MOSCOW - Runaway inflation and unemployment rates are the conventional killers
of campaigns for reelection in the democracies such as the United States and
the United Kingdom. But in the autocracies, the rising price of bread (or
rice), leading to hoarding, usually does the trick.
Joseph Stalin wasn't mistaken in suspecting that popular Communist Party rivals
like Nikolai Bukharin might be plotting his downfall if he allowed them to
exploit the wave of resentment, protest, rebellion and grain hoarding that came
during 1928 in the wake of Stalin's forced collectivization of farming, and the
punitive measures he ordered to seize grain and punish growers, hoarders,
speculators, kulaks.
More than 80 years later the trauma of those events, and the
effect they had on Stalin's decision to start the terror purges of 1937 and
1938, remain lessons no Russian politician, let alone a Chekist, would
overlook. And so the most dramatic effect of this summer's extreme weather
conditions turns out to be a spate of warnings, threats, and police raids
ordered against alleged hoarders and speculators in the domestic grain market.
Here's President Dmitry Medvedev, for example, uncovering plots and playing old
Joe to the limit: "People are buying up this buckwheat from big retailers in
the evenings, using sacks to fill up their trucks, and then selling it in small
shops and markets," Medvedev announced at a session of officials at Saratov on
the Volga last week.
"Those who are involved in hiking up prices, those involved in earning
unjustified profits, should be dealt with by prosecutors, by the police, by the
anti-monopoly and tariff services. ... The speculators need to be caught. ...
The situation should be kept under control by the government and regional
leaders. ... If the situation changes, I will take the decision to ensure our
citizens have quality and affordable food. ... This is a priority for the
state."
No one at his table, no one across the country, has so far dared to ask the
president to explain what as a lawyer and legislator he means by an
"unjustified profit". If he made the attempt, that might have revolutionary
implications for those oligarchs whose relief from bankruptcy Medvedev has
championed since the start of the crisis two years ago.
A newly published work from the US on Bukharin's fatal conflict with Stalin,
and the cruel end to which he and his wife, Anna Larina, were subjected,
invites continuing questions about the meaning of the price of bread in Russian
politics. Paul Gregory's book, Politics, Murder and Love in Stalin's Kremlin
[1], draws on documents not previously available to earlier historians
sympathetic to Bukharin. These include evidence that Bukharin was tortured
before he signed the confession that was the principal piece of evidence
against him in the show trial of March 1938.
The fresh publication also reveals that Stalin personally doctored Bukharin's
last statement at his trial on March 12, 1938, removing all trace of the
mockery Bukharin made of the trumped-up charges, his confession of guilt, and
the death sentence that followed. Crossed out in Stalin's hand was Bukharin's
declamation: "I accept responsibility even for those crimes about which I did
not know or about which I did not have the slightest idea."
In the latest opinion poll reported by a regional branch of the Russian
Communist Party, the sentiment remains in line with Lenin and Stalin. Bukharin,
if he's remembered at all, is lumped in with post-revolutionary "traitors",
such as Leon Trotsky and the White Army commander admiral Alexander Kolchak.
Even if the Communist Party doesn't count in Russian government any longer, the
sentiment against Bukharin clearly remains the official, the governing
consensus. And when it comes to dealing with the price of bread in the year
before national parliamentary elections are held, followed by the new
presidential poll, it is obvious why.
After a week of contradictory signals from the Kremlin failed to plug
speculative rises in the price of bread - and the grain price has jumped 40% in
the international markets with the withdrawal of Russian supplies from export -
Prime Minister Vladimir Putin told last week's session of his cabinet:
Another
issue that directly concerns the stability of the food market [is this]. To
protect our consumers we have introduced a temporary ban on wheat exports for
the period until January 1, 2011. And what do we see now? We see that the grain
is being held in anticipation of some further steps. In order not to create
unnecessary anxiety, to ensure a stable and predictable business environment
for all market participants, I should note that the abolition of the grain
exports ban we can consider only after the next crops have been harvested and
there is clarity on the grain balance. Zigzagging should not be allowed here.
Our producers and sellers of grain should work quietly on the basis of
objective conditions and focus on the needs of the domestic market.
This is stronger language than Putin expressed two days earlier when he told a
meeting of workers at Norilsk:
With us, it would seem, even export
potential still remains ... we do not know what situation we will have in
agriculture in the next year ... Let's see what will happen in the market. I
repeat: no objective reasons for price hikes are there."
