Moscow’s Efforts to Limit Inflation in Food Prices Seen Leading to Soviet-Style Shortages

Paul Goble

            Staunton, December 10 – Faced with price rises for basic foodstuffs, the Russian government has entered into discussions with producers to set wholesale and retail prices below where the market has set them. As a result, experts say, there is a real risk of shortages of the kind Russians experienced at the end of Soviet times.

            If state-mandated prices are set too low, goods will simply not be offered for sale via regular channels but only in limited quantities via the gray or black market; and if prices are set by conversations rather than transparently by government orders, suspicions and anger among the population are likely to grow.

            In an article entitled “Russia has decided to fight inflation using USSR recipes,” Finanz.ru says its sources within the government say officials are already discussing talking to producers and distributors to cut prices (finanz.ru/novosti/lichnyye-finansy/s-inflyaciey-v-rossii-reshili-borotsya-po-receptam-sssr-1029882318).

            These behind-the-scenes negotiations are intended to result in reductions of consumer prices for these basic goods by 12 to 15 percent. If that doesn’t work, the government is prepared to impose more levies and restrictions on the export of such goods so that there won’t be as much upward pressure on prices.

            Aleksandr Korbut, vice president of the Russian Grain Union, says that controlling the situation will be difficult. Moreover, he suggests, there is a real risk that these steps will lead to higher costs for the government and empty shelves in stores as producers don’t want to sell anything at the prices set.

            In that case, there is the possibility of serious shortages as occurred at various times in the Soviet period.

            Dmitry Rylko, director of the Moscow Institute for the Agricultural Marketplace, says that no post-Soviet Russian government has tried this approach; and he urges that if the current one does, it do so openly, with clear and transparent orders rather than behind-the-scenes negotiations. The latter approach will only spark more suspicion and anger.