By Andre Damon, World Socialist Website, 7/25/23

Since January of this year, the New York Times has published dozens of articles claiming that Ukraine’s “spring offensive” would be a decisive turning point in the war with Russia. But this offensive, now six weeks old, has turned into a debacle. While Ukrainian forces have nowhere breached Russia’s main defensive line, tens of thousands of troops have died.

This is the context in which the New York Times published and quickly edited an article presenting a realistic, and therefore nightmarish, depiction of the Ukrainian troops as little more than cannon fodder, “forced into action” to face almost certain death.

Buried on page A9 and not referenced on the front page of the print edition, the extensive and detailed report on Ukraine’s offensive was titled, “Depleted Troops, Unreliable Munitions: Kyiv’s Obstacles in the East.” It included a sub-headline describing the offensive as a “grisly stalemate.”

With equally little notice, that article had been published online the day before under the title, “Weary Soldiers, Unreliable Munitions: Ukraine’s Many Challenges.”

The article presented Ukraine’s offensive as a bloody debacle, in which Ukrainian forces have suffered massive casualties, who are then replaced with older recruits who are “forced” to fight.

The article documented three new, previously undisclosed revelations:

-There exists a unit in Ukraine with a “200 percent” casualty rate, meaning that all of its members were killed or injured, then replaced with recruits, all of whom were killed or injured.

-The munitions provided to Ukraine are often so old that they regularly misfire or accidentally detonate, injuring soldiers.

-After young troops are killed in combat, they are typically replaced with much older people, a sign that Ukraine is running out of fighting-age troops.

Typically, a journalist who uncovered these facts based on firsthand reporting would proclaim each of them a “scoop” and take to Twitter to publicize them.

But the method of the New York Times is that of the “buried lede”–to take these potentially explosive revelations and stick them in an article on the inside pages, which is quickly removed from the newspaper’s online front page.

In this case, however, merely burying these revelations was insufficient. It was necessary to erase them.

The first snapshot of the article was captured by archive.org at 5:32 a.m. Eastern Time. Over the ensuing 24 hours, a series of major changes was implemented, with no public notice, in which all three of the facts presented above were effaced.

The initial version of the article published online contained a paragraph stating that Ukraine was achieving “small territorial gains” at an “outsize cost.” It continued with the following quote:

“We’re trading our people for their people and they have more people and equipment,” said one Ukrainian commander whose platoon has suffered around 200 percent casualties since Russia launched its full-scale invasion last year.

This paragraph was revised as follows:

“We’re trading our people for their people, and they have more people and equipment,” said one Ukrainian commander whose platoon has suffered around [sic] heavy casualties since Russia launched its full-scale invasion last year.

In this case, “200 percent” was replaced with “heavy,” (albeit in such a hasty manner that the preceding word, “around,” remained). In the Battle of Normandy, in which 156,000 Allied soldiers landed on the beaches, approximately 10,000, or 6 percent, were killed or injured in what would typically be described as “heavy” casualties.

By contrast, the original language in the Times article implied that the entire unit was killed or wounded, then replaced, and the entire replacement unit was killed or wounded again.

This is a jaw-dropping figure, perhaps totally unheard of since the First World War, if even then. Rather than explaining it, the Times simply expunged it from the record, never to be seen again by readers of the Times.

The modifications continued. The next (literally) explosive revelation in the article was the statement that the munitions being sent to Ukraine, often to clear out expiring stockrooms for the imperialist powers, would regularly explode as Ukrainian troops were handling them. The article originally read as follows:

“Ammunition, as always, is in short supply, and there is a mixture of munitions sent from different countries. That has forced Ukrainian artillery units to use more ammunition to hit their targets, since accuracy varies widely between the various shells, Ukrainian soldiers said. In addition, some of the older shells and rockets sent from abroad are damaging their equipment, and injuring soldiers. ‘It’s a huge problem,’ said Alex, a Ukrainian battalion commander.”

The last sentence was modified to read as follows:

“In addition, some of the older shells and rockets sent from abroad are damaging their equipment and injuring soldiers. ‘t’s a very big problem now,’ said Alex, a Ukrainian battalion commander.”

An excerpt of the Times article, showing additions in green and deletions in red.

Modern artillery munitions typically have a shelf life of 10 to 15 years. After that time, it becomes hazardous to operate these munitions, which are prone to misfires and accidental detonations.

The rate at which “older” and possibly expired munitions misfire and accidentally detonate is, apparently, a “huge” problem for Ukrainian troops. At least it was, until the problem was downgraded to “very big” by the Times editors, again without explanation.

The article continued:

“But other Ukrainian formations elsewhere on the front have had trouble filling their ranks with the caliber of soldiers capable of carrying out successful trench attacks, given that months of fighting have exhausted their ranks. New replacements are often older recruits who were forced into action.”

This article replaces this line with the following:

“But other Ukrainian formations elsewhere on the front have had trouble filling their ranks with the caliber of soldiers capable of carrying out successful trench attacks, given that months of fighting have exhausted their ranks. New replacements are sometimes older recruits who were mobilized.”

