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Taras Kutovy resigns as Minister of Agrarian Policy & Food

May 23, 2017

23rd May witnessed the resignation of Taras Kutovy as Minister of Agrarian Policy and Food, a post he has held for 1 year and 1 month.

Mr Kutovy requested the Verkhovna Rada vote to accept his resignation – and whether they do or do not, his forced labour is obviously not an option.

His resignation comes as two Draft Bills (5535 and 5535-1) relating to creating an agricultural land market make their way through the procedures and protocols of Verkhovna Rada Committees prior to any vote.

A reader should note that whilst the Verkhovna Rada votes for changing the pensions system are just about there or thereabouts, votes for creating an agricultural land market from 1st January 2018 when the current moratorium expires – are not.  At least not yet.  Selling Ukraine’s exceptionally fertile black soil to foreigners is an emotive subject – unlike the current long term leasing arrangements.

For those interested in the differences between Draft law 5535 and 5535-1, of most significance is foreign ownership and how and when that can occur.

Draft Bill 5535 allows for foreign ownership after 2030 – a sufficiently long period for Ukrainian farmers and the oligarchy to robustly position themselves prior to any sales to external agricultural corporations.

Draft Bill 5535-1 allows for ownership only by Ukrainian citizens and/or Ukrainian registered companies with effect from the 1st January 2018 moratorium ending – but at least 51% of the shares of Ukrainian companies must be owned by Ukrainian citizens.  Ergo a minority 49% share of the Ukrainian registered company can be owned by foreigners.

In short neither Draft Bill creates an entirely free market when it comes to creating an agricultural land market in Ukraine.  Neither provide for foreign controlling interests.  (Whether either Draft Bill would suffice in satisfying IMF requirements remains to be seen.)

However, as vaunted as an economic driver as the creation of an agricultural land market is – even if entirely open to foreign ownership, there is perhaps a need to temper expectations.

Currently both foreign and domestic (many of which have significant foreign shareholders) agri-corporations lease truly vast areas of agricultural land on very long term lease agreements.  How likely is it that they would rush to buy what they already contractually lease far into the future?

Not only do the leases last far into the future, often those leases have already been paid for far into the future too.  (No doubt an insurance policy against swift and feckless policy changes under innumerable unstable Ukrainian governments past.)

That said, there remains equally vast areas of agricultural land that could be sold per Draft Bill 5535 or 5535-1.  It could however, also be leased per current practice avoiding the foreign ownership issues restrained within either Draft Bill.  Perhaps the creation of a agricultural leasing market instead of, or in parallel with a sales market would provide maximum market participation possibilities and prospects for entry?  If so, what tweaking to existing leasing statute would be required – if any?

Ergo a Klondike-esque agricultural land rush when a market is created may not be particularly Klondike-esque – whichever Draft Bill gets through the Verkhovna Rada and becomes law (if either manage to do so).

All of this brings about a return to the resignation of Mr Kutovy – and in particular the motivation for resignation after 13 months in the job, and 6 months prior to the current agricultural land sale moratorium ending.

It may be that he does not want to be the Minister if the Draft Bills crash in the Verkhovna Rada, he may not support either Bill and thus painted as the Ministry that derailed further IMF cooperation (although the NABU wiretapping requirement of the IMF is equally likely to have extreme difficulty getting through the Verkhovna Rada too).

However, a cursory glance at Mr Kutovy’s career history prior to entering politics and government outlines a successful private career in financial investment – 5 years at XXI Century Investment,  1 year with Rise, and on-going relations with Global Holdings.

Mr Kutovy within his resignation letter states “I believe that I have enough knowledge, energy and strength to do more for Ukraine, in the near future I plan to focus on attracting investment in Ukraine.”  

A cynical reader may well perceive that to be a return to the private sector with the specific intention of maximising ministry attained knowledge facilitating seamless entry for foreigners into a newly born agricultural land market – with healthy fees for such skillful assistance.  (That not withstanding the insights gleaned regarding SOE privatisations as a Cabinet member.)  Thus resigning 6 months prior to the land moratorium ending is perhaps deemed a suitable distancing in time.

Lo, a cynical reader may perceive this resignation as little more than a preparatory move purely for the benefit of Mr Kutovy rather than for the benefit of Ukraine.  That is not to say they are mutually exclusive, but nevertheless more a deliberately engineered framing and timescale designed to avoid allegations of corruption or conflicts of interest where riches await.

If viewing this resignation through that lens (as cynical as that may be), then it would suggest that Mr Kutovy sees a more than reasonable chance that of one of the Draft Bills will manage to find (by hook or by crook) sufficient votes to be forced through the Verkhovna Rada prior to 1st January 2018 – and looking at the detail within those Draft Laws, 5535-1 would perhaps have the edge when it comes to his motivation.

Naturally it also raises the questions as to who (as he runs from the Klitschko stable) will replace him – and whether this is a permanent or temporary leave of absence from top table politics for Mr Kutovy.

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