Russian Food Makers, Retailers Sign Deal

The agreement was backdated to Oct. 15 and will last until the end of January and cover only essential staples such as milk, bread, eggs and cooking oil. Though strictly a commercial deal, it was signed in the Agriculture Ministry, a ministry spokeswoman said.

In recent weeks food prices in Russia have climbed rapidly due to a combination of global trends and systemic weaknesses in food production and distribution on the domestic market.

The new Cabinet, formed in mid-September by President Vladimir Putin to ensure stability as the country heads toward parliamentary election in December -- and a presidential ballot in March -- is under intense pressure to stabilize food prices.

But not all ministers approve of freezing prices.

"Freezing prices is impossible," Finance Minister Alexei Kudrin said, according to the RIA Novosti news agency. "This is a market, and market prices do not freeze. It would be a mistake."

The state anti-monopoly watchdog defended the price freeze as a temporary move that would benefit consumers.

Signatories denied any political pressure or negative effects on earnings.

"We took this step voluntarily. Our phone lines were ringing around the clock with complaints from our customers," said Anton Saraikin, spokesman for Wimm-Bill-Damm, Russia's largest milk producer.

Analysts, meanwhile, voiced doubt that the agreement would have an impact on overall inflation. "The impact on inflation will be insignificant since the agreement concerns a narrow range of products and not all retailers signed on to it," said Anton Stroutchenevski, an economist at Troika Dialog, an investment bank.

He said a majority of consumers in Russia buy their goods at small shops that are not bound to such a voluntary price freeze.

In October the state anti-monopoly committee has launched several investigations into possible cartel arrangements, particularly in the milk market, and announced that it has uncovered multiple antitrust violations.

So far this year Russia's consumer price index has risen 8.5 percent, Putin said last week during his nationwide call-in show -- over the 8 percent target this year. Kudrin has said that 2007 inflation could reach 10 percent.

Other anti-inflationary measures include raising export duties on grain, intervention on the commodities market and reducing import for dairy products.