Showdown at the Nikopol Ferroalloy Plant
Frequent poster Hello has been trying to win me over to Yushchenko's side of the recent Yushchenko-Tymoshenko split.
In doing so, she caught a blunder of mine in the last posting:
Dan, --- "her two great mistakes"
You missed giving Nikopol Plant of Ferrosmelting to "Privat". It, going from one set of oligarchs to another, is NOT the re-privatization which everyday Ukrainians want and would economically benefit the country - it was NOT an open sale. - Hello
The two mistakes I had listed had been Tymoshenko's statements about privatization (that there would be a whopping 3,000) and her attempted price controls (over oil, meat, and bread, I believe) as her two biggest mistakes, yet left out the issue of Nikopol Ferroalloy Plant.
Just Another of Pinchuk's Plums
Nikopol Ferroalloy is the second major business the Yushchenko government aims to reprivatize, after Krivoryzhstal. Like Krivoryzhstal, it is owned by Pinchuk (or was).
A few days before the sacking of the Cabinet, I had mused idly about why the government wasn't seeing Krivoryzhstal through to completion before getting into new debates about different plants. In the process, I dismissed the rumors about it being sold to a business close to members of the YuGov, assuming that they were just more attempts by Pinchuk to play the victim. I was especially dismissive after hearing counter accusations that Pinchuk was underreporting profits at the plant.
Yushchenko had ordered that the plant be renationalized himself, and Tymoshenko had been saying the same things he was about transparent privatization for big money. The thing hadn't even been renationalized, why should I be concerned about a vague future reprivatization?
Good Privatization is Good
Well, according to this AP article, Yushchenko was concerned that Tymoshenko and a bunch of her allies in the government were planning to privatize the plant to themselves:
Ukrainian President Viktor Yushchenko on Sunday accused the prime minister he dismissed of having acted in favour of certain business groups in a dispute over a metals plant.
Yushchenko strongly criticized former Prime Minister Yulia Tymoshenko's government for its handling last month of the re-nationalization of Nikopol Ferroalloy Plant.
"High officials started directing events in favour of corporate interests; then crises appeared," Yushchenko said Sunday. "It was the last straw. I decided firmly that the decision most of all should be the following: Everybody should get lost." [AP, Natasha Lisova, 13 Sep]
These were only a few of the comments made. You can read him scathe Tymoshenko to the AP here. This is an escalation of the accusations to match Tymoshenko's recent comments that he could have either chosen her and an honest country or officials suspected of corruption. Which comes on top of her other numerous allegations made on Sep 9. (thanks to Josef K for all the links)
Now I Have a Motive
When Yushchenko first fired the government, I'd been at a loss to know why Tymoshenko was included. He had made general accusations that ministers had been having a turf war and been using their posts for personal gain, but I didn't see how that applied to Tymoshenko. Among those unfocused accusations were these:
The latest conflict involved a court ruling that overturned the 2003 privatization of a big steel factory, the Nikopol Ferroalloy Plant. The new owner, Viktor Pinchuk, Mr. Kuchma's son-in-law and one of the country's richest men, appealed, but in the meantime minority shareholders elected a new management team.
Mr. Pinchuk and the plant's workers rallied last week, calling the shareholders meeting illegal and confronting riot policemen sent to enforce the court's order. Mr. Pinchuk at the time accused Ms. Tymoshenko of trying to wrest control of the plant on behalf of her allies.
In his remarks on Thursday, Mr. Yushchenko referred to the showdown, saying that while the court's order was "deeply correct," he lamented "the intrigues behind the scenes" that nearly resulted in an armed clash.
"The finale of the story had nothing to do with attempts to hand the company from a gang over to the state," he said, "but it appeared that it was handed over from one gang to another. Therefore the people had a right to protest."
He did not elaborate.
