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Cablegate: Ukrainian Govt Lifts Quotas On Grain Exports

VZCZCXRO7673
PP RUEHLN RUEHVK RUEHYG
DE RUEHKV #0807 1160237
ZNR UUUUU ZZH
P 250237Z APR 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 5435
INFO RUEHRC/USDA WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE

UNCLAS KYIV 000807

SIPDIS

SIPDIS
SENSITIVE

TREASURY FOR ALIKONIS
DEPT PLS PASS USTR FOR CKLEIN/PBURKHEAD/EPORTER
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK
USDA/FAS/OCRA FOR JFLEMINGS/DADAMS
USDA/FAS/OGA FOR ROMEARA/JLAGOS
USDA/FAS/PECAD FOR MLINDEMAN

E.O. 12958: N/A
TAGS: ETRD EAGR WTRO UP
SUBJECT: UKRAINIAN GOVT LIFTS QUOTAS ON GRAIN EXPORTS

REFS: A) 2007 KYIV 2500

B) 2007 KYIV 1790

Treat as Sensitive but Unclassified. Not for Internet.

1. (U) Summary: The GOU announced an end to grain export
restrictions, long a sore spot for grain traders and WTO
members, on April 23. The GOU also announced a relaxation
of restrictions on sunflower oil, although quotas on
sunflower oil and seeds do remain in place. The move was
likely in part to satisfy trading partners ahead of
Ukraine's accession to the WTO in May. End Summary.

2. (U) Prime Minister Yuliya Tymoshenko announced at a
press conference on April 23 that her government had
decided to lift the country's grain export restrictions,
effective immediately. (Note: The previous government
first introduced restrictions on grain exports in September
2006, with modifications to the quotas subsequently put
into place (reftels). End note.) Tymoshenko said that
expectations of a robust grain harvest had made the
decision possible.

3. (U) The GOU also announced its decision to relax
restrictions on exports of sunflower oil, increasing the
quota from 300,000 tons to 500,000 until July 1. Quotas on
sunflower seeds remain at 1,000 tons, however.

Comment: Just in Time for WTO Accession
---------------------------------------

4. (SBU) The GOU decision came just weeks before Ukraine's
scheduled entry into the WTO on May 16. The GOU had
repeatedly promised WTO members that Ukraine would
eliminate the grain export restrictions by the time of
accession, and lead WTO negotiator Valeriy Pyatnytskiy had
pushed hard within the GOU for adherence to this
commitment. (Note: Sunflower oil/seed restrictions came
into effect only after accession negotiations had
concluded. End note.) There was probably also pressure as
much of Ukraine's grain storage is full and farmers would
face huge problems if there was no storage available for
this year's crop. Skyrocketing world food prices,
coinciding with Ukraine's own inflation problems, will
continue to put pressure on the GOU to do something about
food prices, however. Because export restrictions are
easier to introduce than structural reforms, it is quite
possible that the GOU could seek to reintroduce grain
export quotas sometime in the future, although there is no
talk of this for the moment. At least by that time the GOU
will have to answer to the WTO for such action. (Note:
Post will report septel on the broader effects of rising
world food prices on Ukraine. End note.) End comment.

TAYLOR

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