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The vicious circle: How financing from IMF and other financial institutes feeds corruption in #Ukraine agricultural Sector




Recently the New York Times recently stated that Ukraine had intentionally frozen an investigation into four cases related to Paul Manafort – former head of the election campaign of Donald Trump. According to The New York Times, Ukrainian officials are afraid to offend Trump and lose both financial aid from the USA and supply of the US weapon. But it seems that Ukrainian officials do not fully understand what factors define the financial assistance to Ukraine. Rather than inventing complicated diplomatic moves, Ukraine should urgently put in order a number of key sectors of the national economy - writes Robert Lewis, of WISC24: news from Wisconsin to New York.The Ukrainian agricultural sector as an example of coalescence of government authorities and business:

Being one of the most perspective Ukrainian markets, the country’s agricultural sector is a typical example of coalescence between governmental authorities and business. Ukraine ranks among the leading exporters of agricultural produce. Ukrainian companies have a number of sound competitive advantages, in particular, proximity to consumer markets and large production volumes. Some of these companies had successfully undergone IPOs. However, bright prospects of Ukrainian agricultural sector are seriously hampered by the fact that today it stays under control of several owners of large agricultural holdings. They use the whole set of political instruments (even the most corrupt ones) to put obstacles in the way of the land reform (agricultural land in Ukraine can still not be freely sold or purchased), dictate terms to other market participants, and most importantly – to successfully steal funds from the state budget of Ukraine, which is backed by the IMF and other international financial institutions.

All these groups form their own political wings, and spend considerable corporate budgets to make them vast and influential. To win parliamentary elections and become a people’s deputy it is necessary to spend around USD 5-7 million depending on whether it is a majority district or the list of a political party. Along with this, agricultural holdings conduct negotiations to receive backing from other MPs, and directly finance political parties of their choice. As a result, they all have at least 3-6 MPs at their disposal, and these MPs primarily represent the agrarian and the tax committees of the Ukrainian parliament. These committees are crucial for their activity – the former is distributing subsidies while the latter is granting the privileges and tax exemptions.

A number of Ukrainian agricultural holdings are public companies, and their shares are traded on the London and Warsaw Stock Exchanges. When you have a closer look at their structure, you will always see offshore companies there, and beneficiaries of these holdings receive their dividends on offshore accounts paying no taxes in Ukraine. This is where a life of luxury is financed from – including luxurious estates, yachts, private airplanes and more commonly – political corruption in Ukraine in general. At the same time, most owners of Ukrainian agricultural holdings do not live in their country – they are registered and reside in such countries as Switzerland, Germany or Austria.

Conflict of interest among Ukrainian MPs representing the agrarian committee of the Ukrainian parliament (according to the data gathered by the Public movement “Chesno”):

  • 29 MPs representing the Agrarian Committee
  • 21 MPs possess at least 1 company related to agrarian business
  • 150 Companies are in possession of MPs representing the agrarian committee
  • 100 of these firms belong to agrarian sector
  • 7 MPs have a direct connection with agrarian holdings

A problem of РЕРs and excessive indulgence of international financial institutes:

Should we help Ukraine? Of course, we should. For several years the country has been opposing Russian ambitions of regional dominance and declares European democratic values. However, it is a matter of paramount importance to review the mechanism of control over the use of financing provided to Ukraine since its current weakness gives free rein to many agrarian “nouveau riche” and corrupted officials. Besides, there is a feeling that in Ukraine financial institutions also take a less principled stand when trying to control the fulfillment of requirements that are usually set for recipients of financing.


In March 2015, the International Monetary Fund endorsed four-year programme of lending 17.5 billion dollars to facilitate Ukrainian economy. Within this programme Ukraine has already obtained four loan tranches totaling 8.7 billion dollars. The fifth tranche for the total of 1.9 billion dollars will come in the third quarter of 2018. Along with this, the IMF is not in a hurry to claim Ukraine for nonfulfillment of its two key requirements necessary to continue cooperation with the IMF. In particular, Ukraine did not establish Anti-corruption court and did not introduce automatic adjustment of gas tariffs to comply with the market level.

