VZCZCXYZ0014
PP RUEHWEB

DE RUEHMO #0817/01 0911236
ZNR UUUUU ZZH
P 011236Z APR 09
FM AMEMBASSY MOSCOW
TO RUEHRC/USDA FAS WASHDC PRIORITY 5467
RUEHC/SECSTATE WASHDC 2646
INFO RUEHVI/AMEMBASSY VIENNA 4736
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 5292

UNCLAS MOSCOW 000817 
 
SENSITIVE 
SIPDIS 
 
USDA FAS FOR OCRA/KUYPERS, NENON; OSTA/BEAN, 
HAMILTON, HAXTON; ONA/TING, SALLYARDS 
PASS FSIS DUTROW, HARRIES 
PASS APHIS TANIEWSKI 
STATE FOR EUR/RUS 
STATE PASS USTR FOR CHATTIN, HAFNER, S MURPHY 
BRUSSELS PASS APHIS/FERNANDEZ 
VIENNA PASS APHIS/MITCHELL 
 
E.O. 12958: N/A 
TAGS: EAGR ETRD ECON WTO RS
SUBJECT: 1ST DEPUTY PRIME MINISTER GIVES 
INTERVIEW ON AGRICULTURE 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1. (SBU) SUMMARY: First Deputy Prime Minister 
Viktor Zubhkov gave a rare interview on March 31 
to leading daily newspaper "Izvestia" on 
agricultural issues.  Zubkov is responsible for 
overseeing overall agricultural development in 
Russia and implementation of the national 
priority project in agriculture. The 
protectionist comments made by Zubkov are at odds 
with the commitments made by Russian negotiators 
in WTO accession talks. END SUMMARY. 
 
¶2. (U) BEGIN INTERVIEW: 
 
Question: One of the priorities of the current 
anti-crisis plan is to support demand for 
domestically-made products. What products or 
services are considered as priorities? 
 
Answer: Under the current circumstances, it is 
more expedient to produce locally and pay in 
rubles than to buy imported goods.  Now that the 
dollar has become stronger, prices have grown 
dramatically.  Thus, domestic production of 
foodstuffs is much more economically feasible 
today.  We are also happy to notice that 
agricultural manufacturers are now willing to 
increase output.  What we need to understand here 
is that the demand for foodstuffs is a daily 
indicator and it does exist. 
 
Question: What actions are planned in order to 
stimulate this demand? 
 
Answer: Loans, first of all.  We have calculated 
the needed volume of loans for the agricultural 
sector this year, and we have agreed this volume 
with all banks in advance: about 900 billion 
rubles ($25.6 billion).  In the first two months 
of the year, 120 billion rubles ($3.5 billion) 
have already been issued.  This is a very good 
sum.  Secondly, there are plans to increase the 
authorized capital of Rosselkhozbank (Russian 
Agricultural Bank) by 45 billion rubles ($1.3 
billion) this year and then to increase the 
authorized capital of Rosagroleasing by 25 
billion rubles ($735 million).  This will allow 
agricultural producers to buy combine harvesters, 
fodder producing machines, cars, tractors, and 
pedigree livestock.  Thirdly, mineral 
fertilizers.  This is the first time ever that 
agricultural producers and producers of mineral 
fertilizers have entered into an agreement.  And 
they have fixed the price formula for spring 
(until June). Prices will be also fixed for 
autumn.  The same goes for fuel.  For instance, 
prices for petrol and diesel fuel have been fixed 
at the lowest market level since January 15 - 
about 13,000 rubles ($383) per metric ton of 
AI-76 petrol and about 13,300 rubles ($391) per 
metric ton of diesel fuel. 
 
Question: And still, will it be possible to 
ensure sufficient supply of locally produced 
foodstuffs?  After all, about 40 percent of our 
foodstuffs are now imported. 
 
Answer: That's right.  For now we cannot fully 
provide enough food for ourselves.  And this is 
not going to happen this year or the next.  Of 
course we are not satisfied with our processing 
facilities; many of them are outdated and 
obsolete.  But upgrading is under way, and we 
have a few powerful enterprises we can rely on. 
There is determination and certainty that this 
year, despite the recession, agricultural output 
will increase.  We reduced meat import quotas 
from the United States and other countries by 
 
half a million tons! This means we will produce 
an additional 300,000 metric tons of poultry meat 
and 200,000 metric tons of pork domestically.  We 
count on getting the required volume of grain 
yield.  Considering that over 8 million metric 
tons of food wheat and fodder grain have been 
purchased for the intervention fund, we will have 
the capacity to influence both the bread products 
market and the livestock market. 
 