Needless to say, if Tymoshenko truly was seeking to privatize the business into her own pocket, she deserved the boot. I certainly don't have enough information to be certain if it is true, but at least now Yushchenko has elaborated.
Dan McMinn
in 01) Economics and Finance, 07) Political History, 10) The Cabinet, 11) Tymoshenko - Bloc Yulia Tymoshenko, 20) Privatization
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"Ukraine: A Conflict Over Gas And Power
By Roman Kupchinsky"
http://www.rferl.org/featuresarticle/2005/09/46189b83-b037-4966-910c-89f5d78adc96.html
The long-simmering conflict between former Prime Minister Yuliya Tymoshenko and the National Defense and Security Council Secretary Petro Poroshenko, which most Ukrainian analysts believe led to the dismissal of her government on 8 September, had already grown intense by early this summer.
In mid-summer, Poroshenko made a number of statements demanding a far-ranging reform of the Ukrainian Security Service (SBU), then headed by Oleksandr Turchynov, a Tymoshenko loyalist and widely regarded in the media as a scrupulously honest broker.
This surprised many people, for it was the first time that Poroshenko had expressed this view and it came after a decision to reform the SBU had already been adopted by President Viktor Yushchenko and Turchynov anyway. Why did Poroshenko suddenly become so adamant about reforming the SBU at that time?
Allegations Of Corruption In Gas Sector
On 18 June Turchynov announced that a number of criminal investigations dealing with corruption in the gas industry had been launched, Interfax reported. Turchynov and Tymoshenko both made strong statements condemning the previous government's use of a middleman, Eural Trans Gas, and its replacement, RosUkrEnergo, to act as the transit operator for Turkmen gas to Ukraine. According to Tymoshenko, the use of these companies had cost Ukraine "more than $1 billion" (see "Ukraine: Criminal Cases Filed Over Gas Schemes")
In her televised appearance on 9 September, Tymoshenko said that she had gone to see Yushchenko about the allegedly crooked schemes in the gas sector, and his response was to forbid her from dealing with the energy sector.
Turchynov, according to Interfax on 18 June, placed responsibility for the Eural Trans Gas deal on former President Leonid Kuchma; Yuriy Boyko, the then head of Naftohaz Ukrayiny, the state energy monopoly; and on "the highest state officials in Ukraine and Russia."
After Turchynov's announcement, the Russian gas monopoly Gazprom announced that it would raise the prices it charged Ukraine for gas to international levels. Also soon afterward, the Russian Military Prosecutor's Office announced that Tymoshenko was still under investigation for bribery and fraud, despite the fact that Interpol had earlier announced that Tymoshenko had been cleared of all charges.
While it's not clear that the military prosecutor's announcement was in any way related to Turchynov's allegations of high-level corruption in Russia, it seems unlikely that a prosecutor would say such things about Ukraine's prime minister without the approval of Russia's highest political leadership.
Then, on 3 July Interfax quoted Tymoshenko as saying that the RosUkrEnergo scheme was a "criminal enterprise" and warned unnamed officials close to Yushchenko "not to replace the old schemes of the Kuchma government with new ones." She added that Naftohaz was "beyond the control of the cabinet of ministers" and that she had asked the new head of Naftohaz, Oleksiy Ivchenko, to report on Naftohaz's activities at a cabinet meeting. Ivchenko never attended the meeting, claiming to have suddenly gone on vacation.
Who's In Charge?
Ivchenko, a member of the Congress of Ukrainian Nationalists, a small party in the Verkhovna Rada that supports Yushchenko, was allegedly chosen to head Naftohaz Ukrayiny by Poroshenko and Oleksandr Tretyakov, Yushchenko's top aide. Tymoshenko consistently denied having been consulted about his appointment, despite ordering that all heads of state-owned companies should be appointed on the basis of competition.
Poroshenko, however, did not seem to attach any great significance to the investigation of RosUkrEnergo and never mentioned corruption in the gas business as a major concern. In an interview with the Internet publication Obkom, he downplayed the allegations of criminal connections to Eural Trans Gas and said that all he knew about the case was from media reports.
