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Ukraine’s plan to sell farmland raises fears of foreigners

Ukraine’s plan to sell farmland raises fears of foreigners

Most of Ukraine’s rich farmland is carved up into small plots owned by about 7 million people, like Tetiana Petrovych, the postmistress in this village west of the capital. They own the land but can’t sell it.

Ukraine, which is one of the top grain exporters in the world and recently overtook the U.S. as the leading exporter of corn to China, forbids the sale of agricultural land.

This seems about to change. Ukraine’s new president wants to open the land market, a step long pushed by economists and international financial institutions to stimulate investment in an agricultural sector with much untapped potential. Not everyone is happy, though.

The government’s plans are stirring fears that Ukraine’s coveted black earth will be bought up by foreigners, including Russians.

It’s a sensitive subject, given the ongoing fighting in eastern Ukraine against Russia-backed separatists. About 100 protesters marched through Kyiv, the capital, in October carrying signs that said, “Sold land is lost territory.”

President Volodymyr Zelenskiy and his government have given assurances that Ukrainians will have preference in buying land, but there are potential loopholes and the fears persist.

Most small landowners lease their plots so they can be farmed more efficiently. That’s the case with Petrovych and others in Nebelytsia, a village of several hundred people. She and her daughter own plots of two hectares (five acres) each, which they lease to Serhii Halusyn, who farms the cornfields that stretch out from the village.

“Thanks to Halusyn, our lands don’t choke with weeds and I have corn,” Petrovych said. Instead of cash, she takes her yearly payment in corn and uses it to feed her cow. And because she has milk and cottage cheese to share with her neighbors, they give her carrots, beets and pumpkins from their gardens.

Petrovych, 61, earns a little money by delivering the village mail on her bicycle. On a recent Saturday, her pouch was stuffed with electricity bills and an envelope of cash for a woman who receives her alimony through the post office. She also delivers monthly pensions of about $80 to more than 40 elderly villagers.

She has no interest in selling her land, hoping some of her 10 grandchildren will one day want to live in the village, about a 90-minute drive from Kyiv. She also opposes allowing land sales in general, a view widely shared in the village.

“If foreigners come, they will take away our only possibility to work,” Viktor Romaniuk, 52, said as he drove a combine harvesting the last of this year’s corn crop. “They will give us only a little money and crush small- and medium-sized business. I’m against the sale of land.”

When Ukraine was part of the Soviet Union, farms were collectivized with all land in state hands. After the Soviet breakup in 1991, those who worked on the farms were given shares of the land, although it took years to formalize. There was then a brief period when land sales were permitted, but a moratorium was imposed in 2001 until a legal framework could be created to regulate the market. It has never been lifted.

In a country of 42 million people, 7 million own the small plots that add up to the roughly 32 million hectares (79 million acres) of farmland in private hands. The remaining 10 million hectares are owned by the state.

That’s just fine with Halusyn, who farms land around Nebelytsia and leases about 4,500 hectares (11,000 acres). He worries that without access to affordable credit, he won’t be able to compete with big Ukrainian or foreign firms, which he fears would offer villagers so much money for their land that they would be unable to refuse. As it is now, he pays them the equivalent of $100 per year per hectare, the going rate for that type of land.

To protect his crop from theft, Halusyn hired guards to patrol the perimeter of his fields day and night, which they do on foot with a large guard dog, a Caucasian Shepherd.

Halusyn, who was among those who protested in Kyiv, wants the government to buy the land and lease it to Ukrainians.

“We have an interesting situation when the government understands that completing the land reform would be the right thing for the country, for the economy and for the landowners, but the voices that are opposed to this land reform sometimes sound louder,” said Natalia Shpygotska, senior analyst at Dragon Capital.

Zelenskiy took office in May with ambitious plans to fight corruption, increase economic growth and integrate Ukraine more firmly in Europe while moving away from dependence on Russia. His tenure has been troubled from the beginning by uneasy relations with the Trump administration and questions over whether Ukraine could continue to count on strong U.S. financial, military and political support. These questions are at the center of the impeachment inquiry now roiling Washington.

Zelenskiy wants Ukraine’s parliament by the end of the year to pass legislation on lifting the ban on land sales. In the face of the opposition from farmers, he has agreed that only Ukrainians should be allowed to buy farmland for the first few years. The loophole is that this would include foreign-owned companies that have been working in Ukraine for more than three years.

Among them is AgroGeneration, a French-based publicly traded company that is majority owned by U.S. investors and whose CEO is an American, John Shmorhun. He says the company farms about 55,000 hectares leased from about 15,000 individual owners in the Kharkiv region of eastern Ukraine, producing sunflowers, soybeans, corn and wheat. He has a team of people who manage the lease agreements, which by law run for a minimum of seven years, although often much longer.

He supports the land reform, saying “it’s about time” Ukraine had a land market, while cautioning that much depends on what the final laws look like.

He sees great potential, predicting Ukraine will soon pass the United States as the No. 1 grain exporter, and points to what appears to be another record harvest this year. Ukraine surpassed the U.S. in corn exports to China, largely because of U.S. tariffs imposed on China, although the volumes are relatively small.

The World Bank has been pushing for land reform, which it says will help boost agricultural productivity and drive significant economic growth.

Shpygotska says farmers who own their land would be more willing to invest in irrigation systems and plant more permanent crops, such as nut and fruit trees. They also would be able to use their land as collateral for loans.

First, though, the government needs to overcome the suspicion of foreigners, especially Russians. Shpygotsksa says there is little reason to worry. Russians have shown scant interest in investing in Ukrainian agriculture, and in any case their participation would be restricted under the proposed legislation, she says.

She notes that some in the countryside fear that foreigners will literally steal the land and take the rich topsoil out of the country. Such tales were widespread in Ukraine when it was occupied by Nazi Germany during World War II.

Shmorhun also is sensitive to these fears.

“It’s very emotional,” he said. “I think it dates back to the war, when black earth was being exported by the Germans. People don’t forget that.”

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