Instead of replacements for the troops that were killed being “often” older recruits, they are now “sometimes” older recruits. Moreover, instead of being “forced into action,” the troops are now “mobilized.”

The following paragraph gives context to what is being described:

“How can you expect a 40-year-old to be a good infantry soldier or machine-gunner?” asked the Ukrainian commander whose platoon had taken dozens of casualties. Youth not only means better physical prowess, but younger soldiers are less likely to question orders.

In other words, it is “often” the case that the soldiers “forced into action” are close to middle-age and, moreover, “question orders” when they are told to carry out suicidal attacks.

The changes to this article are a microcosm of US media reporting on the war. The horrendous, bloody debacle of the war in Ukraine is systematically sanitized, with certain topics clearly taboo and in many cases completely expunged from the media.

To cite just one example, a search for the term “Ukraine conscription” in the publicly accessible AP news image database returns only five results, all of them dealing with conscription in Russia.

Even though Ukraine has its entire prime-age population under arms, the US media seems to have an internal code that does not allow these images of recruitment and mobilization to be transmitted to the population.

Just one month ago, Times columnist Bret Stephens mused of the offensive bringing a “crushing and unmistakable defeat” for Russia, while Washington Post columnist Max Boot quoted General David Petraeus as stating that he expected “the Ukrainians to achieve significant breakthroughs and accomplish much more than most analysts are predicting.”

It has produced something else: A nightmare on the scale of the First World War, in which whole units are wiped out, replaced with conscripts, then wiped out again, then told to assault well-defended trenches.

In September of last year, the World Socialist Web Site characterized the growing calls in the US media and political establishment for Ukrainian forces to go on the offensive against well-defended Russian trenches as follows:

“Human life means nothing to the Washington warmongers or their stooges in Kiev. … The lives of Ukraine’s youth, many of them conscripted, are being squandered, mere cannon fodder, or to use the phrase favored by Leo Tolstoy, ‘cannon meat.’”

These warnings have been horrifyingly confirmed.

The Bell, 7/29/23

The war in Ukraine is woven into the fabric of public life in Russia

Russia’s war in Ukraine is already in its 17th month. In that time, President Vladimir Putin has clearly demonstrated that he is not bothered by losses — whether they be financial, material, or human. His war will go on as long as he needs. And, judging by how the authorities have woven the so-called “special military operation” into Russian life, that will be a long time. The government has cash reserves and policy options (such as tax hikes) that mean the current level of military expenditure can be maintained. Putin has not unveiled a coherent plan for “eternal war,” but the Russian parliament has recently passed many laws that institutionalize the war; making it ever-present in day-to-day life.

Wartime legislation

This week, before it went into holidays, the State Duma greenlighted a whole series of amendments to the law on military service. Most of these were only published hours before they were passed (a tactic deputies typically use when they want to prevent a public outcry). “This law has been written for a major war, for general mobilization,” said Andrei Karatonov, head of the State Duma’s defense committee.

Perhaps the most significant change was an extension of the age at which men can be conscripted for military service. Now, young people aged between 18 and 30 can be called up for military service, not just those aged between 18 and 27 (as it had been since Soviet times). This comes into force next year (legislators said that anyone turning 27 before the New Year will not be affected — however, the law itself does not state this).

In addition, failing to report to a recruitment office or provide up-to-date personal information to the military authorities can now be punished with much higher fines. And there will be tougher penalties for organizations that try to help employees avoid the draft.

Interestingly, these amendments were not unanimously supported by Duma deputies, notices independent journalist Farida Rustamova. Some even voted against — a rare occurrence when it comes to major political initiatives.

This week’s changes follow legislation passed earlier this year that means, as soon as call-up papers are issued (i.e. included in an online call-up register), men will face restrictions on leaving Russia. Being unaware of the call-up does not relieve a conscript of responsibility. Draft dodgers can be hit with limits on acquiring real estate and cars, as well as huge fines.

Other significant laws added to the statute books in recent weeks include those on military companies, which governors can now create in their regions on the president’s behalf (during periods of mobilization and martial law). Rosgvardia, Russia’s National Guard, is obliged to provide arms to these groups, and their soldiers have the right to carry and use them. The Moscow mayor has extra powers and he can make his own arrangements directly with Rosgvardia. This law was a clear response to Wagner’s rebellion.

Deputies have also approved laws allowing the Defense Ministry to make purchases for the armed forces in cash, canceling maximum purchase sizes and requirements about suppliers. In simple terms, the Defense Ministry can now buy almost anything from almost anyone – if the purchase can be justified by the needs of the war.

The war and elections

Electoral legislation has also been altered as a result of the war — and the course of the fighting will be a key part of upcoming campaigns in both regional and local elections. On Sep. 10, there will be governor elections in 21 regions, 16 regional parliament elections and local assembly elections in 12 cities. This is the start of the current electoral cycle culminating in a presidential election expected to be in March next year. According to sources cited by independent media outlet Meduza, the Kremlin’s aim is to deliver a record 80% support for the aging president (in 2018, Putin officially got 78% of the vote).

