would represent a substantial
proportion of Russia’s annual imports of food which in the last few years have been
in the range of $10 billion.4 Thus the risk of crowding out shipments from other transition
countries is evident. These countries have been trying to increase their barter
transactions to Russia to compensate for losses in the present crisis, sectoral shocks and
layoffs. If the overall welfare impact of the credits offered were the prime consideration
it would be better if the aid could be used to purchase Polish sausage or Lithuanian dairy
products.
In addition to the potentially negative effect of crowding out other
transition economies’ food exports to Russia, it is already clear that the terms of
the proposed deals risk a repetition of the 1992-1993 aid episode. In what seemed to be an
efficient arrangement then, the food was delivered to Russian enterprises for further
processing and distribution. The profits were supposed to be used for "social
purposes". This is precisely what has been agreed again. In the earlier episode,
however, there were many charges of corruption, some still under investigation, the net
effect of which was to create considerable ill will. Some of the Russian groups and
individuals involved in the 1992-1993 programme are again involved in the new
transactions. The United States government is proposing to send only two people to check
on the deliveries and, in contrast to normal United States practice, it appears that there
will be no bidding by the Russian agencies for the right to process and deliver the food.5 This stands in marked
contrast to an earlier warning by the new Russian Deputy Prime Minister for Social Policy,
Matviyenko. She has noted that problems of food distribution do exist for 26 identified
Russian districts, which need both food and medicines. Recalling that there had been many
abuses with respect to humanitarian aid in the past, she asked for "firm and rigid
control" in future, including checks by donors.6 This plea appears to have gone unheeded.
1 The United States is reportedly offering a (tied) credit of $600
million for food, a donation of 1.5 million tonnes of wheat and another outright gift of
100,000 tonnes of food. The credit is repayable over 20 years at an interest rate of 2 per
cent, and has a five-year grace period.
2 This would be for a commodity loan, similar to that being agreed
with the United States for $600 million. The food available for this would be about 1
million tonnes of EU wheat, 500,000 tonnes of rye, and 50,000 tonnes of rice, all of which
are in stocks. There would also be 100,000 tonnes of pork and between 100,000 and 150,000
tonnes of beef. Moscow Times, 11 November 1998.
3 There has been considerable exaggeration of the extent to which
Russia today depends on food imports, with initial (excessive) estimates of over 50 per
cent, no doubt based on partial data, and predominantly from large cities/oblast capitals.
(The figures now quoted by Russian policy makers tend to be in the range of about one
third.) Goskomstat has previously presented quarterly data, reporting the weight of
selected imported food items in retail trade. The basis, geographical distribution and
method of sampling is unclear, but the results are perhaps indicative. Thus, in the fourth
quarter of 1997, 22.3 per cent of meat, 56.9 per cent of poultry, 24.5 per cent of
sausage, 56.4 per cent of vegetable oil and 40.8 per cent of pasta products on sale in
retail outlets were said to be imported (Sotsial’no-ekonomicheskoe polozhenie
Rossii, 1997 (Moscow), 1998, p. 133). It does not need to be stressed that
Russian families also produce some of their own food, and this has been on a distinctly
rising trend in recent years. (The Minister of Agriculture has suggested that 100 million
Russians (that is two thirds) now grow their own vegetables and potatoes.) Some better
indications may be found in trade and production data. UN/ECE secretariat estimates of the
total value in 1997 of net imports of food and agriculture produce, minus alcohol and
tobacco, based on State Customs Committee of the Russian Federation figures, are $9.4
billion. For the first half of 1998 the corresponding figure is $5 billion. Meat,
including poultry, is the single most important item in both periods. In tonnes, over half
the poultry consumed as early as 1996 was imported. In the first half of 1998, 34 per cent
of meat imports were from the United States, 31 per cent from the European Union and 11
per cent from eastern Europe and the Baltics. As table 3.2.8 makes clear, this trade is
far more significant overall for the latter countries. Thus, in 1997, 53 per cent of
Latvian, 46 per cent of Estonian and 37 per cent of Lithuanian exports to Russia consisted
of food, beverages and agricultural products. The total value of these products was less
than the $600 million in soft and tied trade credit being offered by the United States, in
addition to which the latter will pay for the transportation costs.
4 This is without an adjustment for the understatement of Russian
imports noted by a number of observers. Even with an upward revision for the value of
imports of 20 to 30 per cent, as suggested by the Bureau of Economic Analysis (Moscow), or
the 40 to 50 per cent consistent with a recent study by Finnish customs (Bank of Finland,
Institute for Economies in Transition, Russian Economy. The Month in Review, No. 8,
1998, p. 1), the United States and EU aid would still amount to a substantial proportion
of annual Russian imports.
5 There is no particular reason to believe that the current round
of proposals for aid will do any more to win "hearts and minds" than the
previous exercise. Apart from popular scepticism about corruption, recent survey data
indicate that it is precisely those in possible need of assistance who are not in favour
of it. The major national opinion polling organization, VTsIOM, in a stratified sample of
1,608 Russians questioned on 23-26 October, found that 45 per cent were in favour of such
aid, and 39 per cent were opposed. Those opposed, however, were disproportionately
pensioners, those with lower than average incomes, over 40 years old, living in small
towns, or unemployed. Those in favour were likely to be found among industrial managers,
white collar workers, the young, people with higher than average incomes, living in Moscow
or other large cities. Johnson’s Russia List, No. 2458, 4 November 1998.
6 Reuters, 27 October 1998 quoting ITAR-TASS World
Service, 27 October 1998.