Vodka Dispute Dampens Trade Party

Free samples of one of the world's best-known vodkas aren't doled out on Capitol Hill every day of the week.

However, when an industry worth an estimated $2 billion is up for grabs, Washington lobbyists will do just about anything to get their spin on the story. And that's exactly what lawyers for a group that owns the rights to Stolichnaya vodka are doing.

The Greenberg Traurig firm, which represents the SPI Spirits Group, held a May 26 vodka party for "a couple of hundred Capitol Hill staffers" to discuss and "introduce them to the issue of the vodka embargo ... and the trade issues at the heart of this dispute," said attorney Richard Edlin.

But what exactly is that dispute — and what does it have to do with free vodka?

Apparently, some elements in the Russian government are trying to take over private companies' intellectual property. In this case, they are making a move on the famed Stoli trademark, according to Eric Whitman, a Stoli label representative and chairman of the Russian-American Chamber of Commerce.

Specifically, authorities in the Russian city of St. Petersburg have refused to ship 150 containers of vodka, mostly Stoli, contending that SPI no longer has the rights to distribute the world-famous liquor.

Experts say the standoff highlights one of the several areas in which the U.S. and Russia have yet to work out their differences. While the U.S. designated the former communist nation a "market economy" just last month — a move Russia hopes will lead to acceptance as a full member of the World Trade Organization — hardliners within Russia's government are trying to re-institute state control over whatever industries are worth keeping.

That leaves the bottles of Stoli, one of Russia's most widely valued exports, as hostages in the dispute.

Edlin said his client bought out the Stoli label after it was privatized in 1992, subsequently paying off almost $50 million in debt. Investors have since dumped another $20 million into the company.

And the investments have apparently paid off. Stoli sells about $2 billion worth of vodka a year across the globe, about half of that in the U.S. market.

Edlin said he's ready to fight the battle in court. Meanwhile, an official from the Russian Trade Mission in New York said his office has yet to take a position on the dispute, which he called "very serious." Negotiations are underway to settle the matter.

Meanwhile, the lobbying team has managed to secure support from several members of Congress in getting the issue resolved. A "Dear Colleague" letter to U.S. Trade Representative Robert B. Zoellick urged his office "to take immediate steps to rectify this situation."

"This is not an isolated incident," said the letter, which was initiated by Rep. Dana Rohrabacher, R-Calif., and was signed by 20 mostly Republican members. "This reverses Russia's progressive privatization practices of the past and casts significant doubt on Russia's ability to become a reliable member of the international economic community."