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Thursday, June 29, 2006

First Sign of the Neo-Soviet Apocalypse: Hopelessly Incompetent Russians Can't Even get Alcohol Right

The New York Times reports that Russians can't even manage to effectively sell alcohol. If this is how they handle that most favored of all subjects, do you dare to imagine what a hospital is like? La Russophobe doesn't, but it's likely why the population is plummeting so severely ... and then there's the matter of the nuclear weapons ...

MOSCOW, June 26 — For wine drinkers here, things were bad enough when the authorities banned imports from Georgia and Moldova in the spring, but one could get by with other imports that were — no offense — better. Things are about to get worse.

In the last few days, wines from France, Italy, the United States and everywhere else have started disappearing from shops, supermarkets and restaurants. So have the whiskeys of Scotland and Ireland, the gins of England, the tequilas of Mexico. The reason is neither panic buying (though that would be in order) nor an unexpected appearance of Russian teetotalism, but rather a new federal excise law that has bottles flying off the shelves in a way no one intended.

Starting Saturday, any bottle of imported alcohol is required to have a newly designed excise stamp. It sounds simple enough, but little ever is in Russia, recalling the aphorism popularized by the former prime minister, Viktor S. Chernomyrdin: "We wanted better, but it turned out as usual."

The deadline is being called Black Saturday, but by Tuesday the whole week was looking very black indeed.

Bureaucratic delays have slowed the distribution of the new stamps to importers, who are responsible for stamping the bottles themselves.

And the law requires thousands of dollars worth of computer equipment and software that has to be installed and certified by experts from an enterprise called Atlas, which is affiliated with the Federal Security Service, the K.G.B.'s successor.

The equipment must also be kept in special rooms with detailed requirements on space, temperature and the size of dust particles in the air.

The turmoil has left in the lurch hundreds of importers and distributors already reeling financially from the ban on Georgian and Moldovan wines (ostensibly for health concerns, though it is almost universally believed to have been a political move to punish two irksome governments spinning out of Moscow's orbit).

Worse, the law forbids selling imports with the old excise stamps and requires sellers to warehouse them in the meantime, forcing stores to empty their shelves this week in preparation or, at one supermarket chain, to sell their imported stocks at a steep discount that was not, alas, widely advertised.

The law, passed last year, signed by President Vladimir V. Putin on New Year's Eve and already delayed once, has disturbed the booming imports of wines and other alcohol that in Soviet times most could only dream of buying. In 2005, imports totaled $1.2 billion, more than double the amount only two years before, according to official statistics.

Imports accounted for half of the wine sold in Russia last year. The rest, like Russian vodka and other liquors, is also subject to the new excise law, but despite a brief scare over the possibility of a vodka shortage in the spring, the new stamps were developed and distributed by a different agency — the Tax Service, not Customs, as with imports — in time to meet an April deadline. "It will be a summer of low-quality Russian wine," said Vadim I. Drobiz, a spokesman for a union of wine and spirit makers and dealers, noting that most Russian wines are mass produced from concentrate shipped from abroad.

The law was intended to bring order to a market that has been prone to smuggling and counterfeiting of the current stamp, even of some of the nicer brands.

The new stamp, printed with special materials and details for each bottle, should accomplish that, though not without significant disruptions in imports that Mr. Drobiz and others said could last through the year and even into 2007, while costing the market and the government millions in lost revenues.

Mr. Drobiz predicted that at least half of the country's alcohol distributors would be forced out of business. Many, he said, have already been crippled by debt because the ban on Georgian and Moldovan wines left them with unsalable merchandise. As a result they cannot easily borrow more to refill the now-empty shelves with other imports.

Only 70 of 126 licensed importers have managed to acquire the new equipment and software necessary, the newspaper Vedomosti reported. Many foreign exporters have also been wary of sending new shipments until the mess can be sorted out, compounding the shortages. Irina A. Sazonova, a spokeswoman for the Federal Customs Service, defended the law's implementation. "There are no problems," she said. "The stamps are issued to every importer who asks for them."

At the same time, she said that as of last week, fewer than half the requests for stamps for 162 million bottles had been granted, since the requests take as long as a month to process. Only 1.8 million bottles of foreign alcohol with the new stamps have been shipped so far, an amount Mr. Drobiz said amounted to only 5 percent of the market.

And the effect is already evident. Store after store visited this week had only a smattering of bottles with the new stamps, mostly spirits, not wine. Some made a futile effort to fill shelves that would normally have been full of wines and whiskeys with other products, often vodka, beer or boxed Russian wine.

Fyodor Omelchenko, the manager of an Italian restaurant called Vivace, said his wine menu was suffering. Where once he offered 70 wines, he said, he now has only a dozen. "The assortment will be reduced to a minimum," he said, expressing a hope that the supply would be restored in weeks, not months.

Aleksandr Khaidukov, the manager of the wine section of the Davidoff store on Moscow's prominent shopping street, Tverskaya, summarized the frustration with a colorful expletive that translates roughly as catastrophic.

His cellar shop, once abundantly stocked, was already virtually empty, its selection boxed and sent to a warehouse — during a recent hot spell, he noted, in which temperatures have exceeded 90 degrees — where its ultimate fate remains in limbo. (A proposal to give distributors until December to affix the new stamps on the bottles with the old ones is in the works, but even so the old bottles must be removed by Saturday.)

"You cannot sell," he said, "but you still have to pay rent."

Andrei Y. Yegorov, a spokesman for Wine World, one of the largest importers, said the government had disregarded the warnings of importers to delay the deadline or phase it in, perhaps to benefit domestic producers but more likely out of incompetence.

"The roads are bad in Russia," he said, speaking euphemistically. "That is why nothing is sorted out in time."