Between June 2022 and May 2023 Russia’s parliament passed six amendments to the law on electoral rights, according to election monitor Golos. They included banning so-called “foreign agents” from being members of electoral commissions or serving as election observers. Elections can now also be held under martial law (something explicitly prohibited in the Russian constitution).

There is almost no doubt that Putin will be re-elected for another six-year term. The Kremlin is already preparing for the vote and the war will be a major part of Putin’s campaign. According to political expert Tatiana Stanovaya, there will be a big emphasis on the social issues linked to the war like assistance to families and children and support for veterans. At the same time, she predicts patriotic messaging will be less prominent.

War and the economy

The nation’s finances have inevitably been influenced by the war and the upcoming elections. Despite problems at the start of the year, things have improved in recent months. The budget deficit fell from its April peak of 3.4 trillion rubles to 2.6 trillion at the end of June. In addition, economic growth has led to a rise in non-energy taxation revenue and spending fell. Finance Minister Anton Siluanov has promised the annual budget deficit will not exceed 2.5% of GDP, but there is still a high risk that it will increase above its current level.

In 2024, we expect some tweaks to expenditure. But any major cuts seem impossible: not just for political reasons but because state spending – primarily military spending and social handouts — are driving economic growth and rising salaries (you can read more about this here). On a structural level, the war is now an integral part of the country’s economy. Even if the conflict in Ukraine transitions from an active war to a more frozen conflict, Russia’s military spending is extremely unlikely to decline.

Without spending cuts, the government has a range of measures to combat the deficit. First, it can increase taxes. Although this cannot be used right away — the current moratorium on tax rises expires in 2024. It’s unlikely the government will rush to announce tax hikes on the eve of the election, but this could happen immediately after the vote. There is also the possibility of “stealth taxes.” For example, there was a recent proposal to increase duties on alcohol from countries that Russia has deemed “unfriendly.” But the market for wine is not large and demand is elastic, so higher duties would mostly benefit Russian winemakers and importers from Latin America and South Africa.

Borrowing could also plug the deficit. There is liquidity in the market. However, Russian banks, which no longer face foreign competition, are increasingly dictating their own terms. They prefer to shift inflationary risks to the government and buy inflation-linked bonds. In the context of accelerating inflation, this will make servicing debt more expensive.

The Kremlin could also increase withdrawals from the National Welfare Fund. Over the past six months, doing this has helped plug a 507 billion ruble hole in the budget, the Finance Ministry reported.  A further 300 billion rubles went into shares and bonds of state-owned companies. In total, the fund has 6.8 trillion rubles of liquid assets left, specifically gold and yuan. By the end of next year, 2.3 trillion rubles should remain (according to the Finance Ministry). However, the budget deficit could grow much faster than planned and there is likely reluctance to spend every last cent from the fund.

Western sanctions mean the Russian economy is securely insulated from global shocks. If there is no sudden fall in oil prices, or anything similarly catastrophic, there is enough money to maintain current spending for about two years.

Signs of crisis

The Russian economy is set to completely reverse last year’s slump – something Putin has recently highlighted. Manufacturing and construction lead the way, alongside retail. In a broad sense, all three sectors are beneficiaries of the war. The defense sector, working in three shifts, is boosting production: in June, for example, the biggest increases were in finished metal products (+45.8% year-on-year); computers, electronics and optics (+71.6% year-on-year), radar equipment (+75.4% year-on-year) and electrical equipment (+32.1% year-on-year). Production capacities are running at their maximum.

Construction is primarily driven by discounted mortgages: currently, 51% of loans come with state support, up two percentage points since April. Overall, the mortgage portfolio of Russia’s top 20 banks was up 3% in May. In addition, construction continues on occupied Ukrainian territory. “In the first half of the year, 20 apartment blocks were built and more than 2,000 were restored. More than 150 public buildings, plus more than 1,000 residential and community objects. Federal contractors restored 260 kilometers of roads,” Deputy Prime Minister Marat Khusnullin said recently. These projects, along with the construction of massive defensive fortifications on the frontline, even led to a shortage of cement.

Retail growth has been driven by increased salaries and social handouts (some of which are connected to the war). Real incomes are up in regions that are home to military factories and where reports suggest there are large numbers of contract soldiers (for example, Buryatia, the Jewish Autonomous Okrug and Chechnya). Double-digit wage growth masks one of the biggest barriers to economic growth — a shortage of labor. A lack of workers and limits on production capacity lead to what economists call an “overheated economy”: supply cannot match rising demand, and prices increase accordingly. To cool down the economy, the Central Bank may be forced to further increase interest rates.

Why the world should care

The distribution of demand via military expenditure encourages the Kremlin to drag out the war as long as possible. Or to start a cold war in place of the current hot one. All indicators suggest that this is what is happening: economically and legally, the Russian authorities are weaving the war in Ukraine — and more generally the struggle against the West — into the fabric of public life. However, the more the economy binges on military expenditures, the greater the hangover. In political terms, “eternal war” is increasingly becoming a cornerstone of the Kremlin’s narrative. Putin has no other vision to offer.

