Russian “Water,” Machismo and National Decay

One traditional resource which Russia has valued beyond hydrocarbons and land is vodka, the nation’s traditional moral and physical painkiller. Nikolai Kostomarov, a nineteenth century Russian historian, wrote that at the dawn of Russian history a feast was a major social event, with the goal of "Making one’s guests so drunk that they would not remember how they were transported back home." Those who were reluctant to drink were beaten into it, since the "Russians ascribed to hard drinking some kind of heroism." The Russians were getting drunk on mead, wine or beer since the fourteenth century, however, vodka emerged as the true national drink of Russia to replace them all. Ever since, under the Czars and throughout the Soviet rule, vodka has been both the curse of Russia, and the backbone of its economy.
In the Romanov Empire, vodka production and sales accounted for 30 percent of the state budget. In the Soviet era, according to Sergei Stepashin, the Chairman of Russia’s Audit Chamber, "vodka and tobacco revenues covered the entire military expenditure, almost $170 billion in those eras’ prices" (www.finmarket.ru, June 30).
Vodka was also the USSR’s main cash generator. The first visible cash shortages happened in the USSR back in the early 1970’s, when the Kremlin, scared about the growing mortality rate and collapsing labor discipline, caused by hard drinking, raised prices for vodka, and clamped the first curbs on alcohol consumption, however feeble. Mikhail Gorbachev’s anti-alcoholism campaign, launched in 1985, cost the budget $27.5 billion by 1989 in the prices of that time. Not unlike the case during the prohibition era in the United States, the monies lost by the state went to the mafia. The first Russian President Boris Yeltsin finally gave up the state vodka monopoly in 1991 as he was launching his market reforms. In the general chaos of the early 1990’s, the revenues that had once sustained the enormous Soviet military machine started sustaining organized crime.
However, the alcohol market by private producers and retailers, however originally criminalized, eventually emerged by the late 1990’s and started acquiring more civilized forms. Nonetheless, Yeltsin, a well-known expert on vodka consumption, sought to recover the state’s lost treasures. "As long as the people spend money on vodka, the profits must go to the state," Yeltsin said in the wake of the financial meltdown that hit Russia in August 1998. "We will use them to revive our economy." In October 1998, Yeltsin decreed that 184 Russian distilleries that produced the pure alcohol from which vodka is made should sell a controlling stake to the government.
Putin’s first crackdown on private business -a year before he took on Yukos and jailed Mikhail Khodorkovsky- was dismantling and taking over SPI, a major private vodka producer that had restored production of famous vodka brands like Stolichnaya and Moskovskaya, aggressively sold Russian vodka to some 150 countries and brought an annual $100 million in revenue to the Russian treasury (Time, June 23, 2002).
Now, the state-owned Rosspirtprom company accounts for 40 percent of the entire pure alcohol, as well as 16 percent of the national vodka production (Kommersant, April 9). Still, the state revenues from vodka accounts for less than 1 percent of the entire revenue. Meanwhile the Kremlin projects a budget deficit of 5 percent of GDP in 2010, or $100 billion (www.finmarket.ru, June 30).
Hence, the Kremlin is seriously considering restoring the state vodka monopoly as a desperate step to raise falling revenues. Russia’s entire alcohol market is worth $37.5 billion per year, and stands second only to that of the United States (www.dailyonline.ru, June 29).
Putin indicated his eagerness for the total state takeover of this valuable asset, although he warned that "everything should be properly weighted" before the decision is made (June 30, Nezavisimaya Gazeta). Meanwhile, on July 7, First Deputy Prime Minister Victor Zubkov held a meeting on raising excise duties on vodka as way of securing extra revenues also to shore up the dwindling budget in which he said that it "presents an acute problem." Zubkov wants alcohol excises stepped up to a stiff 30 percent. He also hopes to take over illegal vodka sales that he says accounts for some 46 to 50 percent of the entire alcohol market (www.finmarket.ru, July 9).
The World Health Organization warns that the per capita consumption of over eight liters of alcohol a year threatens the gene pool of any nation. Alexander Nemtsov, a department chief at the Moscow Research Institute of Psychiatry, estimates Russia’s annual consumption at 15 liters of pure alcohol per capita (www.javno.com, June 26). In recent years, alcohol was a cause of more than half of all Russian deaths between the ages of 15-54 (The Lancet, June, 27). Alexandra Ochirova, the Chairperson of Russia’s Public Chamber’s Commission on Social and Demographic Policies, says that alcohol accounts for 500,000 deaths in Russia annually (Moskovskaya Pravda, June 30).
Alcohol is a critical factor in Russia’s rapidly shrinking population. Russian and international demography experts expect that the population in Russia will shrink from the current 141.9 million to just some 83 to 115 million by 2050 (www.echo.msk.ru, July 12).
Still, after 25 years of reform that includes the decade of Putinomics, the Russian state has no viable economic alternative to filling the nation’s coffers except taking over and raising vodka consumption and drinking its people to death. The traditional Russian painkiller now threatens to kill Russia itself.