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. Last Updated: 07/27/2016

Kristall Chiefs May Be Replaced

The government will consider replacing the management of one of Russia's top vodka makers after bankruptcy proceedings were inititiated against the company, a bankruptcy official said.

The Kristall joint-stock company, maker of Stolichnaya and two dozen other brands of vodka, received notice of insolvency, the first step on the road to bankruptcy, last week.

"They spend too little on production, and 63 percent on endless construction of God knows what," said Nodar Sarkisian of the Federal Bankruptcy Administration, which has been handling the case.

Kristall has debts of 6.7 billion rubles ($3 million), and the state, which owns 51 percent of the company, is planning to discuss the restructuring of the company with management.

"I can assure you that no one wants to close vodka production," Sarkisian said. "We shall together see what can be done."

Kristall officials disputed the ruling and said they have appealed to the city and federal governments.

The government, which for centuries had a monopoly on vodka sales, still has a stake in the fortunes of Russian distillers. In February, the state lowered excise duties on Russian vodka from 90 percent to 80 percent to try to help the troubled domestic industry.

Russian distillers have been struggling to adapt to a new market awash with foreign brands. Expensive foreign vodkas often have more prestige than domestic ones, and cheap foreign bottles can undercut domestic ones by avoiding the excise duty.

In February, with sales and production plummeting, Kristall briefly sent its 700 workers on unpaid leave to protest taxes and tariffs.

On Tuesday, company officials said their debts are just part of a larger cycle of non-payments affecting Russia's post-communist economy.

"We owe nothing to the state, we have taken no loans from the government, we have paid all our taxes," said chief engineer and acting director Yury Yermilov.

"Of course we have some cash-flow difficulties. Nowadays everyone has problems like that because of the debts companies owe each other," he said.

The state stepped up efforts this summer to shut or reorganize companies that aren't paying their bills. Many inefficient state enterprises from Soviet days have continued operating at a loss, loath to lay off workers.

In other cases, the state wants more accountability over company directors who are increasingly acting on their own, while the government pays the bills. That appeared to be the case with Kristall.

Vodka makers have said the excise duty nearly doubles the price of a bottle of vodka. Stolichnaya now sells for about 3,000 rubles ($1.50) a half-liter.