CHAPTER 4

Potential

Large enterprises, land banks, and transactions are no rarity in current Russian agriculture. They reflect a rapid and ongoing process of concentration. In late 2009, twenty-two companies each controlled land banks of more than one hundred thousand hectares—around twice the size of Andorra. This number increased to around forty companies in 2015, and further to seventy-one in 2022 (BEFL; BEFL 2015a; BEFL 2022). According to official statistics, commercial farming enterprises controlled roughly one-third of Russia’s agricultural land. Out of these, the seventy-one giants with land banks of one hundred thousand hectares or more controlled roughly 9 percent. In 2019, the Russian meat producer Miratorg became the first company in Russia to control a million hectares (BEFL 2019) which is more than the territory of Cyprus, the Mediterranean island home to more than one million people which also happens to be the financial center through which a substantial part of Russian agribusinesses’ financial flows are being channeled (Lander and Kuns 2021).¹

While the concentration of agricultural assets is massive, it usually does not look very spectacular on the ground. In many cases, no particular signs visibly distinguish enterprises that now belong to agricultural holding or foreign investment companies from the successors of Soviet collective farm enterprises that people still call “kolkhoz.” Further, rural residents and smaller agricultural producers describe how the land “went away quietly” (Private farmer, Nizhniy Novgorod region, 2021) and gradually, as they could no longer afford to rent or work it.

Over recent years, one could observe numerous large-scale bankruptcies and investment withdrawals that illustrate how the concentration process is less straightforward and stable than one may assume. These include the larger part of the most ambitious Western investment projects, including Agrokultura. The challenges for foreign agrarian investors in Russia have been described in detail elsewhere with a focus on company performances, management, and investment rationalities and decisions (Kuns, Visser, and Wästfelt 2016; Lander and Kuns 2021; Luyt, Santos, and Carita 2013). This study combines company insights with insights from some villages in which they operate to shed light on the relationship between investment projects and rural populations’ losses and benefits. I conceptualize investments as steps in longer processes of reordering, which allows for a more thorough investigation of the relationship between appropriation and dispossession than by focusing on the land deals. It reveals how companies, more than simply profiting from buying cheap assets, navigate and, if they can, exploit processes of de- and revaluation, both drawing on and accumulating different forms of capital: profit but also rent, and political and social capital.

I start with some vignettes that exemplify such maneuvering by managers and directors involved in large-scale agricultural deals and operations. I invite the reader on a trip through various scenes across western Russia and argue that many of these investments are a quite bumpy trip.

Investment Detours

We are on one of several long car rides to one of Agrokultura’s farms with one of its expat production managers. I ask him about the company’s recent purchase of several farms and around eighty thousand hectares of farmland. The contrast to the enthusiasm voiced in his company’s announcements and press releases could hardly be starker. He complains how investment promises have been exaggerated from the very beginning. Estimates on the state of the farms, infrastructure, and machinery turned out to be inaccurate after the purchase, so the company faced much higher expenses than expected. He concludes that it had been a bad deal and that the financial difficulties that followed also had an impact on the company’s other farms. The company had struggled to achieve net profitability for years now, and the badly planned purchase seemed to frustrate the manager. I ask him if he did not see the promised great potential in the expansion. Without any hesitation, he replies: “There is potential in everything, but in this case, it will be difficult to realize it.”

We spend most of the day driving around the two-hundred-square-kilometer farm, checking field operations or searching for people and tractors scattered on the territory. It was an illuminating demonstration of things that can go wrong with operations at such a large scale: people, machinery, and spare parts getting lost, operators in various functions losing oversight over commands and duties, the smaller and larger leakages in long chains of command. It seems perfectly plausible that those who experience such unsolved “friction” (Tsing 2005) in finance-driven operations on the ground are highly skeptical about plans to expand operations further. Late at night, I travel back to town with the more senior production director. He calls the deal a “disaster” and explains that the acquired production facilities and land bank are too large for the company to handle. He describes the purchase as a typical attempt to create shareholder value and speculates that what it took to convince shareholders and the board to get into it was probably some “beautiful PowerPoint presentation.” In fact, he says, the company was lacking ideas on how to manage the acquired farms profitably—yet another gap between investment discourse and local operations, as the company built much of its promises of profitable investment on the notion that the application of international best practices will uplift farming operations to international standards.

Traveling seven hundred kilometers south on a four-day farm-to-farm trip with the managing director of a Russian agricultural company, I learn that the fifty-thousand-hectare farm that we just visited has changed tremendously since Soviet times, when it had been a sovkhoz supplying the Soviet army. It has lost this function, and the number of goats held on the territory has diminished from fifty-five thousand to three thousand. Attempts to revive grain production have been frustrated by unfavorable climatic conditions and soils salinized by one of the large and disastrous Soviet irrigation projects. The director doubts that the farm will ever be profitable in the foreseeable future and says it is not the sort of enterprise anybody would readily choose to invest in. He shares his assumption that his boss—one of the region’s most successful businessmen and a member of the regional parliament—was obliged by the governor to take over the farm, probably in exchange for access to more favorable farms and assets and other privileges. Similar deals between state representatives interested in preventing the total degeneration of enterprises and affiliated villages and businessmen with an interest in state resources are common in other economic spheres in Russia, too (Wengle 2018). This manager believes that several farms and enterprises in their company network were taken over in a similar, not quite voluntary, way and complains that this greatly complicates his own obligation to run a profitable business.

