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When do imported cigarettes count as ‘humanitarian’ aid?
Gordon Feller uncovers some curious fundraising techniques in Russia.

The Russian Orthodox Church has never shied away from making money to stay solvent. It runs a factory that produces and sells icons and candles, bishops bless automobiles in exchange for pocket change, and one diocese has entered into a high-profile bottled-water venture with private partners.

But this is small change compared to the big business that is being conducted by the Patriarchate’s Department of External Affairs. It is founding banks, importing duty-free cigarettes and is a partner in an oil-exporting business that had a turnover of two billion dollars last year. That makes the Church a major business concern by any measure.

One of its biggest revenue sources is International Economic Partnership, or MES, one of Russia’s major oil exporters and a partner with the Church. MES belongs to a unique class of traders that sells quotas of oil allotted to them by the Federal Government. A company such as MES can buy oil wholesale from Russian producers and then sell it over the border, usually enjoying a variety of tax breaks.

Early last year, MES was granted the right to export 4.5 million tons of oil during 1996: ‘They’re allowed to keep the profits from these operations, usually tax free, and use that to fund whatever they’re supposed to be doing,’ said one observer who asked not to be named. Everyone’s happy: the Government can patronize organizations without funding them through the budget; producers receive hard currency for their oil; and the exporter gains a cash cow.

Reports surfaced last summer that Patriarch Alexei had personally approached President Boris Yeltsin with a request to set aside 650 tons of oil for the Church to export duty-free. Proceeds from the sale, to Germany’s MRH company, were to be used to purchase a collection of Orthodox art outside of the country for Moscow’s Christ the Saviour Cathedral.

Nevertheless, Archbishop Sergei, who oversees the Moscow Patriarchate’s Management Department, announced in September that ‘the Russian Orthodox Church is not and never has been involved in the oil business, and the Synod has recommended that priests do not participate in business’.

Yet oil trading is not the Church’s only business. Last year it was one of Russia’s largest importers of tobacco, accounting for one in every ten cigarettes legally imported into the country. The Church’s cigarette imports have been classified as ‘humanitarian aid’. Under Russian law there are no import taxes on such aid.

‘Two years ago, a Dutch cigarette producer approached us with a request to allow them to give their surplus production [over what they could sell in Europe] to the Russian Orthodox Church in the form of humanitarian aid,’ said Valery Solovyov, executive secretary of the Commission on International Humanitarian and Technological Aid. As a result, the Moscow Patriarchate was granted the right to import 50,000 tons of tobacco duty-free.

According to Geny Ugolnikov, director of market research for the importers’ association, ‘the main volume of cigarette imports – in the form of humanitarian aid for the Church – has come in 1996, following the National Sports Fund’s loss of its privileges for tobacco imports’.

Vladimir Smirnov, an adviser at the National Importers Co-operation Association, said that the Church has become Russia’s largest tobacco importer. ‘None of the known importers can boast of such volumes,’ he added.

Last September a presidential decree disqualified excise goods like cigarettes from being considered as humanitarian aid. With that decree the import scheme ended.

The Moscow Patriarchate has not limited its business activities to mercantile operations. Over the past four years, and in spite of a canonized ban on this form of activity, its subdivisions have founded several banks.

Alexander Nezhny, who has written a number of exposés on the Patriarchate, suspects that it is also involved in the diamond-mining industry: ‘Last summer,’ he says, ‘the Patriarch personally participated in the opening ceremonies of a cleaning plant at the Aikhau mine in Yakutia, where Russia’s largest diamond resources are located’. The Patriarch’s flight to Yakutia can be easily enough explained. But the fact that he put up with the participation of local shamans in the ceremony, which he would not usually do, suggests that his reasons for going went beyond a simple desire to bless another factory.

The Russian Orthodox Church is not the only religious organization with business dealings. Most Protestant churches, unlike the Orthodox Church, do not have canonized limitations on profit-making. And, according to one expert on the financial affairs of the Roman Catholic Church, the Vatican’s largest commercial project in Russia involves securities investments totalling nearly $500 million.

Secular concern about the Orthodox Church’s business activities centre on the fact that they are not openly declared and depend on favours from the Government. ‘The only problem,’ said one government analyst, who asked to remain anonymous, ‘is that the size of these privileges is too great and with its secular operations the Moscow Patriarchate has started to look like the National Sports Fund’.

Gordon Feller is a freelance journalist based in St Petersburg.

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