On 5 July, Poroshenko told Interfax that there were no significant problems in the gas business and that "the good relations between Presidents Yushchenko and Putin" would insure that all gas-related issues would be peacefully settled.
Then on 6 July, Yushchenko sent a letter to Tymoshenko in which, according to Interfax, he said that all "rumors" about Naftohaz must end and that the company should not be drawn into "political intrigues." He chided Tymoshenko and her colleagues for "unthought-through, emotional articles by people who have no relation to the gas sector." People close to Tymoshenko believe that this letter was in fact composed by Tretyakov, who later was accused of corruption by presidential chief of staff Oleksandr Zinchenko. (see "Corruption Allegations Abound")
On 13 July, Interfax reported that the SBU had given Yushchenko documents detailing the alleged illegalities of the RosUkrEnergo middleman arrangement. Tymoshenko was quoted in the same report as saying that Naftohaz should itself be the middleman and not pay others to transport Turkmen gas to Ukraine.
The defenders of RosUkrEnergo responded to these charges in an article in the Internet publication Forum on 4 August, in which author Yuriy Zakrevskyy wrote that without RosUkrEnergo, Ukraine would be forced to pay even more for gas and that the country should be grateful to such a company "built on Western principles and totally transparent."
As the situation heated up, Interfax reported on 12 August that the SBU had conducted a search of Naftohaz headquarters for documents relating to RosUkrEnergo. Interfax reported that the company's new management reportedly collected materials and gave them to the Prosecutor-General's Office, SBU, and other law enforcement bodies, which allowed a number of criminal cases to be filed.
A week later, on 20 August, Interfax quoted Poroshenko as saying that "the SBU was itself a danger to the security of the state" and needed major revamping. This was widely regarded as a formal declaration of war on Turchynov by Poroshenko.
Tymoshenko, in her televised appearance on 9 September, shed further light on the conflict when she said that at a meeting just prior to her dismissal with Yushchenko, Poroshenko, and others close to the president, she was asked to agree to SBU head Turchynov's dismissal. Tymoshenko refused and told the television audience that Turchynov was considered a threat by those present at that meeting.
In late August, Poroshenko announced that he would go to Moscow personally to negotiate with Gazprom on prices for gas and to arrange a long-term supply agreement. Although he was not a cabinet member and thus not legally empowered to negotiate on behalf of the government, Yushchenko did not interfere and Tymoshenko could not prevent him from going.
Former Naftohaz head Yuriy Boyko, who is under investigation in the Eural Trans Gas-RosUkrEnergo affair, continued to deny any wrongdoings and on 5 September issued a statement saying that he was filing a libel suit against Tymoshenko. Two days earlier, Boyko publicly accused the SBU of following him and said that he feared for his life, Interfax reported. Whether he coordinated this announcement with anyone from Yushchenko's inner circle is not known, but few believe that it was coincidental.
Role Of President's Aide
The SBU investigation into the transit of Turkmen gas was also looking into the role, if any, played by Tretyakov, the 35-year-old businessman who was Yushchenko's top aide.
Tretyakov, according to a 31 January report by RFE/RL's Ukrainian Service correspondent Serhiy Rudenko, made his money in the oil-and-gas business in Ukraine, was the owner of a company named ATEK-95, and while in parliament was a member of the Energy Committee.
ATEK-95 was a company which dealt with oil and gas and was affiliated with a company, TiKo, that owned filling stations and supermarkets in Kyiv and was affiliated with former Kuchma aide Dmytro Tabachnik's brother. ATEK-95 eventually came under the control of an offshore holding company based in the Bahamas, Thyssen Corporation, in which Tretyakov is a shareholder.
