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Cultivating Ties: Ukraine Feeds China's Growing Appetite For Crops

  • Tony Wesolowsky

Ukraine shipped nearly 1 million tons of corn to China in 2014. Officials say they want to double that amount this year. (file photo)

Ukraine shipped nearly 1 million tons of corn to China in 2014. Officials say they want to double that amount this year. (file photo)

For years, the United States was China’s main source of corn. Not anymore.

In January 2015, Ukraine shipped 470,047 tons of corn to China, overtaking the United States, according to official customs data.

Ukraine shipped nearly 1 million tons of corn to China in 2014, and officials said in July that they want to double that amount this year.

For Ukraine’s flat-lined economy, its agricultural sector has provided a much-needed jolt of life.

The 16-month-long conflict with pro-Russian separatists in the east has not only cost more than 6,400 lives, but left much of the heavy industry there either shuttered or operating at less than full steam. Overall, the economy shrank nearly 7 percent last year and is projected to do even worse in 2015. The country’s currency, the hryvnya, has dropped more than 70 percent against the U.S. dollar since early 2014.

Despite that, Ukraine’s total crop production in 2014 reached 63 million tons, a post-Soviet record, and agricultural officials are hoping to come close to that this year.

The bumper crops should come as no surprise for a country once dubbed Europe’s “breadbasket” due to the bountiful harvests cultivated on fertile lands known as “black soil.” Ukraine has about 32 million hectares of arable land, about one-third as much as in the entire European Union.

This has officials in Beijing salivating.

Ukraine fits into China’s plans to diversify its agricultural imports, according to Fred Gale, a senior economist at the U.S. Department of Agriculture.

“One of its key strategies has been to diversify its sources of corn imports because China has been importing almost exclusively from the United States," Gale told RFE/RL in a telephone interview.

China is the world’s second-biggest consumer of corn, which Beijing needs mainly to feed livestock as the Chinese population’s appetite for a Western diet -- including lots of meat -- grows.

And the Ukrainians have eagerly stepped forward.

In November 2013, UkrLandFarming -- Ukraine’s biggest agribusiness, owned by Oleh Bakhmatyuk -- stated that it hoped to sell up to 700,000 tons of corn to China that season and reach exports to China of 2 million tons per year by 2018.

Aivaras Abromavichus, Ukraine's minister of economic development and trade

Aivaras Abromavichus, Ukraine's minister of economic development and trade

Ukraine is also a piece of Beijing’s grander puzzle to develop a new trade route from China to Europe, according to Gale.

"China has a strategy to raise its profile in global economics and politics. Part of that is its new Silk Road or also known as ‘One Belt, One Road’ strategy. And that involves strengthening economic relations with various countries between China and Europe, including Ukraine,” he said.

In 2011, Beijing declared a Sino-Ukrainian strategic partnership, and a year later, in September 2012, Kyiv signed a $3 billion loan with the Export-Import Bank of China. Dubbed “loan-for-crops,” the deal guaranteed Ukraine a line of credit in exchange for part of the country’s corn harvest for a period of 15 years.

In November 2013, Beijing declared its ambitious intention to rent and farm 5 percent of Ukraine’s land. A moratorium on the sale of land in Ukraine is set to expire on January 1, 2016. The ban, however, has not stopped foreign-owned companies from tilling the soil there. For example, Kernel Holding S.A., based in Luxembourg, farms 405,000 hectares of land in Ukraine under lease agreements.

Beijing’s interest in Ukraine extends beyond its farmland.

In March, China lent Ukraine $15 billion over 15 years for housing construction to revive Ukraine’s collapsing real estate market.

That same month, Ukrainian Economic Development and Trade Minister Aivaras Abromavichus said China was interested in investing in Ukraine’s information technology, or IT, sector. A few months later, in July, a first-ever China-Ukraine forum on science and technology was announced.

Beijing’s closer ties with Kyiv may not sit well in Moscow, which has been hit with sanctions by the United States, the EU, and other Western nations over its support for the pro-Russian rebels in eastern Ukraine and its annexation of the Ukrainian peninsula of Crimea.

Amid his growing isolation in the West, Russian President Vladimir Putin has turned to China for support -- both on the geopolitical stage and as a trade partner and purchaser of Russian energy.

But one of the limitations of Putin’s eastward pivot is that China is pursuing economic footholds in many neighbors of Russia, regardless of the tone of their ties with Moscow, and is only willing to go so far to please the Kremlin.

That does not mean Ukraine will eclipse Russia in the eyes of China, however.

John C.K. Daly of the Jamestown Foundation in Washington writes that “China’s budding economic ties with Ukraine are most likely to always take second stage to its relations with Russia.”

And the trade figures seem to support him.

Annual trade between Russia and China is worth some $100 billion, while trade with Ukraine amounts to $10 billion.