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	NOTES FROM UKRAINE: GRAIN IS GAIN Was the arrest of a deputy minister for agriculture really an attempt to root out corruption, or the signal for an attack on the free market?
	The following news analysis article was written by Ivan Khokhotva, TOL Correspondent in Kyiv, and published by the Transitions Online Internet Magazine in Prague, Czech Republic on April 10, 2003: KIEV, Ukraine--Every day, Kievs busy traffic grinds to a halt as senior Ukrainian government members whiz past in their limos, escorted by police cars. For the privileged few who are accustomed to having the road miles ahead of them ending up in a dingy jail cell must come as a shock of a lifetime. That, though, is what Leonid Kozachenko, a hapless former deputy prime minister for agriculture, is now having to cope with after a president-ordered inquiry into reported grain shortages in parts of Ukraine. The former minister, who held office for six months in 2002, is accused of forcing farmers to sell their produce when prices were in a trough and allowing too much of last years bumper crop to be exported. Ukraine, it turns out, may soon have to import grain in order to keep bread prices at bay, and somehow it is all Kozachenkos fault. He is also facing charges of bribery and tax evasion dating back to the time before he took office. Yet in a country plagued by corruption and cronyism, Kozachenko, who was arrested on 24 March, is only the third bigwig to have come so badly unstuck. The first two were arrested either after fleeing the country with stolen millions (former Prime Minister Pavlo Lazarenko, who is awaiting trial in the United States on money-laundering charges) or after accusing the authorities of corruption and misrule (former deputy minister for energy Yuliya Tymoshenko). No wonder then that the question on expertsminds is not whether Kozachenko is actually guilty but why he was singled out for a public humiliation and whether there is a hidden agenda that might explain his arrest. Some believe that the government, which has always seen keeping bread prices low as a political imperative, is simply trying to find a scapegoat to blame for an apparent failure of the country's maturing grain market. Many wonder, however, if the reported shortages are being deliberately hyped up to attack the free market mechanisms that have allegedly caused them. FARMING FORTUNES Farming in Ukraine, a country once known as the breadbasket of Europe, went into a nosedive after independence in 1991. The cash-strapped government could no longer afford to plow huge subsidies into inefficient collective farms, and private farming was strangled by bureaucracy and unfriendly legislation. But after a series of much-needed laws were adopted three years ago, introducing private land ownership and facilitating commercial credit for farmers, Ukrainian agriculture has experienced something of a renaissance. Bumper crops in 2001 and 2002 ended the countrys dependence on grain imports and put it back in the league of exporters. Last year up to 10 million tonnes of grain was sold abroad, out of the total crop of about 40 million. From a bottomless pit agriculture has turned into something of a cash cow--but not always for farmers. Attempts to liberalize the grain market, adopt international quality standards and introduce commodity exchanges to ensure that farmers get a fair price for their produce have been hampered by government bureaucracy. There are powerful vested interests in keeping the market closed to outsiders and not allowing competition among grain traders to drive prices up. Kozachenko, prosecutors say, acted in the interests of these traders by vetting export deals at the peak of the grain supply immediately after the harvest season, when the prices were at the bottom. About five million tonnes of grain, half of all the exports, was sold when market conditions least favored farmers, and the pressure to sell was coming from Kozachenko,said Tetyana Kornyakova, deputy prosecutor-general. Indeed, so much grain was sold abroad, prosecutors reckon, that the country may not have enough stocks to tide it over until the next crop. Most experts agree, however, that the charges simply don't add up. They point out that the oversupply of grain on the domestic market at the time was up to 15 million tonnes. With no budget funds for state interventions to support prices, and no mechanism of futures contracts in place, stimulating exports was the only way to keep farmers afloat, analysts say. Had Kozachenko tried to block export contracts until grain traders were prepared to offer a better deal, the domestic prices would have collapsed even further and Ukraine would have lost its share on the world markets. Some insiders even doubt that there is actually a shortage of grain in the country. They say the granaries are far from empty, and that the owners simply dont want to sell now, when prices are only just rising out of the trough, in the hope that prices will pick up further. Up to 40 percent of this years winter crops have been damaged by the harsh winter and will have to be re-sown, increasing demand for last years grain and reducing the chances of a grain glut this year. A HIDDEN AGENDA? Why then all this hype about man-made grain shortages and the former ministers dramatic arrest? Analysts believe one distinct possibility is a power struggle between political clans who would like to put their own men in charge of lucrative industries. Picking on easy targets to advertise the administrations anti-corruption drive without treading on important toes is another. More ominously though, experts both in Ukraine and abroad fear that by trumping up the alleged failure of the grain market and, by implication, market reforms in agriculture, the government is paving the way for a restoration of the corrupt and inefficient administrative command system in the sector. Grain traders and farmers alike were dismayed when the prosecutor mused aloud on national television shortly before Kozachenkos arrest about the possibility of reviving the old Soviet system of state contracts, awarded to (or foisted on) farms at the bureaucratsdiscretion and at rock-bottom prices. As the 2004 presidential election draws nearer, the temptation in some quarters to milk Ukraines farming for campaign funds could become irresistible, some fear. And Kozachenko, who is not affiliated with any of Ukraines competing political and business clans, could be a convenient candidate for the role of the villain in a campaign to discredit agricultural reform. A very similar view was voiced by the Ukrainian Union of Industrialists and Entrepreneurs, a business association, which described Kozachenko's arrest as a trumped-up case launched as part of the heated political struggle in the country. Instead of working professionally and systematically to create a modern grain market infrastructure, attempts are being made to discredit grain traders, the union said in a statement. A search for a professional solution to a real economic problem has been substituted by a search for a scapegoat. This significantly reduces the effectiveness of land reform. The scandal has already spilt over the country's borders. Canada, a major sponsor of Ukraines agricultural reform, has expressed its concern at Kozachenkos arrest and hinted that its aid programs in the sector could be suspended. The Canadian ambassador in Kiev, Andrew Robinson, has described the former deputy prime minister as one of the key proponents of the policy of reforms in agriculture.If the grain shortages are indeed real, the right way to tackle the problem would be to accelerate reforms instead of reversing them and punishing their advocates, the ambassador said. Reforms have turned agriculture into a locomotive of Ukraine's economic growth, the ambassador added. Small and medium producers have started making profits thanks to a free market, without the help of the state. And that, skeptics note, is exactly what the state may be finding so hard to swallow.

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