Ukraine’s grain traders have long complained about state interference in a lucrative sector frequently seen as key to the country’s economic future.
When export quotas were introduced last year, some top international firms were shut out while a disproportionate share of quotas have gone to a company owned by the state and unknown individuals.
On Feb. 2, lawmakers from several parties made a move to increase state control further with a proposal to create a monopoly that allows only state companies and farmers to export grain.
The Kyiv office of the influential Grain and Feed Trade Association wrote to the speaker of parliament, Volodymyr Lytvyn, saying the draft law “contradicts all known standards of free trade and the market.”
One of the most vocal critics has been Volodymyr Klymenko, president of the Ukrainian Grain Association, an organization that brings together 80 percent of Ukrainian traders.
The Kyiv Post sat down with him to talk about the draft law and corruption in the agriculture sector.
Mykola Prysyazhnyuk
Kyiv Post: Why have you been so critical of this draft law? What’s so bad about it?
Volodymyr Klymenko: Competition has become the key to success of Ukraine’s agrarian sector in last 15 years, and this draft law could lead to the demise of the country’s entire grain sector. It aims only to squeeze private firms from grain export. Private grain traders have invested in Ukraine’s agrarian sector for 20 years.
They brought investment, built or modernized grain silos, constructed facilities for loading grain, cultivated soil – and now they are all told to get out of the market.
The members of our association alone own 250 silos, while there are about 700 private grain silos all over Ukraine. All of them could be closed as the silos used only for storage of the grain without subsequent export would be unprofitable.
If the grain storages and the grain loading facilities become useless, their value will decrease dramatically.
So, perhaps the aim of this draft law is to make grain market participants sell out their granaries for pennies?
I can assure you that the grain trading companies, some of which have a budget bigger than the state budget of Ukraine, will never give up their silos for nothing.
All state attempts to displace them from the market could lead to an international scandal.
KP: Are chances high that this law will be passed, as it was sent for revisions by parliament’ agriculture committee?
VK: I think this draft law was written with the aim to monopolize grain exports, to enable one company to run all export operations and to dictate its own prices and working conditions to the market.
KP: Are you hinting that corruption could be at play as a result of monopolizing of the export?
VK: Sure. We know that Hr 7 billion, including grain, disappeared from the State Committee of Material Reserves. We know that it is risky to store grain in the silos of the state company Khlib Ukrainy, as more than once grain completely disappeared from there.
Several months ago, the agriculture minister said about 300,000 metric tons of grain had disappeared from the state-owned Agrarian Fund.
Now we hear about plans to create a fourth state body that will run grain export, and I have serious doubts that this new institution will not have the problems of mystery losses.
I can compare grain trade with a casino game as both things are equally risky. In Russia, the state-run United Grain Company failed to become a big grain trader.
Two years of its work as a monopolist led to huge losses. Now we are trying to repeat Russia’s unsuccessful experience.
KP: In recent grain export quota allocations, one company, Khlib Investbud, received a disproportionally large proportion, while international grain traders like Cargill and Louis Dreyfus were not given any. How could you explain this?
VK: The lawmaker Volodymyr Matveyev [from the Communist Party] made a request to the general prosecutor during a parliamentary session to investigate the transparency of quota distribution. But he received no reply.
KP: Who are the owners of Khlib Investbud?
VK: At a press conference, Agriculture Minister Mykola Prysyazhnyuk said the state owns 61 percent while 39 percent belongs to private owners.
When asked who those private owners are, Prysyazhnyuk said he couldn’t remember. So, the minister can’t remember, and I don’t know them.
KP: When do you expect grain quotas to be abolished?
VK: Quotas were introduced twice, then they were twice distributed and everywhere, including abroad, this distribution was called non-transparent.
I hope for a miracle, that quotas on corn can be abolished in April, but I think the quotas on wheat export will stay, maybe even until summer.
KP: How have the quotas impacted the state budget?
VK: In 2008 when Ukraine had a good harvest, it exported about 25 million tons and gained a profit of $4.3 billion.
This season, according to forecasts, the country is able to export 15 million tons, but the world prices on grain increased so much that Ukraine could receive more than $4 billion for this amount of grain.
Through January we received only $1.3 billion from exports. I have serious doubts we will receive $3 billion more, due to the quotas and the whole mess on the market.
Kyiv Post staff writer Oksana Grytsenko can be reached at [email protected].
