Tuesday, February 06, 2007

Bungling grain trade

In October 2006 Viktor Yanukovych's Cabinet of ministers hurriedly decided to place limits on the quantity of wheat Ukraine would export 2007. Quotas were applied from 31 st December 2006 and this has led to the scandalous situation described in newpapers across the world. "Ukraine's grain dumped into sea as quotas strangle exports," from FT is typical.

Yanukovych has 'history' when it comes to bungling in the grain trading business, as described in an article in 'Obozrevatel'.

Yanukovich, when he replaced Anatoliy Kinakh as PM in November 2002, decided it would be a good idea to earn some extra money, so he ordered the vice- premier responsible for the agribusiness, Leonid Kozachenko to sell more Ukrainian grain abroad. After several months very few reserves remained, and then much of the winter crop failed.

Citizens panicked as prices in bread shops went through the roof, in several regions of the country, by February the price of flour increased dramatically. People were ready to riot, and in order to calm matters President Leonid Kuchma directed Attorney General Svyatoslav Piskun to personally sort out the situation. The Attorney General's deputy Tatiana Kornyakov decided to 'hang' the blame for the scandal on agribusiness vice- premier Leonid Kozachenko.

Eventually the Yanukovych government were forced to purchase from Russia an equivalent quantity of grain to that which it had sold to the Europeans, but at an exorbitant price. Kozachenko was released after spending a month in prison.

The above mentioned 'FT' article says: "The World Bank has dubbed the [export] restrictions "not justified" and upheld claims that the country's grain supply is more than adequate to cover domestic needs. The bank has also warned that the restrictions have opened a door to corruption.

"The administration of the quota system so far has been highly non-transparent, and thus creates opportunities for corruption," reads a report released by the bank.

Andriy Yarmak, an agriculture consultant, said many traders were surprised recently to hear that little-known companies had won big export quotas while larger foreign companies with massive stockpiles received smaller quotas.

Suspicions are mounting that inside deals could be at play in the quota-granting process, Mr Yarmak said. Some companies could be selling their quotas to larger traders."

Th 'Oboz' article adds most of the major Ukrainian grain traders are serious supporters of either NU or BYuT and include big names from the Ukrainian politikum. The export restrictions are intended to give them 'a poke in the eye', for it is they that will have to take a financial 'hit' for the rotten grain, and allow a few select insiders to cash in.

No comments: