VZCZCXRO1764
RR RUEHIK
DE RUEHKV #2172/01 3550732
ZNR UUUUU ZZH
R 210732Z DEC 09 ZDK
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 9003
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHZG/NATO EU COLLECTIVE
RUCNCIS/CIS COLLECTIVE

UNCLAS SECTION 01 OF 03 KYIV 002172 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/UMB, EEB/TPP/MTAA/ABT 
COMMERCE FOR CLUCYK 
 
E.O.: 12958: N/A 
TAGS: ECON EAGR UP
SUBJECT: UKRAINE: NO END IN SIGHT TO LAND SALE MORATORIUM 
 
KYIV 00002172  001.2 OF 003 
 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1.  (U) Summary.  Agricultural land in Ukraine cannot be traded 
legally for farming or development due to a moratorium on 
agricultural land sales.  However, major market investors have used 
loopholes to bypass the moratorium and convert usable arable land 
for housing and commercial development.  With presidential elections 
fast approaching, none of the candidates have fully addressed how 
the moratorium on agricultural land sales could be lifted. The 
inability to legitimately sell agricultural land not only limits 
investment in the land but holds back the development of Ukraine's 
agricultural sector, which currently makes up less than 7% of 
Ukraine's GDP. Since Ukraine is home to close to 1/4 of the world's 
fertile "black soil", Ukraine's potential agricultural output is 
clearly much greater and would likely grow if reforms were 
successfully carried out. End Summary. 
 
--------------------------------------------- 
99% of Private Land in Ukraine Cannot Be Sold 
--------------------------------------------- 
 
¶2.  (U) Although close to 95% of Ukrainian land has been titled, 99% 
of Ukraine's privately held land is zoned for agricultural uses and 
cannot be sold or purchased due to a sales moratorium that was 
introduced in 2005.  This provisional moratorium states that no 
agricultural land shall be sold before both a national land registry 
(the so-called cadastre) law and a land market law are passed and 
come into force.  Establishing a national land registry is no simple 
task: at present, there are a number of different real estate 
registries in Ukraine.  Some of these registries give technical 
information about agricultural land while others list buildings on 
the land.  These registries are also supplemented by a registry of 
deeds, registry of mortgages, and other similar registries. 
Furthermore, different government agencies control the registries; 
the State Committee on Land Resources administers the land registry 
and the Ministry of Justice is responsible for the building 
registry. 
 
¶3. (U) Along with the moratorium on agricultural land sales, an 
individual or corporation is allowed to own no more than 100 
hectares of agricultural land.  Given that effective modern farming 
requires larger plots of land, both the moratorium and the plot size 
limitations restrict Ukraine's agricultural output. At this moment, 
land leasing remains the only option for investors who want to 
operate large-scale agricultural businesses in Ukraine. 
 
-------------------------------------- 
Land Registry Draft Law Rejected Again 
-------------------------------------- 
 
¶4. (U) Recent attempts to pass a law on a unified land registry 
failed again on November 17.  The drafters of a bill had hoped to 
build a legal basis for land-registration, create a national land 
registry, and improve land ownership rights by binding rights to the 
official registration of the land.  However, critics of the bill, 
including President Yushchenko, noted that it did nothing more than 
duplicate existing national real estate registries.   The President 
also expressed his concern that the draft law contravened the 
interests of the state and its citizens, while its provisions 
contradicted the constitution and the land code.  According to the 
President, the bill also duplicated other functioning government 
real estate registries. 
 
--------------------------------------------- ------ 
Failed World Bank Attempt at National Land Registry 
--------------------------------------------- ----- 
 
¶5. (U) Ukraine has seen other attempts at land reform fail.  For 
example, Ukraine created a Committee on State Land Cadastre (CSLC) 
which has not been able to fulfill its primary goal of creating a 
functioning, automated land registry system.  During the first four 
years of its operation, CSLC, which was supported by a World Bank 
loan of $8.5 million for the creation of land registry, made little 
progress.  Given the difficult progress, the World Bank had to 
restructure the project and its funding in order to ensure that its 
targets could be achieved before 2012, the original project 
completion date. 
 
--------------------------------------------- --------- 
Land Moratorium Reflects Paranoia about Losing Control 
--------------------------------------------- --------- 
 
¶6. (SBU) The moratorium on land sales reflects paranoia among the 
ruling class in Ukraine, according to Max Fedorchenko, Director of 
Kyiv NGO Center for Land Reform.  Some fear that foreigners would 
 
KYIV 00002172  002.2 OF 003 
 
 
"scoop up" Ukraine's fertile land and that the benefits of its use 
would not be fully realized by Ukrainians themselves.  Others have 
found ways to work around the system and are benefitting from the 
sales moratorium by being able to have access to and pay less for 
land use than what most would expect to pay should the moratorium be 
lifted. 
 
