DEVELOPMENT-RUSSIA: Moscow Auction May Liberalise Land Sales

By IPS Correspondents Reprint | | Print |

Sergei Blagov

MOSCOW, Oct 5 2000 (IPS) - For the first time since the 1917 Bolshevik Revolution, Moscow this month auctioned plots of its land, in a move that may signal the freeing up of trade in land to boost the ailing agriculture sector.

For years, the Kremlin had been pressing for a new land code with the freedom to sell and buy land. In fact, the Russian government hopes to persuade Parliament to adopt a land code this autumn, one that would ease trade in land starting next year.

But the left-wing opposition in Parliament argues that this freedom would lead to speculators purchasing most of the land for nothing from impoverished farmers, making them landless serfs.

In what has been billed as a breakthrough, the city of Moscow on Oct. 2 sold its first plot of land in eight decades at an auction — 0.73 hectare for 310,000 U.S. dollars.

Firms rather than individuals took part in the auction, since City Hall has already designated each plot for commercial projects, such as a gas station, supermarket, and restaurant. It would also require a developer with the capacity to handle those projects.

Buyers must build on their land, but are then free to rent, sell, or use it as collateral for loans. Nine lots — all located in Zelenograd, a satellite city some 40 km north of the Moscow centre — were auctioned, but only one was sold.

The sales are set to continue but there will be no rush, the head of the Moscow Land Committee, Viktor Damurchiyev, told journalists.

Until now, building owners in Moscow take out renewable 49-year leases instead of having title to the land.

Although the Russian Lower House of Parliament, the State Duma, has refused to vote on a law authorising the sale of land, certain local authorities have passed regional bills that liberalise landholdings.

St. Petersburg, Samara, Saratov and Nizhny Novgorod have already initiated limited land sales.

Once upon a time, the Bolshevik leader Vladimir Lenin incited the masses with the revolutionary slogan “land to the peasants”, though the land eventually ended up in state’s hands.

But even now — in the market-oriented Russia — few expect a rush to acquire land in the absence of a federal land code still being debated by the State Duma.

Agricultural land is Russia’s last yet-to-be-fully privatised frontier, and Russian President Vladimir Putin had hinted during his campaign he might move to pursue this.

The land needs to have a true ‘khozyain’ (master) to ensure order and wealth in Russia, Putin has said. However, he has carefully refrained from clearly defining what he meant by ‘khozyain’ — whether a rightful owner would be able to sell land, be a lessee or simply a good manager.

The Russian president is now in a position to push through a pliant Duma legislation to allow land sales — but it remains to be seen if he will indeed do so.

The lack of a land code is an obstacle for the development of Russian agriculture, and it needs to be approved this year, argued Deputy Prime Minister Alexei Gordeyev, who is also agriculture minister.

Passage of the code this autumn could revolutionise Russian farming, which has been plagued for years by lack of funds for basic inputs and by falling output. Lack of true private ownership has held farmers back from raising the loans needed to boost production.

In its present form, the proposed land code does not allow for trade in agricultural land.

Most farmland in Russia is no longer state property, and private ownership of land is guaranteed by the Constitution, but the mechanism for buying and selling farmland has not been defined.

A new code is supposed not only to declare people’s right to buy and sell land, but to provide concrete mechanisms that are not available.

Though the purchase of land is legal, the absence of a new code and lack of clear laws on land make the purchase of farmland virtually impossible for majority of Russia’s regions.

Some 40 million people of Russia’s 146 million population live in rural areas. The market value of the nation’s land is 5 trillion dollars, according to the State Land Committee.

Should a property tax equal to 2 percent of the property market value be implemented, the budgets of all levels will be able to receive up to 100 billion dollars annually.

The government believes that without the freedom to sell and buy land, Russia’s agricultural sector is doomed to stagnation.

In the two previous years, Russia, a food exporter before 1917, applied for food aid from the United States.

Billions of rubles of state aid each year disappear into the black hole of the agricultural credits programme, and more than half of farms are said to be insolvent, according to the Russian Statistics Committee.

In 2001, government subsidies to the farmers are to be halved down to 2 billion rubles (720 million dollars), Gordeyev said.

The Kremlin has been arguing that Russia was poised to become a “Great Grain State” in reference to grain exports by Tsarist Russia, but the agricultural sector has had its ups and downs.

The grain harvest in 1999 was a mere 55 million tonnes, roughly half of 99 million tonnes in 1993. Gordeyev has said that no grain will be imported this year, since the harvest is expected to equal 65 million metric tons.

The government sees agricultural land sales as a way to boost the rural economy, while others are wary that the liberalised sale of land would lead to it being bought up on the cheap by affluent Russians or foreigners.

The trade in land could just become the only option for destitute peasants, who may be forced to sell their land to survive, argued Yury Chernichenko, head of Russia’s Peasants Party.