By John Helmer in Moscow
Runaway inflation and unemployment rates are the conventional killers of campaigns for reelection in the democracies, such as the US and the UK. But in the autocracies, the rising price of bread (or rice), leading to hoarding, usually does the trick.
Joseph Stalin wasn’t mistaken to suspect 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 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 on the Volga the day before yesterday.
“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.”
Noone at his table, none 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. About one of them, Oleg Deripaska, Prime Minister Vladimir Putin warned on Tuesday against trying to extract more profit than he is entitled to from the coffers of Russia’s largest mining company, Norilsk Nickel.
A newly published book 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*, draws on documents not previously available to earlier historians sympathetic to Bukharin. These include evidence that Bukharin was tortured before he signed the confession which 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 because of the withdrawal of Russian supplies from export – Putin told a session of his cabinet yesterday: “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 now 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. 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 – Rb6.2 billion ($248 million) in 2008, Rb1.6 billion in 2009 ($60 million). 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 RUR 10,970 million [$344 million].” 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.
* 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?”