Land Grab
The war in Ukraine is devastating the country's land values just as a national ban on the sale of farmland to investors expires.
Much of my thinking about the war in Ukraine has been based on a key axiom I adopted from President Obama’s analysis of U.S. strategy in Eastern Europe: the United States has no real strategic interest in Ukraine.
Obama’s theory here is simple: Ukraine is a core Russian interest but not an American one, so Russia will always be able to maintain escalatory dominance there.
“The fact is that Ukraine, which is a non-NATO country, is going to be vulnerable to military domination by Russia no matter what we do,” he said.
This article challenges my own presumptions and Obama’s thinking by advancing a theory of Ukraine’s geopolitical significance that places the country squarely within America’s strategic interests. As we will see, Ukraine is critical to western food security in the era of climate catastrophe.
In short, this article presents the theory the U.S. stood aside when Russia threatened to invade Ukraine in December 2021 in part because war in Ukraine would lead to the devastation of Ukraine’s farmland. Destroying the value of Ukraine’s farmland comes just in time for wealthy Ukrainians, and possibly foreign investors, to take advantage of Ukraine’s recent decision to reverse a ban on the sale of the nation’s arable lands.
As they say, the best time to buy is when there is blood in the streets . . . .
Ukraine has some of the most fertile lands in the world. The country is home to almost a third of the world’s reserves of black earth.1 Approximately 70 percent of Ukraine is agricultural land. (Id.) Agriculture accounts for 17 percent of Ukraine’s GDP and is the country’s leading export. (Id.) In 2019, Ukraine produced 74 million tons of grain. (Id.) Hence the country’s moniker: “the breadbasket of Europe.” In sum, Ukraine's natural agricultural resources rival those of California, which state has the most productive arable lands on Earth.2
Ukrainian farmers historically worked in collectives since private ownership of land was prohibited under the Soviet Union.3 After the fall of the U.S.S.R. in 1991, as part of IMF-sponsored reforms, six million Ukrainians each received 2-3 hectare (5-8 acre) plots of farmland. (Id.) However, many farmers could not cultivate their plots themselves, as oftentimes their plots were located several miles from their homes.4 Weak economic conditions throughout the 1990s prompted many farmers to sell their plots, leading to the concentration of arable lands in the hands of a new class of oligarchs.5
In response, the Ukrainian government instituted a moratorium on certain real estate transactions in 2001, including an outright ban on the sale of arable land.6 The ban covered 41 million hectares of land (~100 million acres), of which 27.7 million hectares (68 percent) belonged to private citizens and 10.5 million hectares (26 percent) to the state and localities.7 The ban also blocked Ukrainians from mortgaging their land to banks in order to prevent speculation.8 Further, no business entity was allowed to own land, nor loan money against land, nor otherwise transfer land in consideration for other goods and services. (Id.)
During the moratorium, the only legal mechanisms to transfer use and occupancy rights were lease agreements and certain forms of gifts and devises. (Id.) Many small landowners leased their land to domestic and foreign corporations.9 President Zelenskyy’s government claims prior administrations temporarily privatized five million hectares of public lands using illegal leases. (Id.) Other estimates place the number of hectares owned by large corporations at six million, including 430,000 hectares (~1 million acres) held by a single U.S. private equity firm and 195,000 hectares (~500,000 acres) held by a Saudi conglomerate. (Id.)
In 2018, the European Court for Human Rights (“ECHR”) struck down the 2001 ban.10 (ECHR has jurisdiction over Ukraine, which is a member of the Council of Europe, if not a member of the European Union.) In Zelenchuk and Tsytsyura v. Ukraine, the ECHR ruled Ukraine’s ban on the sale of farmland violated the Ukrainian Constitution. (Id.) The court held the ban prevented landowners from exercising some property rights, such as transferring the land, profiting from its sale, and using it as collateral. (Id.) The decision has been criticized by the International Peasants’ Movement as legalizing land grabs in violation of the UN Declaration of the Rights of Peasants.11
Barely a month after assuming office, Zelenskyy began a campaign to push through land reforms in Ukraine in the summer of 2019, with the aim of repealing the ban on selling farmland before 2020.12 Agriculturalists who opposed repealing the ban clashed with supporters of the new law, resulting in a brawl between lawmakers in the Verkhovna Rada.
