Wednesday, March 09, 2011

Grain export madness [updated]

This article from "Ukrainian Week" [in English] explains how the Ukrainian grain–export market is being monopolised by the Donetsk clan.

A company called Khlib Investbud Ltd. (KhIB) last year was granted a major portion of the country's grain export quotas, whilst other big grain export traders were shut out. Agriculture minister, Mykola Prysyazhnyuk, tried to convince the mass media that this was all OK and 'above board' because KhIB was 61% state-owned.

However, the Ukrainian version of 'Ukr.Week', 'Tyzhden' magazine, has documents revealing that the state no longer controls 'KhIB' - which is now Ukraine's main grain trader. It seems 'KhIB' is in the hands of a company linked to business spheres close to the minister himself - 'Kalasar Ltd'.

'Tyzhden' says 'Kalasar's joint owners are Oleksandr Kozyryev [connected to the Yenakiyiv business group], and also Genetechma Finance Limited, an offshore company registered in Cyprus [surprise, surprise]. The latter is a daughter company of the Luxembourg-registered Belevue Industries Sarl, who, in turn, are a daughter company of VEB-Leasing. They are a daughter company of the Russian VneshEkonomBank [VEB]....and the head of the supervisory council of VEB is PM of Russia, Vladimir Putin, no less.

'Tyzhden' calls this classic layering arrangement a new 'RosUkrEnergo', or 'RosUkrZerno'.

The periodical declares: Now Putin's bank has found easy money on the Ukrainian grain market. Last summer, the state lost control of 'KhIB' but nevertheless selected the company to be the state's chief grain trader. 'KhIB' received a contract to purchase 5 million tons of Ukrainian grain for 7 billion hryven [1,400 hryven/tonne], then received the lion's share of grain export quotas. As a result, other large transnational corporations who for years worked in Ukraine were squeezed out of the grain business. 'KhIB' monopolised the market and Ukrainian farmers have been forced to sell their grain to the company at a depressed price. Now the main state exporter sells the same grain inside Ukraine at a higher price. The activity of the 'KhIB' in the domestic grain market is one of the reasons why cheap flour has disappeared from store shelves, and the price of bread has increased.

Last month the Ukrainian Agrarian [strategic reserve] Fund decided to buy well over 2 million tons of grain from KhIB in three batches. It will have to pay 1.55 Bn hryven for each batch - providing a tidy profit the 'KhIB', basically for doing nothing..

Several weeks ago and article entitled: "Quotas threaten 'collapse' in Ukraine grain output" was posted on 'Agrimoney' site.

"The head of one of Ukraine's major farm operators has warned of a potential "collapse" in the country's grains production if it does not repeal quotas which could cost farmers up to $1.3bn.

Eugene Leng, the chief executive of Ukrzernoprom Agro warned that a fall in sowings of winter crops would herald an even greater drop in spring plantings unless the government lifts the quotas which are denying farmers the full benefit of high world crop prices."

Last week the respected Ukraine-watcher Anders Aslund, in a TV interview with Mykola Knyazytsky, stated he was very disturbed about the monopolisation of grain trade in the country -"There is no reason for it", [apart from the obvious.]

Agrobusiness is one of the great hopes for the future of Ukraine, but short-term greed is threatening its future development. In Ukraine export scams such as those described above are still then norm rather than the exception.

Update: A comment note in an article in Wednesday's 'Ekonomichna Pravda' which fleshes out this story], claims the above-mentioned Oleksandr Kozyryev has close business ties, via another company to the daughter's of agriculture minister Mykola Prysyazhnyuk and of head of the council of ministers of Crimea, Vasyl Dzarty,

More on the dapper Dzarty from a previous blog here

"50`year`old Prysyazhnyuk is considered to be a member of Yanukovych’s team. He met Yanukovych in Yenakiyevo in the 1980s and at that time Prysyazhnyuk was production manager at Ordzhonikidzevuhillya agrarian economy. Yanukovych was head of its motor pool.

They say Prysyazhnyuk was appointed first deputy head of Zhytomyr Oblast State Administration in 2002 under Yanukovych’s patronage. By that time he founded and became head of the PR oblast organization in Yenakiyevo. Prysyazhnyuk was elected MP from the PR in 2006. In the VR of next convocation he was promoted to the office of head of the agrarian committee.

Prysyazhnyuk’s main business is little related to agrarian sector, though. He mostly profits from extraction of quartzite (used for production of ferroalloys) and gravel. Mass media estimated his fortune as US $80 — 90 mn." source:

No comments: