The following article was translated from an article appearing in Lutte de Classe #238, March 2024, the political journal of the comrades of Lutte Ouvrière, the French Trotskyist organization.
The suspension of import duties on Ukrainian products into the European Union, and the establishment of “transit corridors” for Ukrainian grain destined for export outside Europe, are provoking anger among European farmers, starting in neighboring Poland, the Czech Republic and Romania. Polish farmers emptied grain trucks onto the roads. The Polish government closed its border crossings several times. The French president, Emmanuel Macron, threatened to reinstate customs duties. These Ukrainian exports—which plummeted by 50% with the war and customs blockades—highlighted the clout acquired by a handful of agricultural holding companies, associating Ukrainian oligarchs with Western investment funds. Securing and consolidating this association is one of the issues at stake in the current war.
Before the war, Ukraine was the world’s fourth largest grain exporter, behind the United States, Russia and Argentina. It exported mainly to Egypt, China, India and Turkey, but little to Europe. The free trade agreements signed with the EU in 2016, and above all the authorization for Ukrainian exports to transit through the EU since the Black Sea ports were blocked, have changed the situation somewhat, with some convoys disappearing between Ukrainian borders and European ports. After Russia, Ukraine is Europe’s largest agricultural country, with 41.5 million hectares of usable agricultural land. With its famous “black soil” (Chernozium), it has some of the most fertile arable land in the world, with a surface area equivalent to a third of the arable land in the whole of the European Union. But Ukrainian agriculture is split into two worlds at opposite ends of the spectrum.
On the one hand, there are some four million tiny farms of less than 2.5 acres—the product of the dismantling of Soviet-era collective farms (kolkhozes) and state farms (sovkhozes)—but which provide half of the country’s agricultural production, including 98% of potatoes, 85% of vegetables and fruit, and 80% of milk. Over the past two years, many of these rural dwellers, especially in the east of the country where the fighting is most intense, have lost their homes, their land and their means of subsistence. Rural dwellers have been more massively integrated into the fighting troops than city dwellers, who more easily can hide out, be exempted or flee abroad. The “little people,” especially the small peasants, fight and die while the rich oligarchs prosper in the rear or abroad.
On the other hand, 35,000 farms control 80% of agricultural land. Of these, 4,500 are agricultural enterprises larger than 2,500 acres, and only 184 are the so-called agro-holdings (those operating between 25,000 and a million and a half acres). These two categories control more than half of Ukraine’s usable agricultural land and have a virtual monopoly on exports. Their wealthy owners are among the profiteers from the war which is accelerating land concentration, land ownership “reforms” and Western capitalist control of the country’s means of production. The Power of Agro-Holdings
Agro-holdings are conglomerates that control a large number of vertically concentrated agricultural businesses, from land cultivation to farming equipment, processing and storage, right through to export; or horizontally, extending over vast areas and sometimes several production sectors. They are often specialized in one area: cereals, oilseeds, poultry or pig farming, in which they have a virtual monopoly. They have access to the latest high-performance agricultural machinery and equipment, sold by the American John Deere or other Western manufacturers. They use satellites and drones to optimize fertilizer spreading and monitor crop conditions.
The capital and legal structure of these holdings is complex and highly variable, with a parent company overseeing a multitude of subsidiaries. The main shareholder is most often a Ukrainian oligarch, one of the billionaires who emerged from the bureaucracy after the collapse of the Soviet Union and took over entire sectors of the previously planned economy. But these parent companies are headquartered in Luxembourg or Cyprus, to avoid taxes, and also in Amsterdam or New York, to benefit from the security of private property rights in Western countries, which are far from guaranteed in Ukraine.
Kernel is the largest holding, with almost a million and a half acres (about the size of Delaware, the state from which Biden was senator). Specializing in sunflower oil, it is owned by Andriy Verevskyi, Ukraine’s 16th richest man, and is registered in Luxembourg. With more than a million acres, UkrLandFarming, the second biggest, specializes in cereals, eggs and milk; it is owned by Oleh Bakhmatyuk and is registered in Cyprus. He held the 28th largest fortune before a setback caused by the war. Also registered in Cyprus is MHP, with over 900,000 acres, third biggest and owned by Yuriy Kosyuk, known as “the chicken king” because he exports 60% of the country’s poultry. Like his counterparts, he could be called “the chicken mafioso” given the methods he used to build his empire, protect his fortune and silence his critics and the farmers he has robbed. The country’s tenth richest man, Kosyuk has built himself a residence on the outskirts of Kyiv inspired by the Château de Versailles, lavish parties included.