Another example is the fact that in terms of financing under EBRD Ukraine ranks third in the world after Turkey and Egypt. According to the latest EBRD report, last year the total amount of financial assistance to Ukraine accounted for 581 million euros. But what do we observe in the news from Ukraine? Due to the absence of a principal law on the management of state-owned banks, the EBRD is still not able to participate in the competition for purchasing 20% of «Oschadbank» State Bank, though Ukraine has promised to fulfill this condition until mid-2018. Recently, the EBRD has been trying for almost three years to recover collateral in the form of railcars, which the bankrupt company did not want to return, despite the refusal of fulfilling its credit commitments. And because of the scandal with six unfinished crossing points on the border with the EU, the European Union has stopped funding Ukraine under Customs programme at all and now it requires reporting on embezzlement of funds.

IFC has already invested more than 3,2 billion dollars in 90 Ukrainian projects. Another 1 billion dollars was allocated to Ukraine in the framework of IFC Global Trade Finance Program. But, for example, due to financial problems of Mriya Agro Holding, IFC was compelled to buy and manage three grain elevators that previously belonged to Mriya and were taken to restructure its debt. While due to another decision to give 95 million dollars to Kernel (that belongs to agrarian tycoons Andriy Verevsky and Vitaliy Khomutynnyk), several sector associations addressed an open letter to IFC and the EBRD claiming that their cooperation with Kernel is inappropriate.
These examples are aplenty, but the EBRD and other financial institutions remain indulgent when working with Ukrainian companies – in some cases, financial assistance is provided to companies managed by politically exposed persons (PEP).

According to its internal rules and procedures, the EBRD has the right to refrain from their financing as well as to refrain from backing the entities that it suspects of corruption or money laundering. The EBRD’s Integrity Risk Policy explicitly states: “In the event that the Bank receives any information on fraud, corruption, conspiracy, coercion, artificial interference, theft or misuse of the Bank’s resources in the course of its current operations or its projects, the Bank should be guided by the Principles of International Financial Institutions as part of the Integrated Network for the Prevention and Fighting of Fraud and Corruption”. Therefore when the EBRD is opening financing for companies, which are openly managed by Ukrainian РЕРs, it directly violates its internal standards. In other words, in Ukraine the EBRD and other international financial institutions suffer from problems that were created by themselves.

Everyday life of Ukrainian agrarian holdings:

So, it is quite natural for the owners of the largest agrarian groups in Ukraine to combine the work for governmental authorities with participation in the family business. This gives them wide opportunities as to use the state budget to earn money while paying no taxes, receiving budgetary subsidies and withdrawing money abroad. To understand the scale of this problem, we should analyze the results of the most resonant investigations of Ukrainian journalists, and monitor the statements made by profile experts and local control authorities.

Representatives of agrarian sector among the richest people of Ukraine in 2016, source: Forbes Ukraine

«Mriya» Agro Holding. In August 2014, «Mriya» Agro Holding being one of the largest agricultural producers in Ukraine announced its technical default. Then the company had almost 300,000 ha of farming land, exported its agrarian produce to 20 countries worldwide, possessed four elevators for the total of 380,000 tons and issued Eurobonds for the total of USD 400 million. But later it was revealed that the total amount of its debt accounted for USD 1.3 billion. The CEO of Rothschild & Cie Banque in Russia and the CIS, the financial advisor of the Committee of «Mriya» Eurobonds holders Giovanni Salvetti commented on the reasons for the bankruptcy of the giant company as follows: “The company borrowed too much money. It had more debts than it could handle. It’s one of the reasons. Then, the company could provide inaccurate financial data and overstated its profitability in previous periods. If you report higher profitability, you may attract more loans… So, in 2013 «Mriya» reported about 260 million dollars of EBITDA. While actual figures were lower than the reported ones”.

