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Ukrainian agro-cooperation prospects with MENA-countries

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The Ukrainian agro-industrial complex (AIC) has been traditional subject of both interest and scare for foreign investors. Despite high-yielding black earth lands, sufficient water resources, agricultural traditions and cheap yet qualified labour force, foreign companies are scared off by corruption and unfavourable business climate.

In addition, ownership of Ukrainian agricultural lands still may not be acquired – the government has not yet adopted the land sale moratorium. However, this does not prevent investors from working under long-term lease schemes, accumulating vast land banks and promptly earning money due to export of agricultural products.
There are at least 15 companies in Ukraine having farmland bank that exceeds 100,000 hectares. These are large latifundia that actively develop both plant production and storage and processing of animal products. As a rule, these are companies where Ukrainian stock prevails. However, even today large western companies, as well as Arabic companies operate both as traders and manufacturers in Ukraine. Such companies have adapted to the Ukrainian reality.
Firstly, it is important to mention NCH company with its headquarters in NY, as well as its regional offices in other countries within the region, in particular, Russia, Latvia and Romania. According to expert assessments this company cultivates 400,000 hectares of Ukrainian land. The Ukrainian Agrarian Investments Company founded by Russian Renaissance Partners Company has land bank of no less significance. This company has approximately 240,000 hectares of land under lease.

Swedish companies are also active market participants. Thus, Alpcot Agro controls 93,000 hectares of Ukrainian land concentrated mostly in the country’s West. In 2012 this Swedish company has focused on maize and wheat production and has harvested thousands of tons of grain and oil crops in 2012. In addition, there are also other Scandinavian participants on the market. Thus, Trigon Agri, with its headquarters in Copenhagen, operating also in Russia and Estonia, controls approximately 55,000 hectares of Ukrainian land, and the world known Swiss Glencore Company grows agricultural products on over 80,000 hectares of land.

French businesses are also among active market participants and one of them is AgroGeneration Company that has control over approximately 52,000 hectares of land. Recently it has decided to merge with the American SigmaBleyzer Company that also invests in the Ukrainian agro-industrial complex. As a result, Ukrainian market will meet a company cultivating approximately 120,000 hectares of the country’s land.

There is also a number of small agricultural enterprises with foreign stock that cultivate few thousands hectares of land. Thus, foreign companies control approximately more than 1 million hectares of high-grade lands while Ukraine has 40 millions of cropland in total. In addition, latifundia being considered large by Ukrainian standards and having land banks exceeding 50,000 hectares of land, controls about 5.5 million hectares of land. The rest of lessees are represented by small companies with performance decreasing every year, which are forced to sell their businesses to larger market players.

It is AIC market consolidation that is the main Ukrainian trend within the last 3-4 years. In 2012, 7 companies have increased their land bank by more than 20,000 hectares by way of purchasing smaller and weaker businesses. The leader is Kernel Company, which specializes in oil crops and has increased its land bank by 120,000 hectares in 2012.

Meanwhile, Eastern companies are only examining the Ukrainian market, first market entry attempts being made by Arabic companies. Their potential interest may be cultivation of more than 1 million of Ukrainian land. However, nowadays they only try to adapt to Ukrainian reality and follow the way of Western corporations.
Interest of Arab companies is easy to understand as Ukraine is one of the serious trade partners for Arab countries supplying grain crops to them. According to the 2011/2012 marketing year results Arab countries are apparent leaders in grain import in total share of Ukrainian export. Thus, their share in export of Ukrainian barley is 87% with fair share of 69% belonging to Saudi Arabia. Ukraine also exports 44% of wheat in these countries, and Egypt is its largest importing country with a 22% share. There is also 41% of maize export falling on Arab countries. The largest export share also falls on Egypt and comprises 26%.

