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Russia produces vodka, USA wastes it

August 12, 2013, 17:01 UTC+3 Alexandrova Lyudmila

MOSCOW, August 12 (Itar-Tass) - Producers of famous Russian vodka have asked the authorities not to increase excise duty, warning that counterfeiters will inundate the country with cheap fakes. Meanwhile, in the western hemisphere, Russian vodka was poured out onto asphalt as the US made the famed beverage a bargaining chip in political games.

The largest Russian vodka producers asked President Vladimir Putin not to change the excise duty rate for strong alcoholic beverages until 2017. They said they were concerned over a steep increase in the output of bootleg liquor due to a 33 percent excise duty hike in January. The share of fake alcohol on the market has reached 50 percent at present, for the first time since 2008.

On Friday, chairman of the board of the Union of Alcohol Producers /SPAP/ Dmitry Dobrov wrote to Vladimir Putin with the suggestion of keeping the excise duty rate at 400 roubles per one litre of absolute alcohol for the period from 2014 to 2016. The letter noted that the sharp increase in the excise duty from January 1 was the main reason behind the population's turning to bootleg liquor and the decrease in the production of legal vodka in the first half of the year.

"The state will fall short of 150 billion roubles in revenues from excise duty and other taxes... considerable damage will be inflicted on the population due to a dramatic increase in the consumption of bootleg liquor... the proceeds from illegal production will skyrocket to 100 billion roubles a year," the newspaper Kommersant citied Dobrov as saying.

In the past two years, the excise duty on 9-proof alcohol has increased by 73 percent from 231 roubles in 2011. Since then, minimum retail prices have increased from 98 roubles per 0.5 litre to 170 roubles. The Tax Code sets the excise duty at 500 roubles in 2015 and at 600 roubles in 2015.

The Finance Ministry has always been the chief advocate of higher excise duty on alcohol. The ministry's press service told Kommersant that "the decision on the excise duty has been made" and that it would not be revised.

On July 23, head of the Rospotrebnadzor consumer rights watchdog Gennady Onishchenko called for an increase in the minimum price of vodka to 300 roubles for 0.5 litre. This measure would help reduce alcohol abuse in the country, Onishchenko claimed.

Meanwhile, President Vladimir Putin objected to sharp increases in the excise duties on alcohol and tobacco. "We know what the fight against alcohol can lead to: homemade liquor and drinking denaturated alcohol," he said.

In June, Russian distilleries bottled 40 percent less vodka compared with a year ago. Legal vodka production has plunged by 40 percent since the beginning of this year. The heavier tax burden makes the competition with bootleg liquor increasingly harder for legal producers.

Nobody would commit himself to naming the precise share of the illegal market, but approximate figures can be provided. Chairman of the Sineriya board Alexander Mechetin estimates that fake vodka now accounts for 40 percent of the market. Vice-president of the Russky Standart holding Igor Kosaryov assumes that this year, the share of the illegal segment in overall consumption of vodka and other strong alcoholic beverages might reach 60 percent. "This indicator can be regarded as a threat to national security," Kosaryov said in expressing his concerns.

Experts last estimated the share of bootleg vodka in the market in 2008. Later, the Rosalkogolregulirovaniye regulator took a range of measures to scale down illegal production. Admittedly, the state has done much in the past three years to legalise the alcohol market. The measures taken in 2009-2012 helped cut the share of the bootleg market by two times. The trend reversed as the excise duty rate soared.

Meanwhile, the demand for mini-distilleries and moonshine stills has been growing in Russia, insiders at several specialised shops told the Rossiiskaya Gazeta newspaper. This is an alternative to the increasingly expensive vodka and protection from counterfeit alcohol.

Sales have increased five-fold in the past 12 months, Yevgeny Demidov, a representative of one of the largest Internet shops which sells accessories for alcohol production at home, said.

Russia annually produces 250 million litres of homemade alcohol a year, according to the federal and regional alcohol market study centre. The production cost of homemade liquor does not exceed 40 roubles. Compared with a minimum price of 170 roubles per 0.5 litre of vodka at legal retail outlets, moonshiners operate at a profit.

Recently, Russian vodka has become particularly popular abroad for a curious reason. The idea to make problems for the Sochi Olympic Games is now very popular among representatives of sexual minorities of the West, who accuse Russia of homophobia in connection with the law that bans propaganda of untraditional sex among minors. In protest, the West's gay communities could find nothing better than to boycott Russian vodka.

Last week, owners of New York bars poured out vodka on Manhattan streets in protest against what they regard as infringement upon the rights of the LGBT community. At least 200 New York outlets took part in the boycott, which spread to many gay bars across North America.

It was not the first such action. In New York, Los Angeles, Philadelphia and Chicago, LGBT activists take the vodka bottles sporting the name "Mosow" on the label out into the streets to pour out their contents onto the pavement.

Amazed at this senseless waste, Russian lovers of vodka just shake their heads, staring at the television screens.