Four years into the announced default of «Mriya» Agro Holding its major lenders haven’t still recovered their losses. To their surprise, in April 2018, Deutsche Welle published a hard-hitting investigation to point at the fact that the family of the former Mriya’s owner Ivan Guta bought the most expensive villa in Germany! «The price of the estate is almost 13 million euros. Chandeliers in Rococo style crown light-filled halls, marble floors radiate the atmosphere of the Palace of Italian nobility. Pretensions of the owner of this Villa have clearly surpassed even the villa of his richest neighbor in Garmisch-Partenkirchen — Russian billionaire Roman Abramovich, who owns the historic Villa Leitenschlöss», the publication states.

In Ukraine Ivan Guta was suspected of withdrawal of more than 200 million dollars from the holding. The previous year he lost the case against extradition to Ukraine, while the Swiss government refused to give him a shelter.

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

Villa Glori, the most expensive villa on the German market, with a cost of 13 million euros, was acquired by the Ukrainian tycoon Ivan Guta, the owner of «Mriya» Agro Holding, according to «Deutsche Welle». Screenshot of Villa Glory, offered by Sotheby’s

Kernel Holding. In November 2017, Transparency International published the results of the investigation supported by the United States Agency for International Development (USAID), which pointed to the fact that the second largest co-owner of Kernel Holding Vitaliy Khomutynnyk (after the Kernel’s founder Andriy Verevskiy) has a conflict of interests. Authors of the investigation claimed that Vitaliy Khomutynnyk combined his work as a Ukrainian MP with lobbying the business interests of Kernel. Here we should admit that the other large owner of Kernel, Andriy Verevskiy, served as a member of Ukrainian parliament four times and today also ranks among the richest Ukrainian businessmen (as well as Vitaliy Khomutynnyk).

In Ukraine, Vitaliy Khomutynnyk is considered a ‘tax guru’. His specialization in the parliament is tax legislation. Also he has significant influence on parliamentary tax committee – the key committee that distributes privileges and subsidies among agrarian producers and companies from other sectors of Ukrainian economy. Experts insist that it was Khomutynnyk who recently initiated the amendments to the Tax Code abolishing VAT refund to small exporters of oil products. According to them, if the ‘Khomutynnyk amendments’ remain in force, in 2018 their losses would amount to USD 230 million while Kernel revenues would increase by 16.7%. This fact is easy to comprehend since Kernel is the largest processor of oil crops in Ukraine and it will obtain direct benefits if other producers would be forced to cut the exports of oil crops and supply them as inexpensive raw materials to Kernel plants instead. Small and medium-size producers greatly suffered from ‘Khomutynnyk amendments’ and in March they even protested against them.

Also, Vitaliy Khomutynnyk is often called a VAT refund specialist: in 2017, for instance, Kernel Holding run by Verevskiy and Khomutynnyk became the leading agrarian company in terms of VAT refund. The company received almost 350 million dollars from the state budget. The VAT refund is traditionally considered as one of the most corrupt businesses in Ukraine – exporters are forced to unofficially pay up to 25-30% of the amount of reimbursed funds to officials that make decisions related to the VAT reimbursement.

The size of the land bank belonging to selected Ukrainian agrarian holdings in 2017, hectares (1 hectare = 2.5 acres):

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

News about current activities of the company (602,500 hectares of land, export supplies to 60 countries, the Warsaw Stock Exchange trade its shares since 2007) also impress with a large number of minor and major legislation violations, for which, as we can see, the company owners are not held accountable.