On another farm the next day, a man approaches the director with an offer to sell a well-equipped agricultural enterprise with a two-thousand-hectare land bank for 70 million rubles (around $2.2 million at the time), but the director turns down the offer and explains: “My boss is interested in land. Farms are like appendages for him, he calculates through land.” He later explains this investment strategy to me: Suppose you have millions of rubles at your disposal, what will you do with that money? And at a time of falling gold prices and shortly after the 2012–13 Cypriot financial crisis, which led to the flight or loss of several billions of dollars of Russian state and private capital? Unlike Russian banks and Russian industry, land seems like a stable asset to pour in surplus millions. After having complained about hopeless investments yesterday, he now seems to be carried away by the prospect of investing in an asset that soon will “rule the world”: grain. In short, we see a remarkable combination of heterogeneous rationalities in a single company: on the one hand, what seems like land-grab rationality in a pure form—spare capital betting on agriculture as a future market—and on the other a state-bound development agenda to uphold nonprofitable enterprises.

Two thousand kilometers northwest, a Russian businessman explains how the potential he sensed when comparing agricultural enterprises in Western countries with those in Russia—together with some spare millions in his pocket—motivated him to start an agricultural investment project. A biologist by training, he seized the opportunity to buy land with soil favorable for growing potatoes, believing that agriculture was the last undervalued asset in the Russian economy. He describes how disillusionment came to spoil his initial enthusiasm: “Our ideas of the business were very wrong when we entered it. This is to say, our evaluation of the business potential, returns, expenses, and the business in general corresponded with reality only to around 50 percent. It all turned out to be more difficult, more expensive, slower, and harder. I understand that the engineering company . . . that we first cooperated with . . . needs to sell its machinery. This is why they say that [this] is like Klondike, a gold mine! You just have to dig, and then dollars will pour down on you in a stream of gold, you will be rolling in money! And so we got into this affair, into this project. All turned out to be difficult” (Businessman, Perm region, 2011).

He admits he had missed that profitability had shifted from primary agriculture to other parts of the food production chain: processing and retail. Now he believes that “working land became unprofitable” and “you won’t make any money on farmland” (Businessman, Perm region, 2011). Being an urbanite who has made his money in industry, agriculture has caught his attention only recently—which he notes is part of the problem.

Taking investment detours and failures into analytical account is important as the realization of projects on the ground turns out to differ remarkably from polished company representations, to which we now turn. At the same time—and this will be the topic of this chapter’s second part—the partial “vulnerability” of agribusinesses should not distract from who profits and who loses, and that they are closely related to longer spirals of devaluation and dispossession.

A Promise and a Lack: Investment Imaginaries

Many Russian companies started to accumulate land from the late 1990s or early 2000s (Barnes 2006). Most of the foreign investment companies joined what in the beginning looked like a rush on Russian farmland from the year 2005. Companies listed and raising money on stock markets began with making spectacular promises and fostering high expectations, claiming both exceptional returns and high levels of security.

The three largest Western private investment companies—Black Earth Farming, Agrokultura, and Trigon Agri—all originating in Nordic countries and listed on the Stockholm stock exchange, were founded between 2005 and 2006. All of them started as “pure play” companies growing solely cereals and oil-seed crops, and all of them quickly took over vast areas of farmland from the start of their operations (Kuns, Visser, and Wästfelt 2016). Their predominant sense at this point was to seize the moment and bet on rising land prices. Brian Kuns and colleagues (2016, 205) cite one early investor in Agrokultura as saying, in 2008: “I believe it will be a fantastic trip. . . . The big thing is not cereals, but the growth in land prices,” presenting a calculation according to which land prices in Russia are merely 5–6 percent of those in Sweden. Around this time, another manager in Agrokultura described how investors and hedge funds were pouring in millions of U.S. dollars, “ridiculous money,” with the expectation to “buy land, buy land always” (Kuns, Visser, and Wästfelt 2016, 205). At that point, such promises and expectations were well in line with official company policies. In a public letter to investors on April 25, 2007, the Alpcot Russian Land Fund (later renamed Agrokultura) summarizes the start-up period as follows: “We are optimistic about the future prospects, and our main focus at the moment is to acquire arable land before prices rise too much. Our estimate is that prices for arable land will increase in the future and approach the price levels now prevailing in, for example, Central European countries such as Poland. In addition, our investment case is supported by increasing prices for agricultural commodities. . . . Global trends . . . should also lead to increased demand for agricultural commodities in the future.”

Similarly, when EkoSem Agrar—by then the third-largest Russian milk producer—was listed on the stock exchange in Stuttgart in March 2012, it published leaflets that announced “two megatrends in one investment: the sunrise sector agriculture and a fast-growing threshold country”; an investment that “profits from globally rising demand for agricultural commodities and dairy products.” It declares its ambitions to expand the land bank further, as “the global run for agricultural land has begun.”

