With money, political influence, thousands of lobbyists, and the help of Ukraine’s own land reform laws, Western giants have acquired a huge portion of Ukraine’s farmland since the fall of the Soviet Union, Mandiner writes in the first of a series of articles on the topic.
Ukraine is known for top-quality farmland, cheap production costs (labor, energy), and a very favorable regulatory environment.
Almost all of Ukraine’s 42 million hectares of arable land is covered by so-called “black earth,” known in Russian as chernozem. This soil is extremely rich in humus, phosphorus, and nitrogen, with a very high moisture retention capacity, making it the best quality soil for growing agricultural crops.
Ukraine is home to one quarter of the world’s best-quality chernozem soil, making the country one of the world’s largest grain producers and exporters — fifth in terms of the volume of grain exported before the war. And with the opening of European and sea transport routes, grain exports continued unabated.
In Ukraine, labor is significantly cheaper than in EU countries. In comparison, the Hungarian minimum wage is more than four times higher, and the average salary is more than three times higher than in Ukraine. The energy required for production in the country is also cheaper.
In terms of the regulatory environment, while the European Union features the strictest laws in the world, pretty much anything goes in Ukraine.
As András Tibor Cseh, secretary general of the National Association of Hungarian Farmers’ Circles and Cooperatives (MAGOSZ), told Mandiner,
In Ukraine, there are essentially no animal welfare or phytosanitary regulations.
The agricultural expert said that half of the fertilizers used in Ukrainian agriculture have already been banned in the EU, while no one knows the composition of the other half. In addition, the country allows the cultivation of genetically modified crops for both human consumption and animal feed.
The Oakland Institute, an American think tank, published a detailed report on the Western expansion of Ukrainian agricultural lands in 2023. The authors say that back in 1991, when independent Ukraine was established, corrupt governance and privatization led to the concentration of huge amounts of agricultural land in the hands of a new oligarchy.
Ukraine’s total agricultural area is 42 million hectares. Of this, 33 million hectares are arable land. For comparison, according to KSH 2022 data, the total Hungarian agricultural area is just over 5 million hectares, and 45 percent of this, approximately 2.3 million hectares, is arable land.
In Ukraine, large-scale agriculture is practiced on more than 4.3 million hectares, and most of this – 3 million hectares – is in the hands of just a dozen large agribusiness companies.
According to the government, about 5 million hectares – an area the size of two Crimean peninsulas – have been “stolen” from the Ukrainian state by private interests. But according to the U.S. report, the total area controlled by oligarchs and large foreign agribusiness corporations is more than 9 million hectares in size—more than 28 percent of the country’s arable land. The remaining area is used by more than 8 million Ukrainian farmers.
Foreign interests in Ukrainian farmland are mostly European and North American, including a U.S.-based private equity fund and the Saudi Arabian state fund. All but one of the ten largest land-owning companies are registered abroad, mostly based in tax havens such as Cyprus or Luxembourg. But many agricultural companies run by Ukrainian oligarchs were also floated on the stock exchange, and Western banks and investment funds acquired ownership stakes in these shares.
The Oakland Institute report highlights several major investors, including Vanguard Group, Kopernik Global Investors, BNP Asset Management Holding, Goldman Sachs-owned NN Investment Partners Holdings, and Norges Bank Investment Management, which manages Norway’s sovereign wealth fund. The fifth-largest landowner in Ukraine is NCH Capital, a U.S.-based private equity fund through which several large U.S. pension funds, foundations, and university endowments invest in Ukrainian land.
In March 2020, under pressure from the International Monetary Fund (IMF) and as a condition for a loan, Ukraine adopted a land reform amendment, lifting a 19-year moratorium on the sale of agricultural land from July 2021. Some 64 percent of the Ukrainian population rejected this law amendment, with the adoption of the law taking place right when the curfew was imposed due to the coronavirus pandemic. This prevented major protests, although many actions still did take place across the country.
The goal of the land reform is to push “less productive farmers” out of agriculture and promote further concentration of land, Mandiner cites the report as stating. The largest agribusinesses are taking advantage of this to further increase the areas they own.
In the first year alone, thousands of agricultural plots of land changed hands, and after the outbreak of war, the number of transactions increased further.
The Oakland Institute report details cases where land ownership changed due to the war, including areas allegedly seized by Russian agricultural companies. As land could only be bought and sold between private individuals, agricultural companies had often previously “encouraged” their employees to buy land and then “rent” it from them.
The latest amendment to the law, effective from January 2024, brought further changes. According to the new law, not only individuals but also legal entities can purchase Ukrainian agricultural land from January 1 last year. The amendment increased the upper limit of 100 hectares for individuals to 10,000 hectares and prohibited Ukrainian companies whose participants/founders or beneficiaries are not Ukrainian citizens from purchasing land.
Although there are countless ways to circumvent this new ban (for example, by granting someone Ukrainian citizenship by presidential decree), another loophole has been added to the law: According to this, if deemed acceptable via a local referendum, companies with founders or beneficial owners who are not Ukrainian citizens can still purchase agricultural land.
It is in the fundamental interest of these giants that Ukraine becomes a member of the EU as quickly as possible to not only consolidate their ownership rights, but also to gain access to a huge duty-free market for their products.
In an answer to a question submitted to the European Commission last November about increased U.S. interests in Ukrainian farmland, it noted that “large agricultural companies working in Ukraine operate on leased land,” citing the law against foreign purchase. They also stressed the importance of these companies in “providing food security for about 400 million people around the world” and that accession for Ukraine to the EU includes conditions that its agricultural regulations fall “in line with EU standards.”
These producers would have a major competitive advantage over other agricultural companies operating in the EU. In addition to not being restricted by the strict EU agricultural regulation system due to the moratorium, which is likely to last at least seven years, they would be able to produce their products on better quality land, at lower costs, and in larger quantities than their European competitors.
The authors note that if Ukraine were to become a member of the EU, due to its size and population, it would require a much larger amount than any other member state from the European Union’s cohesion and structural funds, meaning huge sums from agricultural subsidies would go to these landowners in Ukraine.
This is why these ag companies employ thousands of lobbyists in Brussels to make sure any accession process is favorable to them, both in terms of regulation and speed.
The consequences for Hungarian agriculture would be severe, writes Mandiner, noting that the next part in its series will explore specifics, including the largest companies established in Ukraine and how they are getting Ukrainian farmland into foreign hands.
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