You Better Buy Russian!

Why pay more for quality, go local!

Johnson’s Russia List, 1 October 1998

Russians Forced To Buy Local

By Greg Myre

Just a few years ago, imports were so scarce that an American visitor with
an extra pair of Levi’s blue jeans could ignite a bidding war on the streets
of Moscow. Today, Russia is one of the most import-addicted nations in the
world — a remarkable 48 percent of all consumer goods here are foreign made,
according to the State Statistics Committee.

The businessman hasn’t made it until he’s chauffeured to work in the quiet
comfort of a Mercedes sedan. A middle-class family eats American chicken
on Chinese plates while watching a Mexican soap opera on their Japanese
television. Even a poor Russian stopping at the corner kiosk for sausages
and cigarettes is likely to be buying imports.

This dramatic transformation has created a huge problem: in the current crisis,
most Russians can’t afford imports, and the country’s feeble economy can’t
produce many of the most basic things people want to buy. And it’s not just
the wealthy ‘new Russians’ who’ve had their lifestyles pared back. Imports
have infiltrated almost every sector of the economy, but now they’re at least
twice as expensive because the ruble has fallen from 6 to 15 against the
U.S. dollar.

Russia’s economy has been shrinking for a decade, and the latest crisis has
once again driven it into full-fledged depression, with this year’s contraction
expected to be around 5 percent. Prices have soared 67 percent since August
and could climb 300 to 500 percent by the end of the year, according to Central
Bank forecasts.

Consider chicken, a major Russian import. American drumsticks began appearing
in Russian stores during George Bush’s presidency, and to this day they are
fondly known as ‘Bush legs.’ Tyson Foods, a leading American exporter to
Russia, slaughters its birds in Arkansas, sends them to New Orleans, ships
them across the Atlantic Ocean and trucks them into the Russian heartland.
When they finally hit the freezer section at Russian supermarkets, they are
competitively priced — at least until the ruble crashed — and are far superior
to Russian chicken that comes from just down the road.

Russian agriculture has so withered that the country imported 73 percent
of its sugar, 37 percent of its fish and 35 percent of its meat last year,
said Nikolai Kharitonov, leader of the Agrarian Party. This year’s
drought-stricken grain harvest is expected to be the smallest since 1957.
‘During the seven years of pseudo-reforms, the country has been plundered,
industry has stopped functioning, and Russian agriculture has the rights
of a step-daughter,’ Kharitonov said. Hundreds of foreign companies took
part in the recent World Food Moscow trade exhibition, all vying for a slice
of what had been a rapidly expanding import market. Instead, many of them
may soon be leaving Russia.

‘Last chance to look at imported food,’ Kommersant newspaper joked in an
article on the trade fair.

Russians who quickly grew accustomed to filling their shopping carts with
Kellogg’s Corn Flakes, Skippy peanut butter and Baskin Robbins ice cream
are now facing sticker shock. ‘Before the crisis, I didn’t even check the
prices,’ said Dmitri Teterin, a concert pianist lugging groceries out of
Seven Continents, an upscale supermarket stocked almost entirely with imports.
‘Now I’ll have to start looking in the Russian shops.’

Some sample prices: Nescafe Gold coffee, $15 for a half-pound. Blue cheese
from France, $25 a pound. Heineken beer, nearly $3 a bottle.

President
Boris Yeltsin tried to launch a ‘buy Russian’ campaign last year, but even
he wasn’t too persuasive. ‘Yes,’ Yeltsin conceded, ‘our cars are not as
good as foreign-made ones and break down more often.’

Go for a beer truck, for the ultimate in keg living!

The economic emergency has achieved what Yeltsin’s exhortations could not.
Imports to Russia fell 19 percent in August compared to a year earlier, and
the trend seems certain to continue, the government said. Customers have
already moved to stores selling cheaper Russian goods, and the crisis could
stimulate some Russian industries to produce more. But many businesses and
shops that depend on imports could be ruined.