Black Earth Farming (BEF), the largest foreign investment company by land bank and capital flows around that time, uses visualization of large land banks as a marketing strategy. A photograph of a vast field has been the cover image of its annual reports and investor presentations for years (figure 4.1), and an advertising information sheet graphically compares the area of the company’s fully owned landholdings (232,000 hectares) with Central Park, New York (917 times), the special administrative region of Hong Kong (2.1 times), or the state of Luxembourg (90 percent ). The message is obvious: a company controlling fields that could contain nearly one thousand Central Parks, and reaches the size of state territories, must be powerful.²

Investors expected land prices to rise due to market fundamentals and growing global demand for agricultural produce and farmland, but also by increasing farmland productivity and identifying “yield gaps” that they assumed could be closed. Accordingly, companies created images of great local potential waiting to be realized. BEF (2015) described the Central Black Earth Region where it operates as “endowed with some of the most fertile soils in the world” and in parallel emphasizes the company’s “large state of the art machinery fleet.” The combination of natural potential and technological and financial potency promised a smooth realization of lingering agricultural and economic potential.

Similar representational patterns can be observed across various companies: high-tech machinery smoothly operating on vast and fertile fields, and the reduction of operations to elements of technology, horsepower, wide fields, and yields. The implication is that machines and capital were necessary but also sufficient to realize the potential at hand, a powerful reduction that makes the conditions for profit appear self-evident and secure. One finds such patterns on company websites and investor presentations—and I suspect they were part of the “beautiful PowerPoint presentation” that convinced Agrokultura’s shareholders of the deal that its production manager later described as a “disaster.” More generally, around that time, investors did not hold back on promises to “revolutionize” or “unlock the potential of” agriculture in this region (Lundin 2008 and BEF 2008, cited in Kuns, Visser, and Wästfelt 2016, 200). Bracketing both people on the land and prior agrarian history, representations by investors and Western media often created the impression that the land was a tabula rasa. This led some investors to the assumption that average wheat yields on Russian farms could be doubled by relatively moderate investment and predictable amortization rates, and that the increase in demand and prices would do the rest.³

However, the grounds on which such expectations were built turned out to be shaky. Several local operators were aware of this gap between investors’ expectations and the material conditions in which they operate, such as this production director for Agrokultura:

Production director: I think the optimism in some of the people who are investing was always probably a little bit too high . . . some people were . . . suggesting it is easier than it actually is . . . the worldwide shortage of food, [the belief] that the commodity boom will go on for ever and ever.

Alexander: You have to show people why to invest?

Production director: Why to invest, yes. And a lot of people have been let down by the promises (Production director, Lipetsk region, 2014)

Similar to the above-cited millionaire who complains about the gold mine failing to materialize, this director describes how not only international investors but also Russian consultants and state agents compared investing in agriculture with harvesting “gold-bearing fields.” But he concludes, after having worked such fields for years: “Boy, they are not. You can make money here, but it is bloody hard work.” In contrast to gold-rush promises, many foreign companies constantly struggled to reach net profitability.

Even though investment promises were to some degree simply “spectacles designed to attract investors” (Li 2014b, 596), they were not entirely baseless. A variety of sources agree that in 2010–15 Russian farmland was and remained undervalued relative to its production potential and in global comparison (Luyt, Santos, and Carita 2013; Oliver and Horne 2013; Shirley 2011). Several high-profile reports around that time emphasized prevailing yield gaps in Russia (often along with Ukraine and Kazakhstan) and predicted substantial increases, particularly in grain productivity and exports (Deininger and Byerlee 2011; Luyt, Santos, and Carita 2013). At a national level, some of these predictions turned out to be relatively accurate (Uzun, Shagaida, and Lerman 2019; Wegren, Nikulin, and Trotsuk 2023). But profits were realized only for certain companies, and investing big money into farmland brought no guarantee for getting there. One reason is that in contrast to investors’ early confidence in agricultural products’ ever-rising demand and prices, agricultural commodity markets remained relatively unstable. In several regions over the study period, price volatilities and drops depressed results, and years with bad weather conditions did the rest. Experts confirm that price developments are “absolutely unpredictable” for agricultural producers (Academic Moscow 2014). State regulations at that time were aimed less at stabilizing commodity prices than at stabilizing output levels, or even keeping domestic grain prices low, which of course increases risks for producers.

On the operational level, optimistic expectations were grounded in “givens” such as large fields, large-scale production facilities and infrastructure, and workers trained for industrialized agriculture already in place. If infused with fresh capital, technology, and expertise, this potential could be brought to fruition, as even some expat agricultural specialists working for these companies expected. Some vividly described their excitement when getting out on the vast fields for the first time and realizing the scale of operations that would be possible. They would proudly post photographs of large fields and farms on social media or show them to visiting friends. And they identified with the mission to overcome yield and profitability gaps, as one Western specialist states: “Of course, it’s not a boring atmosphere. And that made me decide to . . . go to Eastern Europe. Because . . . in Western Europe, everything is organized, pretty well managed, and it’s only to improve the margins. . . . But here, with a lot of good common sense, you can make big steps forward. And then, of course, the scale of operations here is big. You will never find these large areas in Western Europe” (Production manager, Voronezh, 2012).