Deputy Central Bank head Ksenia Yudaeva steps down

Russia’s Central Bank has lost its fourth deputy since the invasion of Ukraine as Ksenia Yudaeva said Friday she was resigning. Along with Central Bank head Elvira Nabiullina, Yudaeva has played a key role in transforming the Central Bank into one of Russia’s most effective institutions and managing the economic fallout from the Ukraine war.

From Aug. 1, Yudaeva will be an adviser to Nabiullina. She will remain a member of the Central Bank’s Executive Board and the Financial Stability Committee.

Yudaeva became deputy head of the Central Bank in 2013 shortly after Nabiullina was appointed chairwoman by Putin. Initially, Yudaeva was responsible for monetary policy and inflation targeting. In recent years, she has overseen financial stability and analytics.

A prominent economist who received her Phd from MIT in the United States, Yudaeva was widely seen as a technocrat with liberal views. However, like her boss Nabiullina, she remained in post following Russia’s invasion of Ukraine. Prior to joining the Central Bank, Yudaeva was in charge of state-owned Sberbank’s macroeconomic research center. She was sanctioned by the U.S. last year for her affiliation with bailed-out lender Otkritie Bank.

Key figures

Between July 18 and July 24, inflation accelerated from 0.18% to 0.23%. Year-on-year inflation reached 4.19%. This increase is primarily a knock-on effect of the exchange rate on prices. Last week, the Central Bank increased interest rates by a percentage point to 8.5%.

The IMF updated its forecast for the world economy. Expectations of GDP growth in Russia in 2023 were upgraded from 0.7% to 1.5%. The prediction for 2024 is unchanged at 1.3%.

Russia Matters, 7/28/23

According to Levada Center’s polls. At the end of July, the share of respondents supporting continued hostilities was at 41% compared to 40% in June. As for supporters of the transition to peace negotiations, their share decreased from 53% in June to 51% in July. In July, only 10% of the Levada Center’s respondents believed that hostilities would last less than six more months (11% in May ), while 73% of respondents believe that hostilities will last more than six months (71% in May). Levada’s recent polls also show that the share of Russians who approve of Putin’s conduct as president reached 82% in July. When asked to name several public figures that they trust most, 44% of Russians named Putin in July (43% did so in June). Failed mutineer Yevgeny Prigozhin, who featured on the list of most trusted figures in June, was no longer on that list in July. The slight decrease in the share of Russians who support peace negotiations in July can be explained, in part, by the ending of Prigozhin’s short-lived mutiny the previous month. The conclusion of the June 23-24 mutiny can explain the increase, if only slight, in Putin’s approval and trust ratings.

By Andrew Korybko, Substack, 7/28/23

Poland’s “Ukraine Reconstruction Service”

Poland’s Plenipotentiary for Polish-Ukrainian Development Cooperation Jadwiga Emilewicz opened Warsaw’s first “Ukraine Reconstruction Service” (URS) office in Lvov on 17 July in an event that attracted scant international media attention outside of those two countries. Publicly financed Polskie Radio reported on the seminar that she held that day under the auspices of the Warsaw Enterprise Institute here as well as the next day’s one in neighboring Volyn Region’s capital of Lutsk here.

In brief, Emilewicz announced that more offices will soon open elsewhere in Ukraine and that “We are preparing insurance and credit instruments for Polish companies.” She added that “We want to be present on the ground to support Polish entrepreneurs in establishing contacts and to monitor investment needs…We are creating a dialogue platform between Polish and Ukrainian businesses, and involving development institutions, as well as national and local authorities.”

Both seminars were attended by influential figures. The one in Lvov saw the participation of regional governor Maxim Kozitsky, who shared details about the URS’ activities in that region on his Telegram channel here. Meanwhile, the seminar in Lutsk was attended by neighboring Rivne Region’s Military Administration chief Vitaly Koval, who invited Polish companies to invest there right away. It’s important to note that all three regions – Lvov, Volyn, and Rivne – used to be part of interwar Poland.

Two Interconnected Developments

URS’ activities in these parts of Western Ukraine that most Poles still consider to be an inextricable part of their millennium-old civilization are the natural outgrowth of two interconnected developments from May 2022. Polish President Andrzej Duda visited Kiev and spoke at the Rada on the 22^nd of that month, during which time he and his Ukrainian counterpart Vladimir Zelensky pledged to accelerate their countries’ comprehensive integration.

The full English-language transcripts of their speeches can be read at each of their respective official presidential websites here and here. In the context of the present analysis, the top takeaway from Duda’s speech was that he shared their plans to streamline more road, rail, and other infrastructure connectivity. Meanwhile, Zelensky said that they’ll create a joint border and customs control. He also declared that Kiev will give Poles practically the same rights in his country as Ukrainians have.

Additionally, Duda’s remarks about how “The Polish-Ukrainian border should unite, not divide” and Zelensky’s about how “there should be no borders or barriers between us” strongly suggested the intent to eventually merge into a de facto confederation as was assessed in this analysis at the time here. The next day on 23 May 2022, Zelensky virtually attended that year’s World Economic Forum (WEF) in Davos and gave a speech that can be read in full in English at his official presidential website here.  