Here are some stories from Ukrainian media. In February 2018, the Ukrainian police disclosed a scheme of illegal grain exports to the Baltic states and Uzbekistan. It was found out that agricultural products were sold for cash without any taxing and accounting paperwork. This scheme disclosed unlawful activities of elevators managed by “Kernel Trade” and “Nibulon” belonging to another family of agrarian oligarchs, who will be discussed further – the Vadaturskyi family. In December 2017, the State Fiscal Service of Ukraine revealed a criminal transfer of money abroad from Kernel Holding. As the investigation figured out, the scheme was deliberately organized to avoid the prohibition of the National Bank of Ukraine to withdraw foreign currency abroad. It looks like Kernel is going to go on providing new information hooks for Ukrainian media on a regular basis.

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

Gulfstream G280 plane (around 20 million dollars) and Apostrophe yacht (around 21.5 million dollars) in possession of an MP and Kernel shareholder Vitaliy Khomutynnyk

Meanwhile, the well-known Ukrainian journalist Christina Berdinskih calculated that according to official accounting data, in 2011-2014 Khomutynnyk increased his revenues 30 times to become the richest member of Ukrainian parliament in 2015. The people’s deputy owns a private Gulfstream G280 plane worth around USD 20 million and a 40-meter Apostrophe yacht, whose construction under individual request lasted for 5 years. “In autumn 2014, Moran Yacht & Ship offered the Apostrophe for USD 24 million. Sources of Ukrainian magazine “Novoe vremya” insist that it was purchased by Khomutynnyk. However, you will not see this yacht in his official tax declaration since it was registered in the Cayman Islands offshore” – Berdinsky wrote.

Nibulon Company. According to Ukrainian journalists, nowadays this company is the closest to share sad destiny of «Mriya” and only new loans from international financial institutions save it from bankruptcy, as well as tax payment evasion and, as in the Kernel’s case, the lobbying activities of MP Andriy Vadaturskyi, who together with his father Oleksiy owns “Nibulon” and its subsidiaries (82,500 hectares of land, almost 50 vessels, 25 elevator complexes ad terminals on Ukraine’s largest rivers, export supplies to 64 countries, and monopoly in the sphere of river freight transportation).

Market experts claim that the whole history of Nibulon’s economic upswing resulted from the fact that for years the company employed illegal schemes to minimize tax payment on the territory of Ukraine and obtain benefits from every Ukrainian government. A typical example: fake exchange of letters and imposing penalty for allegedly delayed supplies between Vadaturskyi Sr. as the owner of mother company in Ukraine, and Vadaturskyi Jr. as a head of its Swiss subsidiary. As a result of correspondence between two businessmen who actually sat in neighboring rooms of the same office only to establish favorable conditions for money withdrawal, that year Ukrainian Nibulon paid taxes for meager USD 15 million though received the VAT refund for the total of almost 50 million dollars.

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

Agricultural tycoon Oleksiy Vadaturskiy feels fine under the reign of any Ukrainian authority – pictured are his meetings with the former President Viktor Yanukovich and current President Petro Poroshenko

Generally, the owners of Nibulon have always been able to successfully negotiate with Ukrainian authorities. In 2010-2011, which local business recalls as the period of “tightening the screws” by the former Ukraine’s President Viktor Yanukovych, “Nibulon”, for example, managed to get one of the biggest export quotas for supplying agricultural produce abroad. At that time, the distribution of export quotas was usually referred to as the first large-scale corrupt project of the ewsly-elected president Yanukovych, and Ukrainian media wrote a lot about it. In 2010, Nibulon became the largest export supplier of corn (20.7%), the third largest supplier of wheat (9%) and the fourth largest supplier of barley (13.5%). To compare, that year even such international giants as Cargill, Louis Dreyfus, Alfred Toepfer and Soufflet Group enjoyed considerably modest trading opportunities in Ukraine.

