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Fishy business inflates prices in Russia wild east

Written by: Staff

Vladivostok (Russia), Apr 10: The saury fish on supermarket shelves in this port city on Russia's Pacific seaboard is caught off the coast and processed on the doorstep, but costs less to buy seven time zones away in Moscow.

This paradox is all too familiar to the 650,000 people who live in Vladivostok. They regularly complain about a cost of living that is among the highest in Russia while incomes lag behind.

Critics of the local administration say the reason is clear: cosy relations between officials and favoured business interests are stifling the market forces that should be weakening prices.

''If you're a foreign businessman, say from Singapore or Kazakhstan or wherever, and you want to start up a business in Vladivostok, they just won't let you,'' said Nikolai Markovtsev, a former deputy mayor of the city.

A three-hour drive from China and three day's sailing from Japan, Vladivostok is a maze of narrow streets crammed on to a steep hillside overlooking the Pacific Fishing, timber and shipping are the biggest industries. The city has a reputation as the centre of the ''Wild East'' -- a hotbed of chaos, corruption and violent organised crime.

But it could hold a lesson for the rest of Russia, too.

At a time when critics accuse President Vladimir Putin of sharing out political and economic power among a narrow clique of insiders, Vladivostok shows what can happen if this style of government is taken too far.


The cost of living in Vladivostok is now so high that even diplomats in the city are feeling the pinch, said a member of staff at the U.S. consulate, who did not want to be identified.

''Prices have gone up so much that the consul-general has asked the State Department to put locally-hired staff on the same pay scale as staff in Moscow,'' she said.

An identical pair of Adidas trainers cost 2,125 roubles (77.19 dollars) in Moscow. In Vladivostok they cost 3,500.

Local entrepreneurs say it is commonplace to have to make payoffs to corrupt officials -- a business expense that is passed on to consumers in the form of higher prices.

They say going to the authorities for help is useless: the widespread perception in Russia is that the police and the courts are corrupt, too.

Alexei makes a modest living as a middleman, selling on small batches of fish brought ashore by trawlers that operate out of Vladivostok's port. ''We wanted to get into the meat business, it's very profitable,'' he said. ''But there are only four suppliers here. You can pull off one deal, maybe two. But by the third, they will bury you.'' With competition limited, companies in Vladivostok see little need to advertise.

''Everyone's advertising has died out. There's no trade advertising left at all,'' said Oleg Klimenko, editor of the Golden Horn business newspaper.


In an interview with Reuters, Sergei Darkin, the 43-year-old governor of the Primorye region that includes Vladivostok, agreed the cost of living is high.

He denied that corruption and a lack of competition were to blame for the high prices, saying instead it was inflationary pressures in Russia's booming economy. ''It's the standard of living that's driving the prices up,'' he said.

However, Darkin's opponents say he is part of the problem. They say the business groups that do well are the ones that have links to the governor, or to the region's other power broker, Vladivostok Mayor Vladimir Nikolayev.

A former stevedore IN the docks who went into the fishing business, Darkin was elected governor in 2001.

About that time, a Moscow television station broadcast footage it said showed Darkin acting as chief mourner at the funeral of a local organised crime boss in the 1990s.

Darkin has repeatedly denied any criminal links and prosecutors have brought no charges against him.

Critics say the Kremlin has not helped. Direct elections for governors such as Darkin were abolished last year. Governors are now appointed by the Kremlin, subject to approval by the regional parliament.

The Kremlin said the new system would allow it to get rid of governors who were failing local people. Yet Darkin last year became the first governor to be re-appointed to his old job under the new system.

''Direct blame rests with Moscow,'' said Markovtsev, the former deputy mayor. ''Putin says one thing when he makes his annual address...but on the ground they step on the brakes.''


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