Realization: Mind the Gap

Part of what makes farmland attractive for investors at a global scale is the expectation that it could “store and produce capital” (Ouma 2014, 163)—if they are good investments.⁴ In Russia, in regions with average conditions for agricultural production, storing capital in land without immediate plans to work it was not uncommon in previous decades, and the practice is still commonly criticized by rural residents. They emphasize that investors stored capital “cheaply,” at a time when “money was still unstable” (Rural resident, Nizhniy Novgorod region, 2021), but never intended to produce anything, and this strategy contributed to driving weaker producers out of business. Such business practices have become less common, and they do not work for everyone. Western investment companies, in particular, had to learn that unless they produce capital quickly, their projects will count as bad investments. Managers describe how their initial enthusiasm began to crumble not only due to endless hurdles such as technical defects, spare parts never arriving, organizational difficulties, workers unwilling to be disciplined, or inflexible state authorities. Such friction contradicts images of straightforward operations. However, those familiar with large-scale farming, or farming in Russia, would expect difficulties to some degree and not see it as a general threat to planned operations. But sometimes such difficulties pile up. Expenses for infrastructure repairs, the modernization of machinery, and bringing production facilities and farmland that may have been abandoned for years back into production may increase costs far beyond expectations. In other instances, the production infrastructure has to be completely rebuilt, as this farm director puts it: “Particularly when a company goes through a bankruptcy procedure . . . all that remains is the bare place and the soil, because you can’t take that in your pocket” (LFE director, Lipetsk region, 2013). Others describe how they found out about pending debts and unforeseen expenditures after the takeover and only then realized that they “have not bought enterprises cheaply at all” (Journalist, Rostov, 2012). Cost for land registration and the consolidation of the land bank, too, often turned out to relativize its low purchase price. This Russian director sums up the long road from a promising purchase to reasonable profits: “The business will enter the agricultural sphere, because [land] is very much an undervalued resource in Russia. This is the last undervalued resource in Russia. If you are buying land for some two or three thousand rubles per hectare, and its real worth is one thousand dollars, even two thousand, or even maybe three thousand dollars, you will increase your capitalization thirty times. . . . But land, agricultural land in the Russian understanding, isn’t worth anything. And you have to convert agricultural land into land in a European understanding. And this will cost money. There has to be an enterprise on it, with a good turnover and a good high-quality agrarian production” (Businessman, Perm region, 2011).⁵

I doubt that agricultural land is “the last undervalued resource in Russia,” but the quote illustrates the sense of a “first mover advantage” to invest in a resource with a “newly enhanced value, and the spectacular riches it promises to investors who get into the business early” (Li 2014b, 595). The chairman of the BEF board in 2007 expressed a similar expectation when he told a Swedish newspaper: “The possibilities for Russian agricultural land are now. That is why we want to be able to finance investments now and not in a half-year or a year” (cited in Kuns, Visser, and Wästfelt 2016, 207). However, when it comes to the level of “operations” (Ouma 2016), it turns out that you will not have realized an opportunity by acting at the right time, and things are far from settled once the deal is concluded. Production managers rather emphasized that land deals were only the beginning of a lengthy, slow, and risky process. This should not come as a surprise. If yield and profitability gaps were overcome easily, why would not others have done that before?

Managers and directors of different companies described how their strategies shifted, at least partly, from acquiring large land banks and betting on increasing land prices to focusing more on agricultural production and making it predictable and profitable. Kuns and colleagues (2016) suggest that, in the case of the “big three” Scandinavian investors, this reorientation from “asset play” to focusing on production started in 2008 when, after the previous peak, global grain prices started to fall, the financial crisis hit, and share prices collapsed. For instance, BEF shares lost around 75 percent of their value within ten months in 2008. By 2012, the share prices of all three companies stood below 50 percent of the price at which they had been issued.⁶ All three companies also showed negative (at times two-digit) average returns on investment (ROIC) and returns on equity (ROE) for the period 2007–11 (Luyt, Santos, and Carita 2013, xxvi).

In reaction to business outcomes, and as reaching net profitability became the main goal, company strategies to control as much land as possible were partly reversed. One study even found a negative correlation between land bank size and economic success, as the two Western companies “with the weakest performance to date control the largest land banks, each with over 250,000 hectares” (Luyt, Santos, and Carita 2013, XXV).⁷ So while the opportunity to run large-scale operations was often cited as a motivation for entering Russian agriculture in the first place, it was later addressed as among the biggest problems: “Most people agree [that] even in Russia it is fairly easy to turn a profit on five thousand, ten thousand hectares if you put in sufficient investment. . . . Now the problem comes in when you try to scale up, from ten thousand hectares to thirty, forty, fifty . . . [some companies operate] over two hundred thousand hectares, that is where the problems came in. . . . It becomes much harder to manage, first because of the complexity of operations, or because some of the farms are very scattered, the fields are literally fifty kilometers apart in some cases. . . . It just becomes more difficult to do what you need to do at an optimum time. Things start slipping, costs go up and yields go down” (Production director, Lipetsk region, 2014).

Managers would admit that their organizational capacities lag behind the scale and complexity of operations. Miscommunication and delays in chains of information and command were among the frequent examples. Size became problematic, especially when things did not work as expected, and hours were often spent searching for defective machinery or essential personnel. Some of the investing companies achieved profitability on a farm and operational level, but these profits were not enough to sustain an expensive superstructure of central offices, higher management, and a board of directors. Some companies substantially cut down on this superstructure, albeit relatively late.

