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A bubbly Borodino has erupted between Paris and Moscow over restrictions on sparkling wine labels.

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Russia’s fight with France over the use of the name “Champagne” is part of a familiar protectionist playbook from Russian President Vladimir Putin.

Putin triggered uproar in France in July by signing off on new rules on how sparkling wines should be labeled in Russian. A French vintage like Moët & Chandon will only be allowed to call itself a "sparkling wine" on the back-of-the-bottle sticker, while Russian wines will be allowed to call themselves shampanskoe, Champagne in Russian. Incensed at being identified as second best, France's main industry group for Champagne called for all producers to halt exports to Russia “until further notice.”

That's not a problem for Putin. In fact, this is part of a broader strategy to give a marketing boost to his own producers, not only in the Russian Caucasus, but also in the newly annexed territory of Crimea, which was captured from Ukraine in 2014. The measures even stand to bolster the Crimean wine-growing interests of a man identified by Washington as Putin's personal cashier.

Moscow itself is playing down the idea that the rule changes from July cause any harm to French producers. After all, the original French label will still be allowed on the front of the bottle. "This hubbub doesn't create a problem for the EU wine industry, including producers of Champagne," Russia's Ambassador to the EU Vladimir Chizhov told POLITICO. "Well-known names of French producers will remain on the front label of the bottles, in spite of the fact that the term 'Champagne' is not protected in Russia as a geographical indication."

Self-sufficiency is increasingly a watchword across the entire economy in Putin's Russia. Since 2010, the country is following an official “food security doctrine” to reduce import dependency, and in 2015, the government launched 19 sectoral programs to replace imports with national production.

Russia even publicly boasted that the sanctions disputes between Russia and the EU — which escalated over Russian military intervention in Ukraine in 2014 — only boosted the import substitution drive. In 2016, then Agriculture Minister Alexander Tkachev said he welcomed long-running sanctions as a way to push Russian consumers to buy more home-grown food.

Indeed the official explanatory note accompanying Russia's new rules says that these are "amendments of great importance to successfully consolidate previously undertaken ground-breaking legislative initiatives" such as "the production of wine products by peasant (farms) households and small businesses, which began to create a 'small-scale sector' for viticulture and winemaking.”

France's trade minister instantly called out Russia for protectionism and hinted at Crimean motives. “Obviously, this is to promote the conditions for Russian sparkling wine, especially following a certain number of new investments in new Russian regions,” French Trade Minister Franck Riester told reporters in July after a series of meetings with EU commissioners in Brussels.

Unsurprisingly, gastropatriotism rings out loud and clear from lawmakers who designed the new rules. Of the 15 lawmakers who wrote the amendments, all from Putin’s dominant party United Russia and hailing mostly from the winemaking regions of Crimea, Krasnodar and Dagestan, Crimean MP Mikhail Sheremet is the most vocal in defending the new rules.

“These amendments are solely in the interests of the development of winemaking in Russia," said Sheremet, who’s on the EU sanctions list for having played an important role in the 2014 annexation.

“We protect our winemakers and our producers. We have sufficiently high-quality products that need to be promoted in the domestic market. ... This is again very important from the point of view of economic growth, increasing profits and contributions to the budget of the country and the region,” he was quoted as saying by the Kommersant daily.

POLITICO contacted the United Russia regional offices in Crimea, Krasnodar, Dagestan, Samara, Vologda and Rostov for comment from the lawmakers but received no response.

Michael Emerson, the EU’s former ambassador to Moscow and current associate senior research fellow at the Centre for European Policy Studies, a think tank, said Moscow was probably taking relish in the political gambit.

“As for the politically exotic addition of having 'Champagne' to be removed from bottles, my guess is that this was found to be a highly amusing idea by the honorable Duma members, also as a move to make sanctions policy in general seem ridiculous,” he said.