The rush to pass the new law resulted from pressure from the International Monetary Fund (“IMF”), which leaned on Ukraine to open up farmland for sale as a means of repaying $17 billion in foreign loans that were due in 2020.13 The IMF explicitly conditioned a $5.5 billion loan, to help Ukraine repay existing debt, on the repeal of the ban on the sale of farmland. (Id.) Critics argue the IMF’s undue influence and Ukrainians lack of ability to protest the law during COVID-19 quarantine undermined the democratic process.14 At the time the law passed, polling showed two-in-three Ukrainians opposed the measure, raising questions about Zelenskyy’s sincerity when he said “we knew we were doing it for Ukrainians.”15 Opponents of the new law argue it will put small family farming at risk by laying the foundation for the “continuous expansion of large industrial farming in Ukraine.” (Id.) The International Finance Corporation (“IFC”), the World Bank’s private sector entity, agrees with this criticism, claiming the boost to Ukrainian GDP will result from “the exit of producers with lower value added and the expansion of producers with higher value added, as the price of land rises.”16 (The phrase “lower value added” producers is doublespeak for small farmers.)
The Ukrainian legislature repealed the moratorium on March 31, 2021.17 The new law lifts the ban in four phases. First, although privately held farmland became marketable on July 1, 2021, only Ukrainian individuals and communities are allowed to purchase the land initially. (Id.) Further, no individual Ukrainian can purchase more than 100 hectares (247 acres). (Id.) Second, farmland held by the state and localities is still subject to the moratorium through July 2023. (Id.) However, third, beginning January 1, 2024, Ukrainian legal entities will be able to buy up to 10,000 hectares (~25,000 acres). (Id.) Foreign citizens and entities will not be allowed to purchase any land, until, fourth, such a measure is approved by Ukrainians in a national referendum. (Id.)
Despite these protections, there is apparently nothing stopping foreign citizens from investing in as many Ukrainian business entities as they need, to purchase and hold as much land as they want, come 2024. Nor is it clear how the Ukrainian government intends to stop Ukrainians acting as proxies for foreign investors between now and then.
For many citizens, the most serious concern with this law is the potential for foreign interests to illegally gain ownership of land, for example through opaque ownership of a Ukrainian company, exploiting the country’s impotent judicial and regulatory systems. Some of the largest land deals in Ukraine in recent years were carried out by foreign corporations that may try to circumvent the new law and obtain title to the land.18
Under the new law, it is possible for international investment banks to seize land to satisfy unpaid debts, which land must then be resold within two years at auction. (Id.) The large landowning corporations in Ukraine will have a systematic advantage at auction over small landowners because they receive hundreds of millions of dollars in subsidies from the Ukrainian government and EU. (Id.)
In any case, we can safely presume this Ukrainian government’s ultimate objective is to open the country’s land to foreign investors, since proponents of the new law argue it is “necessary to attract the foreign investment that Ukrainian agriculture needs to achieve its full economic potential[.]” (Id.)
The United States and NATO seem to have an unusually keen interest in what happens to Ukraine’s farmland. The U.S. International Trade Administration (“ITA”) publicly supported the new law, arguing the ban on selling arable lands made it difficult for Ukrainian farmers to secure financing, leading to underinvestment in productivity improvements like irrigation and drainage.19 The ITA argues a “fair and transparent farmland market,” backed by $200 million in loans from the World Bank, “could lead to incremental GDP growth of over two percent per annum over the next few years.” (Id.) Similarly, the Atlantic Council, NATO’s de facto propaganda machine, claims lifting the ban “could eventually add several percentage points to the country’s GDP.”20 (Ukraine’s GDP growth rate in 2018 and 2019 was 3.41 and 3.22 percent, respectively.21 Neither the U.S. nor NATO’s mouthpiece offer any evidence to support the claim lifting the ban may improve Ukraine’s GDP.)
The Atlantic Council goes so far as to frame lifting the ban as an anti-corruption measure. “For decades, [repealing the ban] was opposed by Ukrainian tycoons and politicians who extended the country’s longstanding moratorium and used the shadow land market to their advantage.”22 The forces opposing the new law allegedly resorted “to blackmail, bribery, and even threats towards [the] personal safety and that of [the] families [of the proponents of the new law].” (Id.) Although the Council admits “resistance also came from many ordinary Ukrainians,” NATO’s mouthpiece claims Ukrainians were “misled into believing that an open land market would be exploited for the benefit of the few.” (Id.) (The Oakland Institute argues Ukrainian “agriculture has been dominated by oligarchs and multinational corporations since the privatization of state-owned land following the collapse of the Soviet Union in 1991.”23 The Atlantic Council does not offer any evidence to support any of their accusations against supporters of the ban.)
Meanwhile, the United States Agency for International Development (“USAID”) proudly boasts of their attempts to propagandize Ukrainian farmers into backing the new law.24 “USAID and its partners [ ] launched a nation-wide information campaign to educate farmers and communities on how to take advantage of newly established land rights and the changes brought by land reform[.]” (Id.) The messaging behind this propaganda runs counter to the IFC’s own analysis by claiming “land reform in Ukraine goes hand-in-hand with decentralization that entitles communities to the ownership of previously state-owned land.” (Id.) (It is not clear how landownership will become more decentralized when productivity gains are expected to come from pushing smaller farmers who add less value out of the market.) The U.S. International Trade Administration is also in on the act, claiming the new law will “modernize” farming in Ukraine.25
Lastly, the World Bank spread fear, uncertainty, and doubt that the ban on private ownership in farmland would cause farmers to “lose everything” if the land was taken away from them.26 (The Bank does not explain how farmers might lose access to the land, which access is secured by contract, or why farmers would not receive just compensation for the taking of any fixed improvements they made to the land.)