Of relevance, he announced that “we offer a special – historically significant – model of reconstruction. When each of the partner countries or partner cities or partner companies will have the opportunity – historical one – to take patronage over a particular region of Ukraine, city, community or industry.” Basically, Kiev plans to pay its overlords back by giving them post-war privileges in their preferred regions, which in Poland’s case are the parts of Western Ukraine that it used to control.

Perfecting The De Facto Confederation’s Economic Plans

These two interconnected developments from May 2022 directly led to Poland opening its first URS office in Lvov 14 months later. Tangible progress was therefore made on their leaders’ thinly disguised plans to merge into a de facto confederation via the “special – historically significant – model” that Zelensky described during his speech at the WEF. Although Kiev granted Poland “patronage” over Western Ukraine at that time, it took till now for Warsaw to launch its associated economic mechanism.

This delay can be explained by the need to carry out topical studies and bring together all stakeholders so that everything can move at an accelerated pace after the first URS office’s opening. Kozitsky’s earlier cited Telegram post touched upon three particular infrastructure projects that advance Duda’s vision of streamlining Polish-Ukrainian connectivity. When paired with the plans to create a shared customs space, this essentially equates to the economic dimension of their de facto confederation.

Poland’s Military Aid & Security Guarantee Demands

The security aspect of these plans is also moving forward. The Polish Finance Minister announced in March of this year that Warsaw gave Ukraine around €6.2 billion worth of military aid in 2022, which made Poland the third-largest state-level financier of the NATO-Russian proxy war there. Reports about Polish mercenaries fighting for Kiev have also circulated since the start of Russia’s special operation, and the “Polish Volunteer Corps” even took credit for a raid into Russia’s Belgorod Region in May.

Poland’s repeated calls for “security guarantees” for Ukraine could serve as the tripwire for it to formally deploy its conventional forces there in the event that such are extended, whether multilaterally via Warsaw’s participation in this scheme or bilaterally with Kiev, even if the latter is reached in secret. Politico’s report last November about Poland’s unprecedented military buildup suggests that it’s planning to have the excess capacity required for a large-scale foreign deployment sometime in the future.  

Towards A Conventional Polish Intervention In Ukraine

Of pertinence, its defense spending will be raised to 5% of GDP, it’ll have 300,000 active troops by 2035, and it’s buying billions in modern equipment from the US and South Korea. Poland is a NATO member with Article 5 mutual defense guarantees from the American nuclear superpower, however, so all these steps are excessive if Warsaw only wanted to protect itself from a speculative Russian attack. This observation suggests that Poland is indeed preparing for a conventional military intervention in Ukraine.

Even though it’ll take many more years for it complete its ambitious military plans, being a NATO member means that Poland can in theory deploy abroad whatever is presently available at home without fear of Russia attacking since the US’ nuclear umbrella deters that from happening. The Russian and Belarusian leaderships are taking this scenario very seriously as proven by what their representatives said in late July just several days after Poland opened its first URS office in Lvov on the 17^th of that month.

Russia & Belarus Warn About Polish Plans For Ukraine

Russian Foreign Intelligence Service chief Sergey Naryshkin warned about Poland’s military buildup near the Ukrainian border on 21 July during a Security Council meeting whose English-language transcript can be read in full at the official Kremlin website here. “Putin Exposed Poland’s Regional Plans In An Attempt To Deter Them”, but he also said that “If [Kiev] want[s] to relinquish or sell off something (to Poland) in order to pay their bosses, as traitors usually do, that’s their business. We will not interfere.”

His only red line in this respect is for Poland not to attack Belarus since that “would mean launching an aggression against the Russian Federation. We will respond to that with all the resources available to us.” As for that member of the Union State, President Alexander Lukashenko visited St. Petersburg two days later on 23 July, which was less than a week after Poland opened its first URS office. While there, he also rang the alarm about Poland’s plans in remarks that can be read at the official Kremlin website here.

The Belarusian leader felt differently about this scenario than his Russian counterpart did, however, since he described it as “unacceptable” due to the security threat this could potentially pose to the Union State’s southern borders. Their divergent views aside, these statements confirm that the Russian and Belarusian leaderships believe that Poland soon might commence a conventional military intervention in Ukraine to complement its economic control over the western part of that country.

The pretext that Poland might exploit to implement its hegemonic plans could be a Russian breakthrough across the Line of Contact or a false flag attack against Polish projects in Western Ukraine that’s blamed on Belarusian-based Wagner, though other “trigger events” are also possible. There’s even the chance that Kiev could openly invite this intervention during or after seemingly inevitable ceasefire and/or peace talks with Russia as part of a bilateral or multilateral “security guarantee”.

Concluding Thoughts

As it presently stands, Poland has already slyly taken control of Western Ukraine without having to fire a shot. Its political power was cemented last summer after the Rada granted Poles practically the same rights as Ukrainians in accordance with the promise that Zelensky made to Duda in May 2022, while the economic aspect was advanced through mid-July’s opening of the first URA office in Lvov. That being the case, there isn’t even a need apart from prestige for Poland to formally deploy troops to Ukraine.

Nevertheless, it’s precisely for that abovementioned reason that this might still end up happening, both because it could boost the ruling party’s prospects at the polls ahead of this fall’s elections and also since it would show the world that Poland is successfully restoring its long-lost status as a Great Power. That said, Western Ukraine’s formal integration into Poland isn’t a fait accompli even if this happens since it would risk provoking intense furor from nationalist forces on both sides of the border.

With these concerns in mind, which have very serious political and even latent security implications, the scenario of one day formalizing the currently de facto Polish-Ukrainian confederation is much more realistic than Warsaw biting off the western part of that former Soviet Republic. That would accomplish the same strategic goal of expanding Poland’s “sphere of influence” across a portion of its former Commonwealth without risking any major blowback. Truth be told, this scenario might be inevitable.

The Oakland Institute, Executive Summary, 2023

The war in Ukraine has been at the center stage of foreign policy and media reports since February 2022. Little attention, however, has been given to a major issue, which is at the core of the conflict – who controls the agricultural land in the country known as the “breadbasket of Europe?”

This report addresses this gap – identifying the interests controlling Ukraine’s agricultural land and presenting an analysis of the dynamics at play around land tenure in the country. This includes the highly controversial land reform that took place in 2021 as part of the structural adjustment program initiated under the auspices of Western financial institutions, after the installation of a pro-European Union (EU) government following the Maidan Revolution in 2014.

With 33 million hectares of arable land, Ukraine has large swaths of the most fertile farmland in the world.1 Misguided privatization and corrupt governance since the early 1990s have concentrated land in the hands of a new oligarchic class. Around 4.3 million hectares are under large-scale agriculture, with the bulk, three million hectares, in the hands of just a dozen large agribusiness firms.2 In addition, according to the government, about five million hectares – the size of two Crimea – have been “stolen” by private interests from the state of Ukraine.3 The total amount of land controlled by oligarchs, corrupt individuals, and large agribusinesses is thus over nine million hectares, exceeding 28 percent of the country’s arable land. The rest is used by over eight million Ukrainian farmers.4

The largest landholders are a mix of oligarchs and a variety of foreign interests – mostly European and North American, including a US-based private equity fund and the sovereign fund of Saudi Arabia. All but one of the ten largest landholding firms are registered overseas, mainly in tax havens such as Cyprus or Luxembourg. Even when run and still largely controlled by an oligarch founder, a number of firms have gone public with Western banks and investment funds now controlling a significant amount of their shares.

The report identifies many prominent investors, including Vanguard Group, Kopernik Global Investors, BNP Asset Management Holding, Goldman Sachs-owned NN Investment Partners Holdings, and Norges Bank Investment Management, which manages Norway’s sovereign wealth fund. A number of large US pension funds, foundations, and university endowments are also invested in Ukrainian land through NCH Capital – a US-based private equity fund, which is the fifth largest landholder in the country.

Most of these firms are substantially indebted to Western financial institutions, in particular the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and the International Finance Corporation (IFC) – the private sector arm of the World Bank. Together, these institutions have been major lenders to Ukrainian agribusinesses, with close to US$1.7 billion lent to just six of Ukraine’s largest landholding firms in recent years. Other key lenders are a mix of mainly European and North American financial institutions, both public and private. Not only does this debt gives creditors financial stakes in the operation of the agribusinesses, but also confers a significant level of leverage over them. This was evidenced by the debt restructuring of UkrLandFarming, one of Ukraine’s largest landholders, which involved creditors including the Export-Import agencies of the US, Canada, and Denmark, among others, and led to important organizational changes including layoffs of thousands of workers.

This international financing directly benefits oligarchs, several of whom face accusations of fraud and corrupt dealings, as well as the foreign funds and firms associated as shareholders or creditors. Meanwhile, Ukrainian farmers have had to operate with limited amounts of land and financing, and many are now on the verge of poverty. Data shows that these farmers receive virtually no support compared to agribusinesses and oligarchs. 5 The Partial Credit Guarantee Fund established by the World Bank to support small farmers is only US$5.4 million, a negligible amount compared to the billions channeled to large agribusinesses.6

In recent years, Western countries and institutions have provided massive military and economic assistance to Ukraine, which became the top recipient of US foreign aid – marking the first time since
the Marshall Plan that a European country holds this top spot. 7 As of December 2022, less than one year into the war, the US has allocated over US$113 billion to Ukraine, including US$65 billion of military aid, 8 which is more than the entire budget of the State Department and USAID globally (US$58 billion).9

The report details how Western aid has been conditioned to a drastic structural adjustment program, which includes austerity measures, cuts in social safety nets, and the privatization of key sectors of the economy. A central condition has been the creation of a land market, put into law in 2020 under President Zelenskyy, despite opposition from a majority of Ukrainians fearing that it will exacerbate corruption in the agricultural sector and reinforce its control by powerful interests.

The findings of the report validate this concern, showing that the creation of a land market will likely further increase the amount of agricultural land in the hands of oligarchs and large agribusiness firms. The latter have already started expanding their access to land. Kernel has announced plans to increase its land bank to 700,000 hectares – up from 506,000 hectares in 2021. 10 Similarly, MHP, which currently controls 360,000 hectares of land, seeks to expand its holdings to 550,000 hectares.11 MHP is also reportedly circumventing restrictions on the purchase of land by asking its employees to buy land and lease it to the company.12

Additionally, by supporting large agribusinesses, international financial institutions are in effect subsidizing the concentration of land and an industrial model of agriculture based on the intensive use of synthetic inputs, fossil fuels, and large-scale monocropping – long shown to be environmentally and socially destructive.13 By contrast, small scale farmers in Ukraine demonstrate resilience and a great potential for leading the expansion of a different production model based on agroecology, environmental sustainability, and the production of healthy food.14 It is Ukraine’s small and medium-sized farmers who guarantee the country’s food security whereas large agribusinesses are geared towards export markets.

In December 2022, a coalition of farmers, academics, and NGOs called on the Ukrainian government to suspend the 2020 land reform law and all market transactions of land during the war and post-war period, “in order to guarantee the national security and preservation of territorial integrity of the country in wartime and post-war reconstruction period.”15 As explained by Prof. Olena Borodina of the National Academy of Sciences of Ukraine (NASU), “Today, thousands of rural boys and girls, farmers, are fighting and dying in the war. They have lost everything. The processes of free land sale and purchase are increasingly liberalized and advertised. This really threatens the rights of Ukrainians to their land, for which they give their lives.”16

At a time of tremendous suffering and displacement, wherein countless lives have been lost and massive financial resources spent for the control of Ukraine, this report raises major concerns about
the future of land and food production in the country, which is likely to become more consolidated and controlled by oligarchs and foreign interests.

These concerns are exacerbated by Ukraine’s staggering and growing foreign debt, contracted at the expense of the population’s living conditions as a result of the measures required under the structural adjustment program. Ukraine is now the world’s third-largest debtor to the International Monetary Fund (IMF)17 and its crippling debt burden will likely result in additional pressure from its creditors, bondholders, and international financial institutions on how post-war reconstruction – estimated to cost US$750 billion – should happen. 18 These powerful actors have already been explicit that they will use their leverage to further privatize the country’s public sector and liberalize its agriculture.19

The end of the war should be the moment and opportunity for just the opposite, i.e. the redesign of an economic model no longer dominated by oligarchy and corruption, but where land and resources are controlled by and benefit all Ukrainians. This could form the basis for the transformation of the agricultural sector to make it more democratic and environmentally and socially sustainable. International policy and financial support should be geared towards this transformation, to benefit people and farmers rather than oligarchs and foreign financial interests.

Endnotes

1. UkraineInvest. “Agrifood.” https://ukraineinvest.gov.ua/industries/agrifood/; Leshchenko, R. “Ukraine can feed the world.” Atlantic Council, March 4, 2021. https://www.atlanticcouncil.org/blogs/ukrainealert/ukraine-can-feed-the-world/ (all accessed February 2, 2023).

2. Data on land leases was obtained from the Land Matrix https://landmatrix.org/ (accessed February 2, 2023) and compared with companies’ own documents as well as other databases such as https://www.largescaleagriculture.com/data/. The various sources present sometimes different data, but the Land Matrix appears to be the more up to date.

3. President of Ukraine. “For almost 30 years, the Ukrainian people have been fooled about land reform, 5 million hectares have been stolen during this period – President in an interview for Ukrainian
TV channels.” October 22, 2020. 

https://www.president.gov.ua/en/news/majzhe-30-rokiv-ukrayinskij-narod-durili-shodo-zemel-noyi-ref-64785 (accessed January 30, 2023).

4. US Department of Agriculture. Foreign Agricultural Service. Ukraine: Households Agricultural Production. May 23, 2022. 

https://www.fas.usda.gov/data/ukraine-households-agricultural-production (accessed January 30, 2023).

5. Foote, N. “Small farmers: The unsung heroes of the Ukraine war.” Euractiv. April 20, 2022.

https://www.euractiv.com/section/agriculture-food/news/small-farmers-the-unsung-heroes-of-the-ukraine-war/ (accessed January 30, 2023).

6. International Bank for Reconstruction and Development. Program document for a proposed first economic recovery development policy loan (dpl) in the amount of US$350 million to Ukraine. June 1, 2020. 

https://documents1.worldbank.org/curat-ed/en/665101593482807601/pdf/ukraine-first-economic-recovery-development-policy-loan.pdf; International Bank for Reconstruction and Development. Supplemental financing document for a proposed loan in the amount of EUR437.05 million (US$489.45 mil-lion equivalent) to Ukraine for the financing of recovery from economic emergency. March 4, 2022.

https://documents1.worldbank.org/curated/en/752081647378220940/pdf/Ukraine-Financing-of-Re-covery-from-Economic-Emergency-Ukraine-Supplemental-Development-Policy-Loan-Supplemental-Financing-Document.pdf (all accessed January 30, 2023.

