Cablegate: Ukrainian Land Sale Moratorium Ends, But

VZCZCXRO9418
RR RUEHIK
DE RUEHKV #0068 0151347
ZNR UUUUU ZZH
R 151347Z JAN 10
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 9120
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS KYIV 000068

SIPDIS

STATE FOR EUR/UMB, EEB/TPP/MTAA/ABT, COMMERCE FOR CLUCYK

E.O. 12958: N/A
TAGS: ECON EAGR UP
SUBJECT: UKRAINIAN LAND SALE MORATORIUM ENDS, BUT
TRANSACTIONS REMAIN BLOCKED

REF: KYIV 2172

1. (U) Summary. President Yuschenko vetoed a bill that would
have extended the moratorium on the sale of agricultural land
through the end of 2011, allowing the ban to expire on
January 1, 2010. As in past years, parliament is expected to
make a strong push to overturn the veto. However, even
should the moratorium end, free-market trading of
agricultural land will still have to wait until a land
registry (cadastre) law and a land market regulation law are
passed. The lack of reform in the sector will continue to
severely restrict what should be one of Ukraine's leading
sectors, as reported in reftel. End summary.

2. (U) On December 29, 2009, President Yuschenko vetoed a
measure, approved by the Verkhovna Rada (Ukraine's
parliament) on December 22, 2009, that would have extended
the moratorium on the sale of agricultural land another two
years past its pre-set expiration date of January 1, 2010.
He justified the veto by arguing that the extension would
create further opportunities for corruption and abuse in the
land market, and further slow Ukraine's agricultural
development.

3. (U) This marks the third time Yuschenko has vetoed
extensions of the moratorium. On December 31, 2006, he
vetoed a measure extending the moratorium to January 1, 2008,
but parliament overturned the veto on January 12, 2007. A
later measure extended the moratorium to January 1, 2010.
Yuschenko vetoed this legislation as well, but parliament
overturned it on March 4, 2009. Parliament has 30 days in
which to vote to overturn Yuschenko's latest veto. On
January 5, 2010, Speaker of Parliament Volodymyr Lytvyn
announced his intention to secure the votes to push the
extension of the moratorium through.

4. (U) Staunchly opposed to the free trade of agricultural
land, Speaker Lytvyn echeos the fears of Ukrainians who
believe that unrestricted sale of land would benefit only
those who have purchased land on the black market and want to
legalize their holdings, and that the free market for
agricultural land would be dominated by ultra-wealthy
speculators seeking to buy land as an investment, pricing
Ukrainian family farmers out of the market.

5. (SBU) Comment. Given Yuschenko's dismal level of
political and popular support, it is highly likely that
parliament will once again overturn his veto and extend the
moratorium to January 1, 2012. Even should Lytvyn's override
attempt fail, the required cadastre and market regulation
laws do not have significant support in Parliament and are
unlikely to be enacted in the foreseeable future.
Unfortunately, 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 curently makes up less than 7% of Ukraine's GDP.
TEFFT

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