Prime minister lays the blame for rise in Ukraine's grain prices

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine's Prime Minister Viktor Yanukovych laid responsibility for the recent steep rise in grain prices in the domestic market on several government ministries and asked for the resignation of three oblast chairman during a special Cabinet of Ministers session on July 23.

Meanwhile the Procurator General's Office announced the same day that it had opened some 270 criminal investigations against various grain traders.

Speaking at the start of a session called to address the ongoing agricultural crisis in the country, Mr. Yanukovych called the grain price increases "artificially stimulated" and said that proper diligence by government officials could have averted the situation.

Grain traders blamed

The prime minister laid specific blame on grain traders as well, who he said had thought they could silently "take some cream off the top," with the onset of a grain shortage, but didn't foresee that the matter would become politicized.

"The commercial structures became instruments in the hands of forces opposed to the government openly or in a hidden way," explained Mr. Yanukovych in a statement that tried to portray oppositionist political groups as at least partly responsible for the grain debacle.

"I state today: let those who wish to do so - the political opponents that are content with what they helped to create - express glee with the current situation. I admit that we lost this time. We should not have allowed it to come to this. But I believe that we need to overcome this crisis together," Mr. Yanukovych added.

Ukraine has experienced a sharp rise in prices for wheat and other primary grain commodities after prolonged spring frosts and a bad winter harvest brought to light that the country had insufficient stocks for domestic consumption. The situation was aggravated by the lack of rain in May and June, which has made the outlook for the fall harvest equally pessimistic.

In addition, many stores have kept oatmeal, buckwheat and other grain products off shelves, creating consumer shortages for staple products while anticipating higher prices.

Harvest figures overstated

During an initial investigation ordered by President Leonid Kuchma in February, it was determined that some oblast governors had overstated their harvests from the previous fall by as much as 50 percent. That harvest, officially thought to have been around 40 million tons of grain, at the time was considered the best in 12 years of independence and a sign that the agricultural sector was finally back on its feet.

During a meeting that lasted more than five hours, Prime Minister Yanukovych received support from the Cabinet to call for the dismissal of the Chairmen of Dnipropetrovsk, Poltava and Chernivtsi Oblasts, subject to the approval of President Kuchma. In addition, he fired the director of the State Department of Procurement, the director of the Department of Pricing in the Cabinet of Ministers and several oblast vice-chairmen.

Mr. Yanukovych blamed the State Anti-Monopoly Committee, the Ministry of Agriculture, and the Ministry of the Economy and European Integration for inadequately tracking the situation in the grain market as it developed and failing to find an appropriate remedy before it reached crisis proportions. He warned Vice Prime Minister for Agricultural Affairs Ivan Kyrylenko and Minister of Agricultural Policy Serhii Ryzhuk that their jobs now hang by a thread. He gave them three months to alleviate existing problems with respect to inflated grain prices and grain shortages.

"If we see that they are not able to fulfill their responsibilities, we will make our decision even before October. But let us allow them to correct the situation," said the prime minister.

Threat of more dismissals

Mr. Yanukovych explained that in addition to Dnipropetrovsk, Chernivtsi and Poltava, the oblasts of Sumy, Ivano-Frankivsk and Zaporizhia, and the Autonomous Republic of Crimea had either allowed for the artificial inflation of grain prices or falsified harvest figures and misled government authorities. He warned the chairmen of these regions that they, too, could be dismissed if matters did not improve.

Assistant Procurator General Tetiana Korniakova said during a press conference the same day that the Procurator General's office is pursuing 270 criminal cases associated with the grain crisis. She said the cases involve matters of illegal privatization in the agro-industrial complex, unlawful use of state funds and abuse of authority. She said violations of grain storage laws and procedures for use of state grain reserves also are under investigation. The Ukrainian prime minister said he would pursue all criminal cases to conclusion.

"None of the cases will be dropped," Mr. Yanukovych understored, "especially since law enforcement officials have uncovered that such operations took place with the knowledge of certain local government leaders, regional leaders and, unfortunately, involved some central government officials, as well. By their actions they artificially triggered the panic purchasing of foodstuffs among the population."

Government steps in

In the last weeks the government and the state have taken several steps to improve the situation in the grain market, which has resulted in prices falling somewhat and grain products beginning to reappear on store shelves.

On July 9 the Verkhovna Rada passed a law, signed by President Kuchma on July 22, which freed imported grain commodities from import duties through the end of 2003. Then on July 17 Vice Prime Minister Kyrylenko announced that Ukraine would import about 600,000 tons of grain to tide the country over until the fall harvest is collected. He said the import amounts would remain limited because mid-summer deluges had saved the summer wheat crop.

Market experts disagreed, however. Interfax-Ukraine reported that most maintain that Ukraine will need to import at least 2.5 million tons and more likely 2.8 million tons before the end of the year. Ukraine's domestic demand stands at 6 million to 6.5 million tons, while the Ministry of Agricultural Policy has forecast domestic availability from this year's harvest at 4.5 million to 4.7 million tons.

Last year Ukraine was the world's sixth largest wheat exporter. This year's harvest forecast has been reduced to about 25 million tons.

Copyright © The Ukrainian Weekly, July 27, 2003, No. 30, Vol. LXXI

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