West's
agri-giants snap up Ukraine
By
Frederic Mousseau
28
January, 2015
OAKLAND,
United States - At the same time as the United States, Canada and the
European Union announced a set of new sanctions against Russia in
mid-December last year, Ukraine received US$350 million in US
military aid, coming on top of a $1 billion aid package approved by
the US Congress in March 2014.
Western
governments' further involvement in the Ukraine conflict signals
their confidence in the cabinet appointed by the newgovernment
earlier in December 2014. This new government is unique given that
three of its most important ministries were granted to foreign-born
individuals who received Ukrainian citizenship just hours before
their appointment.
The
Ministry of Finance went to Natalie Jaresko, a US-born and educated
businesswoman who has been working in Ukraine since the mid-1990s,
overseeing a private equity fund established by the US government to
invest in the country. Jaresko is also the CEO of Horizon Capital, an
investment firm that administers various Western investments in the
country.
As
unusual as it may seem, this appointment is consistent with what
looks more like a takeover of the Ukrainian economy by Western
interests. In two reports - "The Corporate Takeover of Ukrainian
Agriculture" and "Walking on the West Side: The World Bank
and the IMF in the Ukraine Conflict" - the Oakland Institute has
documented this takeover, particularly in the agricultural sector.
A
major factor in the crisis that led to deadly protests and eventually
to president Viktor Yanukovych's removal from office in February 2014
was his rejection of a European Union Association agreement aimed at
expanding trade and integrating Ukraine with the EU - an agreement
that was tied to a US$17 billion loan from the International Monetary
Fund (IMF).
After
the president's departure and the installation of a pro-Western
government, the IMF initiated a reform program that was a condition
of its loan with the goal of increasing private investment in the
country.
The
package of measures includes reforming the public provision of water
and energy, and, more important, attempts to address what the World
Bank identified as the “structural roots” of the current economic
crisis in Ukraine, notably the high cost of doing business in the
country.
The
Ukrainian agricultural sector has been a prime target for foreign
private investment and is logically seen by the IMF and World Bank as
a priority sector for reform. Both institutions praise the new
government's readiness to follow their advice.
For
example, the foreign-driven agricultural reform roadmap provided to
Ukraine includes facilitating the acquisition of agricultural land,
cutting food and plant regulations and controls, and reducing
corporate taxes and custom duties.
The
stakes around Ukraine's vast agricultural sector - the world's
third-largest exporter of corn and fifth-largest exporter of wheat -
could not be higher. Ukraine is known for its ample fields of rich
black soil, and the country boasts more than 32 million hectares of
fertile, arable land - the equivalent of one-third of the entire
arable land in the European Union.
The
maneuvering for control over the country's agricultural system is a
pivotal factor in the struggle that has been taking place over the
last year in the greatest East-West confrontation since the Cold War.
The
presence of foreign corporations in Ukrainian agriculture is growing
quickly, with more than 1.6 million hectares signed over to foreign
companies for agricultural purposes in recent years. While Monsanto,
Cargill, and DuPont have been in Ukraine for quite some time, their
investments in the country have grown significantly over the past few
years.
Cargill
is involved in the sale of pesticides, seeds and fertilizers and has
recently expanded its agricultural investments to include grain
storage, animal nutrition and a stake in UkrLandFarming, the largest
agribusiness in the country.
Similarly,
Monsanto has been in Ukraine for years but has doubled the size of
its team over the last three years. In March 2014, just weeks after
Yanukovych was deposed, the company invested $140 million in building
a new seed plant in Ukraine.
DuPont
has also expanded its investments and announced in June 2013 that it
too would be investing in a new seed plant in the country.
Western
corporations have not just taken control of certain profitable
agribusinesses and agricultural activities, they have now initiated a
vertical integration of the agricultural sector and extended their
grip on infrastructure and shipping.
For
instance, Cargill now owns at least four grain elevators and two
sunflower seed processing plants used for the production of sunflower
oil. In December 2013, the company bought a “25% +1 share” in a
grain terminal at the Black Sea port of Novorossiysk with a capacity
of 3.5 million tonnes of grain per year.
All
aspects of Ukraine's agricultural supply chain - from the production
of seeds and other agricultural inputs to the actual shipment of
commodities out of the country - are thus increasingly controlled by
Western firms.
European
institutions and the US government have actively promoted this
expansion. It started with the push for a change of government at a
time when president Yanukovych was seen as pro-Russian interests.
This was further pushed, starting in February 2014, through the
promotion of a “pro-business” reform agenda, as described by the
US Secretary of Commerce Penny Pritzker when she met with Prime
Minister Arsenly Yatsenyuk in October 2014.
The
European Union and the United States are working hand in hand in the
takeover of Ukrainian agriculture. Although Ukraine does not allow
the production of genetically modified (GM) crops, the Association
Agreement between Ukraine and the European Union, which ignited the
conflict that ousted Yanukovych, includes a clause (Article 404) that
commits both parties to cooperate to “extend the use of
biotechnologies” within the country.
This
clause is surprising given that most European consumers reject GM
crops. However, it creates an opening to bring GM products into
Europe, an opportunity sought after by large agro-seed companies such
as Monsanto.
Opening
up Ukraine to the cultivation of GM crops would go against the will
of European citizens, and it is unclear how the change would benefit
Ukrainians.
It
is similarly unclear how Ukrainians will benefit from this wave of
foreign investment in their agriculture, and what impact these
investments will have on the seven million local farmers.
Once
they eventually look away from the conflict in the Eastern
"pro-Russian" part of the country, Ukrainians may wonder
what remains of their country's ability to control its food supply
and manage the economy to their own benefit.
As
for US and European citizens, will they eventually awaken from the
headlines and grand rhetoric about Russian aggression and human
rights abuses and question their governments' involvement in the
Ukraine conflict?
Frederic
Mousseau is Policy Director at the Oakland Institute.
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