Anonymous said...

"The law was intended to bring order to a market that has been prone to smuggling and counterfeiting of the current stamp, even of some of the nicer brands."

In any other country, this would be considered an important regulatory step to normalise a chaotic import industry by stamping out smuggling and counterfeiting. For LR its a sign of Russia's collapse! Judging by the stuff that you write, you're a fan of the moonshine yourself, which is probably why you're so upset it's being clamped down on.

La Russophobe said...

REITH: In any other country, alcohol would not disappear from store shelves and restaurants and the country would not be held up to international ridicule and scorn. The measure would be competently implemented, not as if by chickens with their heads cut off.

Anonymous said...

reith, you seem to be suggesting that you think Russia's sticking little pieces of paper on bottles will have some impact on the thousands of deaths due to bootleg hooch, as opposed to just creating (yet another) layer of corruption in the Russian bureacracy. is that right?

Anonymous said...

That is certainly what it is designed to do. The hope that the implementation of this regulation will lead to a slightly more accountable standards in the industry is considerably more reasonable than LR's ridiculous assertion that it is indicative of the country eventual dissolution. There is certainly an interesting discussion to be had on the matter, but not within the eccentric parameters established by this site.

Anonymous said...

Reith, I didn't ask you what it was supposed to do, I asked whether you think it will achieve its goal or not. Will you answer the question or not?

Anonymous said...

"In any other country, alcohol would not disappear from store shelves and restaurants and the country would not be held up to international ridicule and scorn."

LR is right. Today I came to work and every single person on the parking lot, then in the office, then during lunch, even my non-Russian wife at home were ridiculing and scorning me for this horible news. Russia must stop this quality labeling non-sense! Who cares about which alcohol went through proper custom and health inspection?

LR, Reith, Gomavs, take out the bottles of Georgian wine from a local rynok! Let's celebrate!

I bet when Russia will toughen its car inspections, it would mean that it's commiting another action worth of scorn and ridicule!

Great job LR, you continue well your role of a bigot!

Anonymous said...

gomavs (university of Nebraska?), yes and no.

yes it will decrease the chances that the alcohol being sold is of bad quality.

and no because there always will be some people drinking homemade moonshine, cologne and antifreeze, just like in the rest of the world! (out of six billion people, odds are that there are some idiots... hence the LR:-) )

You cannot eliminate problems completely, you can simply increase or decrease risks of their occurance.

As for another layer of corruption, yes, there could an icrease of it, only if the appropriate department is innefficient. And the time will tell that. Some of the most ridiculously sounding government initiatives (anywhere in the world) proved to carry a positive impact in the long run, such as requiring people to obtain a useless piece of paper or plastic like driver's license, or fishing license, alcohol license, etc.

Actually, knowing that alcohol in Russia and Ukraine already required those paper labels, for already sometime, then whoever from that part of the world gives me a botttle of alcohol, I simply through it away if I don't see a paper certificate on the cork or cap. So in my case, I am very happy because it reduces a risk of an unnecessary poisoning.

In any case, this is just a temporary measure until the Russian government finds another way of controlling and imposing tighter inspections on alcohol imported into Russia, either at the source of production or at a point of distribution. But first we have to wait for natual law of free market to sort the descent producers from the one who make crap, i.e. some Georgian, Moldovan, and Russian factories.

Welcome to the board, and try not to cozy up to LR, they (it's a team of internet propagandists) are a mean bunch:-)

Anonymous said...

"Reith, I didn't ask you what it was supposed to do, I asked whether you think it will achieve its goal or not. Will you answer the question or not?"

Unlike your idol, the LR, I do not claim to know all. However, in principle the law is a completely legitimate one and one that would raise no eyebrows were it not for a deterministic will to seek out worst case scenarios. For all its worth it probably will be a mitigated success. It will apply a required degree of regulation but the implementation will almost certainly leave something to be desired. What conclusion do you derive from that? If you are the paranoid LR, it's that the Russians are an evil race who all deserve to die. If you question was meant to elicit a constructive exchange you're probably in the wrong place.

Anonymous said...

Reith, you wrote that the law was an "important regulatory step to normalise a chaotic import industry by stamping out smuggling and counterfeiting."

Now you say "for all its worth it probably will be a mitigated success." Those are weasel words. Go on record now so that you can be judged in the future. LR is saying that in the short term this program is clearly a disastrous failure. She's clearly right about this, as the news story proves. You are saying it will be a success in the long term that will outweigh the short term disaster. Quantify your claim.

What reduction in alcohol-related deaths, and what increase in government revenues, will be achieved by next year at this time? And what basis do you have for believing the law will succeed in a country known the world around for its spectacular failures in regard to measures like this?

PS: The Mavericks are the professional basketball team in Dallas Texas which recently played for the national championship.

Anonymous said...

"Reith, you wrote that the law was an "important regulatory step to normalise a chaotic import industry by stamping out smuggling and counterfeiting."

Now you say "for all its worth it probably will be a mitigated success.""

This is completely coherent and sensible. Forgive me if my powers of soothseeing are not so powerful that I can give you specific figures about the effect this law will have, but you are just going to have settle for the fact that it will introduce some degree of accountability. It is odd that you object to this approach when you favour the wholly bizzare approach of this blog's author, which is to describe the law as the "First Sign of the Neo-Soviet Apocalypse". So, I'll tell you what, if you want me to put a wager on it, I bet you whatever you want that the law will produce consequences closer to what I forsee than LR does over the next five years. I think it will quantifiably reduce tax evasion, sale of couterfeit alcohol and bootlegging. Obviously, I don't how much by, but even if the results are marginal, it still makes me more right than the rabid ravings of the woeful LR.