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Russia: Telling Economic And Political Fortunes From Tea Leaves

Moscow, 15 May 1997 (RFE/RL) - Did the head of one of Russia's most powerful banks arrange with his friends in government to double the customs duty on imported tea, sweetening the pot for Russian companies he and his bank control?

This is one of many angry questions being asked following the government's hurried decision in late April to raise the import tariff on imported packaged tea to 20 percent from ten percent, and to add costly delay to the procedure for rebating over-payments by tea importers.

Russia is the world's largest importer of bulk tea. It is a major destination for tea producers in India, Sri Lanka, and China. Sri Lankan and Indian government officials say they were taken by surprise, when the State Customs Committee announced the policy change.

A Russian industry source tells RFE/RL, "the normal procedure for approving duties was not fulfilled in this case. It should have been approved by a ministerial committee." This was bypassed, he claimed, because the Ministry of Finance, and possibly also the Ministry of Foreign Economic Relations, were opposed.

Alexei Rizantsev, who handled the tea issue at the Ministry of Foreign Economic Relations, told RFE/RL "it was Minister Yakov Urinson and the Ministry of Economics, who took the initiative." Rizantsev claims the move is "not protectionist. It won't lead to an increase of prices. The volume of imports will remain the same."

Anton Dirlyadko, marketing director for the Nikitin tea-packing company in Moscow, confirms the Ministry of Economics and the Ministry of Agriculture were the promoters of the duty increase. He denies that Nikitin, which is the dominant tea-packer in Russia, and the biggest beneficiary of the duty increase, was behind the move. "It's wrong to say Nikitin is the only company behind this," Dirlyadko said. Conceding Nikitin was better informed than the tea producers, he claimed "we knew about it, but it wasn't our initiative."

Nikitin is part of the Alfa Group, a banking and trading conglomerate led by Pyotr Aven, who was minister for foreign economic relations in 1992. It is Aven, whom the tea industry believes lobbied Urinson to fix the new tariff, in order to boost market share and profitability of Nikitin. Nikitin directly or indirectly controls most of the tea-packing industry in Russia. At the close of the Soviet period in 1991, 95 percent of the tea sold to Russian consumers was packed domestically. Then the flood of imported packet tea started; and today Nikitin claims only 25 percent of tea sold in Russia is packed by Russian companies.

Tea exporters from Sri Lanka and India have been approached by officials of Russian ministries and asked to invest in idle or under-employed Russian tea-packing plants.

Yury Schepochkin, commercial director of Maiskiy Chai ("May Tea"), said "the rapid introduction of this measure is explained by the packing lobby. It was done by Aven through Urinson." Maiskiy Chai competes with Nikitin in the Russian tea market, and claims a 15 percent market share of tea sales, compared to 12 percent for Nikitin. But Maiskiy Chai operates a packing plant in Colombo, the Sri Lankan capital. "Packing tea is not profitable in Russia," Schepochkin said. "As no tea is produced in Russia, it makes no sense to protect the tea packer as a national producer."

Aven was asked whether he had met or discussed tea-import policy with Urinson. He replied through a spokesman: "I didn't meet anyone in the government, and I didn't discuss this issue with them."

Tea traders also also tell RFE/RL that they believe the government move won't improve customs revenue, because much of the tea, as well as coffee currently imported into Russia, is being smuggled past customs officers.

At Maiskiy Chai, officials believe tea smuggling will increase, and Nikitin won't gain much. Maiskiy Chai also believes price increases for Russian tea-drinkers are inevitable, and they will hurt.

Schepochkin said: "If we look outside Moscow, there will be changes..., because people are affected even by 50-rouble increases in price. Even now people are using surrogates for tea, because they can't afford the real thing."

Poor Russians, he said, are now having to drink dried carrot shavings and teas made from other roots and leaves.

(John Helmer is a Moscow-based journalist who routinely contributes to RFE/RL.)