Naturally, under such import performance entry of foreign companies to the production market is only a matter of time as Ukraine fits excellently the national foreign investment strategies to ensure food security.
However, Arab investors are now only beginning their entering the market. Thus, businessmen from UAE expressed their interest in entering the Ukrainian market already during Yushchenko’s presidency; however, these were just talks. At the same time, investors from Saudi Arabia are more decisive. This year consortium of Arab investors including such largest companies as Almarai and Al Rajhi, purchased Continental Farmers Group Company having small land bank in Ukraine and Poland (23.7 thousand hectares and 2.5 thousand hectares of farmland, respectively). It should be noted that, having production capacities in Agypt, Jordan and UAE, Almarai with its specializing in dairy, baking, juice and other types of production markets 65% of its products in Saudi Arabia. In its turn, Al Rajhi has been operating in Ukraine since 2006 through International Investment Co LLC., and is engaged in grain trade.

Ukrainian experience of these companies may become a litmus paper for activation of Arab investors on the market. Such investments have quite many potential stakeholders. Among Saudi Arabic companies one may mention Foras International Investment Co. This company has experience of work in Tatarstan (Russia) and Bosnia and Herzegovina and meanwhile develops AIC direction in African countries such as Mali, Senegal and Sudan. Among UAE companies we may mention Al dahra Agricultural Company as potential investor. This company has subdivisions in Egypt and Pakistan. In addition, governmental Abu Dhabi Fund for Development (ADFD) also is potentially interested in investments in Ukraine. This company has agricultural assets in Morocco, Mauritania, Senegal and Egypt. Among other Qatari companies with potential interest in entering the Ukrainian market we may mention national structure, the Hassad Food Company. This company is an active participant of land and AIC company sale and purchase markets in Pakistan, India, Australia, Turkey, Brazil, Nigeria, Ghana, Sudan, and, what is important for future work in Ukraine – in Russia. Among potential Kuwaiti investors to the Ukrainian AIC one may call Kharafi Group. Food industry is not primary business for this company; however, it has experience of successful work in this direction.

It should be noted that there will be no mass entry to the Ukrainian market of governmental structures from Arab countries which could purchase agricultural business directly as they do in Eastern African countries. In case of large inflow, investments shall be made by investors entering the existing Ukrainian companies with further increase of land bank in case of adaptation to social and economic reality.
There are also many talks in Ukraine about investments from China. However, there are currently no obvious practical steps by Chinese investors towards coming to the agricultural production sector observed.

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Eastern Europe

Unhappy Iran Battles for Lost Influence in South Caucasus

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Events that might not matter elsewhere in the world matter quite a lot in the South Caucasus. Given a recent history of conflict, with all the bad feelings that generates, plus outside powers playing geostrategic games, and its growing importance as an energy corridor between Europe and Central Asia, the region is vulnerable. 

This has been worsened by the two-year-long Western absence of engagement. In 2020, Europe and the U.S. were barely involved as the second Nagorno-Karabakh war broke out between Armenia and Azerbaijan, leaving about 7,000 dead. With tensions now on the rise between Azerbaijan and Iran, Western uninterest is again evident, even though this might have wider ramifications for future re-alignment in the South Caucasus. 

The drumbeat of Iranian activity against Azerbaijan has been consistent in recent months. Iran is getting increasingly edgy about Israel’s presence in the South Caucasus — hardly surprising given Israel’s painfully well-targeted assassination and computer hacking campaigns against nuclear staff and facilities — and especially its growing security and military ties with Azerbaijan, with whom Iran shares a 765km (430 mile) border. Iran has also voiced concern about the presence in the region of Turkish-backed Syrian mercenaries, who were used as Azeri assault troops last year.  

Much of the anger has been played out in military exercises. The Azeri military has been busy since its victory, exercising near the strategic Lachin corridor which connects the separatist region to Armenia, and in the Caspian Sea, where it has jointly exercised with Turkish personnel. Iran, in turn, sent units to the border region this month for drills of an unstated scale. 

This week, the Azeri and Iranian foreign ministers agreed to dial down the rhetoric amid much talk of mutual understanding. Whether that involved promises regarding the Israeli presence or a pledge by Iran to abandon a newly promised road to Armenia was not stated. 

Iran’s behavior is a recognition of the long-term strategic changes caused by the Armenian defeat last year. Iran has been sidelined. Its diplomatic initiatives have failed, and it has been unwelcome in post-conflict discussions. 

It is true that Iran was never a dominant power in the South Caucasus. Unlike Russia or Turkey, the traditional power brokers, it has not had a true ally. Iran was certainly part of the calculus for states in the region, but it was not feared, like Russia or Turkey. And yet, the South Caucasus represents an area of key influence, based on millennia of close political and cultural contacts. 