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

Volume of allocated export quotas in 2010, thousands tonnes

Under the current government in Ukraine, the relations between Nibulon and Ukrainian high-ranking officials are also quite good. In 2016, Nibulon was the ninth Ukrainian company by the volume of VAT refunding accounting for USD 80 million. In 2017, the company also managed to become one of the ten leading companies with the total VAT refunding of USD 145 million. Ukrainian journalists suspected that Nibulon enjoyed the unhindered VAT refund due to unofficial backing by Vitaliy Khomutynnyk, who used this case to study the activities of Ukrainian agrarian holdings and then decided to purchase a share in Kernel.

The previous year schemes employed by Nibulon were subject to large-scale investigations performed by known Ukrainian journalists. For instance, Ukrainian media have found that Nibulon exported grain to its subsidiaries in Switzerland and the Netherlands at a price of USD 176 per ton, although, to compare with, export price for the state-owned grain equaled USD 213.2 per ton. According to their estimates, the state budget annually lost no less than USD 50 million dollars in taxes due to that price reduction. “It’s a very profitable mode of operation. The company conducts its business through its subsidiaries abroad. When the grain is exported from Ukraine to Switzerland and the Netherlands, its price gets reduced artificially. And when it gets sold by subsidiaries, its price increases accordingly. Often it leads to situation when Ukrainian companies declare the loss, and on the contrary their foreign subsidiaries enjoy good financial performance” – the experts stated.

This observation can be proved with information from open Ukrainian registers: Nibulon insists that its export supplies embrace 64 countries worldwide though open registers show that at first its export supplies are directed solely to the countries where its foreign subsidiaries were founded, namely Switzerland and the Netherlands. However, Nibulon’s work in Switzerland has almost led to another big scandal though Ukrainian media seem to miss it. In 2016, the head of Nibulon subsidiary in Switzerland David Clark was unexpectedly fired after he was mentioned as a head of several other offshore companies belonging to Russian grain traders during the international offshore scandal, known as Panamagate.


The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

The use of a business scheme that allows for transferring money abroad and paying fewer taxes in Ukraine had a profound influence on financial performance of Nibulon. In contrast to Kernel, Nibulon refuses to disclose its financial reporting appealing to the fact that the company is not public. However, the State Fiscal Service has provided reporters with information about the financial performance of the company. It shows that despite the fact that for many years Nibulon’s owner Oleksiy Vadaturskiy ranked among the ten richest Ukrainians, his company remained unprofitable and used to run at a loss. For example, in 2017 the company’s loss exceeded USD 20 million, and the total amount of loans reached USD 360 million. To compare, in 2016 its loans totaled almost USD 100 million – in other words, Nibulon’s indebtedness has been growing. The amount of short-term bank loans in the past year has reached USD 257 million and the volume of long-term loans totaled around USD 217 million. In the recent years, Nibulon borrowed money from the EBRD, the European Investment Bank, Private Export Funding Corp., BNP Paribas, ING Bank, and a number of Swiss and Dutch banks.

In February 2017, StockWorld published the article which stated that Nibulon could be subject to default since it won’t be able to return money to the EBRD. “In 2016, the total amount of Nibulon’s liabilities reached USD 474.3 million. And the amount of current liabilities redeemable during the year reached USD 316.5 million. Another USD 157 million are a long-term debt. While the total proceeds of the company in the first 9 months of 2016 reached meager USD 363 million, that’s all. It should also be noted that in 2014 and 2015 Nibulon showed multi-million loss accompanied by very high proceeds… In 2014, its losses exceeded USD 240 million and were almost 4 times higher than the operating profit. In 2015, the revenues fell two times to USD 540 million while the company’s losses amounted to USD 92 million. Obviously, this financial performance shows that the company is not able to fulfill its short-term loan liabilities and there is a threat of imminent corporate default”, – the journalists admitted.