As Russian capitalism has evolved, the initial wave of kiosks that sold imported
candy bars, cigarettes and booze in the early 1990s has been followed by
trendy boutiques and American-style shopping malls in Moscow. Even the remote
corners of Russia are now served by an army of ‘shuttle traders’ who fly
to Europe, the Middle East and Asia, stuffing their suitcases with inexpensive
clothes and shoes that they sell back home. Russia had been exporting enough
oil, gas and other natural resources to pay for the imports. But energy prices
are sagging, imports are costlier and something has to give.

St. Petersburg, the country’s busiest port, has seen a roughly 50 percent
drop in imports since August, customs officials said. ‘The ships have virtually
disappeared,’ said Viktor Yatsuk, director of Barbaletta, a major
freight-handling company. His firm processed 51,000 tons of food in July,
but only 17,000 tons in August. In the first half of September, it handled
one ship with 1,300 tons of bananas.

‘This is terrible,’ said Yatsuk, who has placed all but 20 of his 300-member
staff on unpaid leave. ‘There are no imports at all.’

The Times (UK) October 17 1998

Feast or famine for shoppers in Moscow

By Anna Blundy

There are two kinds of shopper in Moscow. One is the ubiquitous old lady
in a headscarf who is on a pension of 450 roubles a month – if she receives
it at all – and has to scour evil-smelling state shops for Spam-like sausage,
scraps of festering meat and cabbage that might still be edible if she tears
all the outside leaves off.

The other is the well-dressed woman in her twenties who despite the crisis
still shops at places once reserved exclusively for foreigners where everything
is shipped in from Finland, including Roquefort cheese, fresh lychees and
packets of flaked almonds.

This type can also afford Moscow’s various markets, where Georgian men with
black flashing eyes and gold teeth sell perfect peaches (25 roubles a kilo),
whole piglets (200 roubles each) and live langoustines from a tank (100 roubles
a kilo).

There is no in-between. Not because there is a shortage of people earning
between 450 roubles a month and ú 6,000 a month, but because there
is a produce abyss between luxury and subsistence.

Since the beginning of the economic crisis on August 17, prices of most goods
have more than doubled, with imports down 45 per cent on last year. The rouble
has fallen from six to the US dollar to around 15. It is expected to fall
further over the next few months, which means that those fortunate few with
dollars to spare are finding life a great deal cheaper.

But for the vast majority of the Russian population, basic foodstuffs are
now priced out of their reach. Needless to say, their salaries and welfare
payments, such as they are, have not increased with inflation. Last year
Russia imported more than a third of food consumed here. Not only are imports
down by nearly half this year because of the economic crisis, but this year’s
harvest is the worst since 1967.

If you fed your family from state-run shops in Moscow, you would still find
all the staple goods that constitute dinner. In what was billed as a bread
shop, I found some foul spare ribs at 28.30 per kilo, some very sorry-looking
sausages at 30 roubles, bread for 3 roubles, standard Soviet cheese for 35.60,
and flour for 12.50. The real bargain was vodka at 26 roubles a bottle. This
seemed cheap, but a week’s shopping would wipe out the average pension.

Over at the “Jet” supermarket, there was more abundance, although the management
apologised for a temporary absence of fruit and vegetables. Bread cost 4.20,
cheese 110.60, milk 7.30 and a can of Coke 8.60. A month ago, that can of
Coke cost nearly 1 GBP, now it is less than 40p.

At the market, heaps of watermelons, pomegranates and peaches leap out at
you wherever you look, Georgian women in bright scarves shout out their prices
and the air smells of garlic and spices. There was no absence of anything,
yet the country has asked the EU and the US, according to Boris Nemtsov,
former Deputy Prime Minister, for food aid.

While in the provinces many basic foodstuffs are in painfully short supply,
it would be a lie to say Moscow was suffering a food shortage. But it would
be true to say it was suffering a severe shortage of people who can afford
to buy it.