The international financial crisis of 2007–2008, which unleashed masses of capital in search of profitable investments and sparked global speculation in agricultural commodities, causing prices to soar and famines to spread around the world, marked a turning point. Ukrainian agriculture attracted Western capital in droves. Industrial oligarchs turned their attention to agriculture. Farms of ten or twenty thousand hectares grew to several hundred thousand. The Ukrainian state has supported the formation of these giants by every means possible: credit facilities, access to foreign currency for the largest, refusal to finance the modernization of the smallest, pressure on the nominal owners of land to lease it to the holding companies, complicity in allowing the latter to monopolize state-owned land, authorization to build giant livestock farms or slaughterhouses despite the opposition of local residents, privatization of state-owned agricultural holdings. In 2014, the pro-Western oligarch Petro Poroshenko, known as “the chocolate king,” was elected president. This election accelerated the arrival of Western capital.
European, American and Persian Gulf banks and investment funds have become creditors and even shareholders of companies owned by Ukrainian oligarchs. Investment funds such as Goldman Sachs, BNP, Norges Bank and the American Kopernik fund own shares in Ukrainian agricultural holdings. NCH Capital, Ukraine’s fifth largest holding company with 725,000 acres, is majority American-owned. NCH also operated several hundred thousand acres of farmland in Russia until 2022. AgroGénération, founded in 2007 by Frenchman Charles Beigbeder, farmed up to 250,000 acres before experiencing setbacks with the war in 2014, and again in 2022.
The arrival of Western financiers has mainly taken the form of massive loans, backed by financial institutions such as the World Bank and the European Bank for Reconstruction and Development (EBRD). Starting in 2010, the EBRD granted tens of millions of euros in loans to the “chicken king” MHP to build facilities capable of producing up to 1,000 tons of meat a day. Between 2008 and 2023, the EBRD and the World Bank lent 1.7 billion dollars to Ukraine’s top six holding companies. By 2020, UkrLandFarming’s debt was estimated at 1.65 billion dollars, mostly with foreign creditors including Gramercy Funds Management, the U.S. Export-Import Bank and Deutsche Bank. Kernel’s creditors include the Dutch ING Bank, the French Natixis and the German Landesbank Baden-Württemberg, three banks from major agricultural exporting countries.
This massive indebtedness of Ukrainian agricultural holdings gives Western creditor banks the power to control the companies and their assets. The banks’ investments in agriculture mark a milestone, if not a turning point, in the integration of Ukrainian oligarchs into global capitalism. The oligarchs are no longer simply predators of Ukrainian resources who place their fortunes in tax havens, buy soccer clubs or real estate companies in London or elsewhere. They are becoming business partners with Western capitalists. From Kolkhozes to Agro-Holdings, the Question of Ownership Rights
In 1991, Ukraine took its independence following the break-up of the Soviet Union at the behest of the bureaucrats who ruled at its summit. It took thirty years for the government in Kyiv to vote a land law that makes it possible not only to rent but also to sell agricultural land. During those thirty years it was neither simple nor yet fully worked out for the privileged Ukrainians and the Western capitalists to take over the country’s riches they were eyeing. They had to liquidate the economic, legal and social heritage of the Soviet period, detach Ukraine from Russia and integrate the Ukrainian economy into the global capitalist economy.
The 20,000 kolkhozes (collective farms) and 2,500 sovkhozes (state farms) that accounted for the bulk of cultivated land before 1991 had been conceived, like the entire Soviet economy, on a collective basis, from work in the fields and stables to storage and delivery of produce to consumers. Even though a significant proportion of the country’s food production came from individual farmers’ plots in the kolkhozes, all aspects of village life—housing, schools, health care, shops, electricity supply, even funeral parlors—were structured around the kolkhozes, which in turn were closely linked to neighboring state industrial groups. In addition, all Ukraine’s economic relations, infrastructure, supply and distribution networks were interwoven with neighboring Russia and Belarus, and largely cut off from Western Europe.
In Ukraine, as in Russia, the first attempts to privatize land failed. Formally, private ownership of land no longer existed since the October Revolution of 1917, when the agrarian question raised by millions of poor peasants had been one of the revolution’s main driving forces. The Bolsheviks decreed that “the right to own land is abolished forever and without compensation. Land becomes a national asset for the enjoyment of all who work it.” After the terrible vicissitudes of the civil war, the NEP, forced Stalinist collectivization, the Second World War and Khrushchev’s reforms—all events that particularly affected Ukraine—the land was left untitled. De facto, it was divided between the individual plots—of kolkhoz residents and later of certain city dwellers with their “vacation dachas”—and the kolkhozes, sovkhozes, regions and the State. But there were no registries that recorded and identified land ownership. Such a registry still does not exist thirty years later, to the despair of the EBRD, which in 2013 paid 89 million dollars “to organize the titling of rural land and the development of a land registry.”