In July, Tretyakov was named by the website Obkom as having arranged a meeting between Yushchenko and Dmytro Firtash, one of the main players in Eural Trans Gas and a man believed to be closely associated with RosUkrEnergo. Firtash bought a television broadcasting license in Ukraine during the last days of the Kuchma administration and was accused of owing a large sum of money ($28 million) to the Moscow-based Itera corporation, which is the subject of litigation in Moscow. Tretyakov has denied knowing Firtash and introducing him to Yushchenko.
In his statement (as published on the Ukrainian website Obozrevatel on 5 September) charging Tretyakov with corruption, presidential chief of staff Zinchenko claimed that Tretyakov, after his appointment as Yushchenko's top aide, became a member of the supervisory boards of a major bank, Oschadbank, and Ukrtelekom. These positions had previously been held by Kuchma adviser Serhiy Lavochkin. Zinchenko believed that these supervisory posts were being used by Tretyakov as part of an influence-peddling scheme.
Zinchenko also accused Tretyakov of trying to control the gas business in Ukraine but did not go into specific details except to say that it was Tretyakov who insisted on keeping Ihor Voronin as deputy head of Naftohaz. Voronin, according to Zinchenko, was deeply involved in the Eural Trans Gas-RosUkrEnergo affair.
With Tymoshenko and Turchynov gone, it will be important to see if the SBU investigation of RosUkrEnergo and Eural Trans Gas continues and is brought to trial. If, however, the case is closed due to lack of evidence or lack of will to prosecute, it will raise further questions about Yushchenko's commitment to transparent government and his ability to fight high-level corruption.
Dan - your comment "it seems impossible to kill the SES" - oh yeah, you are on the money!
Thanks to Dykun for pointing me to the following - "In foreign matters, Yekhanurov may be more pro-Russia than his predecessor. He was not shy to voice support for the plans for a Single Economic Space (SES) with Russia, Belarus, and Kazakhstan at the height of the Orange Revolution, when this concept was not popular. Now he has promised, "The SES issue and ties with Russia will be greatly improved."
" UKRAINIAN PRIME MINISTER DESIGNATE PROMISES STABILITY By Oleg Varfolomeyev"
http://jamestown.org/edm/article.php?article_id=2370198
Welcome for the links :-).
Josef
TANGLED RUSSIAN-UKRAINIAN GAS DEALS PROVIDE OPPORTUNITIES FOR CORRUPTION, INFLUENCE
By Taras Kuzio
Friday, August 19, 2005
Russia plans to triple gas prices ahead of Ukraine's parliamentary election and only months before winter begins (International Herald and Tribune, August 1). A recent commentary in Ukrayinska pravda (August 8) accused the regimes of former president Leonid Kuchma and Russia's President Vladimir Putin of being closely tied in energy corruption. "And the entire criminal character of these ties is being fully used to apply pressure on the Ukrainian state." Russia tried the same tactics in Moldova's 2005 parliamentary election.
The increase would raise the prices Russia charges Ukraine to world-market levels. Currently Russia charges Ukraine $80 for 1,000 cubic meters of gas, nearly three times what Moscow charges Belarus. If gas prices do rise this dramatically, "Ukraine will suffer major economic disruptions" (IntelliNews, July 4).
These planned gas price increases could have a negative impact on Ukraine's economic growth, which has already declined from 12% last year to 4% in the first half of this year. Higher gas prices will increase inflation and hurt metallurgical plants, which are the largest consumers of gas.
Russia's stranglehold over the supply of gas to Ukraine is to some degree counter-balanced by Ukraine's control over export outlets for Russia. Some 90% of Russian gas is exported to Europe through Ukraine, and Kyiv has threatened to compensate for any increase by raising transit charges.
