AG MINISTER SENT TO PASTURE

UNCLAS MOSCOW 000396 SENSITIVE SIPDIS USDA FAS FOR OCRA/KUYPERS; OSTA/HAMILTON, BEAN; ONA/TING, SALLYARDS, MURPHY PASS APHIS MITCHELL, BURLESON STATE FOR EUR/RUS STATE PASS USTR FOR CHATTIN BRUSSELS PASS APHIS/FERNANDEZ VIENNA PASS APHIS/OELLERER E.O. 12958: N/A TAGS: EAGR ETRD ECON WTO RS SUBJECT: AG MINISTER SENT TO PASTURE REF: A) MOSCOW 081029 SENSITIVE BUT UNCLASSIFIED ¶1. (SBU) SUMMARY: Russian President Medvedev recently removed long-serving Minister of Agriculture Aleksey Gordeyev from his post, nominating him to be governor of Voronezh Oblast as part of a larger shake-up of regional governors. While this action represents a significant demotion for Gordeyev, most of our sources maintain that it should not be viewed as punishment but rather as the opening salvo in what could be a broader government reorganization in the wake of the economic crisis. GordeyevQs ouster as Agriculture Minister after ten years in the job is not likely to end the widespread corruption and protectionism that permeate all levels of the ministry. At this point, the GOR has not named a replacement for Gordeyev. END SUMMARY -------------- Gordeyev is Demoted -------------- ¶2. (SBU) Minister of Agriculture Aleksey Gordeyev, long known as a strong supporter of protectionism and government control in agricultural production and an outspoken opponent of WTO accession - will soon depart his position to become the new governor of the Voronezh oblast. His Deputy, Alexander Kozlov, will also be leaving MinAg to take up the post of acting governor of Oriol oblast. The transition is expected to take place quickly. The regional legislative authority (a rubber stamp) can approve the PresidentQs nominee for governor at the end of February. Once approved by the region, Medvedev will issue a decree on the MinisterQs reshuffle. In the event that Gordeyev departs before his successor is nominated, Deputy Ag Minister Andrey Slepnev would run the ministry of agriculture in the interim. ¶3. (SBU) The Russian media attributed these changes to Qanti-crisis rearrangementsQ of President Medvedev that are aimed at re- enforcing the management of Russian regions. It is also widely seen as the opening salvo in what could prove to be an extensive government reorganization as the economic crisis continues to worsen. -------------- But How Much of a Demotion Is It? -------------- ¶4. (SBU) Our sources in the agriculture sector insist, however, that GordeyevQs demotion was not unexpected but rather part of a planned reshuffle that had been put off last fall in the wake of the Georgia conflict and start of the economic downturn. Moreover, these sources claim that the Vornoezh governorship is a honored retirement for Gordeyev and that his resignation is in sync with the expiration of Vladimir KulakovQs term as governor of the region, which is scheduled to end on March 14. Kulakov, a former head of the counterintelligence department at the Voronezh branch of the KGB, was elected governor of Voronezh in 2000 and re-elected in 2004. His tenure as governor has been heavily criticized for failing to develop the rich agricultural resources of the region, which remains one of the poorest in Russia. ¶5. (SBU) The Russia country manager of one of the U.S. agricultural equipment manufacturers told us that with a wave of bankruptcies likely coming in the agricultural sector as the economic crisis continues, ensuring stability in important agricultural regions, including Voronezh, would become increasingly important. While he agreed that GordeyevQs transfer to a regional post was a demotion, Gordeyev was absolutely loyal, would likely remain close to Putin, and would help to ensure regional stability through a difficult period. By contrast, the next agriculture minister could well be a Qfall guyQ who would take the blame for the credit problems and the coming insolvencies in the agricultural sector, according to our contact. ¶6. (SBU) Gordeyev publicly attributed his QresignationQ to the extended time he had served as minister (ten years) and maintained that the new assignment QcoincidesQ with his personal wishes. While the Voronezh governorship is clearly a step down from minister of agriculture, our contacts tell us that Governor Gordeyev will continue to be a member of a small and high-level group of the KremlinQs top governmental policy-makers on agricultural issues. -------------- Criticisms of GordeyevQs Tenure as Minister -------------- ¶7. (SBU) Some of GordeyevQs critics hold him responsible for the sharp inflation in food prices during the last two years. In 2007, food prices increased 17.1 percent. They increased another 17.6 percent in 2008. In 2008, moreover, the largest increases were seen in basic foodstuff commodities, including a 33.8 percent jump in pasta prices, more than 25 percent rises for bread and baked products, groats and legumes, and more than 20 percent increases for meat, poultry, and vegetable oils. ¶8. (SBU) Further undermining GordeyevQs position, during the last few months, he delivered several unusual messages to the Russian public, which reportedly concerned Kremlin officials, such as establishing production quotas for domestic poultry and egg products. Putin also severely criticized the Ministry of Agriculture last summer for using blatantly inaccurate data about the amount of Russian land being used for agricultural production. -------------- Who Will be the Next AG Minister? -------------- ¶9. (SBU) Several candidates are rumored to be on the short list to replace Gordeyev as Agriculture Minister, including Igor Rudeniya and current Governor of Belgorod oblast Yevgeniy Savchenko. Rudeniya currently serves in the White House as Director of the Department of Agro-Industrial Complex . Savchenko is viewed as the leading contender, given his extensive agricultural background and solid relationship with the GOR leadership, including First Deputy PM Zubkov, who managed a collective farm during the Soviet era and is the chief policy-maker on agriculture issues under PM Putin. Unfortunately, he is known to share GordeyevQs protectionist tendencies. -------------- COMMENT -------------- ¶10. (SBU) As Agriculture Minister, Gordeyev has advocated a toxic mix of state control and protectionism. During his ten-year reign, Gordeyev reinstated governmental control and intervention throughout the agriculture and food sector. He also successfully controlled the volume of the largest agricultural U.S. export to Russia, poultry - through protectionist measures such as tariff rate quotas and sanitary and phyto-sanitary (SPS) measures by the Russian Federal Veterinary and Phytosanitary Surveillance Service (VPSS) that were based on bogus science. He was a vocal opponent of RussiaQs WTO accession process and the QdamageQ it could inflict on domestic agricultural producers (including himself as one of the largest poultry producers in Russia),and insisted that Russia should be entitled to use large agricultural subsidies after accession that were unacceptable to RussiaQs trading partners. Unfortunately, we think GordeyevQs demotion likely has nothing to do with his anti-trade bias and with protectionism and corruption so deeply entrenched in the Ministry of Agriculture at all levels, any change in leadership at the ministry will not likely bring a quick reform of either the VPSS or a more enlightened view on WTO membership. BEYRLE