Cost-cutting strategies imply deciding not to work parts of the land banks (and if they were free to decide, enterprises would often work even less if they were not bound to conditions and government policies), saving on wages, fertilizers, pesticides, seeds, and machinery. In the words of one Agrokultura manager, a strategy of aiming for profit “that can be done by going for less than optimum yields, but . . . running a much lower cost structure” (Production director, Lipetsk region, 2014). Even though net profitability and positive results for the shareholders remain the element “that never changes,” as one production manager describes it, “what might change is how the companies decide to go about that” (Production manager, Lipetsk region, 2014). Many managers I interviewed between 2012 and 2014 described how they try to bridge the gap between expectations and performance under such circumstances: “Unfortunately . . . all these [foreign investment] companies have not made any profit since they started. . . . I really hope that . . . we can at least make a profitable farming business here in Russia. Because I’m 100 percent sure that it is possible . . . that the potential is there to make a profit” (Production manager, Voronezh, 2012).

By that time, however, vanishing optimism on the investment side also made itself felt on the ground as Agrokultura became less liquid and cut expenditures on machinery, seeds, and fertilizers and also investments in social services and infrastructure. One manager criticized those in the company leadership who “don’t think about what they want to look like in ten years from now and how they want the countryside to look like in the long run” and explains this, partly, by the fact that none of the foreign crop-producing companies have ” been profitable in the last six years. Which forces them to . . . be shortsighted actually. Just how are we going to survive another year?” (Production director, Voronezh, 2014). Such insights confirm findings by Kuns and colleagues (2016, 208), who argued that the time necessary to build up a successful farming company at the attempted scale takes considerably more time than expected by investors. They emphasize the tension between “investor short-termism” (Kuns, Visser, and Wästfelt 2016, 208) and the much longer operational time spans. Young, fast-growing, and foreign companies have been identified as particularly prone to economic troubles (Lander and Kuns 2021; Luyt, Santos, and Carita 2013) but others face similar risks. A study found that in 2014, half of the twenty-five largest agribusinesses in Russia (by land bank sizes) either run on huge debts or were unprofitable, and a quarter of them went bankrupt or were sold (Visser, Spoor, and Mamonova 2014).

In 2014, Agrokultura was bought out by Prodimex, a Russian sugar refiner that in 2015 became the largest landholder in Russia, even without taking into account the land of former Agrokultura (BEFL 2015a). The largest foreign investment company by the land bank, BEF, was bought in 2017 by a Russian company linked to the oil and gas industry via family ties. The takeover resulted in the creation of a new entity, Volga-Don Agroinvest (Lander and Kuns 2021, 3). Trigon Agri still operates under the name Agomino, but it sold off large parts of the business and was delisted from the Stockholm stock exchange in late 2020 (Nasdaq Stockholm 2020). In light of such developments, Kuns and colleagues (2016, 203) conclude that Russian investment-driven agriculture is “a dynamic sector with companies regularly appearing, merging and disappearing.” I shall now turn to some implications of such dynamics with regard to appropriation and the relationship between companies and rural populations.

Concentration: Big Fish Eat Little Fish

We have seen that while the concentration of farmland and other agricultural assets has become a defining characteristic of the Russian agrarian landscape, the process of accumulation has often not been straightforward. Indeed, numerous investments in Russian agriculture turned into rather unfortunate ventures. So what to make of this concurrence of extreme concentration of power and assets on the one hand, and failing giants on the other?

It is important to understand this accumulation not as resulting from single investment projects, or a post-2007 global land rush, but as part of a longer process implying rounds of bankruptcies, disintegration, devaluation, revaluation, and dispossession. It is a historic process that started long before consulting companies and publicly listed companies drafted their presentations and created the image of an undervalued asset class, and it continued after they left the game. Foreign-led investment has overall not been a strong driver of the overall accumulation tendency; it has been small relative to the country’s agricultural potential (Luyt, Santos, and Carita 2013, XIX). Foreign companies’ land acquisition may have been most visible in parts of the media, and through their PR campaigns, but most of the giants in the sector are not foreign investment companies, and their operations go far beyond the production of field crops.⁸

Capital’s resurgent interest in Russian agriculture represents a remarkable, though not sudden, reorientation after the state and private disinvestment from the sector during the 1990s. While the concentration of former state assets in a few private hands in the post-Soviet period is well known and documented (Barnes 2006), except for a few extraordinarily favorable regions, oligarchs entered or grew from the agricultural sector much later than industries or the energy sector. As Alexander Nikulin (2011, 56) summarizes: “The post-Soviet oligarchism emerged and rose up in Russian megalopolises and large industrial centers, and during the first post-Soviet decade it generally disdained to appear in the countryside, which was considered to be a depressed and unprofitable sphere.” How, then, did agriculture become a field for economic opportunity seekers?