With friends like these . . . .
After the ban was reversed, the Atlantic Council said ending the moratorium “would not have been possible without the requisite political will of the current authorities.”27 The World Bank gushed that “this is without exaggeration a historic event, made possible by the leadership of the President of Ukraine, the will of the parliament and the hard work of the government.”28 Ukrainians were not so supportive of the new law. Zelenskyy’s disapproval rating was trending towards 70 percent before Russia invaded Ukraine.
Recent events beg the question: how would one go about wiping out a native population of farmers, so that their lands could be sold-off to the highest bidder in the west?
A solid plan to disenfranchise Ukrainians might encourage local farmers to buy while land values are high, perhaps under the pretense of giving them priority to stake their claim to the land. Then, when the specter of war appears, arguably through one’s own historical provocation, simply stand aside to allow the violence to wipe out land values. If your timing is right, you will destroy land values a year or two before foreign investors are free to swoop in and buy up as much as land as they want on the cheap.
After all, Action on Armed Violence, a UK NGO, openly speculates the reason for President Putin invading Ukraine is to seize control over Ukraine’s black earth, which “is at the center of Vladimir Putin’s dreams of Russian expansion.”29 As I have argued ad nauseam, the narrative Putin is invading Ukraine to recreate Ancient Rus is western propaganda. The real reason Putin invaded Ukraine, according to Putin and the Russian Ministry of Defense, is to stop Ukraine from joining NATO, because the U.S. might place hypersonic missiles with a five-minute flight time to Moscow in northern Ukraine. (See “Biden’s Gambit: Sacrificing Ukraine to checkmate Russia is a colossal strategic error for the U.S.”) But, if western propagandists say Ukraine’s black earth was good enough reason for Putin to invade, the same argument applies with even more force to the U.S.’s decision to refuse to negotiate a diplomatic solution to avert war. Cui bono?
This is Law and Politics. Until next time . . . .
“Ukraine Adopts Land Reform: Ukraine’s land reform opens opportunities for the modernization of irrigation systems.” U.S. International Trade Administration. Link, accessed May 29th, 2022.
“Land Reform Can Make Ukraine an Agricultural Superpower.” Atlantic Council. Link, accessed May 29th, 2022.
“Main Problems with the New Land Law in Ukraine,” Ukrainian Rural Development and Eco Action. Link, accessed May 31st, 2022.
“Who Really Benefits from the Creation of a Land Market in Ukraine.” The Oakland Institute. Link, accessed May 31st, 2022.
“Land Reform Can Make Ukraine an Agricultural Superpower,” supra.
“Main Problems with the New Land Law in Ukraine,” supra.
“Land Reform Can Make Ukraine an Agricultural Superpower,” supra.
“Main Problems with the New Land Law in Ukraine,” supra.
“Land Reforms By Country: Ukraine,” supra.
“Undemocratic Land Reform Bill Threatens Peasant Access to Land in Ukraine,” La Via Campesina. Link, accessed May 31st, 2022.
“Ukraine Turns to Blueprint That Transformed Ex-Communist Europe.” Bloomberg. Link, accessed May 30th, 2022.
“Land Reforms By Country: Ukraine,” supra.
“Main Problems with the New Land Law in Ukraine,” supra.
“Creating Markets in Ukraine,” The International Finance Corporation. Link, accessed May 31st, 2022.
“Land Reforms By Country: Ukraine,” supra.
“Who Really Benefits from the Creation of a Land Market in Ukraine,” supra.
“Ukraine Adopts Land Reform,” supra.
“Land reform can make Ukraine an agricultural superpower,” supra.
“Land Reform Can Make Ukraine an Agricultural Superpower,” supra.
“Who Really Benefits from the Creation of a Land Market in Ukraine,” supra.
“Private Sector on the Frontlines of Land Reform to Unlock Ukraine’s Investment Potential,” United States Agency of International Development. Link, accessed May 31st, 2022.
“Ukraine Adopts Land Reform,” U.S. International Trade Administration. Link, accessed May 31st, 2022.
“Ukraine’s Land Reform: Success within Reach but Rada Needs to Act,” The World Bank. Link, accessed May 29th, 2022.
“Land Reform Can Make Ukraine an Agricultural Superpower,” supra.
“Ukraine’s Land Reform,” supra.