Seen in this light, it is unsurprising that Iran ratcheted up tensions with Azerbaijan. Firstly, this reasserted the involvement of the Islamic Republic in the geopolitics of the South Caucasus. It was also a thinly-veiled warning to Turkey that its growing ambitions and presence in the region are seen as a threat. In Iran’s view, Turkey’s key role as an enabler of Azeri irridentism is unmistakable. 

Turkish involvement has disrupted the foundations of the South Caucasian status quo established in the 1990s. To expect Turkey to become a major power there is an overstretch, but it nevertheless worries Iran. For example, the recent Caspian Sea exercises between Azerbaijan and Turkey appear to run counter to a 2018 agreement among the sea’s littoral states stipulating no external military involvement. 

The Caspian Sea has always been regarded by Iranians as an exclusive zone shared first with the Russian Empire, later the Soviets, and presently the Russian Federation. Other littoral states play a minor role. This makes Turkish moves in the basin and the recent improvement of ties between Azerbaijan and Turkmenistan an unpleasant development for Iran — fewer barriers to the Trans-Caspian Pipeline threatens the Islamic Republic’s ability to block the project.  

This is where Iranian views align almost squarely with the Kremlin’s. Both fear Turkish progress and new energy routes. The new Iranian leadership might now lean strongly toward Russia. With Russia’s backing, opposition to Turkey would become more serious; Iran’s foreign minister said this month that his country was seeking a “big jump” in relations with Russia. 

The fact is that the region is increasingly fractured and is being pulled in different directions by the greater powers around it. This state of affairs essentially dooms the prospects of pan-regional peace and cooperation initiatives. Take the latest effort by Russia and Turkey to introduce a 3+3 platform with Armenia, Azerbaijan, and Georgia, as well as Iran. Beyond excluding the West, disagreements will eventually preclude any meaningful progress. There is no unity of purpose between the six states and there are profound disagreements. 

Thus, trouble will at some point recur between Iran and Azerbaijan, and by extension Turkey. Given the current situation, and Iran’s visible discontent, it is likely it will take some kind of initiative lest it loses completely its position to Turkey and Russia. 

Author’s note: first published in cepa

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Eastern Europe

Right-wing extremist soldiers pose threat to Lithuania

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It is no secret that Lithuania has become a victim of German army’s radicalization. Could this country count on its partners further or foreign military criminals threaten locals?

It is well known that Germany is one of the largest provider of troops in NATO. There are about 600 German troops in Lithuania, leading a Nato battlegroup. According to Lithuanian authorities, Lithuania needs their support to train national military and to protect NATO’s Central and Northern European member states on NATO’s eastern flank.

Two sides of the same coin should be mentioned when we look at foreign troops in Lithuania.

Though Russian threat fortunately remains hypothetical, foreign soldiers deployed in the country cause serious trouble. Thus, the German defence minister admitted that reported this year cases of racist and sexual abuse in a German platoon based in Lithuania was unacceptable.

Members of the platoon allegedly filmed an incident of sexual assault against another soldier and sang anti-Semitic songs. Later more allegations emerged of sexual and racial abuse in the platoon, including soldiers singing a song to mark Adolf Hitler’s birthday on 20 April this year.

It turned out that German media report that far-right abuses among the Lithuania-based troops had already surfaced last year. In one case, a soldier allegedly racially abused a non-white fellow soldier. In another case, four German soldiers smoking outside a Lithuanian barracks made animal noises when a black soldier walked past.

Lithuania’s Defence Minister Arvydas Anušauskas said later that the investigation was carried out by Germany and that Lithuania was not privy to its details. The more so, Lithuania is not privy to its details even now. “We are not being informed about the details of the investigation. […] The Lithuanian military is not involved in the investigation, nor can it be,” Anušauskas told reporters, stressing that Germany was in charge of the matter.

Ms Kramp-Karrenbauer, German defence minister, said that these misdeeds would be severely prosecuted and punished. Time has passed, and the details are not still known.

