Issue #27/52, November 19 - December 2, 1998  

by Mark Ames

"The path to hell is paved with good intentions"
--Russian proverb

Here's a riddle for you. What do you call it when one country--let's call it "America"--feels so terrible about its role in inadvertently destroying another country's economy--let's call that country "Russia"--that it offers this "Russia" and its freshly impoverished citizens a $600 million loan so that they can starve to death?

Here's another clue. Let's say that this "American" proposal offers those impoverished "Russians" a chance to take out a loan--but only on condition that they use the money to pay corn-fed American farmers three times the price for what the same readily available grain costs at home, pay American shippers to ship the overpriced, unneeded grain to Russia, and then leave the really big profits on the whole loan to a small clique of well-connected Russian distribution companies and their tools in the Russian government, thereby destroying Russia's shaky distribution network and leaving you, the debtor, empty-handed and getting thinner every day.

What would you call this? You sir, stand up.

"Why, that sounds like 'American Food Aid' to me!"

Correct. The food aid meant to prevent starvation might actually create starvation that never would have existed otherwise. Not that you get anything for guessing correctly. No, in this story, you only win if you're already rich. If you're poor, from a remote region in Russia, and stranded, then, in the scheme of this food aid deal, you, sir, madam, little one... can eat shit and die.

Maria Beztuzheva, chief consultant for Thomson Global Markets, believes that Russia's food production and distribution network could be dealt a fatal blow by the aid package.

"The distribution companies that were picked by the government will destroy the competition because they'll be getting essentially free food, which they'll turn around and sell at undercut prices. The problem is that after the distributors die, the ones that survive won't be able to handle all of Russia, they're just too weak. That could leave those people in the far reaches of Russia without access to food."

At first glance, the food deal seems either absurd or so sinister as to be unreal. And yet, like many things, it's actually just a simple back-room deal, papered over by good surface intentions and willful naivete on the American side. Meaning that America will once again, Pvt. Pyle-like, cheerfully crunch its away over another fresh boneyard of our own do-good making.

Although some have argued that Russia may lack the food to feed its population this winter (including an eXile article by John Evelyn), more evidence points to the problem not of a quantitative lack of food, but rather, of weak distribution. Earlier this decade, massive American food aid to Russia resulted in theft, corruption, and the destruction of a well-entrenched distribution network, not to mention the bankruptcy of numerous local farmers. This time, Russia awaits US food aid with a distribution system already teetering and inadequate, plus a farming system struggling to get on its feet, all thanks to a couple of disgustingly fat ministers whom you wouldn't trust to look over your lunch money, let alone $600 million of practically unsupervised food aid.

Of the three firms hand-picked to distribute the American food, one, Roskhleboprodukt, is widely thought to have spizdel'd millions of dollars the last time it distributed American food aid, while Prodintorg and Myasomoltorg are considered small fish and strange choices. Interestingly, the two ministers pushing hardest for US food aid, Deputy Prime Minister Gennady Kulik and First Deputy Prime Minster Yuri Maslyukov, are also the two ministers that Yabloko leader Grigory Yavlinsky recently accused of bribe-taking and corruption. Kulik is also suspected of having interests in at least one of the distribution firms. No one seems to be listening to Food and Agriculture Minister Viktor Semyonov or the chairman of Russia's Grain Union, Arkady Zlochevsky, both of whom insist that Russia doesn't need grain or food aid, but rather, investment.

Last week, Semyonov denounced as "rumor" talk of hunger that he said was meant to benefit importers; around the same time, Maslyukov claimed that Russia was only weeks away from running out of food altogether. American officials chose to listen to Maslyukov, and are including 1.5 million tons of grain and another 1.5 million tons of wheat in their aid package.

"The grain silos in the Krasnodar region are well-stocked," confirmed Victor Frumkin, an American entrepreneur working in local food processing. "Grain lasts for about five years, so there's grain there going back to harvests from 1993. There's no need for more grain, except that some people stand to benefit from it." While Frumkin disagrees that the scheme could harm the distribution network enough to actually bring about starvation, he does acknowledge that it will hurt some and benefit others, while the bulk of the food will never reach the needy. "It'll all probably end up being sold in Moscow," he said.

American farmers are hurting as world commodity prices have collapsed, which is why Maslyukov's argument found friendly ears in America. Such a massive purchase of their grain has boosted depressed prices--at the expense, of course, of the Russian taxpayer, who is unlikely to ever see any of that food. What's even more galling is how eerily similar this "aid" package is to all the IMF and World Bank loans. Russia's strapped masses are forced to borrow money for something that they don't need and can't pay back; the money benefits American producers and shippers on one side and a few corrupt insider Russians on the other side; and the end result is further destruction of local production and distribution, and even potential starvation.

"Right now, Russian grain is going for $35 a ton, while the average world price for grain is $110 a ton, and yet the loan is going towards buying and shipping the American grain," said Frumkin.

Here's a great way to get around this whole market economics thing you've been pushing on everyone if suddenly it works to your disadvantage. If your grain can't compete on the open market, then just label your state subsidies "aid," give it away for free using American taxpayer subsidies, and make the Russian taxpayers pay you back later--making it a "purchase" with a heart of gold. It works both for Americans and for the small clique of Russians who sign onto, and distribute, the aid. "Clearly, this is just a matter of lobbying. Some people lost a lot of money in August, and they need to make up for it."

It couldn't have come at a worse time either. Many have argued that Russian agricultural production has only recently begun to improve as the collapsed ruble made it competitive and profitable. Now, they'll have to compete with essentially free, quality foodstuffs being pushed by a few well-connected firms, putting them right back to square one again. If America was seriously concerned about Russian hunger and desperately wanted to extend a $600 million loan, it could have targeted the areas most in need of help, specifically, the 1.4 million Russians stuck in the far reaches of Russia's northern lands. Not only that, any sane borrower who took out a $600 million dollar loan would spend it a lot differently than the American government has dictated. $600 million spent on Russian products in today's post-devalued market goes a lot farther in Russia than in overvalued America.

That American Food Aid could conceivably cause more damage and even starvation in Russia while enriching the rich and further impoverishing the poor by burdening them with yet another huge, unnecessary loan is nothing new. It's all part of a decade-long tradition of Western programs in Russia that are designed to do so much good, and wind up bringing about just the opposite--the complete inverse of Bulgakov's Woland. First we offer them shock therapy, and the country's economy collapses. Then we propose a voucher plan to make all citizens shareholders, and the entire nation's property gets stolen by a tiny clique; we subsidize Anatoly Chubais's political career to promote Western values and a market economy, and he delivers a kleptocracy and a voting public that wouldn't elect a democrat to high office even if he ran against Genghis Khan; we loan the government money to help pay back defrauded Russian investors, and we wind up disbursing the entire loan to Westerners and government officials, and screwing the defrauded investors a second time by making them pay us back for loaning us the money to ourselves; and so on, and so on.

The EU is right behind us, waiting to get in on the scam. They, too, are looking for a way to dump their excess grain and wheat, which their restless freeway squatting farmers have piled up in unprecedented quantities as the world economy slumps. What better way to dump it off than to call it "aid" and arrange it as a loan?

Not surprisingly, the whole package has been promoted and blessed by the IMF, the reigning prince of well-intentioned fuck-ups.

Doesn't make sense? Too bad. If you're stuck somewhere in Chukhotka or Tuva, then this aid package says one thing: eat shit... or die.