Major problems for the domestic agrarian sector in the 1990s were the concurrence of the failing and taking apart of the agrarian system while the domestic market was flooded with cheap imports. This began to change when the 1998 Russian financial crisis became a stimulus for domestic agrarian production. The deflation of the Russian ruble⁹ improved the competitiveness of domestic agricultural goods in relation to imports, and sale prices for output increased more than input prices, which improved agriculture’s terms of trade (W. Liefert and O. Liefert 1999). As Andrew Barnes (2006, 197) puts it: “The financial crash of 1998 did something extraordinary to Russian agriculture: it made it profitable, or at least solvent. Agriculture was the first sector in which the import-substitution effect of a fourfold currency devaluation took hold, as citizens switched from hopelessly expensive imported foods to acceptable Russian substitutes. The shift significantly increased the number of profitable farms in the country, and the output of Russian agriculture as a whole rose every year from 1999 to 2001.” He identifies a group of primary beneficiaries of this renewed interest in agriculture—and these were not primary producers that were “simply too numerous, too debt-ridden, and too cash-poor” to compete. Rather, “the agrarian groups that fared best after the crash were those that had built up control over food-processing or commodities-trading bottlenecks earlier” (Barnes 2006, 199).

Many of the largest agricultural companies today started as Russian food-processing or commodity-trading companies that deepened their vertical integration and successively bought up their supply base. The aim of avoiding taxation was a further incentive for engaging in production.¹⁰ Already around the turn of the century, the number of such “backwardly integrating food-processing companies” (Atkin 2009, 111) expanded remarkably (Nikulin 2011, 56–57). But also large players from the industry and energy sectors entered the game during this period. Lukoil leased about one hundred thousand hectares in 1998, and Metalloinvest acquired sixty-four farms, fifteen processors, six grain elevators, over three hundred thousand hectares of agricultural land, and other agricultural assets plus trade enterprises around the year 2000 (Barnes 2006, 202–3). Processor-led integration of agricultural producers into larger company networks and even investment by finance and industry had occurred already in the 1990s (Barnes 2006, 155–63), but the post-1998 partial readjustment of agricultural markets spurred company growth and more systematic integration of producers (Uzun, Shagaida, and Sarajkin 2012, 5).

Buying up farms and land at large scale became possible due to a massive devaluation and mass enterprise bankruptcies that freed assets. The portion of nonprofitable agricultural enterprises reached 88 percent in 1998, and the official total number of enterprises decreased from 26,900 in 1995 to 19,800 in 2005, and 5,900 in 2014 (Rosstat 2015a, 124; Rosstat 2002b, 109). In 2002, the legislature passed the federal law “On the financial recovery of agrarian commodity producers”¹¹ that enabled state-backed restructuring of enterprise debts. To benefit from this measure, enterprises had to “prove” their capacity to operate profitably in the future. Bankruptcy procedures were initiated for enterprises that were failing. As a result, devalued farms and land were put up for sale on a massive scale (Uzun, Shagaida, and Sarajkin 2012, 5–6). New land legislation that came into force in 2003 lifted most earlier restrictions on private land purchase and ownership (Lerman and Shagaida 2007, 16). Foreign companies, banks, and funds remain excluded but can acquire farmland through often fully owned daughter companies. Daughter companies also allow bypassing of regulations that limit the portion of a district’s farmland that can be controlled by any single company—often 10 percent (Uzun, Shagaida, and Sarajkin 2012, 6). As state subsidies at this time shifted toward privileging large enterprises, they found favorable conditions for expanding further.

Also, state policies’ return to privileging large farms was in part a reaction to the 1990s agricultural crisis, during which many enterprises were kept alive by administrative measures to prevent a collapse of the sector and job losses, and the administration was searching for more effective ways to organize subsidies (Uzun, Shagaida, and Sarajkin 2012, 4). A strong bias in state subsidies toward the largest farm enterprises has been observed and criticized since the early 2000s (Uzun 2005, 2012). The so-called agroholdings are often condemned for securing immoderate shares of government subsidies and profiting from corruption (Academic, Moscow, 2014).¹² Smaller agricultural producers are often not eligible to apply or lack juridical and economic expertise to produce a business plan for a successful application. One smallholder, echoing many, explains: “I am a real farmer. During harvesting or sowing, I have no time to sleep, let alone write any grants” (Private farmer, Nizhniy Novgorod region, 2021).

The shift toward large agricultural companies has been fundamental: “One of the most dramatic changes has been the emergence of exceptionally large, and in most cases externally owned and managed, commercial farming operations. . . . [Their] emergence and growth . . . offers a stark contrast to earlier expectations of the transformation of Russian agriculture. Rather than create a family farming sector, Russia may reestablish latifundia owned, not by the nobility, but by corporations that may not have a direct relationship to food and fibre production” (Rylko and Jolly 2005, 116).

This concentration goes beyond private and publicly listed companies entering agriculture. State-owned companies, many dating back to the 1990s, comprised the largest share of agricultural holding companies by the mid-2000s (Rylko and Jolly 2005; Uzun 2012). Also, some successor enterprises of the former collective and state farms have expanded, for instance, by taking over assets from (bankrupt) neighbor enterprises. So have “private farms,” the average size of which is growing, with some of them “essentially run as integrated agribusinesses” (Wegren 2011, 219).

Managers explain that, operational difficulties notwithstanding, economies of scale have become a precondition for running a successful farm enterprise in Russia. A certain scale of operations is required for efficient usage of machinery and inputs. Many of the successful larger enterprises either comprise or are well connected to processing or sales, which is crucial given the distribution of profit margins along the food chain. In often relatively fluid agricultural commodity markets, large producers benefit from the negotiating power that comes with buying (of machinery, seeds, fertilizers, or fuel) and selling (to processors or exporters) large quantities (Production manager, Voronezh, 2012). Larger enterprises also can afford to hire lawyers, and sales specialists, or to outsource certain services. Such capacities are particularly relevant in a context where, unlike in many Western countries, there are few organizations and agencies that support farmers with issues around sales, bookkeeping, or legal tasks, and also uncertainties in property and market relations, rapidly changing subsidy schemes, etc., that require and will benefit players with more than agricultural expertise. As we will see in the next chapter, larger companies also often benefit from more powerful ties with state authorities.

