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Food Price Crisis In Russia: Putin Gives Ultimatum For Solution

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Food Price Crisis In Russia: Putin Gives Ultimatum For Solution

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On December 13th, Russian President Vladimir Putin criticized the head of the Ministry of Economic Development Maxim Reshetnikov for “experiments” with food prices and gave him an ultimatum to take measures to curb price increases within a week.

“People limit themselves because they don’t have money for basic food. Are you even looking at them? This is the question! This is no joke! In conditions when unemployment is growing, incomes are falling, basic products are becoming more expensive by such values ​​- and you are telling me stories here,” the president said after the minister’s report during a meeting with members of the government.

The footage was shown in the program “Moscow. Kremlin. Putin” on the TV channel “Russia 1”.

“What do you propose to do for sunflower oil? Do you want to impose duties on the final product? What product do you want to impose a duty on? How long will you experiment with this, is that what I want to understand?” Putin asked.

During the meeting, the head of the Ministry of Economic Development said that inflation indicators at the end of the year are expected to be higher than the target.

Reshetnikov reported that his department monitors prices with the help of the entire cash register equipment.

“That is, we can see directly where and what prices are, and we are also considering this issue at operational meetings in the government,” he explained.

“Look, Maxim Gennadievich, you said: we are monitoring. And the rise in sugar prices has been going on for several months,” Putin commented.

“We understand that in these conditions the purchasing power of the population falls, we constantly talk about it. Real disposable income fell by 4.3%. And sugar prices increased by over 71%.”

Also, according to him, the cost of another basic product – pasta – is growing. According to the president, it has grown by 10.5% and continues to grow.

“Our citizens in the majority – in Moscow and in St. Petersburg – there they eat bolognese – our people are simpler and eat pasta like a navy. And not made in Italy, but ours. Well, this is unacceptable! With such harvests,” the Russian president said.

As a result, the president gave officials a week to take measures to stop the rise in food prices.

“All approvals should be finalized during tomorrow or the day after tomorrow and the corresponding management decisions should be issued in the form of documents early next week,” he demanded.

The situation with the rise in food prices has been discussed at the highest level for several days. On December 9th, Putin said that the situation with the shortage of food for the population, which was in the USSR, should not be repeated now. He stressed that problems with their purchase arise because citizens do not have enough money at the price level that is currently observed on the market.

In response to the rise in prices for basic food products, which are a result of ineffective actions of various officials, the only solution that was invented was a proposal for an administrative cap on prices for basic products, in particular sugar and sunflower oil.

It was precisely as a result of such decisions that a shortage of basic products appeared at the end of the USSR.

Caused by this cap on prices, a black market emerged along with an increase in exports.

As such, it is quite surprising that no other tools have been proposed to resolve the situation.

For example, the introduction of temporary protective export duties on products and raw materials for production.

Critics might argue that the measure would cause manufacturers and sellers to stockpile products until the restrictions are lifted.

However, in the conditions of a modern digital society with a real strong role of the state in the economy, this is solved in two ways:

  1. The acquisition by the state of one of the key market operators (both by the market method and by means of withdrawal from private property due to violation of the law or re-privatization)
  2. Currently, there are various tools that can be used to organize end-to-end control over the movement of raw materials and products. A similar approach is being implemented in Russia as part of the control over the movement of drugs and alcoholic beverages. It wouldn’t even be a precedent.

To establish a similar control over basic products and the raw materials from which they are produced is a matter of several months.

Furthermore, the introduction of tough administrative and even criminal sanctions will limit the ability of market actors to maneuver to extract excess profits.

And these suggestions are not the only possible ways to handle the situation.

However, as the Federation Council experts set out, out of all possible options, the Russian government chooses the most ineffective one.

In addition, there also accusations and suspicions that government officials provide the president with biased data in their reports.

In turn, a positive signal is that the General Prosecutor’s Office, the Accounts Chamber and other bodies effectively conduct parallel monitoring and provide objective information to the country’s leadership.

In general, this is yet another example of the continuing clash of two vectors of the elites present in Russia: the liberal faction and the conventionally national-conservative faction.

The former are trying to act to please the oligarchs, big business and personal interests. The latter, despite all their presumably endless list of faults, are aimed at defending social good.

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