As early as 1992, Ukraine’s ruling bureaucrats attempted to dismantle the collective farms and privatize the land, forcing the emergence of private enterprise. The government distributed certificates of ownership (vouchers) to kolkhoz workers, for an area of land depending on the size of the former collective farm and the number of workers. It gave formal ownership of the plots to the farmers who worked them, and transferred 15% of kolkhoz land to municipal councils as “reserve land.” A new Constitution in 1996 stated both that “land is the property of the Ukrainian people” and that “the right of ownership over land is guaranteed. This right is acquired and realized by citizens, legal entities and the state.” But these legal changes did not bring thousands of owner-managed farms into being. The vast majority of the seven million holders of ownership certificates for unregistered land have been unable to farm due to a lack of equipment and financing. More often than not, they rented out their shares, and more rarely sold, either freely or under pressure, to former kolkhoz managers or to local or more distant businessmen. Many of these new “little owners” became wage earners on what was supposed to be “their” land.
In the 1990s, a multitude of bureaucrats and nouveaux riches close to power were thirsty for immediate profits. They cut up the old productive apparatus and plundered raw materials, causing a general collapse of the economy and a disaster for the population, whose life expectancy declined. Numbers of people declined. In the countryside, most of the kolkhozes and sovkhozes were unprofitable. They were left to rot, their equipment rusted away and livestock often was slaughtered. Most of the food consumed in Ukraine came, as in the past and still today, from intensively farmed family plots and small independent farms. Oligarchs seized the best land, ports, transport and storage facilities. Others bought up scattered property titles and concentrated them in their own hands, without always putting them into operation, waiting for the general business climate to improve.
Faced with the disastrous consequences of this plundering and the opposition of small farmers and former kolkhoz residents, the Ukrainian Parliament voted in 2001 for a moratorium prohibiting the sale of agricultural land. This moratorium was not lifted until 2021, by Zelensky. For years, the IMF and EBRD had been exerting insistent pressure to lift it, for example by conditioning all loans to Ukraine since 2014 on a commitment to “lift the moratorium” and “establish a transparent market for agricultural land.” But every time Parliament was about to lift the moratorium—which two-thirds of Ukrainians opposed, well aware that it would increase land grabbing by the powerful in a country where corruption reigns—farmers’ protests prevented it.
During the election campaign that would carry him to the presidency, Zelensky was the first to pledge to pass a law authorizing the sale of land, including to foreigners. The law passed in 2021 initially limited sales of land only to plots of less than 250 acres and sold only to Ukrainians. Since January 1st of 2024, up to 25,000 acres of land can be sold or acquired by any individual or legal entity. Pressure from international banks finally paid off: the law opens the door to the freehold acquisition of agricultural land by foreign-owned companies. Of course, foreign entrepreneurs didn’t wait until they were legal owners to dispose of the land. The foreign shareholders of powerful agro-holdings have a wide range of legal tools at their disposal to expand farmland by leasing or buying out the use rights of small holders to agricultural land, or by participating in the capital of Ukrainian companies that own it. Even smaller-scale capitalists, such as the French farmers from Haute-Marne who have been associated with Agro KMR since 2006 to farm 50,000 acres in the village of Pavlohrad in eastern Ukraine, control farms in Ukraine.
Ever since their emergence, capitalists have wanted to secure their property rights, even when that property was acquired through fraud, trafficking or slavery. As the EBRD put it back in 2014: “Ukraine will not be able to unlock its agricultural and industrial potential without addressing a number of challenges, including ... the uncertainty associated with land ownership and usage rights.” Land reform and access to full ownership, guaranteed by the Ukrainian state, opens up new prospects for Western capitalists. War and Agro-Holdings
Of course, the war, which is entering its third year and has already claimed hundreds of thousands of Ukrainian and Russian victims, is delaying and complicating the effective implementation of the law on land ownership. In the east of the country, one tenth of farmland has been transformed into minefields, scarred by trenches. Villages and farms have been destroyed. Infrastructures—silos, roads, railroads, and ports—were bombed, and far beyond the front line: Odessa, Ukraine’s biggest port, particularly for cereals, is a case in point. Fertilizer and seed supply circuits have been cut off, and processing plants destroyed. Some holdings have lost a large part of their land. Oligarch Oleg Bakhmatyuk’s UkrLandFarming group has announced that it has lost 40% of its land in the Kherson and Mariupol regions. The AgroGénération group, founded by Beigbeder, has suffered similar setbacks.
