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. Last Updated: 07/27/2016

EDITORIAL: Gazprom's Food-for-Tax Deal Rotten




What does Gazprom have against money? The Russian natural gas monopoly, which is 40 percent owned by the state, announced this week deals with Belarus and Ukraine in which it supplies gas, but accepts payment in food.


Gazprom can't say exactly what kind of food it will be accepting. But oddly, it knows exactly how much food it will take: $200 million worth from Belarus (some of that will be in unspecified non-food goods), and a staggering $1 billion from Ukraine.


To hear Gazprom tell it, these countries desperately need gas but are are too poor to pay for it in cash; Russia's rural regions may go hungry because of the crisis and this fall's dismal harvest; and Gazprom has more gas then it can sell on world markets anyway. So, the reasoning goes, it may as well accept barter. In this scenario, Gazprom is a victim of circumstance and of its own conscience.


There is more to it than that, however. Gazprom has said it intends to give the food to the Russian government f as taxes. Foolishly indeed, the government has apparently agreed.


But barter deals like this are notoriously difficult to understand, and someone is almost always ripping someone else off. A company that pays 100 rubles to the state in currency has paid 100 rubles; but a company that pays 100 rubles in, say, frozen chicken, could be paying nowhere near that. Is this 100 rubles calculated by weight? If so, who sets the price per kilogram f Gazprom? Does this mean Gazprom is going to be asking tough questions about how that price was reached, and whether the quoted weights include the bones, or the fat, or the water weight? Is this fresh chicken or 10-year-old rotten meat? And who is paying to store this chicken (or wheat, or vodka, or trailer full of Chinese candy), or to transport it to the people who need it?


Gazprom itself probably doesn't know the answer to this, and probably doesn't care. It had probably been nearly resigned to writing off its debts in Ukraine and Belarus as losses. But gone are the days when liberals like former Prime Minister Sergei Kiriyenko and his tax chief Boris Fyodorov demanded that the government receive a share of what its own company earned selling the state's natural resources.


Instead, with a new and pliable government, it has settled on a glorious scheme to evade its taxes f one in which Gazprom can actually play the pious martyr. Meanwhile, all along the food chain, bureaucrats from Minsk to Moscow will have their subjective say in putting a ruble price on a given kilogram of meat or wheat. For even the mildly inventive corrupt official, this will be a gargantuan budget-funded smorgasbord.