High levels of corruption remain a major problem in the gas industry. The presidential campaign of Viktor Yanukovych, Kuchma's heir apparent, tapped into hundreds of million of dollars through corruption in Russian-Ukrainian energy consortiums. Russia has ignored this problem by focusing on Ukraine's alleged "unreliability" as a gas transit country. The Yushchenko administration is keen to renegotiate the terms of the Russian-Ukrainian-German agreement of 2003-2004 that would have led to de facto Russian control over Ukraine's transit system (see EDM, July 9).
Corruption has been especially prevalent in two Russian-Ukrainian consortiums (Eural TransGas and RosUkrEnergo) created to facilitate the delivery of Turkmen gas to Ukraine and Europe. Ukraine annually obtains 36 billion cubic meters of gas from Turkmenistan and 24 billion from Russia. The Financial Times (July 27) reported that the Ukrainian authorities were concerned that these two consortiums were not only linked to Putin and Kuchma, but also to organized crime.
Ukrainian Security Service (SBU) chairman Oleksandr Turchynov has openly expressed his fear that international mafia boss Semyon Mogilevich had a business stake in RosUkrEnergo or used it to launder money. Mogilevich is wanted by the FBI and Interpol for money laundering. Like many former Kuchma officials, he is living openly in Moscow and the Russian authorities refuse to extradite him (Ukrayinska pravda, August 3).
Former Naftohaz Ukrainy CEO Ihor Bakay has also been hiding in Russia since December 2004. He was given Russian internal and external passports earlier this year when he took up Russian citizenship. Ukraine, unlike Russia, does not recognize dual citizenship. Bakay was released from Naftohaz Ukrainy in 2001 after corruption scandals but was brought back in 2003-2004 by Kuchma to head the Directorate on State Affairs. Bakay is charged with abuse of office leading to the loss of $1 billion. The new Naftohaz Ukrainy CEO, Olexiy Ivchenko, a Yushchenko loyalist, has nearly tripled revenues to the state.
Fearing criminal charges, outgoing Naftohaz Ukrainy CEO Yuriy Boyko "purchased" the marginal Republican Party of Ukraine (RPU) as a protective political roof. The RPU has no ratings and is not currently being courted as an ally by any well-known political party for the 2006 election. Outgoing Foreign Minister Konstyantin Hryshchenko agreed to become the RPU's foreign affairs spokesman, and on a recent visit to Washington he unsuccessfully attempted to convince policymakers that the RPU is a Ukrainian equivalent of the U.S. Republican Party (Washington Times, June 11).
RosUkrEnergo was created in summer 2004 to replace Eural TransGas. Its aim is to act as an intermediary between Gazprom and Naftohaz Ukrainy to transit Turkmen gas through Russia into Ukraine. Eual TransGas managers moved over to RosUkrEnergo. Gazprom, through its Swiss-registered ARosgas Holding A.G., owns 50% of RosUkrEnergo. The remaining half is owned by Centragas Holding, an Austrian-registered company 100% owned by Raiffeisen Investment A.G.
Centragas CEO Wolfgang Putschek has denied that RosUkrEnergo has any links to Mogilevich (Financial Times, July 27). In a letter to President Yushchenko, Raiffeisen director and Centragas CEO Putschek denied categorically that Mogilevich or any other organized crime boss had ties to RosUkrEnergo. Mogilevich has himself denied he has any links to RosUkrnergo or was using it to launder funds (Ukrayinska pravda, August 1).
Accusations of high-level corruption by the Putin and Kuchma administrations and links to organized crime have led to calls by Prime Minister Yulia Tymoshenko to end the use of intermediaries to bring Turkmen gas to Ukraine. "I am consistently working so that there will be no intermediary between Ukraine and Turkmenistan," she revealed (Ukrayinska pravda, July 2).
Tymoshenko has also refused to countenance working with RosUkrEnergo, because it was established, she believes, with numerous legal infringements. Trade in Turkmen gas should be undertaken directly by Naftohaz Ukrainy with Russia and Turkmenistan, she believes, but without the use of an intermediary (Ukrayinska pravda, July 13).
This, however, may be easier said than done.