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Will land reform turn Ukraine into a colony of multinational corporations?

Economy

Will land reform turn Ukraine into a colony of multinational corporations?

Nikola Mikovic

During the Soviet era, Ukraine was known as the breadbasket of the Soviet Union for its fertile fields of wheat. It was also famous for its huge industrial complex. At the present time, one of the largest countries in Europe is known for prostitution, sex tourism, chronic corruption and a declining economy dominated by various oligarchic groups.

Traditionally, Ukraine was an agrarian country and the breadbasket of the Russian empire. Gradually, it developed its industry. Soviet practices helped Ukraine modernize its mining and metallurgy sectors. The third-largest Soviet republic, after Russia and Kazakhstan, became the heartland of the Soviet industry. It started producing aircraft, engines for vessels, helicopters, and jets, and at the same time, it managed to develop its agricultural sector. After the collapse of the Soviet Union, many successful state-owned companies were privatized by former Soviet-era industrial managers who are now known as the oligarchs. Ever since power in Ukraine has alternated between pro-Western and pro-Russian oligarchic groups. The oligarchs have proved adept at protecting their fortunes and keeping close contacts with the country’s leaders even as politicians come and go. Even the current Ukrainian President, Volodymyr Zelensky, is heavily linked with the oligarch-billionaire Igor Komoloisky.

Presently, the Ukrainian economy is heavily dependent on the IMF loans. The country still has good performances in its agricultural sector, but Ukraine’s GDP is 24 percent smaller now than it was in 1993. Also, the overall incomes are 17 percent lower than 26 years ago. Comparing to the Soviet era, the Ukrainian industry is heavily declining. In 1988, the aircraft manufacturing and services company Antonov completed what is still the world’s largest “heavier than air” aircraft to be used as part of the Soviet space shuttle program. Last year Boeing stepped in to rescue the Ukrainian plane maker as the firm had ceased production because of its heavy reliance on Russian imports. Even though Ukraine entered the US geopolitical sphere of influence after the events in Kyiv’s Maidan Square in 2014, the country is energetically still dependent on Russia. For years Russia provided Ukraine with underpriced gas while Ukraine’s export prices increased rapidly. Over the decades Ukraine, however, grew dependent on oil and gas coming from Russia, at almost no cost. Today, 70 percent of the gas consumed in the country is imported.

Since Ukraine’s energy-rich Donbas region has been under control of the Russia-backed self-proclaimed Donetsk People’s Republic for the past five years, Kyiv is now forced to import from Russia not only gas but coal as well. After Ukraine imposed an economic blockade on the Donbas territory held by pro-Russia forces in 2017, Kyiv effectively lost control over the important Donbas mines. The authorities of the self-proclaimed Donetsk People’s Republic now export coal to Russia, and then Ukraine buys de jure its own coal from Russia.

The ongoing conflict in the Donbas, as well as tense relations with Russia, affected Ukraine’s military-industrial complex. Engines for Russian naval vessels have historically been produced in Ukraine. However, Kyiv banned the export of these valuable military components to Russia in response to the incorporation of Crimea into the Russian Federation in 2014. Ukraine also stopped exporting other military equipment to its largest buyer. Motor Sich, which employs more than 20,000 people in the southwestern city of Zaprozhye, is one of the world’s largest makers of helicopter and airplane engines. Its products are used to fly the Mi family of choppers, as well as Antonov cargo jets. After 2014 the company was forced to stop cooperating with the Russian defense industry complex. However, according to some reports, the firm is still covertly providing its products to the Russian military.

Since Ukraine cannot use its industrial potentials as it did during the Soviet era, presently the most vital sector of the Ukrainian economy is agriculture. The country occupies the third place in the world in the corn export, and fifth place in the wheat export. The government plans to implement a land reform that will allow foreign companies to buy fertile Ukrainian black soil and arable lands. Such policy proved to be catastrophic in many countries worldwide, as it turned local farmers – former landowners – into low paid wage laborers for multinational corporations.

Due to poor economic conditions, Ukraine is faced with mass migration, mostly to Poland, and to Russia to a certain extent. At the same time, the country became famous for sex tourism. Although prostitution is still not legalized in Ukraine, there is an estimated between 52,000 to 83,000 women working as prostitutes in Ukraine, according to the International HIV and Aids Alliance. The so-called VIP prostitutes who are able to speak a foreign language charge customers between $124 to $248 for sex. Corrupt police charge brothel owners up to $1000 for each phone line that is used for clients to arrange for sexual encounters.

Police are not the only part of Ukrainian society that faces corruption. According to a poll conducted by Ernst & Young in 2017, experts considered Ukraine to be the ninth most corrupt nation in the world. In spite of the promised reforms, such negative tendencies in Ukrainian society are unlikely to change in the foreseeable future.

Nikola Mikovic is a contributor to Blitz. He also is a Serbian freelance journalist and geopolitical analyst. He writes for several publications such as Geopolitical Monitor, Global Security Review, International Policy Digest and Global Comment and also regularly contributes for YouTube, geopolitical channel KJ Vids. Nikola covers mostly Russia, Belarus and Ukraine.

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