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Analysis & Opinion
02.02.12 Fueling Voters Turnout
By Tai Adelaja

With just one month to go before Russia's presidential elections, presidential contender Vladimir Putin has pledged new subsidies to farmers in a last-ditch effort to woo the country's 30 million rural voters. The groundswell of middle class protesters in recent weeks has already compelled the Russian prime minister to step up his outreach to his rural supporters. But in a surprise move on Tuesday, he redoubled those efforts by tripling fuel price subsidies for the country's agricultural producers, the Kommersant daily reported on Wednesday. The measure is expected to cement the loyalties of Russian rural voters, who could swing the March 4 election and allow the prime minister to win the majority needed to avoid a runoff, the paper claimed.

Putin told a meeting of agricultural producers in Tambov on Tuesday that farmers would get a discount of 30 percent on the cost of diesel fuel during this spring sowing season, allowing them to pay a lot less for fuel than they did in December. "There will be a 30 percent discount on the prevailing price of fuel in each region as of December 2011, and the discount will be calculated based on the lower wholesale price rather than [the more expensive] retail price," Kommersant quoted Putin as saying. He added that fuel supplies (to the regions) will increase by ten percent compared to last year, which further reduces the cost of diesel fuel. On the downside, Russian oil companies are to lose more than 20 billion rubles ($657 million) if the measure gets implemented, analysts say.

Fuel remains the number-one item in most farm budgets in Russia, and giving rebates and other subsidies to farmers at the expense of oil companies is not uncommon. A government decree dating back to 2003 ensures that the government gives incremental annual subsidies to farmers, an amount which reached 3.3 billion rubles ($108 million) in 2010. Last year, the government directed oil companies to supply farmers with 2.5 million tons of diesel oil and 180,000 tons of gasoline at below-market prices, equaling a ten-percent discount, Kommersant reported. And during last spring??™s planting season, oil companies had to sell fuel at a 30 percent discount, incurring about ten billion rubles ($331 million) in losses in the process, the paper said.

In addition to increasing subsidies, Putin??™s government has also changed the way oil companies distribute subsidized fuel. Previously, oil companies were supplying subsidized fuel based on the extent of their presence in traditional agricultural areas. In the past, the practice had put a higher subsidy burden on state oil giant Rosneft, forcing it to incur heavy loses, Kommersant said. However, a new scheme proposed by Deputy Prime Minister Igor Sechin would allocate extra supplies to oil companies based on their production volumes, thus effectively reducing the burden on the state-owned oil company. The implementation of Putin's latest directives is expected to raise subsidy costs to over 20 billion rubles ($657 million) for oil companies, experts say.

Putin's decision to increase fuel subsidies to farmers took the market by surprise, said Pavel Strokov, the marketing director at Kortes Information Center, which monitors the fuel market. The government had been widely expected to reduce agricultural subsidies by replacing old, fuel-guzzling agricultural machinery with newer, cleaner equipment, Strokov said. And while the government has also considered giving funds to farmers, it has dumped the idea in favor of granting fuel subsidies, which can easily be monitored and controlled.

With lavish subsidies, analysts say, the prime minister was vainly trying to foster a feel-good mood in the countryside ahead of the March 4 presidential elections, which he is expected to win anyway. Of the country's 142.9 million people, 37.4 million eke a living in rural areas, according to Rosstat. While Russia's Central Election Commission said it does not conduct separate statistics for rural and urban voters, experts say up to 30 million dwellers will cast their votes in the March 4 presidential elections. A large percentage of the rural population traditionally votes for the pro-Kremlin ruling party, as many regions rely on grants and subsidies from the state. However, industry executives have expressed skepticism that granting subsidies to farmers at the expense of oil companies could indeed put a downward pressure on fuel prices, which are expected to grow.

"Vladimir Putin made the right campaign pitch for the rural voters, even if a tad belated," said Dmitry Oreshkin, an independent political analyst. "However, the effectiveness of the measure remains in doubt as the ruling party already controls the entire rural electorate." Oreshkin estimated that voter turnout was up ten percent in the regions during the December parliamentary elections thanks to the activities of the ruling United Russia party. He said the party garnered 15 percent more votes in rural areas than in urban areas. "Putin may have decided there are still hidden reserves in the regions which could be enlisted with the help of regional party leaders," Oreshkin said. "This suggests to me that Putin would leave nothing to chance in order to mobilize his whole electorate for the upcoming elections using a more effective method than his regular television appearances."
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