July marked the formal end of a moratorium on farmland sales that has been a sticking point in Ukraine’s relations with western institutions and investors since its imposition in 2001.
Removal of the moratorium is likely to be hailed an important step in efforts to strengthen Ukraine’s resilience against corruption, as President Joe Biden meets with his counterpart Volodymyr Zelensky in Washington next week.
Sources, however, tell Agri Investor that agricultural investment into Ukraine been driven more by the geopolitical currents that have long shaped the mix of capital in the country, than the July loosening of restrictions on local farmland sales. The not-too-distant future also holds a 2024 referendum on whether to further open up to foreign capital.
“The moratorium is a footnote. Russia putting 150,000 men on the other side of the border is less of a footnote,” said Bate Toms, a corporate lawyer with decades of experience in Ukraine who has served as the British Ukrainian Chamber of Commerce’s chairman since 2008.
Toms – who said he advised European investors assembling the Ukrainian agricultural assets that were sold to SALIC – told Agri Investor most clients active in Ukrainian ag have long since partnered with local firms that sell inputs or can operate leased land in large quantities.
“While people have been oohing and ahhing about the Russian threat and not investing, people who are there already have been making a lot of money,” he said. “The moratorium isn’t changing things. Russia probably isn’t changing things. As long as we [Ukraine] have Biden’s support, I don’t think the Russians are crazy enough to try and invade more.”
Biden is likely to stress continuing co-operation with the International Monetary Fund, which has made functioning land markets an important aim in its efforts to help Ukraine build institutions with billions in aid through nine distinct assistance programs since 1995.
The IMF projected in April that removing restrictions on local and foreign farmland buyers could add 12.6 percent to Ukraine’s GDP over the next 10 years, while restricting the market to domestic buyers will add only 6.1 percent.
IMF pressure has been the driving force for land reform within Ukraine, according to Adam Oliver, a Poland-based partner at brokerage Brown & Company. He said the 2024 referendum is widely expected to uphold restrictions on foreign buyers. Though some foreign investors are looking at strategies to join local entities that will have the ability to buy larger Ukrainian parcels, Oliver said, most are likely to wait and see how the market develops.
“Ukraine just has a great history of changing opinions, not getting things right and making legislation grey,” he added.
Toms recently highlighted one potential silver lining for investors within the grey areas of a relaxation of agricultural re-zoning in Ukraine, which he wrote creates a “possible backdoor for some foreign ownership of farmland.”
Ukraine does not need to open the front doors of its farmland markets to impact global value chains. In fact, few institutional managers are likely to rush into the farmland opportunities the Biden administration appears so focused on opening up.
Still, recent progress on land reform suggests investors and strategics who have already found ways into Ukrainian ag face changing conditions that could influence its evolution in important ways.