Perhaps, poor financial performance of Nibulon, among other things, somehow related to the story told by our source at BNP Paribas Bank. The source claimed that several years ago Andriy Vadatursky used the experience of “Mriya” Agro Holding and concealed Nibulon’s losses for the total of USD 100 million. This fact caused the extraordinary meeting of several biggest lenders of the company. They insisted that Vadatursky Jr. should no longer work for Nibulon. Perhaps, this was the reason why Oleksiy Vadaturskiy decided to delegate his son to the Ukrainian parliament – to lead the group of several loyal MPs. To substitute Vadaturskiy Jr., the company hired one of the financial advisors from BNP Paribas.

“Ukrlandfarming” Company (as of 2018, the land bank fell to 570,000 hectares, the second largest elevator facilities in Ukraine – 2.66 million tons, possesses the largest egg-producing holding in Eurasia that successfully underwent IPO at the London Stock Exchange). Recently, the National Bank of Ukraine has calculated that the total debt of Ukrlandfarming shareholder Oleg Bakhmatyuk exceeded USD 1.5 billion. In addition to debts, summoned by his agricultural companies, namely Avangard and Ukrlandfarming, the indebtedness was also accumulated by two affiliated banks – Financial Initiative Bank and VAB Bank that were recognized insolvent. As a result, more than 400,000 depositors lost their money, while the total damage inflicted by Oleg Bahmatyuk on the banking system exceeded USD 500 million.

In addition to the scandals with loans, Oleg Bakhmatyuk caused a number of big international scandals. A few years ago, Bakhmatyuk asked for the loan to construct the poultry factory in Kherson region, but three years later it turned out that this factory had never been constructed, and the money disappeared. In 2012, Bakhmatyuk took a loan under guarantees of the German government to construct another poultry farms in Kherson and Khmelnytskyi regions. This project was put to a halt after 1300 German farmers filed a petition complaining that construction of these factories did not comply with the EU requirements while Bakhmatyuk took European money to receive non-competitive advantages over the European producers. Earlier, Bakhmatyuk acquired two US companies (“Omtron USA” and Townsend) only to make them bankrupt and receive a complaint filed by 130 suppliers of chicken meat from North Carolina, who pointed at non-fulfillment of contract terms under which they were supposed to grow poultry for Bakhmatyuk’s company for three years but lost money instead.

In Ukraine, Oleg Bakhmatyuk employed the same schemes. In 2006-2008, he took a loan for the total of USD 5 million to renew Chornobaivska Poultry Factory and even obtained compensation from the state but failed to erect the facilities mentioned in the project. In 2010, Bakhmatyuk’s Avangard holding issued Eurobonds for the total of USD 200 million and traded them on the London Stock Exchange under guarantees of Avangard’s shares but did not pay off these Eurobonds ever since.

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

Oleg Bakhmatyuk and Viktor Yanukovych

In 2010, Rise Company belonging to Oleg Bakhmatyuk violated the raw materials supply contract and 4 years later was finally forced to pay USD 22 million to compensate for its indebtedness. In 2011, Ukrlandfarming obtained a five-year syndicated loan for the total of USD 600 million granted by Deutsche Bank and Sberbank of Russia aimed at construction of new poultry farms. These funds were used to buy some other agricultural enterprises instead, and Bakhmatyuk failed to pay off this debt. Finally, in 2012-2013, Ukrlandfarming issued Eurobonds worth almost USD 500 million but escaped their pay-off transforming this indebtedness into the debt borne by Financial Initiative and VAB Banks, which subsequently were proclaimed bankrupt.

OJSC Myronivskiy Hliboproduct (30 enterprises, 28,000 employees, 64% of Ukrainian poultry market and 86% of Ukrainian poultry exports, 35% of the company is freely traded on the London Stock Exchange). In 2014, the company’s owner Yuriy Kosyuk was appointed the first Deputy Head of the Administration of the President of Ukraine responsible for military bloc. Today he still has significant influence on the tax committee of Ukrainian parliament – the key committee to ensure smooth performance of his company.

The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

Ace yacht belonging to billionaire Yuriy Kosyuk was mentioned in the investigation made by well-known Ukrainian journalist Sergiy Leschenko

Nowadays he is still doing very well.