It should be said Germany has for years struggled to modernize its military as it becomes more involved in Nato operations. Nevertheless problems existed and have not been solved yet. According to the annual report on the state of the Bundeswehr made in 2020 by Hans-Peter Bartel, then armed forces commissioner for the German Bundestag, Germany’s army “has too little materiel, too few personnel and too much bureaucracy despite a big budget increase.” Mr Bartels’ report made clear that the Bundeswehr continues to be plagued by deep-seated problems. Recruitment remains a key problem. Mr Bartels said 20,000 army posts remained unfilled, and last year the number of newly recruited soldiers stood at just over 20,000, 3,000 fewer than in 2017. The other problem is radicalization of the armed forces.

Apparently, moral requirements for those wishing to serve in the German army have been reduced. Federal Volunteer Military Service Candidate must be subjected to a thorough medical examination. Desirable to play sports, have a driver’s license and be able to eliminate minor malfunctions in the motor, to speak at least one foreign language, have experience of communicating with representatives of other nationalities, be initiative and independent. After the general the interview follows the establishment of the candidate’s suitability for service in certain types of armed forces, taking into account his wishes. Further candidate passes a test on a computer. He will be asked if he wants study a foreign language and attend courses, then serve in German French, German-Dutch formations or institutions NATO.

So, any strong and healthy person could be admitted, even though he or she could adhere to far-right views or even belong to neo-Nazi groups. Such persons served in Lithuania and, probably, serve now and pose a real threat to Lithuanian military, local population. Neo-Nazism leads to cultivating racial inequalities. The main goal of the neo-Nazis is to cause disorder and chaos in the country, as well as to take over the army and security organs. Lithuanian authorities should fully realize this threat and do not turn a blind eye to the criminal behaviour of foreign military in Lithuania. There is no room to excessive loyalty in this case.

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Eastern Europe

Lithuanian foreign policy: Image is everything

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It seems as if Lithuanian government takes care of its image in the eyes of EU and NATO partners much more than of its population. Over the past year Lithuania managed to quarrel with such important for its economy states like China and Belarus, condemned Hungary for the ban on the distribution of images of LGBT relationships among minors, Latvia and Estonia for refusing to completely cut energy from Belarus. Judging by the actions of the authorities, Lithuania has few tools to achieve its political goals. So, it failed to find a compromise and to maintain mutually beneficial relations with economic partners and neighbours. The authorities decided to achieve the desired results by demanding from EU and NATO member states various sanctions for those countries that, in their opinion, are misbehaving.

Calling for sanctions and demonstrating its “enduring political will”, Lithuania exposed the welfare of its own population. Thus, district heating prices will surge by around 30 percent on average across Lithuania.

The more so, prices for biofuels, which make up 70 percent of heat production on average, are now about 40 higher than last year, Taparauskas, a member of the National Energy Regulatory Council (VERT) said.

“Such a huge jump in prices at such a tense time could threaten a social crisis and an even greater increase in tensions in society. We believe that the state must take responsibility for managing rising prices, especially given the situation of the most vulnerable members of society and the potential consequences for them. All the more so as companies such as Ignitis or Vilnius heating networks “has not only financial resources, but also a certain duty again,” sums up Lukas Tamulynas, the chairman of the LSDP Momentum Vilnius movement.

It should be said, that according to the Lithuanian Department of Statistics, prices for consumer goods and services have been rising for the eighth month in a row. According to the latest figures, the annual inflation rate is five percent.

Earlier it became known that in 2020 every fifth inhabitant of Lithuania was below the poverty risk line.

Pensioners are considered one of the most vulnerable groups in Lithuania. In 2019, Lithuania was included in the top five EU anti-leaders in terms of poverty risk for pensioners. The share of people over 65 at risk of poverty was 18.7 percent.

In such situation sanctions imposed on neighbouring countries which tightly connected to Lithuanian economy and directly influence the welfare of people in Lithuania are at least damaging. The more so, according Vladimir Andreichenko, the speaker of the House of Representatives of the Belarus parliament, “the unification of the economic potentials of Minsk and Moscow would be a good response to sanctions.” It turned out that Lithuania itself makes its opponents stronger. Such counter-productiveness is obvious to everyone in Lithuania except for its authorities.

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