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Corruption, credits and bad luck in Siberia: the crisis of Russian agriculture

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In Siberia, agriculture faces crisis after crisis as small farmers find themselves in debt caused by bad weather, bureaucracy and corruption.


Georgy Borodyansky
9 June 2015

On 6 May 2015, Omsk’s Odessa district court began hearing a criminal case against Sergei Gordienko, one of Siberia’s most prominent farmers. Gordienko was accused of large-scale fraud, including misuse of a 2.5m rouble (£31,000) grant from the regional Ministry of Agriculture for modernisation of his farm.

If convicted, Gordienko could receive a 10-year prison sentence. The irony is, though, that Sergei and his wife Anastasia have been at the forefront of Siberian farming for the past two decades. In the late 1980s, they were the first people in the Omsk region to take advantage of the right of the rural population to land and freedom. Several years later, as the Soviet Union was collapsing around them, the first constitution of the Russian Federation enshrined this right for all Russian citizens. But the state has yet to truly implement it. And Russian farmers have paid the price.

Winds of change

Reshetilovka, the village where the Gordienkos were born, was classified as non-viable back at the end of the 1970s when around 100 families left. Ten years later, when the wind of change was blowing through the USSR, Sergei and Anastasia were the only couple to return to the village. In 1989, they set up the first agricultural cooperative in Siberia, which was reclassified as a peasant farm enterprise three years later. 

They ploughed abandoned fields, built a farmhouse and outbuildings and even bred a unique variety of cattle – a Friesian-Red Steppe crossbreed which could produce up to 7,000 litres of milk a year. They now keep roughly 150 head of cattle, along with a range of other livestock (pigs, sheep, goats, chickens, ducks, geese, turkeys), adding up to several thousand head.

Five years ago, the Gordienkos won a silver medal at the national Exhibition of Economic Achievements. The Gordienkos had bred a unique variety of cattle, a Friesian-Red Steppe crossbreed that combined a Dutch high milk yield with Siberian resilience.

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Sergei Gordienko inspects his flock at Reshetilovka. Image courtesy of the author.

But the Russian state, as represented by its bureaucracy, law enforcement agencies, regional authorities, and perhaps the country itself, has no interest in farmers like these. In 20 years of farming, Reshetilovka has had only one visit from an official body: the deputy public prosecutor and chair of the district land management committee risked their shock absorbers to deliver an eviction order.  

The Gordienkos, it seems, along with their children and grandchildren, had been illegally occupying the land for two decades. They therefore had to leave, taking their livestock with them. The order contained no suggestion of where they could take these possessions, or to whom they might sell them.

At the first court hearing Sergei and Anastasia presented documents showing that they could not use the grant they received in 2012 to modernise their farm, as most of the 2.5m roubles went on feed for the cattle in that year of drought.

The FSB take an interest in cattle 

In 2012, Prime Minister Dmitry Medvedev gifted Omsk region a new governor, Viktor Nazarov. Nazarov lost no time in visiting Reshetilovka, and it seemed that the government had finally realised that it needed the Gordienkos’ hard work.

Previously, the Gordienko family had been refused federal agricultural credits, but now they were immediately given a grant. Nazarov also promised to sort out the status of their settlement, which hadn’t officially existed for over 30 years: it isn’t listed in any registry, or marked on any district or regional map. And none of the structures erected by the Gordienkos on its land are part of the Russian Federation either. Reshetilovka has no great ambitions: it just wants to be recognised as a ‘hamlet’.

It seems, however, that this problem was too much for governor Nazarov. Nor is he the man he was when he first took up his post, talking about ‘bridging the gap between the government and the people’. Strangely, even Nazarov’s face has changed: his photos no longer show him smiling (according to the local media, his image was retouched by Moscow PR people). We live in grave times – our enemies are watching us, and the people have rallied around our rulers in the face of a common foe. In such times, the Gordienko family is now treated like a fifth column. 

The change in the governor’s behaviour coincided with the arrival of former FSB officers, including Omsk’s regional chief, who have occupied key roles in his administration. It is this body that has been investigating the ‘Gordienko case’, evidently a serious one: one of the best peasant-run farms in Russia is threatening homeland security.