--------------------------------------------- --- 
"If We Open Our Market, We Will Lose Everything" 
--------------------------------------------- --- 
 
Question: At first Russia says that protectionism 
is bad, and then it introduces barrier (higher 
duties) for certain imported products.  How can 
these things go together? 
 
Answer: The Russian government does not apply any 
tools that are not applied in countries with 
unquestionably liberal economies.  To a certain 
extent, every country is now taking measures to 
protect its market under the crisis conditions. 
But in the West, double standards thrive.  They 
claim to reduce State support, but in fact, they 
do the opposite by increasing it.  And they are 
so deft in doing this, that their prices are 
always a ruble or two below ours.  For example, 
we produce great herring, but it costs, say, 33 
rubles, while they can offer it for 29 rubles. 
Surely retailers will buy foreign herring, 
because the price is 4-5 rubles lower. 
 
Question: Then maybe we should open our market to 
cheap foreign products. 
 
Answer: We could open our market, but we must 
understand and forecast the consequences.  I am 
not at all sure that "cheap" foreign products are 
what we will get.  It is just the first 
impression that imported foodstuffs will be 
cheap.  Retail prices will be the same.  And with 
the current ruble exchange rate, it will be even 
higher than the price of domestic products.  But 
I can assure you that the quality of foodstuffs 
bought at rock bottom prices will be doubtful, 
and this will affect people's health.  Besides, 
in this case we will support the economy of other 
countries instead of the Russian economy, so we 
will lose everything - in terms of industry, 
economy and social sphere. 
 
Question: In this case, how do we turn the 
situation to our advantage? 
 
Answer: Our number one priority is to develop 
domestic production and improve the quality of 
our products: better processing, good packaging, 
conformance to local standards.  How can local 
goods drive out foreign competitors?  The answer 
is simple: by changing domestic standards.  This 
is what happened in Hungary.  They adopted a law, 
introduced standard contracts, 30 day deadlines 
to pay for delivered goods, technical regulations 
for all types of foodstuffs - and that's it: no 
chances left for foreign products.  And this is 
exactly what we should do.  END INTERVIEW. 
 
¶3. (U) Also on March 31, The Moscow Times 
newspaper published a report in which Zubkov 
announced at an extended panel session at the 
Ministry of Agriculture that Russia may allocate 
an additional 72 billion rubles ($2.1 billion) 
toward domestic dairies and meat producers to 
curb Russia's dependence on imported food 
products.  "We have raised the question of 
allocating 72 billion rubles this year for the 
construction of new and the restoration of 
 
already working dairies and meat producers and 
Prime Minister Vladimir Putin also supports this 
initiative.  We must come out of this year with a 
greater volume of domestically produced milk and 
meat." 
 
---------------------- 
Meat and Dairy Imports 
---------------------- 
 
¶4. (U) Russia is heavily dependent on meat and 
dairy imports.  In 2008, the country imported 1.6 
million metric tons of beef and pork - more than 
half of the 3 million metric tons it produced 
domestically.  In the same year, Russia's milk 
production - 32.4 million metric tons - only 
increased 0.5 percent from 2007.  Dairy imports, 
however, were up 38.5 percent year on year to 
total 19 million metric tons in 2008. 
 
¶5. (U) New Minister of Agriculture Elena Skrynnik 
has stated that the GOR will increase domestic 
production capacity this year, and all 
"unfinished investment projects" in the animal- 
breeding sector will be completely restored in 
2009 for about 74 billion rubles ($2.2 billion). 
Skrynnik said that the Ministry of Agriculture 
plans to create 50 new small "family milk farms" 
to support the sector and create jobs in Russia?s 
farming regions.  The family farms, each to be 
equipped with about 100 head of dairy cattle, 
will be responsible for producing, processing and 
delivering milk to local customers and 
businesses. 
 
------- 
COMMENT 
------- 
 
¶6. (SBU) In recent WTO talks held in Geneva, 
Russian negotiators confirmed that Russia will 
adopt international standards as described in the 
Sanitary and Phytosanitary (SPS) Agreement from 
the date of accession and abide by the free trade 
principles embodied in other WTO agreements. 
Russian negotiators also indicated that the GOR 
is in the process of harmonizing its SPS and 
agricultural trading standards with international 
norms.  However, as Zubkov's protectionist 
comments make clear that some senior government 
officials are not keen to see Russia abide by 
international trading norms in the field of 
agriculture.  In that regard, it is especially 
troubling that Zubkov stated that cheaper 
imported agricultural products are of lower 
quality and may pose a health risk to Russian 
consumers, and that Russia can keep out imported 
agricultural products by imposing domestic 
veterinary and food safety standards that trading 
partners would have great difficulty in meeting. 
 
BEYRLE