By Iurii Mykhailov
Soon it will be a year since Russia annexed the Crimea and provoked separatist actions in South-Eastern Ukraine that later had overgrown, in fact, into the war between Ukraine and Russia (though de facto, not de jure). Currently, the military conflict after months of not very active military confrontation has the potential to break into a full-scale war with the invasion of Russian troops on the territory of Ukraine. The consequences of this would be disastrous not only for each of the warring parties, but also to the whole world.
Already at this time, the number of refugees from the Crimea and the Donbass to Ukraine exceeds one million. Several tens of thousands refugees have sought refuge in several neighboring EU countries: Poland, Slovakia, Romania. In the case of full-scale war the wave of refugees to other countries, primarily to the EU, will be a few times higher than the wave of refugees due to the wars in the Balkans during the breakup of Yugoslavia. It should be remembered that Ukraine has a visa-free regime with a number of European countries: Moldova, Serbia, Albania, Montenegro. Ukraine has a visa-free regime also with countries such as Turkey, Israel, Argentina, Brazil, Honduras.
But even if there will not be a Russian invasion now, it can happen a little later, as a consequence of the collapse of the Ukrainian economy. Currently, there is a contest: which economy will collapse first, the Ukrainian or the Russian one.
The economic situation in Ukraine is very close to collapse. Over the next few months, Ukraine has to pay a debt of $11 billion. The state treasury at the moment is about $7.5 billion. If Ukraine will not has fixed in the nearby future the restructuring of its debt with the major creditors (IMF, World Bank, private equity funds, such as the American Franklin Templeton, Russia, etc.), Ukraine will be forced to default. This can lead to catastrophic consequences in the form of social revolts and even the disintegration of Ukraine into a number of separate territories. This, in turn, could trigger a military intervention by Russia under the pretext of “preventing chaos in the heart of Europe”, which will lead to a “bloodshed” and the huge wave of refugees.
But even if Ukraine will be able to avoid the military invasion of Russia and the default, the economy in general and agriculture in particular, may not survive this year. Over the last year the local currency devalued against the dollar and the euro by 2.5 times. A year ago, one US dollar was equal to 8 hryvnas and now the parity is 1:21. The interest rates on bank loans are up to 30 percent or more per year, making them virtually inaccessible.
A large amount of inputs for the Ukrainian agriculture is imported: seeds (corn, soybean, sunflower), pesticides, fertilizers, fuel, farm machinery, implements and equipment.
Although oil prices fell, the price of petroleum products (gasoline, diesel) remained unchanged due to the devaluation of the local currency. The domestic seed production in Ukraine is insufficient to cover the deficit generated due to the high prices of imported seeds. If the grain producers can be able, albeit with difficulty, to pay for the supply of seeds, pesticides, fertilizers and fuel within a half-year, the deliveries of the imported agricultural machinery will sharply decrease, as medium- and long-term loans in Ukraine are virtually nonexistent. But grain producers are in a better position compared with other industries, primarily livestock. Since Ukraine is a major grain exporter, a number of foreign manufacturers and suppliers of inputs to Ukraine now offer to grain producers the inputs on the base of barter schemes under the obligation to sale the harvest later to some designated traders. Even so, one can hardly expect the grain yield comparable to last year’s 63 million tons. It is very likely that the grain production in 2015 will not exceed 40 million tons, with the corresponding decrease in its export, primarily to Spain and Italy, North Africa, the Middle East and East Asia (China, Japan, Korea).
Such industries like dairy, meat and eggs production will have found themselves in a very difficult situation. They will be forced to buy feeds at prices, which grew 2.5 times due to the devaluation of the hryvna, while the export of their products is limited, especially after the Russian ban on import of agricultural products from Ukraine. The sharp decline in incomes of the population of Ukraine will not allow the animal products producers to correspondingly increase prices on the domestic market, with the result that many producers will go bankrupt.
All these problems are exacerbated because of the unimaginable scale of corruption in Ukraine, especially in the judicial and law enforcement systems.
And even if Ukraine and its economy will survive in the next years there still will be global threat of the collapse of Russia – the country with the nuclear weapon.
The only way out of this is to force Russia to calm down, to withdraw from South East Ukraine and the Crimea, to pay the corresponding contribution to Ukraine and focus on its own problems. The role of the world leading countries as I see it must be in pressing Russia to comply with these requirements. Though I am very skeptical about this chance for Russia while the KGB officer Putin as the current President of Russia who lives in the world of hallucinations and his close surrounding (again formed by the former KGB officers) are ruling Russia.