Rossiyskaya Gazeta November 17, 1998

“Buy Russian, or the Kind Of Benefit Which Can Be Derived From the
Crisis”

Article by Vladimir Lysenko, State Duma deputy and member of the organizing
committee for the establishment of the association Buy Russian Goods:

The August financial collapse has brought us to a practical solution to the
age-old problem: how can Russia”s industry be forced to work for the impoverished
market under the conditions of the sharp curtailment of importing? And, first
of all, the light and food industries which directly serve the needs of the
people. After all, the prices for imported goods have tripled in accordance
with the dollar”s exchange rate. In the meanwhile, those for our domestic
foodstuffs and light industry”s products have increased by factors of 1.5-2.
And whereas, a month ago, the Russian buyer gave preference to imported products,
he is now taking our domestic products quite eagerly.

Under these conditions, there are two paths. To reduce the customs duties
on the imported goods and to fill up the store shelves with them anew, their
prices having again been made comparable with those for Russian products.
Or to turn toward domestic industry, providing it with state support. We
went along the first path, hoping that industry itself, under the conditions
of the market and private competition, would get out of the crisis. And we
got deplorable results.

Now, however, a unique moment has arisen–to make an abrupt lunge finally
and, following this, a breakthrough as well in the further development of
domestic industry. And to establish on this basis a solid ruble, to carry
out a structural reorganization of the economy and to begin to solve the
piled-up social problems. Of course, accomplishing this task will require
changes in the very thinking of the political elite. And of the country”s
population as a whole.

The stereotype which has emerged over the last few years that “nothing good
can be produced in Russia” should be demolished by life itself. I will say
more: following the national, professional and, finally, soccer patriotism
which we need not bother with, we have already come close to “commodity
patriotism,” having “had our fill” of second-rate Chinese and Turkish consumer
goods. Thus, over the last 2 years, 90 percent of Russia”s citizens, without
advertising of any sort, have turned to our domestic foodstuffs.

Now it is necessary to take the next step—to return prestige to
our light industry”s goods. After all, in many respects, they are also of
better quality than the overseas ones. But it will not be possible to get
by here without the help of the mass media and public organizations. It is
necessary to educate the Russian fans of domestic “commodity patriotism.”
The same kinds of domestic-brand admirers as those which, for example, the
soccer clubs currently have. After all, no matter how Spartak [Spartacus]
or Dinamo [Dynamo] do in the championship tournament, their ardent admirers”
hearts are always on the home team”s side. They will not put on even the
most beautiful foreign clothing, preferring the simple red-and-white Spartak
or white-and-blue Dinamo cap and scarf to it.

I believe that Russia greatly needs a federal program of support for the
light and food industries. We have looked enough at foreign experience. Let
us look at our own. At least, that of the beginning of the twenties. Remember:
the uplifting of the country”s economy, which had been destroyed by the Civil
War, had been begun during the NEP [New Economic Policy] period with the
light and food industries and agriculture. And after just 2 years, we had
fed and dressed the country and had established the conditions for the conducting
of industrialization.

Now, however, the light and food industries are producing in all around 3-4
percent of the state treasury”s tax revenues. If they were exempted from
the payment of taxes at least for a time under the obligatory requirement
that the saved funds be directed into the further development of production,
then, after just a year, they would fill the country with good-quality domestic
goods. They would also increase the taxable base by no less fourfold and
would establish a powerful springboard for uplifting our industry”s other
sectors. And these are not empty words. I will cite just one example. In
September, the cosmetics association, Svoboda [Freedom], the largest one
in the CIS, under the conditions of the reduction in importing, increased
the volume of products being sold by a factor of more than 2. At the same
time, the total of the taxes being collected from the enterprise increased
precisely by a factor of 4. Possessing significant capacities and manufacturing
capabilities, Svoboda, with the state”s support, could increase the output
of natural soap, of toothpastes, of creams and of shampoos by factors of
2-2.5, supplying domestic consumers completely with personal care and hygiene
products.

And such examples are numerous. There are other enterprises in Russia, which
are capable of clothing, shoeing and feeding their countrymen. It is just
necessary to take them under the government”s wing now.

