Set up in 2004 as a non-governmental organization, the Guild of Purveyors to the Kremlin has since set the standard for which many Russian companies aim. A legal battle within one of its member firms, however, could tarnish the Guild’s reputation.

minsk 75The Guild of Purveyors to the Kremlin, much like the Purveyors to the Court of His Imperial Highness developed in tsarist Russia, is composed of an elite group of member companies, each of which has been awarded the coveted status of ‘Official Purveyor to the Moscow Kremlin’. The status is not far from a literal stamp of approval from Russian President Vladimir Putin himself.By 2007, 26 companies had been brought into the Guild’s inner circle. The membership of the newest recruits was celebrated in a ritzy ceremony at the Kremlin.

According to Igor Pototsky, Deputy Director of the Guild, the organization has two clear benefits for the Russian economy.

First, the prospect of membership encourages Russian companies to aim for quality rather than simply profit maximization. "The Russian economy wants to be competitive but if it can't compete on quality, it'll depend on energy prices," Pototsky stated in an interview with Agence France Presse. Indeed, some analysts argue the Russian economy is dangerously dependent on high gas prices, which will likely decrease over the next decade. Quality, Pototsky argues, is what will allow Russia to compete with international companies in other sectors.

Secondly, the Guild says that it awards membership to companies that are more environmentally and socially conscious than the norm. Aiming for Guild membership “enforce[es] new environmental and quality standards that are more stringent than those normally required by Russian authorities,” according to Pototsky.

The members of the Guild are an eclectic bunch to say the least, including Russky Brilliant, a Russian vodka company that sells its product in gem-shaped bottles, and Bulgarian perfume company BRK Cosmetics. Members reportedly must pay a “reasonable fee” to join the Guild, but it has never been disclosed how much.

Controversy strikes

The transparency of the induction process is now at the heart of the controversy that currently surrounds the Guild, as is the Soyuz Corporation, a leader in the Russian fats and oils industry. As indicated prominently on their website, Soyuz is an “official purveyor to the Moscow Kremlin.” According to several reports in the Russian media, however, the Guild of Purveyors is registered at the same address as the Soyuz Corporation in Moscow and the two share the same Deputy Head, Sergey Zichenko. Some have even gone so far as to suggest that the Guild is in reality a lobby for the special interests of Soyuz’s megalomaniacal owner Sergei Vasilyev, often referred to as an “economic Genghis Khan.”

In 2010, for example, the Guild developed a new industry standard for palm oil, stating that all companies must produce, store and transport their oil and fat products in high-grade stainless steel, a requirement that exists in no other country and which costs companies up to $1 billion. While Soyuz, able to afford the useless stainless steel requirement, complied with the new standard and continued to expand its business, smaller competitors were pushed out of business, regardless of the actual quality of their products.

Soyuz’s boss is no stranger to scandal. Vasilyev’s latest controversy concerns his ex-partner, Andrey Baranov, who claims the economic Genghis Khan defrauded of him in a 25 percent stake in the Dutch company Leaderland TTM B.V. The affair, which is being brought to the Amsterdam Enterprise Chamber today (January 24th), has brought up old questions about the Guild of Purveyors to the Kremlin and tensions between the parties is high. Russian media reports have even claimed that Baranov’s guesthouse has been torched, while his elderly parents claim to have received threatening phone calls.

To some, the allegations against Vasilyev and the Guild hit home because they are so achingly familiar in the Russian capitalist system. Russian companies commonly complain that their competitors succeed not because their products are competitive but thanks to friends in high, official places. It remains to be seen if, after today’s hearing, Putin still wants to give his "stamp of approval" to this institution.