EU/RUSSIA: COMMISSION PROPOSES FOOD SUPPLY PROGRAMME.

Summary: Following Russian requests, the European Commission proposed on December 9 a Council Regulation for an ECU 400 million programme on the free supply of food products to ease the effects of the Russian crisis on the worst-hit sections of the local population. The proposed food aid package contains 1 million tonnes of wheat, 500,000 tonnes of rye, 50,000 tonnes of rice, 150,000 tonnes of beef, 100,000 tonnes of pork, and 50,000 tonnes of skimmed milk powder. The cost of the programme would be borne by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF). Pork will be bought on the open market via tender, but for the rest the Commission will use EU intervention stocks. Tenders will be invited from private operators for transport to Russian ports or border. The net cost of the operation is about ECU 400 million.

The Commission accepts there will be substantial food shortages in certain Russian regions this Winter. Russia says it must import up to 5 million tonnes of grain, because there will be grain shortages in half of Russia's 89 regions. Up to 30% of stocks verified so far contain dirt and mould, and the 1998 grain harvest will be only 48-49 million tonnes, compared with 60-80 million tonnes in the early 1990s, and a 1997 harvest of 88.5 million tonnes. Meat imports have been interrupted due to the financial crisis, and domestic meat production will fall from 1.5 million tonnes in 1997 to 1.3 million tonne this year. The gross cost of this operation is estimated at about 470 million ECU, but ECU 86 million storage costs will be saved. The Memorandum of Understanding initialled by the European Commission and the Russian Federation sets out provisions and conditions including that: the Russian Government will ensure transparency and full controls of all operations from the takeover of the commodities to the ultimate points of distribution of sales and will prepare regular reports on the implementation of the programme, which will be transmitted to the Commission. The products included in the programme will be sold at the prevailing local market prices in the regions where there are food shortages. The proceeds obtained from the sales will be placed on a special account opened and managed by the Ministry of Finance of the Russian Federation for social purposes. The Russian Government will ensure that the products...