If one were to search for a more context-sensitive alternative to the land-grabbing trope, it could be the proverbial image of “big fish eat little fish.”¹³ I would imagine a Russian agribusiness as a wels catfish. The wels is native to the region. It is the largest freshwater fish in Europe. It is not picky when it comes to its food, which can be small animals, fish, insects, but also occasionally frogs, snakes, rats, or ducks, which it usually swallows whole. While it is not fussy when it comes to the size of its prey, sometimes welses die attempting to swallow prey that is too large. The wels has been observed feeding on dead animals. Its feeding patterns are highly opportunistic and adaptive to its environment. When hunting, it relies on hearing and smell more than vision and can trace prey in muddy water. It can use its fins to create eddies to disorient its victim. The more successful agribusinesses, too, seem to be masters in navigating muddy waters and doing quite well by swallowing farms of various sizes and other opportunities that come their way. In effect, the “strong ones become stronger, and the rest become weaker” (Academic, Nizhniy Novgorod region, 2021)—or eaten.

Whose Potential?

Farms and farmland are often passed on over several rounds of sales and acquisition rather than seized once and for all. This is relevant concerning the question of who wins and who loses in the process. While hopes for investors to revive production to the benefit of local populations are often disappointed, takeovers are rarely judged as the appropriation of goods that should belong to the “locals,” simply because local producers often are seen as unable to run stable and profitable businesses. Companies are criticized for closing meat, milk, or vegetable production, for paying low wages and providing little informal support, or for ultimately failing to set up a profitable business—but not for investing. Even though the redistribution of goods and gains does not follow a simple resource-grab pattern in this instance, the question of who wins and who loses in these turbulent takeovers remains relevant.

This chapter has focused on Western investing companies that were betting on rising land prices but withdrew after successive operational losses, plummeting company values, and the “value erosion” (Visser 2017) of Russian farmland. As company shares lost value almost constantly over the years, this meant losses for shareholders, including Western pension funds (Luyt, Santos, and Carita 2013). Companies tried to attain profitability by cutting costs, including those for personnel and management. In the process, they cut back the number of farmworkers, managers, and specialists in urban offices as well as board members. Payments to board members were cut during companies’ late periods. And still, the wages, fees, and bonuses paid to expat managers and specialists, consultants, top management, and boards were substantial compared to the modest income of hundreds of farmworkers.¹⁴ I will not discuss the fate of managers and investors here. Rather, I will stick to the operational side and ask how the gap between investment expectations and the partial failure of such expectations plays out at a farm and village level.

Did the owners of land entitlements eventually benefit from rising land prices? Price levels and increases vary greatly across regions and even places. In Letnevo (northern Black Earth region, Lipetsk region), for instance, land share prices (4.2 hectares) rose from 18,000 rubles in 2002 ($570) to 50,000 rubles in 2012 ($1,700). This price increase is considerable, but it will not make a fortune: 18,000 rubles is roughly what might be earned from two potato harvests on a subsidiary household farm, and 50,000 rubles is what a highly trained and well-paid tractor driver could earn in a month at that time. In Lipenka, located in the Rostov region’s Southern Steppes, where earlier and steeper price increases occurred, share prices rose from 3,000 rubles in 2000 to 300,000 rubles in 2013. A man who had moved to the village around the turn of the century told me how, if he had sold his house in Ingushetia at that time and invested this money in land, he could have bought sixty-six land titles that would have brought him monthly leases of eighty thousand rubles, more than five times the official average agricultural wage. But, just as most others, he had not expected the return of interest and profitability in landownership. Across different regions, many told me that they regret having sold land shares early and below value. But many have effectively sold their titles— because gaining even a modest sum may have been crucial at the time, or because they thought there was no point in keeping the title (see chapter 2). Hence many of those who do profit from rising rents today are not ordinary villagers. Already in 2006, 33 percent of the acreage was leased to agricultural producers, not by individual shareholders but by commercial organizations— usually controlled by one or two people, but with an average of 2,500 hectares at their disposal—or new “landlords,” as Uzun calls them (2012, 141–42).

