Shortly after the collapse of the U.S.S.R., the CIA rated Ukraine as the most likely to succeed and prosper in the post-Soviet era. Indeed all the objective indicators were there: a highly educated population, unrivaled agricultural potential, a wide and diverse array of industry, an abundance of natural resources, temperate climate, and a strategically favorable location between the Occidental and Oriental.
But, in the short term, Ukrainians would have to survive a very difficult transition while the economy ground to a halt. All assets in Ukraine, other than small private homes and tiny plots of adjacent land, had been owned by “the people” (i.e. government) and Soviet authorities never envisioned or provided for any other possibility. So the first order of business was to print up and distribute to “the workers” shares of ownership in the plants in which they had been working; and to the farmers, portions of the land which they had worked “collectively.”
But this failed to produce a miraculous “resurrection” of the economy because starting up industrial plants, and farming small private plots of land required capital – capital to pay for utilities, fuel, current and back wages, transport and markets, equipment, supplies, etc. Neither workers nor farmers nor their managers nor banks nor the government had the capital and the little they had was in a currency that was quickly losing value domestically and almost worthless abroad.
So then-President Leonid Kuchma had a seemingly bright idea. His administration would cobble together “financial-industrial” groups (later known as “clans”) consisting of anyone who had hard currency and interest in specific industrial sectors and/or facilities. These clans would use their capital to hire back employees, buy supplies, and start-up and modernize the plants until the economy was humming again.
Naturally, those who had hard currency were able to pick off all the “plum” assets which were sure moneymakers and then use those assets to bootstrap themselves, with the aid of bribery, intimidation, extortion, “raids” and occasional “contracts” on partners and competitors into their currently respected roles as “captains of industry” and, collectively, ownership of an estimated 80% of the nation’s industrial economy. It must be remembered that these “captains of industry” were – generally – not very nice people. They were the ones who (legally or illegally) had access to hard currency or assets – either KGB, Soviet-era satraps, or thugs. Therefore, it should come as no surprise that – unlike American “robber barons” who left the country more prosperous and powerful – these “shanovnyky” had privatized Ukraine’s industrial assets and left it the poorest country in Europe.
This “walk down memory lane” was necessary to remind us that the same people who bear direct responsibility for the endemic corruption, exploitation, and looting of the nation’s industrial assets – together with eager foreign investors seeking a piece of the best agricultural land in the world – are positioning (if not positioned already) to “privatize” Ukraine’s eternal, life-producing “black gold” with which its national identity has been linked through the centuries ….its “chornozem.”
The moratorium on the sale of Ukrainian farmland has been lifted on the eve of April Fool’s Day. In itself, this is welcome news because the land – if privately owned and managed for the greater prosperity of Ukraine’s citizens is a guarantor of prosperity for Ukraine and food for an increasingly hungry world. The issue is not the need for privatization – that is well understood – but how and when that privatization is implemented. In fact, this point is so important that Col. General Ihor Smeshko, one of Ukraine’s most outspoken defenders of private ownership and the free market, has referred to it as a cause for a “social explosion” if handled without adequate protections for the small and medium farmer and the banning of foreign ownership under cover of legal entities registered in Ukraine. By some estimates, foreign corporations already control up to 2.2 million hectares of Ukrainian agricultural land.
The first question that must be addressed is whether the current land law complies with Article 13 of the Ukrainian Constitution which categorically states that the land is “of the right of ownership of the Ukrainian people” and that the public authority is merely the “proprietor” on behalf of “the Ukrainian people.” Parliament has failed to seek the Constitutional Court’s opinion.
Secondly, Smeshko believes that the passage of the law under current economic conditions when COVID-19 is causing a global recession and possibly a depression would be criminal. “Speculators” will buy up the land for “nothing and cause a colossal fall in the value of national assets and impoverishment of the population.”
Thirdly, the government is unprepared to monitor and control the process, even though this has been raised as a source of concern multiple times. The inventory of agricultural land is incomplete, and no procedures in place for registration of land plots, including the filing of surveys, identification of owners, availability, and current uses. There is no assessment of soil condition, type, composition, and quality of the land. There is no mechanism by which a buyer’s qualifications to purchase the land can be established. The law fails to show how the government will control the uses or ecological abuses to which the land may be put. In short the law’s failure to establish accountability risks a second “wild west” in which corruption flourishes.
Fourthly, the law fails to protect and support small and mid-sized farmers who have been the backbone of Ukraine’s agriculture and the carriers of its culture. Ukraine’s law enforcement and judiciary systems will not be able to cope with the large scale land speculation that this law will generate. Farmers and families will not have access to state loans for the purchase of land nor for seasonal loans and may find themselves dispossessed and working merely as hired hands. The law allows a single owner to hold more than a half-million acres of farmland – twice as large as the largest farm in the United States.
In short, while the government’s intent may be commendable, the timing is as bad as it can get; and its failure to include measures to protect and support Ukraine’s small farmers and suppress corruption and abuse may snatch a bust out of (what should be) the jaws of a boom.
