Opinion: Response to a misleading article published in the New York Times about Russian Wine Country

By Charles W. Borden

On November 1, the New York Times published a seriously misleading article: “Russia Dispatch – In Russia’s Idyllic Wine Country, Dark Tales of Dreams Dashed“. The article tarnishes a winemaking region that has made tremendous progress in the production of quality modern wines since the first modern winery opened just 17 years ago. The author of the NYT article stereotypically depicts some of the region’s natural “growing pains” from youth to maturity as evidence of growing criminal enterprise as if Russia’s roaring ’90s.
Russia now has a very diverse spectrum of a few dozen modern wineries with vineyards ranging from tens to thousands of hectares. They produce wines that have garnered many prestigious international awards. Their winemakers have diverse backgrounds with some from France, Italy and Australia. Robert Parker (Wine Advocate) recently awarded about 30 Russian wines from four Russian wineries. Russian wines have won medals from the London Wine Competition, Decanter Word Wine Awards, International Wine Challenge, Austrian Wine Challenge, Mundus Vini and others.
The article ominously states that “about two years ago, the federal authorities started cracking down, bringing the easy boom years of the country’s upstart vintners to an end”. It provides little discussion of genesis of this situation. In fact, those details illuminate significant progress in recent years from an era of bootlegging to a normal regulatory environment for wine production.
Traditionally there were many unlicensed “garagiste” winemakers in the region who made wine for their own consumption but also sold it openly in open markets. Bootlegging was tolerated because licensed winemakers were taxed like vodka producers with a license cost $100,000 or more. Then, four years ago, a new licensing regime took effect that provided a specific category for wine producers with minimal license cost of about $6000 all-in. Many “garagistes” such as Mr. Berdayev (shown in the photo) and his wife became legal wineries. Despite the hardships of transition, the Berdyaevs now have new markets, opportunities and recognition. Their wines may be legally sold in retail shops in Moscow and throughout the country. Perhaps export markets now beckon. Thus, the law gave new opportunities for those who complied.
The “crackdown” as the NYT called it began about two years ago, which means the “authorities” gave winemakers a grace period of two years to come into compliance with very reasonable international sanitary and health norms. By now, anyone in Russia who makes and sells wine openly in markets without a license is asking for trouble. Are bootleggers allowed to openly sell unlicensed wines in the farmers markets of San Francisco or Paris?
The article also cites winemaker complaints about cost and paperwork to obtain and maintain a license to produce and sell wine, about $6,000. However, that cost is “all-in” including consultants, documentation and other expenses – the license fee itself is about $1000. What does it cost to get a wine production and sale license in California? Are there sanitary, health and paperwork requirements?
As for the statement in the article that “Kremlin-allied oligarchs have poured millions of dollars into elite Russian vineyards” – why is this sinister? What makes a vineyard “elite”? There are others besides “Kremlin-allied oligarchs” who are investing in vineyards – there is serious competition from other wealthy investors and private equity funds. The fact that big money is investing in the industry, and creating world-class wines, bodes well for the future of the industry. The lower license cost also provides opportunities for smaller and specialized wineries to continue to improve the diverse portfolio of Russian wines, and to restore its heritage as part of the oldest wine producing region of the world. It defies common sense to think that oligarchs need to bother with small holdings of “garagistes” like those cited in the article.
The article describes the very sad circumstances of the seizure of wines from Mr. Karakezidi. Yanis is an old friend who I have long considered a special “treasure” in the region. He was a Soviet era dissident and is a poet, jazz musician and artist. I first met him years ago at a trade show where he performed with is son on flute and guitar. He is a symbol of the creativity and potential for the Russian wine industry as a whole. Mr. Karakezidi is stubborn and incorrigible, some would say signs of a great winemaker, and thus he refused to obtain a license. He enjoys a “complicated” relationship with other region winemakers, but many came to his defense when tragedy struck. If anyone deserves a “pass” from the region he does. I hope the authorities find a means to make peace and restore his “treasure”.

Charles W. Borden is an editor and writer who has worked in Russia since 1992. He is author of Russian Wine Country: Sleeping Beauty Awakens (2014) and the FinancePlus Russia Deal Book.
Charles is also Managing Editor for FinancePlus, the largest owner of finance and investment groups on LinkedIn. Charles has worked in the venture capital and investment industry for more than forty years. In Russia he has served as a consultant to international investment funds and well-known global clients with interests in Central and Eastern Europe.