SUNS  4336 Wednesday 2 December 1998



RUSSIANS PONDERING ON NEED FOR US GRAIN AID

Moscow, Nov 30 (IPS/Sergei Blagov) -- The prognosis for the coming winter is pessimistic. With a grain harvest of less than 50 million tonnes, the consumption of meat and dairy products is expected to go down in Russia while prices skyrocket.

Meanwhile, food quality is expected to be lower than ever.

The West, notably the United States, has offered to extend food aid to Russia on what they say will be favourable terms.

International wheat prices are fluctuating in anticipation.

Other Russian forecasts, however, say the country will not experience food shortages this winter despite the worst grain harvest since World War II, shrinking imports and disrupted distribution networks.

"Rumours about imminent famine in Russia are greatly exaggerated," Agriculture Minister Viktor Semyonov says. "These rumours are floated by food importers seeking profit". Semyonov admits, though, that Russia's sizeable food reserves are important.

The Russian Grain Union has lobbied against increased food imports, arguing that the country still has enough grain for its needs. "This year we see no need for grain imports in excess of traditional
volumes," says union chairman Arkady Zlochevsky.

Nonetheless, Russia and the United States have already signed a food aid deal worth hundreds of millions of dollars. Under the deal the United States will give Russia 1.5 million tonnes of U.S. wheat and 100,000 tonnes of other foodstuffs, plus a low-interest loan of $600 million to be used to buy food.

Negotiations for the deal were tricky: initially Russian Deputy Prime Minister Gennady Kulik accused the United States of making unacceptable demands on where and how the aid should be distributed, while the Russian media has voiced suspicion about the true motives of officials
seeking to control the distribution of aid.

But according to U.S. Department of Agriculture General Sales Manager Chris Goldthwait, who headed the American delegation at the Moscow aid talks, the U.S. government has said it trusts Russia to take care of the $600 million food aid package.

Some Russian experts argue, however, that humanitarian aid and loans to buy food just amount to a trick in an ongoing battle for control over the multi-billion-dollar Russian food market.

"Humanitarian food aid constitutes yet another form of Western subsidy," Nikolai Kharitonov, an economist at Moscow University and executive secretary of Russia's Food Security congress, told IPS. "Aid and subsidised exports will deal a final blow to Russian farmers, who are already hardly viable economically," he says.

>From 1985-1990, Russia imported roughly a third of its food, mostly grain. From 1991-1997, imports held at the same level, but consisted mainly of foodstuffs. Some experts say Russia now imports more than half of its food, but government officials disagree.

"In 1997 Russia's domestic food market amounted to roughly 60 billion dollars, and food importers control only 17 percent of that market", Alexander Korolev, director of the food market department of the Agriculture Ministry, told IPS. "Russia's annual food imports amounted to some 10 billion dollars in recent years, but it has dropped considerably within the past two months," he said.

"No reliable statistical data is available, but I guess before the crisis food importers controlled somewhere between 40 and 60 percent of the Russian food market," Kharitonov says.

Food imports to Russia have been driven off by the banking system's collapse and by uncertainty about the value of the rouble. There may soon be far less to choose from on the shelves of Russian grocery stores.

Prime Minister Yevgeny Primakov has announced the creation of a 600 million dollar emergency food reserve to help the country through one of the "most difficult and complex periods in its history." The government has also lowered duties on imports of beef, pork, mutton and goat meat for the next six months in order to "stabilise the food market and support the domestic processing industry."

However, even with food imports plummeting, supply could still outstrip demand simply because millions of Russians have not received their wages for months and the debt leaves millions of families living on the edge of survival.

As a result Russians are eating more bread and potatoes, and meat and milk consumption has fallen to 1960 levels. The annual per capita consumption of meat has fallen from 70 kilograms in 1990 to 48 kilograms last year, and milk from 378 kilograms to 235 kilograms. At the same time, potato consumption increased from 94 kilograms to 108 kilograms per capita.

For some the long and desperate Soviet-era queues in food shops are a distant memory. Private commodity traders bring everything from wheat to fresh fruit into Russia for those who have the money to buy. But experts and government officials argue that Russia relies too much on food imports, suggesting the possibility of taking protectionist measures to support domestic food producers.

The Kremlin and legislators agree. "Russia should secure its food independence and food security," President Yeltsin said when he launched a 'Buy Russian' campaign last year.

The State Duma, the lower house of the Russian parliament, this year adopted a Food Security bill, calling for domestic output to guarantee at least 80 percent of the population's minimal needs in order to safeguard food security.

In one of his radio addresses to the nation last year, Yeltsin said Russia was poised to become a 'Great Grain State'. He urged the country to sell about 10 million tonnes from 1997's harvest on the world market.

Russian farmers produced a good harvest of 88.5 million tonnes in 1997, up almost 20 million tonnes from the previous year. In 1996 the grain harvest was 69.3 million tonnes, still up from the low of 63.4 million tonnes in 1995. The grain harvest in 1994 was 81.3 million tonnes, down from 99.1 million tonnes in 1993.

But even with gross surplus at around 10 million tonnes of mainly feed grain, Russia failed to become a 'Great Grain State' as the country's gross exports from the harvest of 1997 failed to top 1.5 million tonnes.

"Tough international competition was partly to blame for this failure," Anatoly Butenko, vice-president of state-owned Exportkhleb grain-trading company, told IPS.

"Another factor was the design of grain terminals at Russian ports, which were made only for import -- Soviet designers could not even think about the possibility of export."

Russia's failure to export grain could prove vital, however, as unsold surplus from last year becomes an important reserve for Russians facing a difficult winter.