Hiding in the biology lab (the biology teacher was recently discovered to be a foreign spy, natch), Sasha now has one doozy of a daydream.
He sees Stalin's plaster nose, complete with military uniform and pipe, sitting at a desk. The Nose engages Sasha in a conversation about his dad's criminal activities and demands that Sasha denounce his father.
The Nose tells Sasha that they are interrogating his father right now, and that sooner or later he will confess.
It's Surreal Storytime Time! The Nose recounts for Sasha a story about a time when he (Stalin) had some workers arrested for stealing his pipe.
He called one of his State Security agents in to handle the situation. Ten minutes later, Stalin found his pipe in a drawer, and called the agent to let him know.
It was too late, though: all of the workers had already confessed to the "crime." Needless to say, things didn't turn out so well for those workers.
Stalin's Nose laughs uproariously at his own story, and again presses Sasha to denounce his dad.