Moscow is disputing that interpretation, calling the new law a harmless technical move to harmonize its domestic wine regulation. "It would not be appropriate to consider the amendments to federal law number 171-FZ in the context of Russia's wider economic strategy since they constitute a purely technical feature and are aimed at improving Russian legislation in the field of viticulture and winemaking," Chizhov told POLITICO.

In the explanatory notes to the legal amendments, however, there are signals that certain wineries should be helped: Massandra, Tsimlianskie Vina and Abrau-Durso are specifically cited as harboring “historical and national status.”

This brings in a connection to Yury Kovalchuk, a close associate of Putin who is a leading investor in Crimea.

Kovalchuk is “the personal banker for senior officials of the Russian Federation including Putin” and “the largest single shareholder” of Bank Rossiya, according to Washington, with “around 38 percent” of the bank’s shares in 2013.

In 2014, the U.S. and EU sanctioned Kovalchuk. The EU wrote that “since the illegal annexation of Crimea, Bank Rossiya has opened branches across Crimea and Sevastopol, thereby consolidating their integration into the Russian Federation.” This was at a time when Crimea had little access to banking institutions after international sanctions banished foreign bank transactions from Crimea, including via Visa and Mastercard.

Just last month, Putin discretely bestowed upon Kovalchuk one of the highest Russian orders of merit “to the Fatherland” for his “great contribution to the implementation of socially significant projects in the Republic of Crimea.”

Bank Rossiya owns a business called Massandra through its “Yuzhny Proekt” company since last year. Massandra comprises nine wine-making sites, three independent wineries, some 8,800 hectares and a famed cellar with around 1 million bottles. The Russian royal family supported the winery’s founding in 1894, and its bottles survived the 1917 Russian revolution and World War II.

After Moscow seized the Ukrainian peninsula, the Russian state confiscated the property from Ukrainian government ownership before auctioning the winery off. “The Kremlin sold the assets of the illegally exported Ukrainian company 'Massandra' to its own daughter company for pennies,” Ukraine's First Deputy Minister for Foreign Affairs Emine Dzheppar tweeted last year at the time of the takeover.

Massandra has benefitted from auspicious legal circumstances since the annexation. Back in 2016, Massandra was the first winery to use the new Russian geographical indication for wine, “Crimea” — which the EU doesn’t recognize, as it has no bilateral protection agreement with Russia. In 2017, Russia hiked its taxes on all wines that aren’t protected by a geographical indication, meaning that Massandra’s production was safe from price increases.

Right around when Massandra produced its very first “shampanskoe” in May 2017, lawmakers were preparing the ground for the amendments, which were rushed through the Duma in the last days of the parliament’s sitting.

Kovalchuk is a leading winery owner on the Crimean peninsula and beyond: along with Gennady Timchenko, he owns the Crimean Novyi Svit winery, which makes French-style shampanskoe, as well as Crimean winery Inkerman and Divnomorskoe winery in the southern Russian region of Krasnodar.

POLITICO contacted Bank Rossiya, Yuzhny Proekt and Massandra for comment but received no response.

Despite the attempt to bolster production, the new amendments also present challenges for Russia’s winemaking sector, which is already fragile.

Domestic sparkling wine production in early 2021 suffered a production dip by one-third compared to the previous year, which may have given extra political impetus to the amendments. 

But because of the new provisions, which require winemakers to use Russian-grown grapes in their production to call their product “Russian wine,” grape prices are shooting up. In Crimea, the price of grapes more than doubled over the past month, from 60 to 150 rubles per kilo.

Russia’s agriculture ministry recognized that the price increase was expected because of the new law, which boosts demand for domestic grapes. This means that Russia is both replacing imports with home-grown wine and increasing domestic wine prices, which are expected to jump by around 20 percent this year.

Russia harbors huge ambitions for its wine sector.

“In the shortest possible time, our winemakers were able to displace imported wine and are now competing with world producers on international markets,” said Krasnodar’s Governor Veniamin Kondratyev, speaking about his region’s wines.   

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