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Report Highlights Role Of Western Corporations In Ukrainian Agriculture

January 22, 2015

As Ukraine continues to suffer from constant fighting and turmoil, Western corporations like Monsanto or DuPont are entering into the country’s agriculture system for a “corporate takeover,” according to a report last month by the Oakland Institute.

Ukraine is a country, as noted by the report, where the soil is fertile. Indeed, half of the world’s chernozems, a rich soil, can be found there. This, along with an underdeveloped agricultural sector, is an incentive for companies investing in Ukraine.

“All of these companies in the West are investing in the country as a positive investment,” Frederic Mousseau, an economist and policy director for the Oakland Institute, said.

This did not recently begin since previous government administrations allowed investments to take place. The difference was, as Mousseau points out, governments preferred keeping both the West and Russia happy. Now, the current government is siding more with the West as evident in a recent speech by President Petro Poroshenko in Zurich, Switzerland where he spoke highly of Western values.

“The change in government seems highly favorable to the interests in the West,” Mousseau said.

The report highlights numerous aspects of the agricultural industry where acquisition of lands, for instance, was distributed to elites after the fall of the Soviet Union. Land cannot be sold until January 1 of next year, yet foreign firms are able to use loopholes until next year. There was even a potential government program offering lands under public control to businesses:

While it is not clear what happened to this program, what is clear is that in recent years significant parcels of land have ended up under the ownership of foreign investors…[A]t least 1.6 million [hectares] of Ukrainian agricultural land is under foreign ownership. Thus, while the land moratorium has created barriers to full land ownership of Ukraine’s black soils, opportunities for tapping into this rich resource abound.

In addition, firms can buy shares of existing Ukrainian companies, which in turn make billionaires like Oleg Bakhmatyuk. Bakhmatyuk owns UkrLandFarming, a company noted as the “largest land bank in Ukraine.”

Recently, it sought out to buy its rivals as a result of the crisis and, thus, gain even more land. Cargill, one of the largest American agriculture companies in the world, bought shares worth $200,000 with exports to China as the reason for the deal.

With firms from places like Denmark, Saudi Arabia, Russia and France, there is no doubt more investors will seek to obtain more land starting next year.

Companies like Monsanto, meanwhile, invest in Ukraine to promote biotechnology for example. In fact, the Oakland Institute released a report last July where they found an agreement between the European Union and Ukraine actually helped make investments for it more likely:

Whereas Ukraine does not allow the use of genetically modified organisms (GMOs) in agriculture, article 404 of the EU agreement, which relates to agriculture, includes a clause that has generally gone unnoticed: it indicates, among other things, that both parties will cooperate to extend the use of biotechnologies. There is no doubt that this provision meets the expectations of the agribusiness industry. As observed by Michael Cox, research director at the investment bank Piper Jaffray, ‘Ukraine and, to a wider extent, Eastern Europe, are among the “most promising growth markets for farm-equipment giant Deere, as well as seed producers Monsanto and DuPont.’

Strangely, as noted above, Ukraine does not allow GMOs nor do most countries in Europe. It is revealing as these are companies promoting GMO use.

“This is why it is really disturbing to see GMOs pushed in the agreement.” Mousseau said. “The potential markets for Ukraine are all against GMOs. It doesn’t make sense unless you take into account the long-term interests of corporations,”

Investments are rising in Ukraine not only from Western corporations, but China as well. The Chinese government invested billions into Ukraine, especially in agriculture. With Russia now playing a lesser role as a trading partner, Ukraine hopes to be closer to the Chinese government. Oleksiy Pavlenko, a Ukrainian official in charge of agriculture, told a TV station in Ukraine that China was a “very big market” in terms of trade.

“China has been seen as a big market and even Western companies want to invest in Ukraine to export to China. China is one market for all the markets to look at,” Mousseau said.

With sanctions applied to Russia, Ukrainian farmers would be forced to turn to other countries including China. This, in addition to outside investments and de-regulation, affects the decisions and lives of farmers as pointed out by the :

The current surge of foreign investment in the country ’s agriculture and the expected lifting of the moratorium on land sales actually raise important concerns. What will be the impact on Ukraine’s 7 million farmers? How will it affect Ukraine’s ability to control its own food supply and manage its economy?

There is no indication Ukraine will suddenly turn away from these types of investments. The government is still focused on the rebels in the east and are continuing talks with officials from the International Monetary Fund. Only time will tell what the next steps of corporations will be in the country.