Did agrarian workers benefit from investments in production? When managers and farm directors speak about profits failing to materialize, many of them, in particular those with a nonagricultural or non-Russian background, will emphasize inefficiency they see as rooted in the legacy of a Soviet agrarian system, which was not designed to be efficient (but rather output-driven) or resulted in an “overstaffing” of farms that they find hard to reverse (chapter 5). What many of them claim to be most needed are “modern” farming and management methods and schemes, technologies, and expertise. They often speak of themselves as modernizers who, with their expertise, will restructure farming operations to achieve higher efficiency. This implies differentiation between the “new” specialists and managers and “old” workers who become part of everyday interactions on a farm level. The former claim to push productivity to new levels; the latter are ascribed the role of running and maintaining production as is. New specialists claim to engage in bringing home the harvest and also in redefining and optimizing operations for the future. Such a division of roles is in line with investment as well as “modernizing” logics in which the closing of gaps between actual and potential levels of output and efficiency counts more than maintaining the status quo. The “modernizers”— managers, farm directors, and specialists—earn much higher wages, hold central decision-making competencies, and are higher up in the enterprise hierarchy. Crucially, they hold such privileges not despite companies’ nonprofitability but due to it. Their job is to close the gap between the given and the possible, from an investor’s perspective, and they embody the promise of future profits and yields. Workers, in contrast, are often presented as obstructing modernization by sticking to “Soviet” production principles and mindsets.¹⁵

Such divisions do not remain uncontested. In one instance, we visited a driver and the tractor-seeder unit he operated with an expat production manager and his interpreter. The driver explained how, with a self-made bolt, he fixed a fault that caused the seeder to lose oil. He concluded: “Here is the patent, would you give me five hundred dollars?” He repeated the question several times and stuck out his hand for the reward. What kind of a claim is this? Relative to other jobs on the farm, that of a tractor driver is stable and well paid. Still, the market price of the tractor-seeder combination exceeded the lifetime wages of both drivers working on it in shifts. And certainly, any expat working in the company, having been attracted to Russia not least by attractive wages, earns several times more than a tractor driver. One can thus understand the claim for a reward for fixing a crucial machine as a claim to be recognized: the driver is doing skilled and nonsubstitutable work, contributing to maintaining and improving operations, and wants to be rewarded accordingly: with five hundred dollars, not rubles.

In some respects, there seems to be more, rather than less, demand for such skills on farms that higher-level management seeks to quickly “modernize,” and some recognize that drivers and “old” engineers contribute a lot to fixing technical problems before they become problematic for the company. An Agrokultura production director admits that they are “always experimenting” (Production director, Lipetsk region, 2014) with the organizational and agronomic changes they are trying to implement. As one of them puts it, speaking in the eight years after the company started its operations in Russia: “It is still very much a work in progress. There is not one, I don’t think there can be any one template that would work. It may not even work within our company and certainly would not work overall” (Production director, Lipetsk region, 2014). Another manager describes foreign specialists as knowing very well how to count tons and hectares and how to handle high-tech machinery. However, when it comes to reorganizing farms that also consist of humans and social relations, the company appears remarkably clueless: “There is absolutely no company policy on how that could be done. There is an ideal of, say: we’re looking to become more efficient, but there is no overall strategy” (Production manager, Lipetsk region, 2014).

This mode of running and reforming agribusiness clearly diverges from the images of smooth operations based on the implementation of technology, available (Western) know-how, and best practices described above—which all suggest that companies had all means and knowledge at their disposal already. When production managers admit that they do not have any ready-made templates but are in a constant process of experimentation—or trial and error, as others put it—they also reveal that their actual role in both running and reshaping operations is not so different from that of workers. What sets them apart is more a division of recognition and reward than a division of labor. Their experimental schemes very much hinge on workers’, drivers’, or specialists’ skills and capacities to learn from gathered experience, figure out what to do when things do not work out as expected, and develop solutions. This kind of experimentation is a collaborative process more than the mere application of technology and expertise.

Blaming difficulties in reorganizing operations on workers, or solely on operational difficulties in Russia, further hides obstacles and limitations within company structures and asset-driven investment schemes. In the first years the boards of the “big three” foreign investment companies were staffed by members lacking experience in agriculture (Kuns, Visser, and Wästfelt 2016, 208), which was a common point of criticism by Agrokultura’s operational managers. Russian businesspeople included in this study, too, had made the money they invested in agriculture in industry or fossil fuel extraction. If many of them had not expected the amount of follow-up investment, effort, and time required to develop functioning and profitable operations at the required scale, this also has to do with ignorance stemming from such lack of relevant experience. Many of my interlocutors agreed that the investment side had expected quick and easy profits or, in some cases, easy and safe money storage. Yet the capitalist company hands investment risks and misjudgments down to farm workers. As one Agrokultura production manager, whose role is between investors and workers, explained: “I also found that sometimes the people at the farm level actually forget who the ultimate owners of the company are [laughs], and . . . they forget who is providing investments . . . and sometimes they have to be reminded, that, no, we are not just farming here . . . Obviously, we have some local social responsibilities. We have to look after and pay our workers. But at the end of the day, we are, I personally, I am responsible to the shareholders of the company, who have employed me, and that’s it . . . we have to deliver a positive result to the shareholders” (Production manager, Lipetsk region, 2014).

As investing companies saw nonprofitability last well beyond the expected initial restructuring phase of two to three years, the pressure on the operational side to demonstrate profitability came to override plans of longer-term restructuring. This study thus confirms the tension “between investor short-termism and the longer-term perspective” (Kuns, Visser, and Wästfelt 2016, 208) necessary to implement effective midterm changes. It finds such short-termism not only with listed companies, however, but with different investors, including Russian ones, that entered agriculture in expectation of safe and easy profits. Unlike foreign investors, however, some of the companies more embedded in regional and national networks play on multiple assets and forms of capital and thus are more likely to gain benefits even if initial investment expectations don’t materialize. The following chapter describes such strategies in more detail.