In regions occupied by the Russian army, Russian competitors of Ukrainian oligarchs have seized their land. For example, the Russian holding company Agrocomplex, owned by former Agriculture Minister Alexander Tkachev and controlling two million acres of land in Russia, has seized Ukrainian HarvEast’s land in the Donetsk region. The war is speeding up the separation between Russian and Ukrainian oligarchs, whose mafia-style methods are similar, while also allowing them to settle scores. For example, Oleksi Vadatoursky was deliberately targeted and killed in a Russian bomb attack in August 2022. He had been the boss of the Nibulon grain group, the tenth largest in Ukraine. Before the war he had a firm grip on the Mykolaiv port infrastructure through which a third of grain exports passed.
One of the reasons for the war was precisely the increasingly fierce competition between Russia’s agricultural oligarchs, major grain exporters with close ties to Putin’s state apparatus, and their Ukrainian counterparts, increasingly associated with Western capitalists. The entry into force on January 1, 2016, of a free-trade agreement between Ukraine and the European Union, and the rise in power of Ukrainian agro-holdings on the international grain and oilseed markets, directly clashed with the interests of their Russian competitors. Stéphane Séjourné, the new Minister of Europe and Foreign Affairs, openly formulates the agricultural stakes of the war for the imperialist powers: “Letting Russia take over Ukrainian black soil, some of the most fertile in the world, would mean abdicating a share of food sovereignty, accepting unbridled inflation, and offering Russia unprecedented means of pressure and extortion.” (Le Monde, February 17, 2024.) He is the spokesman for Western financiers who have invested in Ukrainian agriculture.
The war has massively strengthened the hold of Western financiers over the Ukrainian economy. The state’s public debt has exploded to finance the war, because the tens of billions of dollars or euros paid to Ukraine by the United States or European countries on the pretext of “helping Ukraine resist the Russian invasion” are in reality loans, which the Ukrainian population will have to repay at a high price for decades to come. This public debt amounted to 135 billion dollars (75% of GDP) at the start of 2023, and continues to grow. Domestic debt, owed by Ukrainian companies including agro-holdings, was estimated at 50 billion. These debts give Western creditors almost absolute power to get their hands on the country’s businesses and mines, and in particular to let them take over ownership of its rich agricultural land.
International conferences on Ukraine’s future, European summits and resolutions published under the aegis of the IMF and the World Bank, all repeat the same thing: non-essential enterprises must be privatized; social services must be reformed; the economy must be deregulated. In the field of agriculture, the World Bank states that “Ukraine’s reconstruction will require further liberalization of the market in agricultural land and expansion of the agricultural revenue program to attract private capital.” (War and Spoliation Report.) Dying for Agribusiness
The war between Russia and Ukraine, which began ten years ago after the pro-Western victory in Kyiv followed by the secession of the Donbass region, and remained low-intensity until Putin’s brutal invasion of Ukraine two years ago, is also a war for the control of resources and markets. Launched by Putin in response to Ukraine’s growing alignment with the United States and its European allies, and the stranglehold of these countries’ capitalists on the Ukrainian economy, this war, which is getting bogged down, is actually accelerating the process. On the one hand, relations with Russia are being severed; on the other, Zelensky’s Western creditors and arms suppliers are preparing to take over the country, perhaps permanently integrating the Ukrainian oligarchs into the international bourgeoisie.
The Ukrainian working classes, the young people mobilized in the army, starting with the tens of thousands of rural dwellers, small farmers or farm workers on huge farms, the inhabitants of combat zones and besieged and destroyed towns, are paying the essential cost of this war. In many villages, there are hardly any men of working age left, as they are all off to war. Lacking manpower, many farmers slaughtered their livestock, driving up the price of milk. Nearly one in two rural inhabitants now lives below the poverty line, some even suffering from malnutrition. The small farmers who feed the country receive no help from the state, which reserves it for giant farms.
The working classes pay the price of blood. They are suffering deprivation. Tomorrow, they will have to pay off a staggering debt. They may think they are dying for their country, but they’re dying for the shareholders of the agro-holdings. All these sacrifices to perpetuate the alliance between Western financiers and Ukrainian oligarchs. The last working-class hero in England.
Clio the cat, ? July 1997 - 1 May 2016 Kira the cat, ? ? 2010 - 3 August 2018 Jasper the Ruffian cat ? ? ? - 4 November 2021
Interesting read, thx - Ukraine is so unbelievably shafted, just brutal... (nm)
on August 1, 2024, 11:03 am