¶7. (U) There is little political appetite to tackle this difficult 
question in the near term.  In fact, the Cabinet of Ministers 
extended the total ban on sales of agricultural land, including land 
plots for gardening in Draft Law #3353 "On Immediate Measures for 
Prevention of Negative Aftermaths of Financial Crisis and on 
Introducing Changes into Some Laws" in early 2009.  The law is still 
being implemented despite a December 1 Constitutional Court ruling 
of its unconstitutionality.  Embassy contacts speculate that the 
moratorium is unlikely to be lifted for several years. 
 
--------------------------------------------- ------- 
Top Presidential Candidates Silent on Lifting Moratorium 
--------------------------------------------- ------- 
 
¶8. (SBU) Top candidates in the upcoming presidential elections have 
largely been silent on the issue of land reform or the lifting of 
the moratorium.  According to Fedorchenko, leading presidential 
candidate Yanukovych and his Party of Regions (PoR) are thought to 
be the least likely to lift the moratorium as his chief supporters 
are Ukrainian business oligarchs who profit from the current system. 
 Lifting the moratorium would mean allowing competition in the 
agricultural sector, rising land prices, and would require greater 
business transparency.  PoR understands the issue is important for 
Ukraine's small landholders, however, and PoR Shadow Minister 
Akimova told econoffs on December 3 that her party favored lifting 
the moratorium.  She purported that Yanukovich would move to put in 
place a national registry and lift the moratorium within a year of 
being elected. 
 
¶9. (SBU) PM Tymoshenko has said little about the moratorium on the 
campaign trail.  Center for Land Reform Fedorchenko referred to her 
program as being "in her head".  She decides on her policy "as it 
happens", so the land reform issue may be addressed by her when a 
specific situation comes up but not during the presidential 
campaign. 
 
¶10. (SBU) President Yushchenko is the only candidate, says 
Fedorchenko, who would like to see an open and transparent land 
market in Ukraine.  His attempts at securing Ukrainians' full rights 
to land ownership, including the right to trade privately-owned 
land, have been thwarted regularly by parliamentary and government 
forces opposed to opening up of the market.  In December, the 
President vetoed the law on eminent domain but his veto was 
overridden by the parliament, which may open the door for shadow 
land transactions. 
 
¶11. (U) Speaker of the Verkhovna Rada (Ukraine's parliament) and 
presidential candidate Lytvyn, in a meeting in western Ukraine, 
expressed his opposition to lifting the moratorium.  He said it 
would lead, in his opinion, to attempts at legalization of land 
holdings obtained illegally under the moratorium.  He also said the 
issue of land sales is not top priority because there are other 
pressing land issues -- such as inventorying land, valuation, 
establishment of a state land bank, and creating a national land 
registry.  Moreover, Lytvyn strongly opposed the idea of selling 
land to foreigners, who cannot purchase agricultural land in Ukraine 
under existing laws. 
 
--------------------------------------------- ---- 
Lack of Public Support for Transparent Land Market 
--------------------------------------------- ----- 
 
¶12. (U) In addition to the lack of interest among politicians, 
numerous public opinion surveys confirm the lack of a pro-market 
majority in Ukrainian society.  A case in point is Crimea, where a 
USAID land titling project met with obstacles from a number of small 
farmers reportedly uninterested not only in obtaining land titles 
but even in having their land plots surveyed.  These farmers felt 
that once their rights were on paper, their property would be 
officially disclosed, which would make it easier for other 
individuals to challenge their rights. 
 
¶13. (U) Recently, the NGO Center for Land Reform wanted to file a 
case with the European Court for Human Rights to claim that the 
moratorium was in violation of the European Convention on Human 
Rights and Fundamental Freedoms.  Unfortunately, the NGO could not 
find a Ukrainian individual who was willing to file such a claim 
based on their own land title and the inability to sell their land. 
 
KYIV 00002172  003.2 OF 003 
 
 
Those that have land do not want reform, they have already 
benefitted from the current scheme; politicians hesitate to take 
land reform decisions because there appears to be no social demand 
for such changes. 
 
-------- 
Comment 
-------- 
 
¶14. (SBU) Since Ukraine first legalized private land ownership soon 
after its 1991 independence, endless debates over the land code and 
land market have stalled agriculture investment.  Such quarrels have 
benefitted the well-connected who skirt the moratorium, but hurt 
Ukraine overall.  Ukraine, which generated 1/4 of the Soviet Union's 
agricultural output, is clearly not living up to its potential in 
this area.  Until the national land registry and land market are 
established, Ukraine will not reap the benefits of the country's 
arguably richest resource. 
 
TEFFT