Ukraine sows whilst China reaps?July 12, 2012
Ukraine sows and China reaps? Not yet, but very soon.
Last year I mentioned China’s expansion into Ukraine several times. In fact I wrote a rather link heavy post called China Watch at the end of last year that listed just a few Chinese expansions across almost every serious political and trade sphere in Ukraine.
A few days ago, whilst writing about the controversial language law, completely blinding the knee-jerk opposition parties to anything else, I mentioned a plethora of laws that went through the RADA unnoticed including a law on leased land.
As a very clever and wise Russian diplomat once stated, “Everything is connected, even when it appears not to be”. To put that into context he was talking about negotiations, levers, carrots and sticks etc. In effect carrying out action A can have repercussions with agreement Z if we want it to. Quite true.
What has this to do with my China Watch post and the raft of legislations past in the RADA last week whilst the opposition were navel gazing?
Well amongst everything pushed through was the ratification of a Ukrainian/Chinese agreement relating to agriculture. After all, with the EU in a state of flux and also somewhat displeased with Ukraine, Russia with some headlining issues of a global nature (see Syria, domestic unhappiness etc) and also not exactly overly friendly with Kyiv at the moment, Ukraine can seek partners elsewhere (as I stated it would in last December’s China Watch post). The two most obvious are China and Turkey, but not only those. Keep a close eye on Indian/Ukrainian relations in the near future.
The ratification of this Ukrainian/Chinese agreement immediately releases $3 billion of initial Chinese investment into Ukrainian agriculture, part of which according to the government of Ukraine, will be spent building an organic fertilizer plant. The rest will be spent on importing Chinese made agricultural equipment, seeds and associated farming requirements. China in return will get more oil, corn and soybeans as a direct result of increased Ukrainian yields from Chinese investment. There is even ambitious talk of converting some of Ukraine’s alcohol producing facilities into bio-fuel producing facilities.
Everyone’s a winner right?
Well, I have mentioned the law on leasing land a few times in this post and since it was passed last week, in others. When it comes into effect next year, it will allow China and Chinese companies to lease and purchase agricultural land. It also seems to allows the Ukrainian government to commandeer leased land in certain circumstances from an initial glance at the legal text.
Rumour has it that when this law comes into effect, China many well throw in excess of $30 billion at Ukrainian agricultural land and production and thus Ukraine may well sow and China reap. Possibly not a bad thing for Ukraine given the definite need for serious agricultural investment to assist some very skilled if under-resourced farmers and agricultural managers. The downside, if there turns out to be one, could be huge areas of prime agricultural land (with the best black soil in Europe) leased long-term, or indeed owned by (indirectly if the ban on non-residents owning agricultural land continues), China.
It would be no surprise to see large numbers of Ukrainian agricultural companies (many owned by those connected to the RADA) suddenly appear buying up agricultural land, to then be bought by a Chinese umbrella company allowing a form of grandfather rights over and above what is directly leased (which has no barriers regarding citizenship) by China and the Chinese.
Once more, quick turnover business and the separation of politics from economics and trade, a trade mark as far as the Chinese government is concerned, looks to leave Russian and EU business interests in the backseat in a very promising area of development in Ukraine.
You can’t say I didn’t tell you a serious trade partnership with China wasn’t coming though!
Posted in bureaucracy, Business Admin - Staying Legal, diplomacy, Doing business in Odessa, Doing business in Ukraine, EU, Odessa, Politics, RADA, Russia, Ukraine | Tagged agriculture, business, China, EU, FDI, odessa, politics, rada, rule of law, Russia, trade, ukraine |