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. Last Updated: 07/27/2016

Russia Needs Backbone, Not Subsidies

Like many in Russia's antiquated agricultural industry, Vladimir Grebenyuk, the deputy governor of the Rostov oblast, talks like a man frozen in time. In an interview with Moscow Times reporter Adam Tanner, Grebenyuk, the highest agricultural official in the bountiful oblast, said his region is still following the "outlines of the five-year agricultural plan."


It is a comment that would otherwise be amusing -- there being no five-year plan to follow -- if it did not speak so clearly to what is wrong with Russia's industries and agriculture today.


While the government has talked about radical reforms since the collapse of the Soviet Union, most of the country's largest industries -- coal, agriculture, defense -- remain unreformed and run by unrepentant central planning dinosaurs like Grebenyuk, awaiting government orders to fulfill chimeric five-year plans.


But Prime Minister Viktor Chernomyrdin and his newly constituted cabinet of nostalgic deputy prime ministers like Oleg Soskovets and Alexander Zaveryukha, believe that what is wrong with Russian enterprises is the lack of government money. Nobody, it seems, is talking about reforms any longer. Faced with the prospects of mounting unemployment and the resultant potential for civil unrest, the government has taken the easy way out.


The idea of pumping subsidies into lame-duck industries works -- on paper. The Michurin Farm in the Rostov oblast, for example, reported a profit of 100 million rubles (about $640,000) in 1993, after having received more than twice that amount in cheap government subsidies or loans.


So long as these subsidies are donations to the kolhoz's bottom line, the kolhoz is right to call the 100 million rubles a profit.


Zaveryukha has said that the government would give 14 trillion rubles to the agricultural lobby, as 30 percent of the crops continue to rot in storage or transportation. Last week the government announced it would provide at least 9.2 trillion rubles in subsidies to the coal industry. Meanwhile, a plan to close 42 unprofitable coal mines remains on the books.


Every day now, it seems, the government caves in to one interest group or another making inflationary demands on the Russian budget without promising or practicing anything resembling reforms.


If these industries were viable, by now they should be earning enough money on their own to at least meet their payroll.


There are no bankruptcy proceedings, no system for changing management and worse, seemingly no backbone in the government to make the tough decisions to close enterprises that would force a restructuring of the Russian economy.