Relations between France and Ukraine have ancient ties, illustriously when one of the four daughters of Grand Duke of Kyiv Yaroslav I, Anne of Kyiv, married King of France Henri I, and later became the first queen of France to serve as regent.
More than 1,000 years on, diplomacy has undergone significant changes. Modern bilateral relations are more complex. As one of the major countries of the European Union, France is a strong individual player despite being part of the consensus-driven, 27-member nation EU.
With Europe still beset by a debt crisis, some economists warn that France may join such countries as Portugal, Spain, Italy and Greece in recession next year. That would be bad news, since France is home to the world’s fifth-biggest economy.
France is one of Ukraine’s top 10 foreign direct investors and trade partners. “We are very proud because the last biggest investment in Ukraine is a French one, its Air Liquide,” enthused Thomas Moreau, president of the French Chamber of Commerce and Industry in Ukraine. “We’re speaking about more than one (hundred) million of euros.”
Air Liquide, a French supplier of industrial gas and services, will construct an air diffuser in Donetsk Oblast’s Yenakiyevo at a metallurgical plant that is part of billionaire Rinat Akhmetov’s Metinvest group.
Ukrainian enterprises also benefit from the expertise of international energy companies, like Schneider Electric, which has headquarters in France. It specializes in energy management for businesses, from steel mills and oil companies to hotels.
Ukraine also missed out on some French investment, however. Just recently, a French producer of processed vegetables, Bonduelle, cancelled its plans to invest in Ukraine in favor of Russia, where it decided to acquire a competitor’s production site. This means Ukraine lost out on a 40-million-euro vegetable processing plant.
Established French investors in Ukraine include Auchan with eight hypermarkets and Leroy Merlin, a home improvement store. Others represent a significant presence on Ukraine’s banking market, with BNP Paribas and Credit Agricole having entered the market by acquiring local banks.
Credit Agricole claims to have the longest history operating in Ukraine through an acquisition of Credit Lyonnais, a French bank that opened a branch in Odesa in 1892. The world’s biggest bank of the 20th century, Credit Lyonnais, was the only foreign bank allowed to operate in czarist Russia.
“(Looking at) the Credit Agricole story through Credit Lyonnais … we could say without any doubt that Credit Agricole is the foreign bank that has been working for a longest time in Ukraine,” says Philippe Guidez, deputy chairman of the board in charge of the bank’s Ukraine operations.
The acquisition of Credit Lyonnais by Credit Agricole brought not only new ownership, but other acquisitions as well. Two years later, in 2006, Credit Agricole purchased Indeks bank for less than $300 million.
Despite the banking sector being hit hard by the world financial crisis, this year Credit Agricole’s retail banking operations in Ukraine were one of the most profitable in the group in terms of return on equity.
“We are one of the rare banks that are very profitable these days,” notes Guidez. “The profit (for 2012) is over 25 million euros in Ukraine.”
Credit Agricole is set to grow further, having become one of the top 20 Ukrainian banks by assets following the recent merger of its two subsidiaries.
Ukraine’s promising agricultural sector was one of the main incentives for Credit Agricole to expand. Such loans now comprise almost 40 percent of the bank’s portfolio. One of the bank’s loan programs includes financing farmers in order to increase milk production for their partner, another French company, Danone. “We strongly believe that to help Ukraine and Ukrainians produce milk, you need to help the babushkas,” says Dario Marchetti, head of Danone in Ukraine.
Danone has matched its increased demand for milk by significantly expanding its operations and production in Ukraine by acquiring Russian dairy company Unimilk, which has two factories in Ukraine. “The scale of the business is amazing, mainly because we had an acquisition,” says Marchetti. “Our business doubled overnight.”
Following the acquisition, Danone went from being primarily a yogurt producer to a full-scale producer of fresh dairy products, and a market leader with a 20 percent share. In Ukraine, Danone competes with other French dairy companies, such as Lactalis, Belle and Bongrain.
“France has a tradition of dairy… it comes from the times when France was the cheese producer of Europe,” explains Danone’s Marchetti.
Furthermore, French cows, famous for their high quality of increased fat and protein content in milk, are starting to be exported to Ukraine. “The French have just started selling cows to Ukraine for meat and milk,” notes Moreau of the French Chamber of Commerce and Industry in Ukraine. “It’s very important because before we never did that.”
France at a glance
Territory: 643,801 square kilometers
Population: 65.6 million people as of July 2012
Government type: republic
Head of government: Prime Minister Jean-Marc Ayrault (since 2012)
GDP (purchasing power parity): $2.214 trillion
GDP per capita (PPP): $35,100
Main industries: machinery, chemicals, automobiles, metallurgy, aircraft, electronics, textiles, food processing and tourism.
Ukrainian-French economic relations
Trade: $2.3 billion in 2011.
Exports from France to Ukraine: pharmaceuticals, boilers, machines, chemicals, essential oils, cosmetics.
Exports from Ukraine to France: seeds, fats and oils, clothes and textile, boilers, machinery, lumber.
France’s investment in Ukraine: $2.5 billion as of July.
Ukraine’s investment in France: $ 0.2 million as of July.
Sources: CIA World Factbook, State Statistics Committee
Kyiv Post staff writer Maryna Irkliyenko can be reached at [email protected].
