Russia may soon be booze-free

Russia may soon be booze-free

2006-07-27 21:13

Moscow - A reform aimed at protecting Russian consumers from substandard alcohol is turning Russia into a country where even vodka, the national drink of choice, is becoming scarce, experts warned.

"Russia could become a country without alcohol by September," said Boris Titov, head of the trade association Business Russia.

The association has written to Prime Minister Mikhail Fradkov warning that alcohol distributors could be put out of business by the new legislation.

The law, which took effect on July 1, obliges alcohol importers and retailers to operate through a centralised data system called EGAIS that identifies every bottle sold.

But businesses say the EGAIS system is virtually inoperable. Connection to the central server is often blocked and many companies lack the expensive equipment needed to access the system.

Bottles sold in Russia now also have to carry a new stamp confirming that excise duties have been paid. The old stamps are illegal and not enough new ones have been printed to meet demand, observers say.

Reminiscent of 1985 anti-alcoholism campaign

Shelves once lined with all kinds of alcohol for the lucrative market are now empty and some restaurants now allow clients to bring their own wine or spirits.

For many Russians, the atmosphere is reminiscent of an anti-alcoholism campaign launched in 1985 by the Soviet Union's last leader Mikhail Gorbachev.

That campaign forced Russian vineyards to close down, while alcoholics drank perfume in a desperate bid to keep sobriety at bay.

Once again, Russian alcohol-related businesses are under threat, observers say.

The country's main retailers risk losing more than $100m in profits between July and September, the Deutsche UFG investment house said in a recent report.

Reform could have opposite effect

Fradkov pressed the Russian government to "take urgent measures" to resolve the crisis, with top officials blaming Russian Finance Minister Alexei Kudrin for poor implementation of the EGAIS system.

Meanwhile, the reform could end up having an effect opposite to the one intended by actually promoting the sale of fake alcohol, experts said.

The Russian market share controlled by counterfeiters could "increase up to 90%" from around 50%, warned Pyotr Kalygin from the Vinny Mir holding, which imports wine from 35 countries.

Poisoning from counterfeit alcohol claims more than 40 000 lives in Russia every year, Russian authorities say.

According to the business daily Vedomosti, another possible beneficiary of the disputed reform could be the national FSB security service, which controls the Atlas plant that came up with the EGAIS technology.

"The FSB will gain $239m" by forcing distributors to pay Atlas for the installation and operation of equipment allowing access to EGAIS, Vedomosti said.