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May 28, 2009

Libya to grow wheat in Ukraine

by Lamine Ghanmi and Pavel Polityuk

Libya has agreed with Ukraine to grow wheat on 100,000 hectares of land and export the grain to the North African country, Libyan state media and Ukrainian officials reported in late May.But Ukrainian officials and analysts said the agreement, which is still to be signed, faced many obstacles including the acquisition of leased land.

"The agreement on farming 100,000 hectares in Ukraine is part of several deals...that include building an oil refinery and investment in several other agriculture projects," Libyan Prime Minister Al-Baghdadi Ali al-Mahmoudi said.

"Libya would set up an investment centre in Ukraine to oversee its investment in several fields including oil, gas and investment in grains farming," Mahmoudi was quoted as telling reporters alongside Ukrainian Prime Minister Yulia Tymoshenko.

Tymoshenko, addressing her cabinet after returning from Tripoli, said the draft farmland deal showed her government was fulfilling promises made by previous Ukrainian administrations but never carried out. This, she said, was the start of a new relationship.

"Promises were made and financing was even provided, specific steps taken to work jointly on 100,000 hectares of agricultural land in order to supply grain to the African continent," she said. "Libya is a bridge to African countries. Africa can be a great consumer of Ukrainian grain and food. We worked out a draft agreement which is to be signed."

Libyan representatives were due in Kiev on July 20-21 for further talks, Tymoshenko said.

She said she had also reached agreement with OPEC member Libya for the supply of 600,000 tonnes of oil to Ukraine's Kremenchug refinery, which has suffered a disruption in supply of crude from Russia due to an ownership dispute.

Libya imports almost all its food needs, including wheat and flour, to feed its 5.3 million people. Its plans in Ukraine follow the example of countries including Saudi Arabia, China and South Korea that have sought farmland abroad to guarantee food supplies and cut dependence on imports. Agriculture analysts said the grain deal could be beset by difficulties over land legislation and ownership.

"The state has no farmland of its own on such a large scale and land is divided among millions of farmers. How do you bring together these pieces to create a relatively large acreage?" Mykola Vernytsky, director of the ProAgro consultancy, said. "Government agreements on this issue are unlikely to be implemented. Private companies, the real owners of the land, do not need government assistance to work together with any foreign investor."

Farm Minister Yuri Melnyk said any deal was subject to finding attractive terms for landowners. "The land would have to be provided for leasing by its owners. Any investor, Ukrainian or Libyan, would have to produce a proposal of interest to an owner," Melnyk told reporters.He said investment of about $700 per hectare was needed to make the project a success.

Ukraine now exports its milling wheat at about $200 per tonne FOB.

Libyan officials had said last year Tripoli was considering leasing 300,000 hectares of Ukrainian farmland to grow 1.5 million tonnes of wheat.

Ukraine planted wheat on 7 million hectares and last year farms harvested 25.9 million tonnes against 13.9 million in 2007.

The Guardian

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