7. Masters, J. and W. Merrow. How Much Aid Has the U.S. Sent Ukraine? Here Are Six Charts. Council on Foreign Relations, December 16, 2022. https://www.cfr.org/article/how-much-aid-has-us-sent-ukraine-here-are-six-charts (accessed January 30, 2023).

8. Four packages of aid for Ukraine were voted by the US Congress in 2022. The first was for US$13.6 bn in March, the second US$40bn in May, the third US$12.3 bn in September and the fourth
US$45 bn in December. US Congress. “Ukraine Supplemental Appropriations Act, 2022.” 

https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/Ukraine%20Supplemental%20Summary.pdf; “Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023. Division B – Ukraine Supplemental Appropriations Act, 2023.” 

https://www.appropriations.senate.gov/imo/media/doc/Continuing%20 Resolution_Section%20by%20Section.pdf#page=5;“Statute at Large 136 Stat. 4378 – Public Law No. 117-128 (05/21/2022).” https://www.congress.gov/bill/117th-congress/house-bill/7691/ text; US Committee on Appropriations; “Fiscal Year 2023 Omnibus Appropriations Bill. US Committee on Appropriations. Division M— Additional Ukraine Supplemental Appropriations Act, 2023.” https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/Ukraine%20Supplemental%20Summa-ry%20FY23.pdf; See for more analysis: Freeman, B. and W. Hartung. “New Ukraine aid is a go — and it’s more than most states get in a year.” Responsible Statecraft. December 23, 2022. 

https://responsiblestatecraft.org/2022/12/23/new-ukraine-aid-is-a-go-and-its-more-than-most-states-get-in-a-year/ (all accessed February 10, 2023).

9. USAID. “Budget Justification, FY 2022.” https://www.usaid.gov/cj/fy-2022 (accessed January 30, 2023).

10. “Kernel to increase its leasehold farmland bank to 0.7 mln ha:Verevskiy.” Latifundist.com, October 4, 2021. 

https://latifundist.com/en/novosti/56910-kernel-nameren-narastit-zemelnyj-bank-do-700-tys-ga–verevskij (accessed January 30, 2023).

11. “MHP plans to increase the land bank to 550 thousand hectares.” Latifundist.com, September 12, 2017. 

https://latifundist.com/en/novosti/37041-mhp-planiruet-uvelichit-zemelnyj-bank-do-550-tys-ga (accessed January 30, 2023).

12. “Offering the Ukrainians to Buy Land for the MHP Agricultural Holding.” Ukraine Gate, October 17, 2021. https://www.ukrgate.com/eng/?p=22025 (accessed January 30, 2023).

13. HLPE. Agroecological and other innovative approaches for sustainable agriculture and food systems that enhance food security and nutrition. July 2019. https://www.fao.org/3/ca5602en/ca5602en.pdf (accessed January 31, 2023); Lindwall, C. Industrial Agriculture 101. NRDC, July 21, 2022. https://www.nrdc.org/stories/industrial-agricultural-pollution-101 (accessed January 31, 2023).

14. “Small farmers are the backbone of food security during the war – and must be supported after the victory.” The Center for Environmental Initiatives “Ekodiya.” May 20, 2022. https://ecoaction.org.ua/mali-fermery-opora.html (accessed January 30, 2023); Mamonova, N. “What does War in Ukraine Mean for Smallholder Farming?” ARC2020, November 24, 2022. https://www.arc2020.eu/what-does-the-war-in-ukraine-mean-for-smallholder-farming/(accessed January 31, 2023); Mamonova, N. “Food sovereignty and solidarity initiatives in rural Ukraine during the war.” The Journal of Peasant Studies 50, no. 1 (2022): 47-66.

15. Resolution of the Public Forum of peasant farms, farming households, civil society organizations, and academic community. Kyiv, December 15, 2022.

16. Direct communication, January 27, 2023.

17. International Monetary Fund. “Total IMF Credit Outstanding Movement From January 01, 2023 to January 30, 2023.” 

https://www.imf.org/external/np/fin/tad/balmov2.aspx?type=TOTAL (accessed January 30, 2023).

18. “Ukraine sees post-war reconstruction costs nearing $750 billion – PM.” Reuters, October 24, 2022. 

https://www.reuters.com/world/europe/ukraine-sees-post-war-reconstruction-costs-nearing-750-billion-pm-2022-10-24/ ; Dolan-Evans, E. “Ukraine’s debts to Western banks are destroying its social safety net.” Open Democracy, November 17, 2022. 

https://www.opendemocracy.net/en/odr/ukraine-debt-freeze-western-creditors/ (all accessed January 30, 2023).

19. Ibid.; Relief, Recovery and Resilient Reconstruction: Supporting Ukraine’s Immediate and Medium-Term Economic Needs. Informal approach paper by World Bank Group staff Presented as background to Ministerial Roundtable for Support to Ukraine at IMF-World Bank Spring Meetings 2022. April 21, 2022. 

https://documents1.worldbank.org/curated/en/099608405122216371/pdf/IDU08c704e400de7a048930b8330494a329ab3ca.pdf (accessed January 30, 2023).