What kind of support are we talking about?

First, about a revision of the customs rates. At the present time, these
rates for finished imported products, strange as it may be, are lower than
those for the industrial greases, oils and accessories, without which our
domestic producer cannot manufacture fragrant soap, attractive tubes for
toothpaste and so on and so forth. However, throughout the entire world,
the practice is the opposite. Everywhere, quotas are being established for
finished products being imported, which, in addition, are also having a higher
customs fee being imposed on them.

Second, I would propose giving “tax vacations” for a year to the food industry
as well, which would be recouped a hundredfold in the future. Especially
since its current share in the state budget is small.

Third, state credits and interest-free loans are necessary for these sectors.
And we will get the money for these purposes from the imposition of a state
monopoly on alcohol production.

And fourth, I think that it is necessary to protect domestic industry more
aggressively from unfair competition. Both within the country andabroad.

After all, it is generally known that the USA and the European Union are
setting quotas on the importing of our products into their own countries.
But here is our market–the most open one in the world. Here, we are ahead
of the entire planet. Last year, for example, the Americans limited the importing
of coats from our sewing association, Vympel [Pennant], into the USA to 50,000
units. They turned out to be more elegant and cheaper than American ones.
Yet, these same Americans filled our country with “Bush knives” [name
transliterated] (subsidized by the state) and ruined our poultry processors.
And when an attempt was undertaken to interfere with this “freedom of trade,”
the U.S. vice president himself got involved in this dispute. Yet everything
remained as before.But look what is written in the rules for the American
government”s allocation of grants to citizens and organizations of other
countries: “…under no circumstances should you buy a commodity not produced
in America, if you have not first proven to the government in writing that
an American commodity is not available in a given region.”

Is it really possible to compare this with the chaos which is reigning in
our country, when everything, beginning with fountain pens and right up to
staff vehicles for officials, are being purchased abroad?

The most important part of this federal program should be a “commodity
patriotism” educational campaign organized through the SMI [mass media] and
public organizations. Today, few people know about even the high-quality
domestic goods: our enterprises do not have “mad” money for advertising.
Therefore, I would like to appeal to our broadcasting companies, both state-owned
and private, to take a patriotic step at last: to allow the best Russian
enterprises to advertise their products either free of charge or at preferential
rates for, let us say, half a year.

I would like to call upon our regional and municipal authorities to establish
in each city and in each region municipal stores, in which our domestic goods
would be sold. Without the numerous add-ons and, thus, at lower prices affordable
for the population. Such stores have already appeared in Moscow.

Organizational steps in this direction are being undertaken. The association,
“Buy Russian Goods!,” is being established in the capital city by the efforts
of managers, entrepreneurs, politicians, the public, journalists, and advertisers
and it is being called upon to protect our commodity producer. Founding
conferences for its regional organizations have already taken place in Moscow
and St. Petersburg. In line are Omsk, Kirov and other cities.

Incidentally, in the second half of the 19th Century, there existed in Russia
the most powerful “Society To Assist the Flourishing of Domestic Industry,”
which was supported by the state in every possible way. Written in the first
paragraph of its charter was: “The society has the goal of maintaining the
examination and clearing of foreign goods being imported through customs.”
And the state carried out the decision of the Russian manufacturers without
a murmur, understanding that this was to the benefit of Russia”s industry
and, thus, Russia as a whole as well.

Has our own positive experience over a hundred years really taught us nothing
at all?

In conclusion, I would like to turn to our citizens who are having a very
hard time today. When each of you considers what to buy, think about the
fact that you are the ones who are deciding the fate of Russia”s economy.
If you buy a Russian product, then the money will go to a domestic enterprise
and its workers will receive their wages on time. And then they will be able
to pay the taxes and this money will go to the budget-funded workers and
the pensioners. Who, in turn, will be able to buy your own enterprise”s products.

By putting the squeeze on importing, we will help each other and ourcountry.