This post won the Social Sciences Grand Prize in the Jordan Center Blog's fourth annual Graduate Student Essay Competition.
Andrew D'Anieri is a resident fellow at the Atlantic Council's Eurasia Center, where he facilitates programming on Ukraine, Russia, and Central Asia. He is also a master's student at Georgetown University's Center for Eurasian and East European Studies, with a focus on business and economic reform.
Until 2021, Ukraine was the only democratic country where it was illegal to sell agricultural land. It held this ignominious title alongside a who’s who of closed authoritarian states: the Democratic Republic of the Congo, Cuba, North Korea, Tajikistan, and Venezuela. But in 2020, Ukraine’s parliament voted to lift a moratorium on land sales that had stood for nearly two decades. Ukraine’s land market reform is a fascinating case study of a successful democratic process in which public opinion, political expediency, and technocratic imperatives all competed for primacy and produced a law that was imperfect, but beneficial to many Ukrainians.
After winning independence in 1991, the government in Kyiv put forward an initiative to return land collectivized under Soviet rule to Ukrainians. The idea seemed sound on its face: give people back their land, which Soviet authorities had taken and misused, and, in doing so, create a class of small rural landowners.
Yet the authorities began to get nervous as some landowners sold their plots, fearing that land sales could result in the rapid consolidation of agricultural land away from the small farming class they sought to cultivate. As a result, in 2001, Ukraine’s parliament passed a one-year moratorium on land sales. But this temporary measure soon became a legislative consensus, and the moratorium was renewed nine subsequent times until its repeal in 2020.
During those 19 years, millions of Ukrainians could not sell the farmland allotted to them and thus did not fully own it, either. Instead, landowners who did not or could not work their land were forced to choose among three bad options: do nothing with their land; lease their land at depressed prices; or sell their land on a black market, also at depressed prices.
Most opted to do nothing or to rent. Both decisions came at a cost. Fallow land brought zero economic benefit to landowners or to the economy. Those who rented their land hardly fared better. Without a proper market, rental prices stagnated well below fair market value for the right to cultivate Ukraine’s famously rich soils. In 2016, rental prices for agricultural land in Ukraine were ten times lower than in neighboring Poland, which passed its own land market law in 2012. Ukraine’s land sales moratorium was, in fact, an economic drain on the very constituency it aimed to protect.
The International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), and the World Bank all understood that the land moratorium was a drain on Ukrainian agriculture and tried to encourage Kyiv to create a land market. A 2004 OECD World Bank report lamented the moratorium’s drag on growth and its creation of $40 billion in “dead [land] assets” that owners could not borrow against. But for many years, their pleas fell on deaf ears in Kyiv.
That changed in 2018, when a small landholder named Viktor Tsytsyura sued Ukraine at the European Court of Human Rights (ECHR) for the right to sell his land. The court ruled that the moratorium violated Ukrainians’ right to full property ownership—Tsytsyura had won. Suddenly, he became a major advocate for the right to sell agricultural land in Ukraine, while the country’s multilateral partners had a mandate to help make the land market happen. In 2018, representatives of the IMF’s mission to Ukraine began to publicly urge the parliament to pass a land market law. But Tsytsyura and donor institutions ran into two major problems: widespread public skepticism of land sales, and political interests in parliament.
March 2020 polling showed that only 21% of Ukrainians supported the creation of a land market. While scholars have struggled to isolate the exact causes of this land reform skepticism, surveys suggest that Ukraine’s history of Soviet land abuses plays a significant part. Soviet forced collectivization in the late 1920s and early ’30s grabbed arable land from rural Ukrainians, leaving them with only tiny personal plots of land. This violent legacy still loomed large in the minds of Ukrainians as the land market took shape.
In independent polls, 69 percent of respondents worried that “oligarchs will purchase the majority of the available land”; 61 percent believed that “land is a value that belongs to the Ukrainian people, and it cannot be sold”; 50 percent expressed concerns that “new owners will destroy the fertile land.” Such responses paint a picture of anxiety over the consolidation of agricultural land away from small landholders.
Some opposition parliamentarians did all they could to exacerbate such fears for their own ends. Leader of the Fatherland party Yuliya Tymoshenko, for instance, was opposed selling Ukrainian land on principle and warned against the prospect of outsiders buying up Ukraine’s “special” lands. More nefarious was the pro-Russian Opposition Platform party, which opposed the land market because it felt threatened by the IMF’s reform program and thus aimed to weaken Ukraine’s ties to the Fund. Fatherland and the Opposition Platform held only 16% of the available seats in parliament, but polling suggests that almost half of Ukrainians supported their efforts in opposing the creation of a land market.
President Zelenskyy and his ruling Servant of the People party faced the difficult task of passing a land market law to comply with the ECHR and the IMF while simultaneously minimizing public backlash to the law itself. Ukrainian think tanks and the IMF had long advocated for a more open land market that would deliver maximum economic benefit to Ukraine. But public pressure against the land market meant that Zelenskyy’s team would need to “water down” the law or risk further hits to their political popularity.
Parliamentary debates throughout the fall of 2019 and winter of 2020 added more restrictions on who could buy land and how much land could be bought. Faced with persistent opposition from Fatherland and Opposition Platform, in the bill’s final reading, Servant of the People lawmakers included two provisions that limited the amount of land individuals could hold and postponed companies’ access to the land market.
On 31 March 2020, Ukraine’s parliament passed the land market bill, which President Zelenskyy duly signed into law. The law provided for the land market to open on 1 July 2021, after which only individual Ukrainians would be able to buy up to 100 hectares for the next two-plus years. Ukrainian legal entities and companies would be able to enter the market in 2024, when individuals and entities could buy up to 10,000 hectares. No foreigners would be allowed to buy or own land until put to a national referendum.
The economic impact of the land market law is still developing. Current datasets are small and have been warped by the full-scale Russian war. Nevertheless, the data suggest that the land market has been moderately successful: small plots have been bought and sold and state land auctioned off, all at market prices. For a country still liberalizing large portions of its economy, this is no small feat.
Yet the land market law is most interesting for its insights into Ukraine’s legislative process. The Ukrainian people clearly have a say in how their government enacts laws. Moreover, market-based reforms like the land market are necessary in providing human rights to all citizens and moving Ukraine further along its Euro-Atlantic trajectory. The 2020 land market law is thus an example of Ukraine’s growing, competitive democracy and an auspicious sign for the country’s future.