One of the best peasant-run farms in Russia is threatening homeland security

It is hard to tell when exactly the threat arose: perhaps when the farmers, only half joking, announced that if the state would not recognise them, they would secede from it and create a ‘self-proclaimed settlement’. After all, they were not part of Russia, but were still paying taxes to it. 

Or perhaps it was later, when they drove a milk tanker up to the regional authority building and poured 500 litres of their own milk down a drain in protest at the falling price for milk paid by state owned depots. Independent experts calculated that a third of the money due to the Gordienkos was being creamed off by middlemen in a scam that could well be organised by moonlighting FSB agents. 

 the Gordienko family pours milk down the drain in Omsk. Image courtesy of the author.

Small farmers all over the country complain bitterly about corruption in this area, but the police are more concerned about the farmers protesting against it. 

Exposing the system

The middlemen are important people. Indeed, they are usually patriots and members of United Russia: their fancy Cadillacs and land cruisers have orange and black St George ribbons fluttering from them. 

On Farmers’ Day, Sergei and Anastasia tell me, the whole square in front of the regional Palace of Culture was packed with these trendy vehicles: it was as if the Oscars had come to town – or a mob convention. But, understandably, the Gordienkos are not invited to these events – they are for the ‘agribarons’, they say.

These agribarons, or ‘businessmen farmers’, don’t get their hands dirty. Instead, they buy up huge swathes of land but keep their distance from it. Meanwhile, Sergei’s hands are always dirty: he is the only real farmer in his district. (And soon enough, you’ll be able to count them using only two hands.) ‘We are being systematically exterminated’, says Pyotr Shumakov, a farmer from the village of Terpenie [literally, ‘Patience’]. 

‘We are being systematically exterminated’ 

Indeed, the story of how Pyotr and hundreds of other small Omsk farmers isn’t for the faint-hearted. Beginning in the late 1990s, Shumakov and his fellow farmers were robbed and ruined with the help of the state after the regional authorities, hearing of Shumakov’s achievements, offered him a contract as the main supplier of superior seed to Omsk’s farmers.

Shumakov dispatched 320,000 tonnes of top quality seed to the Omsk Regional Association of Small Farmers and Cooperatives, an organisation close to the regional authorities, and was due an advance payment of 400,000 roubles – a large sum at the time. But when there was a glitch with the payment: the Association promised to reimburse him in kind, with commercial grain from the coming harvest, which they would get from the farmers. His debt transfer document carries the seal of the Central Directorate for Agriculture and Food. 

After wading through the Regional Association’s accounts, Shumakov discovered that his seed had gone to flour mills, some of which were owned by the association’s director at the time, while the farmers had received low quality grain fit only for cattle food. It was given as a government loan, for which they would have to return double the amount in commercial grain after the harvest. But you can’t make a silk purse out of a sow’s ear: there was nothing to return, and hundreds of farmers became insolvent. It finished most of them: some ended up in mental hospitals, some took to drink, four of them are now dead.

‘It’s the system,’ says Shumakov. Years of probing it have taught him all its ways and means. The machinations around the government seed programme are probably not confined to Omsk (other regions just don’t have their Shumakovs).

When Pyotr exposed the system, it turned on him and besieged him with lawsuits. The farm machinery agency suddenly remembered a 4x4 he had bought with a loan: he had paid it off five years earlier, but it took him 10 months of court hearings to prove it. 

Shumakov has had to deal with a dozen lawsuits like this every year. And that’s just for starters. Once, just before New Year they cut off the heating to his family home when the temperature was minus 40C. His son was hit on the head with iron piping and then charged with causing injury to the man that hit him. And by an odd coincidence, after Shumakov won another case against his attacker in November 2010, a few days later all his farm buildings were burnt down. The arsonists have still not been found. 

When Pyotr exposed the system, it turned on him and besieged him with lawsuits. 

Two months ago, though, Pyotr had a meeting with Governor Nazarov – quite an achievement: he spent ten years failing to get an appointment with his predecessor, Leonid Polezhaev. Nazarov listened intently to the tale of his trials and tribulations. But, as yet, nothing has been done to address his grievances. Perhaps the governor would be glad to help, but alas, is not in a position to do so. 

