"Rostselmash" thrashed billions of state aid for Babkin

The money allocated to support the production of combines goes into the pockets of the owners of Rostselmash.
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The largest producer of combines in Russia has been the Rostselm Rostselmash plant for many years now. Moreover, he succeeded in crushing the agricultural machinery market due to the strong state support. Whether this has benefited domestic farmers is a moot point. But the owners of the plant - definitely yes.

By the availability of agricultural machinery, our country lags far behind not only the United States and European countries, but even Belarus and Kazakhstan. In this regard, the state over the past few years has actively supported the Rostselmash plant. Moreover, its owners continue to complain - they say, if you do not help, the production will be bent! However, they are not in a hurry to invest their money in production. Last year alone, the three main shareholders of the plant - Konstantin Babkin, Dmitry Udras and Yuri Ryazanov received 2.2 billion rubles in dividends and were preparing to split another half billion at the beginning of this year. However, a scandal arose and the last transaction had to be abandoned. However, the owners of the enterprise did not seem to have lost the desire to do business by lobbying their interests in government agencies.

Bought for cheap

Rostselmash has been manufacturing agricultural machinery since 1929. After going through wars and crises, in the mid-90s the plant was slowly dying. It was then that on the horizon there appeared a trinity of young businessmen who had already become skilled by the time of the dashing 90s - Konstantin Babkin, Dmitry Udras and Yuri Ryazanov. They understood: the time when the bulk of the money was made on the resale of imports was running out, it was necessary to invest in real production. Rostselmash, which by that time had been successfully plundered, became interested in friends - harvesters at a huge discount were supplied to troubled intermediaries who sold them at market prices, and the plant received a penny. In 1999, the New Commonwealth company (owned by Babkin, Udras and Ryazanov) began to buy shares in Rostselmash. How much they paid for the enterprise, the largest of which was not in the million city then, is still unknown. However, as Kommersant then assessed the situation, only 1–1.5 million US dollars were spent on the purchase of a blocking stake in the country's largest agricultural machinery manufacturer. In fact, it was the cost of a dozen and a half harvesters produced by the plant.

Let's be fair - the change of ownership has breathed new life into the enterprise. The trinity of businessmen was determined to make money on their property, and for this was ready to invest in personnel and in the modernization of the enterprise.

However, the main trump card was the lobbying potential of Moscow businessmen. Konstantin Babkin acted and acts as a kind of “frontman” of the trinity. He willingly gives interviews, writes articles and books, and even maintains his own blog. Among his regalia is the post of chairman of the board of the RF CCI on industrial development and economic competitiveness, as well as the co-chair of the Moscow Economic Forum. The ideology that Konstantin Babkin adheres to and which he tirelessly promotes at any level is simple: the state must by all means support the domestic producer. So, according to the director of the Institute for Strategic Analysis of the FBK Igor Nikolaev, “it was Babkin who, at the end of 2011, achieved that Russia imposed a special duty on the import of imported agricultural machinery”. This in itself would be nice - however, to the words about "supporting a domestic producer", one should add, by analogy with a well-known joke, "and we even know this producer."

Thus, it seems that all the efforts of the owners of Rostselmash, if we remove the verbal husk, for the second decade, it turns out, were aimed at securing, with financial support from the state, a dominant, and ideally monopolistic, place in Russian market.

The result is predictable.

To achieve this goal, the owners of the Rostov plant show miracles of ingenuity.

“Babkin and another structure that absorbed the tractor plants in Russia, together with the Ministry of Industry, received a total support of almost 500 million rubles for the development of a new combine and a new tractor. Of these, 300 million - to the Rostselmashu harvester, which stands out for a new one. In fact, this combine was developed by the general designer of Rostselmash Ivan Kireevich Meshcheryakov. The archives of Meshcheryakov, which were developed in the 80s, are now given out for their own development, ”said predecessor Konstantin Babkin as head of the Union of Agricultural Machinery and Equipment Manufacturers Arkady Osherov to Novaya Gazeta in 2009.

However, the plant began to receive truly large-scale support after businessmen directly went to power. Babkin himself at one time was even considered as a candidate for various ministerial posts, but, as they say, did not work out. But Yevgeny Korchevoy, who had once started at the Rostselmash press service, had grown to the director at Rosagromash and by 2016 managed to take the position of director of the department of agricultural, food and road construction machinery at the RF Ministry of Industry and Trade. In other words, Rostselmash came from Rostselmash to make decisions on the allocation of money.

The result was predictable.

“The most significant factor adversely affecting the competitiveness of Russian enterprises is that a significant part of the financing from regional budgets for the purchase of agricultural equipment goes to the purchase of foreign products,” Korchevoy said at one of the agro-technical forums. As a result, a program was launched to provide subsidies from the federal budget to support domestic equipment.

In 2019, Rostselmash accounted for 45.2% of subsidies. As a result, Rostselmash currently produces up to 80% of all Russian combine harvesters. Given the limited supply of imported equipment, this actually allows him to dictate prices in the market
Companies received money and discounted customers. The trick was that, as Kommersant wrote, the amount of subsidies under the program was closely tied to ... the number of employees in the enterprise. As a result, it was precisely the crowded Rostselmash and the St. Petersburg Tractor Plant that received 78% of the funds allocated in 2018. And in May 2019, Gazeta.Ru published a letter complaining of seven members of Rosspetsmash who directly accused the leadership of this association that all the lobbying efforts of the association “are carried out mainly in the interests of the Rostselmash group of companies.” The irony is that they addressed this complaint directly to the head of the association, Konstantin Babkin.

In total, according to the Daily Storm, over the past seven years, Rostselmash has received more than 33 billion rubles from the state. The record was set in 2017, when the plant received 10 billion rubles.

In 2019, the amount amounted to about 6 billion. And so the money would flow further in silence, but there was a scandal. “When Rostselmash Withdrew 2 Billion in Dividends

700 million, we could not agree with this, because they require from the budget under 10 billion state aid, ”the State Duma Speaker Vyacheslav Volodin spread his hands. After a public shout, the shareholders slowed down, and the last part of the dividends, in the amount of about half a billion, they decided not to divide, but to leave for the development of the enterprise.

Harvesters are not enough

But perhaps this is the way to act? In the end, as a result of the lobbying efforts of Babkin and his associates, the plant works and generally feels rather well. The trouble is that if you feed the elephant intensely, then there is a chance that he will trample all his neighbors in the aviary. According to the Ministry of Agriculture, in 2019, Rostselmash accounted for 45.2% of subsidies, the St. Petersburg Tractor Plant - 15.8%, and Claas (German-based production located in the Russian Federation) - 10%. As a result, according to a HSE study, Rostselmash currently produces up to 80% of all Russian combine harvesters. Given the limited supply of imported equipment, this actually allows him to dictate prices in the market. As a result, the long-standing problem of Russian farmers - the lack of technology - is not being solved. Rossiyskaya Gazeta recalls that if in 1985 in the USSR there were an average of 7.5 units of such equipment for every thousand hectares of arable land, then in 2007 it was 3.4, and by the end of 2018, the figure was 2.36. For comparison: according to Expert magazine, in Germany there are 11.5 combines working on every thousand hectares, in the USA - 17.9, in Belarus - 9.3. At the same time, the age of the equipment exceeds all established standards - farmers “squeeze” everything possible out of the car, as they simply cannot afford to buy new ones. Is this the result that the state was counting on, blocking access to imported equipment and supporting the domestic manufacturer, which, by the way, as it turns out, is ready to use almost half of this support for its personal needs and projects?