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Ukraine intensifies crackdown on illegal grain exports, industry’s survival at stake

Ukraine intensifies crackdown on illegal grain exports, industry’s survival at stake

UKRAINE- In an effort to combat shadow grain exports and ensure foreign exchange revenue returns to Ukraine, the Ukrainian government has implemented stringent measures that may pose a threat to the survival of the country’s grain industry. 

The Ukrainian Grain Association has expressed deep concerns, warning that these measures could lead to significant challenges for the entire sector.

Under a recent decree, the export of grain and oilseeds is now restricted to companies that successfully pass a newly established exporter verification procedure, demonstrating full compliance with foreign exchange controls. 

This move is aimed at curbing the rampant issue of shadow grain export, where foreign exchange currency is not repatriated to Ukraine as required by law.

Approximately 20% of Ukrainian grain is estimated to be exported under grey schemes, according to Think Brave, a Kyiv-based consultancy. Typically, this involves purchasing grain from farmers in cash by fly-by-night companies, exporting it under fake documents, and then liquidating the business to avoid returning foreign exchange revenue to Ukraine.

The Ukrainian Grain Association has expressed concerns that the recent surge in regulatory initiatives could have detrimental effects on the grain industry, potentially leading to its demise. 

The association emphasizes the need for adequate testing of these new rules to ensure they do not impede a business that is crucial for the Ukrainian state, especially in the current circumstances.

As the untested regulations are introduced, there are fears that they may further complicate an already heavily regulated grain market, resulting in a significant drop in exports and, consequently, grain prices for Ukrainian farmers. 

The association warns that this could lead to the bankruptcy of farmers who have already been grappling with low purchasing prices and high logistics costs due to limited export opportunities over the past two years.

The Ukrainian Grain Association underlines the importance of the grain industry, which not only fills the state budget during times of war but also provides the country with essential foreign exchange earnings. 

Any ill-conceived and unnecessary interference in regulating the grain and export markets, particularly during these challenging times, is viewed as potentially harmful to the country.

Furthermore, additional measures are in the pipeline, with the Verkhovna Rada Committee on Finance, Tax, and Customs Policy supporting two bills aimed at combating “black” grain exports and ensuring the return of foreign currency earnings. One of the proposed measures involves setting a minimum price for Ukrainian farmers to export grain. 

According to Yaroslav Zheleznyak, a member of parliament, shadow exports have cost the country US$4 to US$6 billion in non-returned export revenue, resulting in substantial losses to the state budget.

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