The
classic Russian bogey of profiteering has become the political challenge that
Bukharin represented to Stalin in 1938. Only now there is no doctrine with
which to combat it ideologically. Medvedev's call for police methods is an
obvious throwback, as Kremlin confidence in market regulation evaporates.
Putin is more subtle. He has also come up with, in classic Russian style, a
brand-new terminological enemy - the zigzaggers. Finally, supply and demand are
to get their rightful share of the blame in the post-communist society, after a
spot of hot weather.
Still, until there is a government decree signed by Putin to extend the grain
export ban, there is no reason to believe that he is doing more than jawboning
against inflation. Until December 31, there is no legal requirement that the
prime ministry order an extension of the ban.
Not to be outdone in the jawbone stakes, on Monday this week, Medvedev visited
a flour mill, a bread factory and other agro-industrial enterprises in
Voronezh, a black earth farming center in southeastern Russia. According to the
Kremlin website text, Medvedev "announc[ed] the removal of the embargo on the
grains export once the harvest prospects are clear." In front of a group of
onion growers, Reuters reported, the president said: "The grain embargo is a
forced but temporary measure. ... As soon as we understand how much grain we
have harvested, the embargo will be lifted. All embargoes will be lifted; there
should be no doubt about that."
Exactly when that might be Medvedev didn't say because he doesn't know. As for
the seeming contradiction between Medvedev's remarks and Putin's, Russian and
international grain marketeers see only ambiguity and uncertainty, so the
speculation on the rising commodity price continues. Indexes for December
delivery of wheat all rose on Monday; depending on the index they have jumped
from 60% to 75% since June, as Russia's harvest dwindled and its capacity to
export has been subtracted from market-supply calculations.
A source at the Russian Grain Union says the prime minister is acting with the
best intentions: "I believe that Putin decided to extend the ban in order to
form a clear picture of the grain stocks Russia has; and to cool down the
[grain] companies, giving them a straight message that currently they should
forget about exports. What Putin usually says is very real, and there is no
doubt he will keep the ban as long as he thinks is necessary."
How long that might objectively be is something the modern Russian grain market
should be capable of discussing. But Razgulyai, one of several grain producers
and traders listed on the Moscow stock exchange (MTS), declines to respond to
questions. Its share price is down 9% over the past month.
Razgulyai claims to be the third-leading grain market operator in Russia. It
has reported hefty losses for the past two years - 6.2 billion roubles (US$248
million) in 2008, 1.6 billion roubles in 2009. Igor Potapenko, the chief
executive and board chairman, controls the group with a 47% shareholding,
according to company reports, and directs the flow of its trading profits
through companies in Cyprus, British Virgin Islands and the Netherlands.
At page 53 of the auditors' notes, prepared by KPMG for Razgulyai's 2009
financial report, there is this note on transfer pricing: "The Group structured
some of its operations through transfer-pricing arrangements, including
arrangements between Group entities and arrangements of Group entities with
related parties, thereby decreasing its overall tax liability. In management's
opinion, the Group is in substantial compliance with the tax laws of the
Russian Federation and other countries, where foreign Group companies are
registered. However, relevant tax authorities could take different positions
... "
An additional note appears to raise doubt about the legality of the way in
which Potapenko has taken control of the operating and producing assets in the
grain and sugar sectors. "A significant part of the assets of the Group was
acquired," reads note 31 of the 2009 financial report, page 54, "as a result of
bankruptcy procedures. The carrying amount of the assets of such subsidiaries
as at 31 December 2009 amounted to ... 10,970 million [roubles]." Elsewhere in
the report it is made clear that this figure represents almost one-quarter of
the group's entire asset value.
Because of the takeover tactics under Russian bankruptcy law, the auditor's
report goes on, "this fact creates uncertainty with respect to the title to
such assets, which potentially may be subject to challenge by former legal
owners of these assets or their stakeholders. ... However, management believes
that the likelihood of such challenge being successful is less than probable."
This is complicated stuff. Easier to point the finger of historical blame at
Bukharin; and for Medvedev to tell Russians to believe in the evil of buckwheat
baggers running their trucks in the dark of night.
Note: 1. Published by the Hoover Institution Press, Stanford,
California, in 2010. From his prison cell in the Lubyanka, Bukharin wrote a
letter to Stalin in which, remembering a remark Stalin had earlier made to him
about political intrigue, he asked: "My god, was I a child and a fool?"
John Helmer has been a Moscow-based correspondent since 1989,
specializing in the coverage of Russian business.
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