US embassy cable - 05MINSK870

C O N F I D E N T I A L MINSK 000870 
 
SIPDIS 
 
MOSCOW ALSO FOR FAS 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/15 
TAGS: EAGR, ECON, PGOV, PHUM, BO 
SUBJECT:  Farming In Belarus Still A Risky Business 
 
Ref: 04 Minsk 1228 
 
Classified by Ambassador George Krol for Reasons 1.4 (B,D) 
 
1. (C) Summary:  Poloff visited a "privatized" collective 
farm on July 7 to assess the progress made since the 
previous visit in July 2004.  Financial loss, alcoholism, 
theft, laziness, and government interference remain big 
problems.  The infrastructure has improved little while 
more money needs to be spent on renovation.  Without good 
specialists, the owner is managing a farm and solely 
relying on the opinions and suggestions of the local State 
Control Committee.  End Summary. 
 
Bottomless Money Pit 
-------------------- 
 
2. (C) Poloff met Vladimir Lukonin on July 7 at his farm 
near Dzerzhynsk.  Lukonin, a Minsk-based businessman, 
purchased the bankrupt collective farm in late 2003 
following a government campaign to pressure businesses to 
purchase bankrupt farms.  Poloff visited Lukonin's farm in 
July 2004 and saw the problems businessmen like Lukonin 
faced when purchasing the collectives (reftel).  One year 
has passed, but Lukonin has seen few benefits and zero 
profit. 
 
3. (C) Since July 2004, Lukonin has invested and 
subsequently lost USD 700,000.  When he first purchased the 
farm, he had to merge his air-conditioning company with the 
bankrupt enterprise, meaning both budgets and revenues were 
combined.  Most of Lukonin's air-conditioning profits go 
straight to financing the farm, which he referred to as a 
black hole or endless money pit.  As a result, his Minsk- 
based business is teetering on. 
 
Weak Infrastructure 
------------------- 
 
4. (C) Poloff noticed little improvement in the farm's 
infrastructure.  His water tower, just like the year 
before, still had a large hole in it with water shooting 
out under pressure.  Repairmen were unable to stop the 
leak, so Lukonin loses hundreds, if not thousands of 
gallons of water per day. [Note: He probably pays a flat 
rate for water use and not per volume.]  Lukonin still had 
not built a fence around his pastures to keep the cattle 
in.  He priced a fence at USD 20,000, but decided it was 
too expensive. When asked why he would not use cheap and 
efficient barbed wire, he said the workers would not like 
it because it would feel like a prison and not a farm. 
Therefore, he continues to pay workers to sit all day in a 
pasture to watch the cows. [Note: These people usually 
sleep or drink on the job.] 
 
Poor Labor 
---------- 
 
5. (C) Lukonin employs 101 people and has only fired seven 
since he bought the place.  Alcoholism, theft, and laziness 
are still large problems.  He has been unable catch the 
people stealing his fuel, but they managed to steal enough 
that the SCC took notice and brought Lukonin to court to 
answer for the theft. [Note: The government heavily 
subsidies fuel to farms and audits the amount used.]  His 
employees continue to drink, but Lukonin is paying for some 
of the workers' alcohol rehabilitation programs. 
 
6. (C) Lukonin told Poloff his farm would not make a profit 
until workers change their mentality.  After a year, he has 
reached the point where the workers and villagers are no 
longer afraid of him and speak to him willingly.  Several 
times during the trip, Lukonin would scold workers who were 
just standing around and not doing much of anything.  One 
man, who was collecting hay from the field and bringing it 
to the barn, saw rain in the horizon.  Rather than hurrying 
to collect the rest of the hay before it got wet, he shut 
off the tractor and went home. 
 
Government Interference 
----------------------- 
E 
7. (C) After large-scale theft and several years of 
neglect, most of Lukonin's cow barns are in horrible shape 
and cannot house livestock.  However, he still pays three 
percent of the barns' worth in taxes per year, which is 
expensive since the buildings' over-quoted, government 
balance-sheet price per building is USD 100,000.  Lukonin 
would like to build new ones, but he would have to get 
permission from the local State Control Committee (SCC) and 
would have to invest at least USD 100,000 just to get the 
plans approved and moving.  Lukonin would also have to get 
permission from the SCC to tear down the dilapidated cow 
barns, even though, on paper, they are his private 
property.  In the end, Lukonin decided to renovate the 
buildings, which is not much cheaper. 
 
8. (C) The SCC was waiting for Lukonin at his office after 
the farm tour.  It was their third visit in a week and they 
had already made themselves at home, rummaging through his 
farm's paperwork and making sure that the average wage was 
high enough.  The SCC often fines Lukonin, constantly 
interferes in his farm's activities, and often tells him 
what to do.  However, Lukonin admitted that he sometimes 
appreciates the SCC's "suggestions" because he is not a 
farming specialist. 
 
Community Support 
----------------- 
 
9. (C) Lukonin has been involved in community service.  He 
has sponsored free concerts for the residents and provided 
refrigeration for the local grocery store.  During Victory 
Day, he arranged transportation for the village's veterans 
to attend festivities in Minsk and in 2004 financed an 
excursion trip throughout Belarus for the village's 
children and teenagers.  His current project is renovating 
apartments for the farm's workers and in 2007 he will begin 
building five new homes a year as part of Lukashenko's 
rural revival and development plan. 
 
Comment 
------- 
 
10. (C) Lukonin has made many small improvements, such as 
buying newer equipment and remodeling buildings, but few 
economic advancements have been made.  Government 
interference and restrictions, unwilling labor, and 
Lukonin's lack of expertise in agriculture all greatly 
contribute to the farm's failing status.  On July 22, 
coordinator for the CNFA Lucy Sokolovskaya opined that 
Lukonin's farm would not improve without more specialists 
who know how to manage a farm.  Other businesses, such as 
casinos and a major cell phone company, have purchased 
farms and reportedly make a decent profit, but these 
companies have practically unlimited sources of revenue, 
legal and possibly illegal, that they can afford to throw 
away.  [Note: Some sources have speculated certain 
businesses use their new farms to launder ill-gotten 
money.]  Lukonin seems to have the money now, but if he 
continues to lose USD 15,000 a month, he will not have a 
business or a farm for much longer. 
 
KROL