208 



the Minister stays. Rutskoi talks about being committed to land re- 

 form, and his Federal center is supposed to push land reform, but 

 the people in it are a very close political alliance with the agrarian 

 deputies in the Parliament, which is ultimately probably the most 

 reactionary Parliamentary faction, because their power is based not 

 on land reform, but on maintaining the existing system. 



So you have an interesting political controversy in which Rutskoi 

 talks a great deal about reform and complains about the existing 

 reform, yet his notion of reform is to take arms and sell them 

 abroad and use that money to create ready-market farms. He said 

 in a meeting in October, which I happened to read a transcript of, 

 "There has been no reform, because reform should increase produc- 

 tivity. Productivity hasn't increased; therefore, the land reform has 

 failed. How do you plan reform? Here is a document by province. 

 Here are what they can produce given the resources, here are what 

 they are producing, here are the resources they need. Let us get 

 them the resources. Let us let the large farms produce." 



Mr. Penny. So basically to use the proceeds from foreign arms 

 sales to provide resources or equipment to those regions that are 

 now underproducing? 



Mr. Van Atta. Right, and to set up individual farms on it, which 

 he would build according to a standard model and then lease to de- 

 mobilized military officers who would pay for them over 20 years. 

 He recently gave a speech to AKKOR in which he said, "We have 

 to support the collective farms and the state farms, because who 

 feeds us?" And the private farmers in the audience yelled back, 

 "The United States." That was not the rhetorical answer he was 

 looking for, of course. His answer is the kolkhoz and sovkhoz, even 

 though he knows they're inadequate to feed them; therefore, they 

 must be supported. He winds up, therefore, on the political line 

 that was common to Yegor Ligachev and many others that we sim- 

 ply must give more resources to the big farms. 



Mr. Penny. How do you describe the market system in Russia 

 now in terms of food and the pricing of that food? 



Mr. Wegren. Well, on the one hand, starting in 1993, you're sup- 

 posed to have the abolition of state orders. That is to say, farms 

 no longer have to turn over a set amount of their produce. They're 

 going to a contract system. You had a contract system in 1992, but 

 the problem was that the farms simply didn't fill their contracts. 

 They simply didn't until very late in the harvest season, when the 

 state doubled the price of grain, and then suddenly they were quite 

 anxious to fill them. 



But that's at the wholesale level. At the retail level what you're 

 seeing as of late fall last year, you started to have localities insti- 

 tuting their own price controls on food so that you had the local 

 governments telling, first, the procurement agencies what percent- 

 age they could mark up the price when they sell to the retail 

 stores, and then you had the local governments telling the retail 

 stores how much they could mark up the food to the consumers. So 

 in that sense, even though prices have gone up dramatically, you 

 don't have a completely free market price simply because the local 

 governments are trying to continue to protect the consumers. 



Mr. Penny. How much of produce is moving outside of 



Mr. Wegren. Through the commodity exchanges, for instance? 