Over the course of the 2000s, the number of farmers in Omsk has fallen from 6,000 to a mere 500 and is continuing to do so. And Omsk is not, of course, alone: 80% of small farmers in neighbouring Novosibirsk are estimated to be insolvent, and can only wait to see whether the banks will foreclose on them or give them a little more time.

The SOS to Putin

This spring, a meeting of the Federal Agricultural Council (FSS) took place in Galkinskoye, a village near Ekaterinburg. The main movers of this movement are small peasant farmers fighting for their existence.

On 30 April 2015, they – small farmers, large farm managers and local agricultural officials – sent an SOS to President Putin: the sowing season in the Urals and Siberia might not happen, as there is nothing to sow and no money. Among the signatories were Anastasia Gordienko and Pyotr Shumakov.

‘Circumstances force us to address you personally’, the letter stated. ‘90% of farmers cannot access the credit facilities necessary for their work. Rosselkhozbank, set up to service farmers, is particularly bad in this respect. Their credit conditions and practices are tantamount to sabotage, causing the disruption of this spring sowing season. It is very obvious to those present at this meeting, that Russia’s small farmers are facing a real catastrophe. Your policy of phasing out imports is not being implemented... We cannot manage without your personal support.’

Anastasiya Gordienko protests the treatment of farmers and her family. Image courtesy of the author.

Phasing out imports is no easy task: to produce good seeds, for example, you need quality feed stock, which is expensive and in short supply. Ministry of Agriculture figures show that Russian farmers buy more than half their seeds from abroad, mainly from Europe. But recently this solution has become impracticable: even Vasily Melnichenko, FSS chair and CEO of a successful agribusiness company, has had to cancel an order from a Dutch supplier because of the fall in the rouble. 

If farmers in southern Russia can still scrape some seeds together from last year’s bins (there is a small reserve in the Kuban area), in the Urals and Siberia any guarantee of a crop this year disappeared under the snows of an early winter. And much of what was saved thanks to heroic efforts is unfit for sowing: in Bolshorechensky district only 20% of seeds are viable; in Kolosovsky district - 26%; in Lyubinsky - 40%.

At the same time, prices for other necessities are rising – chemical fertilisers (up 100%), ,spare parts for tractors and harvesters, pesticides, and, most importantly, bank loans. Last year, bank interest rates were at 12%; now they are as high as 35%. Vasily Melnichenko sees this as ‘a trial run at shooting Russian agriculture in the head’ – and in any case it is a blow from which small and medium farmers cannot recover. The agribarons will of course prosper and take over land abandoned by the real farmers. 

The agribarons will of course prosper and take over the land abandoned by the real farmers

What is surprising is that the mass murder of agriculture seems to be happening quite independently of the Russian government and president. A year ago, Melnichenko tells me, Putin ordered officials to create a mechanism that would allow small farmers to get credit at 4% a year. 

Two months ago, Prime Minister Medvedev also announced that interest rates to agriculture should not be higher than 5-10%, and the then Minister of Agriculture criticised the banks for raising them. But now it seems the powers that be have no power, and Russian agribusiness is moving in the opposite direction to the government’s anti-import policy.

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Vasily Melnichenko, head of FSS, at his farm in Sverdlovsk region. (c) Valery Melnikov / VisualRIA.

If Shumakov and the Gordienkos could reach the president on his personal line, they would probably ask the same question as John, an Englishman who has been producing milk in Russia for the last 15 years: did Vladimir Putin believe the statistics – John doesn’t – and how could farmers survive without profit and finance for development? Putin replied that he believed the figures and that if John’s business had survived that long, things couldn’t be so bad.

Shumakov, meanwhile, tells me that none of his dozens of farming acquaintances will be sowing this year – not as a protest, but because there is no point in digging yourself deeper into a debt hole: ‘You’ll see, there will be a crop failure’.

The Gordienkos, however, plan to sow as usual – their cattle have to be fed. But all their equipment – harvester, tractors and milk tanker, as well as their barns and garage, have been impounded, as have 400 square metres of pasture that one of the agribarons has his eye on – the real reason, they believe, for the criminal charges made against them.

If the impoundment isn’t lifted by 20 May, the beginning of the sowing season in Omsk, they will be forced to slaughter all their cattle and sell up.

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