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. Last Updated: 07/27/2016

U.S. Trusts Russia's Aid Distribution




The U.S. government trusts Russia to control the distribution of the $600 million U.S. food aid package, a senior U.S. Department of Agriculture official said Monday.


USDA General Sales Manager Chris Goldthwait, who headed the American delegation at the Moscow aid talks, said in a telephone interview from Washington on Monday that only two U.S. officials will be permanently based in Russia to monitor the distribution, and that the American side considered the force sufficient.


The two officials will be "traveling around" and making themselves "available for any reports of mismanagement," but "the actual control will be the responsibility of the Russian side," Goldthwait said.


The American side takes Russian officials' determination to prevent abuse of the loan "at face value," he added.


Under the agreement reached Friday, Russia will receive a $600 million, 20-year cheap loan from the United States to purchase 1.5 million tons of wheat and other products from U.S. farmers. A further 1.5 million tons of wheat and 100,000 tons of other foodstuffs will be sent to Russia as humanitarian aid.


According to the deal, proceeds from the sale of the food are supposed to be used to pay off Russian government's debt to the Federal Pension Fund and finance other social programs.


Just as the U.S. side made it clear it was not going to exercise tight control over the aid distribution, Interfax reported that three private Russian companies have been handpicked by the government to sell the food on the Russian market.


Leonid Cheshinsky, president of the grain trading firm Roskhleboprodukt, was quoted by Interfax as saying that his company and two others, Prodintorg and Myasomoltorg, have been given the right to distribute the aid package.


No open tender has been held for the right to work with the aid package. According to former Deputy Agriculture Minister Leonid Kholod, neither Prodintorg nor Myasomoltorg are market leaders in the wholesale food trade, but Roskhleboprodukt, formed in the early 1990s from the remains of the Soviet grain procurement ministry, is one of the biggest firms on the market.


As a state agency, Roskhleboprodukt oversaw the distribution of Western humanitarian aid in the early 1990s, when millions of dollars' worth of aid ended up in the pockets of private companies linked to corrupt officials.


Cheshinsky on Friday blamed the embezzlement on other traders, saying Roskhleboprodukt had "accounted for every cent" it managed in the 1992 humanitarian aid campaign.


Analysts doubted that just two U.S. officials would be able to spot abuses if they took place.


A two-member team in charge of controlling such a large aid package is clearly "on the low side," said Peter Westin, an analyst with the Russian-European Center for Economic Policy. Russia may face a situation seen in other countries when food aid "ends up on the black market," he added.


The USDA officials may be able to keep track of the consignments as they come into the country but can do little to control their distribution in the provinces, Westin said.


Meanwhile, offers of more food aid kept pouring in. European Union officials said Monday that the EU was also preparing a 400 million ecu ($472.2 million) food package for Russia, although the Russian government has not yet made a formal request for aid.


"We are waiting for a formal request and in the meantime we are preparing a proposal," Reuters quoted one official as saying.


The EU aid package would include about 1 million tons of wheat, 500,000 tons of rye, 50,000 tons of rice, 100,000 tons of pork, between 100,000 and 150,000 tons of beef and some milk powder. The EU said the food would be donated on condition that it is sold at market prices and the proceeds put in a special fund for financing social programs.


Russia's wheat harvest was poor this year, but experts have argued that an efficient distribution system, not aid, was the answer to the problem.