Russian Village Resists Privatization Effort Championed by Putin

Locals, activists and lawmakers rally to prevent sale of century-old state-owned dairy plant
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The Russian government’s privatization drive soured in a village called Milk.
The dairy plant here that for more than a century has churned out Russia’s most-recognizable brand of butter was scheduled to be auctioned in mid-February, the latest target to raise cash for the budget.
But after locals, activists and lawmakers held rallies and petitioned President Vladimir Putin and other officials, the Kremlin cooled on the plan—a sign of the limited appetite for privatization among a public that remembers state assets being unloaded to insiders for a song in the 1990s.
“The Vologda soul is in this plant,” said regional lawmaker Marina Denisova, referring to the nearby town from which the butter takes its name. “We don’t have the right to sell people’s property, state property, for kopecks.”
The stalled sale reflects the constraints of a renewed privatization effort touted by Mr. Putin as a way to make the state-heavy economy more efficient and to shore up finances. Amid weak prices for oil, Russia’s main export, the government is struggling to meet a target of a budget deficit of 3% of gross domestic product.
Its options are narrowing: Russia raised $1.75 billion this month, the first time it tapped international markets since the U.S. and allies imposed sanctions after Moscow annexed Crimea in March 2014. That was less than expected, and a failure to raise significant extra funds would force the government to dip deep into a rainy-day fund built up during years of soaring oil prices.
The Kremlin is already planning budget cuts of up to 10% in some ministries to close the deficit and is preparing to sell stakes in some companies that it long shielded, including OAO Rosneft, the world’s largest listed oil producer. Other big companies tipped by officials for sales include diamond producer OAO Alrosa and shipping company OAO Sovcomflot.


Some sales of shares in large companies are expected to go ahead. But political factors are lined up against a broader wave of sales this year: Some government officials and management want the state to keep control and foreign investors evince little interest because of sanctions. An April survey by state pollster VTsIOM showed 68% of Russians opposed sales of state assets.
Chris Weafer, senior partner at consulting firm Macro-Advisory, said the planned sales are largely a government tactic to buy time until the oil price recovers. “Below the headline companies, few are ready to be sold,” he said.
The Vologda dairy plant—which bears the full name OAO Scientific-Experimental Dairy Factory of the Vologda State Dairy-Farming Academy of N.V. Vereshchagin—is a case in point. It has become a symbol for opponents of privatization, featuring in a debate on state television’s most popular daytime chat show and attracting support from a sitcom actress-turned-lawmaker and an advocacy group associated with Mr. Putin.
Asked about the plant at a regional forum recently, Mr. Putin said: “When it comes to privatization, I proceed from what often happened in the 1990s, when they just took some enterprise or bakery and opened God knows what, and people didn’t have anywhere to go for bread.”
Such talk resonates in places like Vologda, a 750-year-old town of some 300,000 inhabitants about 250 miles north of Moscow. Several Soviet-era factories here, including a furniture manufacturer and a producer of trolley buses, shut down long ago. Vologda butter is perhaps the most famous in Russia, and among the most expensive on grocery store shelves. Workers at the plant are proud of the butter’s quality, noting that the milk it is made from surpasses the highest state standard.
The history of the plant reflects Russia’s uneasy relationship with capitalism. When the Soviet Union fell apart, production collapsed. Chief Executive Sergei Molotov turned the factory around after taking over at the end of the 1990s, procuring new equipment under a state investment program, and securing the right to use the Vologda butter brand. The factory now employs some 450 people.
The plant appeared to be heading to auction in February with a starting price of one billion rubles (around $15 million). But a campaign against the privatization quickly snowballed.
Maria Kozhevnikova, a 31-year-old sitcom actress and pro-Kremlin lawmaker, came to visit and offer her support.
On a TV show in February, another lawmaker, Elena Nikolaevna, praised the plant in a raucous debate about privatization where proponents of selloffs were yelled down.
“Vologda butter is the best butter in the country, we grew up on it,” she said. “We’re against that kind of privatization.”
The All-Russian People’s Front, the advocacy group associated with Mr. Putin, appealed directly to the president. The regional governor sent the Kremlin petitions with tens of thousands of signatures.
The main complaint: Local or foreign investors wanting to make a quick buck would sell cheap products under the famous Vologda brand, lay off workers and close the dairy school linked to the plant.
Days before the planned auction in mid-February, the government canceled the sale. Now, the Russian State Property Agency says it is looking for a strategic Russian investor that won’t make major changes.
Meanwhile, Mr. Molotov said the uncertainty was preventing the plant from signing contracts to procure milk to run at full capacity. He is skeptical a sale will take place soon.
“What tasks aren’t we solving?” he said. ”The problem is that people want to take control of extra property.”

 
Source: WSJ
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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