Interview by Katharina Seuser (president Verband Deutscher Agrarjournalisten) with Iurii Mykhailov (president Union of Agrarian Journalists of Ukraine):
Question Katharina: Which role plays agriculture in the Ukrainian economy and how is it affected (I would like to give some extra information about agriculture in Ukraine in a additional information box)
Answer Iurii: Nowadays the agriculture in Ukraine is playing a more and more important role in the Ukrainian economy (though I am not very happy with this trend because I do not want to see Ukraine eventually are moving towards the third-world countries). The share of the agriculture is now of about 10 percent of the entire economy with export share of about 30 percent (though the statistical figures for the 2014 when finalized will be much bigger because of the collapse of metallurgical, coal and chemical industries in the South East Ukraine).
The main export commodities now are sunflower oil (21.3 percent of the total agricultural export), maize (20%), milling and feed wheat (14%), rapeseed (5%). Before 2014 there was a sufficiently big export of meat and dairy products to Russia that now is nonexistent.
Crops are mainly produced by the very large (from 10,000 to 1,000,000 hectares of land) agricultural companies owned by the handful of the Ukrainian so-called oligarchs while most of the animal based products and vegetables are produced in the very small households (at least due to the official statistics that in my opinion is not very reliable). About 30 percent of the population (15 mln people) live in the rural areas. Majority of them are very poor because only 600,000 of them work for the agricultural companies while others survive on the subsistent agriculture. The infrastructure (roads, power supply, utilities, public transportation etc.) in the rural areas are in the disastrous shape. The average income of the rural population now is no more than 100 Euros per month. But without necessary professional skills and the stagnation in the urban areas they have no chance to migrate to cities and improve their lives.
Q.: What impact will the war / the crisis possibly have on agriculture?
A.: because of the war Ukraine has already lost about 10 percent of crops after the annexation of the Crimea and the Russian invasion to the South-East Ukraine. It is very likely that there will be no planting season this year there: in the Crimea because of the cut-off of the water supply from Ukraine and in the South-East because of the military actions. The infrastructure in Donbass is heavily ruined as well as many plants including the food ones are destroyed (for example, the big sunflower oil refinery owned by Cargill company in Donetsk).
The expansion of the military actions on the other parts of Ukraine will certainly have the negative effect on the agriculture and export. There is a big risk of the Russian invasion to the South of Ukraine with the goal of cut the corridor from its east border to the Crimea and further to the Transnistria. In this case Ukraine will risk the loss of all its ports on the Black sea that will result in the total collapse of the Ukrainian economy.
Q.: How will exports possibly develop?
A.: there will be very small export of dairy and meat products and the big decrease of the export of grains and oilseeds/oils because of the dire situation with Ukrainian finances.
Q.: How is the situation for the press in Ukraine?
A.: In my opinion Ukraine at the moment is a country with practically total freedom of the press. In Ukraine actually work media are financed by our enemy – Russia. Anybody can express him/herself on any topic without any implication for him/herself. The problem is that power does not react on any critics towards it except the weak responses like “let not criticize power while in the state of war”.
Q.: Are journalists like you in danger?
A.: Yes and no. At the biggest risk for their lives are journalists in the Crimea and the South-east Ukraine or those who cover the military activities. There is no such problem for the journalists in other parts of Ukraine.
Q.: Who is reporting in the Eastern parts of Ukraine?
A.: There are big number of the pro-Ukrainian journalists on the occupied territories who covertly under aliases inform what is going there using internet, social media etc. (though, naturally, sometimes there are doubts about the reliability of such information).
Q.: Is there any critical reporting about the activities of separatists or of the Russian intervention?
A.: There are a lot of criticism towards the President of Ukraine, the minister of defense, the general staff about their role and actions in this unannounced war with Russia though with very small outcome as our president like Mr. Putin lives in his own fantasy world.
Q.: What can the World/EU do to help in this conflict?
A.: In my opinion the answer is to continue the current policy of sanctions towards Russia and at the same time forcing the Ukrainian power not just babbling about the necessary reforms in Ukraine but at least to start implementing them. At the very moment Ukraine desperately needs the funds from the foreign creditors to avoid the financial collapse. But the foreign creditors must closely monitor the ways their money is being used.
Q.: What can journalists/Ag journalists do?
A.: First and most important thing is to persuade the western societies that their future is deeply connected with the support of Ukraine and calming down Russia. Let them say again and again that in contrast to what Russian propaganda says Ukrainians are not fascists, nazis, racists etc. The Ukrainians position themselves as Europeans and just fight for their freedom. And let the foreign journalists establish close connections with the Ukrainian journalists for sharing the information. At the moment this will be enough.