Suspicious minds to keep Chinese farmers from milking Russia

Suspicious minds to keep Chinese farmers from milking Russia
Milking cows at the AgroFarm exhibition for animal husbandry in Russia.
By Jason Corcoran in Moscow February 14, 2017

Farmers and executives from China’s leading agricultural corporations were among foreign players who descended on Moscow’s annual farming showcase AgroFarm on February 7-9 to showcase their produce and the latest agricultural technologies.

Russian Deputy Prime Minister Arkady Dvorkovich and Agriculture Minister Alexander Tkachev joined the throng at Pavilion No.75, which stretched over 16,500 square metres and featured cutting-edge solutions from more than 390 companies in 30 countries showcasing the latest technology and products for reproduction, feeding and maintenance of livestock and poultry health. The event attracted more than 10,000 visitors.

Among the foreign representatives at the three-day event there were 17 Chinese companies with stands, included Biogrowing Co, Kunlong International, Nanchang Howard Electric, Qingdao Huabo International Trade, Shanghai Terrui International Trade and Zibo Yuejiang Machinery .

But, curiously, there was no mention at all at the conference of the ambitious mega-project to build the biggest dairy farm in the world in China to supply Russia with dairy products. Delegates at AgroFarm said the initiative announced in May 2015 to build an agriculture holding with 100,000 dairy cows in Mudanjiang City, in China’s Heilongjiang province wasn’t discussed at any of the many roundtables or presentations.

The massive dairy farm, which would border Russia’s Amur region, is planned to be 50 times bigger than the biggest dairy farm in the UK, with around 2,000 cows, and three times bigger than the largest in the US, with 30,000 cows. 

Industry players say the project has been shrouded in secrecy and now there is growing doubts about whether it will actually go ahead. “There was plenty of Chinese amongst the foreign guys at the Expo, but they there were traders particularly in tomato paste and frozen veg,” a leading player in Russian agriculture told bne IntelliNews. “As for people talking about building this massive farm in China – not a peep.”

Industry sources say the mammoth project was supposed to be developed by the Kremlin’s sovereign wealth vehicle, the Russian Direct Investment Fund (RDIF), in conjunction with its partner the Russia-China Investment Fund. Yet a London-based spokeswoman for the RDIF said the fund had never intended to finance the project from its $2bn China fund. Yury Trofimov, a spokesman for the RCIF, did not respond to bne IntelliNews requests for comment.

Good neighbours

Russia has traditionally suffered from low farming output, which needs to improve significantly if it is to replace the food imports from Europe that have been restricted as a result of Russia’s 2014 counter-sanctions.

The signing ceremony for the dairy farm project in May 2015 was part of Chinese President Xi Jinping’s visit to Russia and the farm is supposed to be the centrepiece of a $2bn fund targeting investment in agricultural projects in Russia and China. Under the agreement, the two countries will consider creating an experimental agricultural free trade zone between the Heilongjiang province in China and the Amur Region in Russia.

Heilongjiang is China’s largest commodity grain production base and has a rich agricultural heritage. Officials claim Heilongjiang is the leading province in terms of China and Russia’s economic and trade cooperation, and is a “bridgehead” for improving the two countries’ strategic cooperation partnership.

Trade and cooperation between the superpowers is certainly growing as part of President Vladimir Putin’s much vaunted “pivot to the East”. Trade turnover between the two nations grew 34% on year in January to $6.5bn, China’s Customs Administration said on February 10. Exports from China to Russia rose 29.5% to $3.4bn, while China’s imports from Russia surged 39.3% to $3.1bn.

However, there have been hiccups. Construction of the first Russia-China bridge across the Amur river has hit financing problems. The major trade link, announced in 2014 by the RDIF, was recently allocated another $110mn in financing, but may need three times that amount. Construction of the bridge started three years ago, but funding problems and construction delays by the Russian side have halted construction work.

Russia is also throwing money at its ambition to achieve food self-sufficiency by 2020 as it keeps the prohibitions on EU produce for several more years. Putin has allocated an extra €3.3bn to Russia’s agricultural sector in the 2017 budget, but there is a tacit acknowledgement amongst the political establishment that Russia has to partner with foreign countries to stimulate moribund production. However, Russia’s distrust of China runs deep, with both geography and history inhibiting them from becoming closer allies. 

I think I’m turning Chinese, I really think so

Many Russians in the east – which has a dwindling population – fear that in the future they will have to speak Chinese. The Russian regions neighbouring China – Amur, Primorye and Khabarovsk – are home to only around 4mn Russians, slightly more than two people per square kilometre, while there is up to 5mn Chinese illegal immigrants living in Russia’s Far East, and the number is increasing by a million or so every year, according to some estimates.

On the other side of the border, stretching for 3,650km, there are 109mn Chinese living in the neighbouring regions of Heilongjiang, Jilin ​​and Liaoning, who are part of a much bigger country with a rapidly growing, hungry population.

Victor Ishaev, former governor of Khabarovsk region, warned back in 1999 that, “all the land in Russia’s Far East” will be bought up by Chinese. “The peaceful capture of the Far East is underway.” 

An actual deal to lease Russian land in the Trans-Baikal region to the Chinese in 2015 caused an uproar. The agreement allows the Chinese firm Huae Sinban to rent up to 300,000 acres of land over 49 years to grow crops and rear livestock.

After the deal was signed, the firebrand leader of the ultranationalist Liberal Democratic Party, Vladimir Zhirinovsky, warned that a future governor of Trans-Baikal Territory will be Chinese and demanded the mass eviction of Chinese migrant workers.

Putin is well aware of the sensitivities and spoke about the demographic problems in the Far East at an economic forum in Vladivostok as recently as September. To tackle this under-population, the Russian government created a new law last year, entitling every Russian citizen to a hectare of land in the Far East for free.

However, the scheme has reportedly had limited success so far. For instance, hundreds of people have been applying for the same prime plots in Khankaiski District with only a dozen or so being successful. The Financial Times reported in September how one Russian trader, Anton Nekhoroshkov, had bought land in Khankaisky with the hope of building a roadside location to service passing truck drivers and tourists from China. However, Nekhoroshov’s hopes faded after he arrived and found that his land was located in a swamp and the road was a gravel track with no passing traffic.  

In the meantime, Chinese are fanning out across Russia’s Far East. In Primorye, parcels of land that used to lie uncultivated are now soyabean fields, many rented and tilled by Chinese farmers. Chinese investors have also renewed former collective rice planting areas near Lake Khanka that were neglected after the Soviet Union collapsed.

Chinese farmers are also making inroads in Western Russia in a project in Ryazan, a region just 200km southeast of Moscow. In May last year, the RDIF said it is partnering with China’s Banner Infant Dairy Products and Thailand’s Charoen Pokphand Group to build a $1bn dairy complex in Ryazan. Once completed in three to five years, the complex is supposed to produce about 300,000 tonnes of milk and 400,000 tonnes of cheese and dairy products.

In a separate deal, Vietnam’s TH Group started building dairy farms outside Moscow as part of a ten-year $2.7bn project.

The Ryazan enterprise, which will be run by Charoen Pokphand, will include dairy farms catering for 80,000 milking cows and a feed factory with 60,000 hectares of grain, according to the RDIF. Industry insiders have speculated whether this project will simply replace the more controversial mega-project in China’s Heilongjiang province.

“The RDIF may be trying to quietly scrap the Chinese farm in Heilongjiang,” a senior agricultural player with links to the government projects, tells bne IntelliNews. “Having Chinese farmers working inside Russian borders might be more palatable than having them milk our cows in China.”