“Despite the crisis and the war, the company paid USD 50 million of quarterly dividends to its shareholders. And if you hope that a part of this payment goes to the state budget in the form of taxes, you are completely wrong. Taxes imposed on these funds will be summoned by the state budget of Luxembourg. And taxes imposed on payments made to pay off the Eurobonds issued by Myronivsky Hliboproduct in 2007 on the London Stock Exchange worth 249 million dollars, would back the UK economy. While in Ukraine the company used to report losses, referring to prohibited supplies of poultry meat to the Customs Union and shutdown of its factory in the occupied Shakhtarsk”, the Ukrainian journalists wrote.

Luxurious estate near Kyiv belonging of Yuriy Kosiuk is commonly referred to as Ukrainian Versailles by the Ukrainian media. In 2016, Yuriy Kosiuk became the fifth richest citizen of Ukraine according to Forbes, which estimated his wealth at USD 1 billion.


The Vicious Circle: How Financing From IMF And Other Financial Institutes Feeds Corruption In Ukrainian Agricultural Sector

‘Ukrainian Versailles’ belonging to a billionaire Yuriy Kosiuk, the owner of ‘Myronivskiy Hliboproduct’

Here is a vivid example of how a company can earn using unfair access to budget subsidies. In August, Dariya Kalenyuk, Executive Director and Member of the Board of the Anti-Corruption Action Centre, wrote that Yuriy Kosyuk would be a recipient of a bigger part of USD 130 million, which were additionally allocated to back Ukrainian agrarians after confiscated “Yanukovich money” returned to the state budget-2017.

“It is common knowledge that the biggest part of this money would be given to Kosyuk in the form of subsidies. The governmental decree contains wording specially written to ensure he gets the money. In 2016, under pressure from the IMF, Ukraine cancelled tax privileges for agrarian producers that for many years enjoyed special regime of the VAT payment. According to the IMF statistical data, these privileges cut the annual receipts of the state budget by USD 200-300 million (0.3% of the country’s GDP). When tax privileges were cancelled officials invented direct budget grants. The state told the agroholdings: “Unfortunately, you are forced to pay VAT in full due to the requirements of the IMF, but don’t worry. We’ll give you the budget money in the form of grants, the amount of which will depend on the amount of VAT that you paid”, – wrote Kalenyuk.

Here are the words of another well-known Ukrainian journalist Sergey Leshchenko:

“If you like poultry meat, you probably were a client of the growing monopoly of Yuriy Kosyuk, who received USD 58 million in the form of grants from the state budget-2017. Add the preferential taxation and note that in his possession there are yachts and planes, as well as the palace that even Viktor Yanukovich would be bursting with envy seeing it”.

More to come:

Today Ukraine remains one of the largest recipients of financial aid from international financial institutions. Ukraine receives a lot but even the slightest look at the local news is enough to understand why the donors often complain that the quality of local reforms is extremely low. Following Mriya’s default and scandals with Kernel, Ukrlandfarming and Nibulon it is quite obvious that their activity stipulates great annual losses of the state budget that may constitute billions of dollars. Also it hampers a number of extremely important reforms. Including the land reform since it is more profitable for big agrarian holdings to rent land almost for free rather than purchase it at market price.

Thus, we used such a perspective Ukrainian market as agrarian to show that international financial institutions should urgently consider how they spend their money in Ukraine. The United States and the European governments should enhance control over Ukrainian ability and eagerness to fulfill the requirements of the IMF and organizations that fight corruption. If we stop corruption in Ukraine, both the USA and Ukraine will greatly benefit from it.

In the following publications we will continue to become acquainted with Ukrainian economy – in particular, with its metallurgy and the market for natural gas.

This article, By Robert Lewis, was originally published by WISC24: news from Wisconsin to New York.

Robert Lewis, of WISC24: news from Wisconsin to New York.

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