Spotlight on the Biggest Privatization in Ukraine 

Since privatization is a big topic again with the fight between Yushchenko and Tymoshenko, I thought it would be worth looking back to see what's going on with Kryvoryzhstal, now Mittal Steel Kryvy Rih.

For background, this state asset was first privatized in an untransparent bid by Akhmetov and Pinchuk in Fall 2004 for $800mn, then reprivatized in November of 2005 in a fair and open bid that provided a massive amount more money for government coffers ($4.8bn: more than the previous 10 years of investment). It's been quite a while since I've seen big news about the plant, but if we're to decide what we think of Tymoshenko's new privatization proposals, knowing the current status of this key privatization will be important.

2006-2007 

In the spring of 2006 ran into troubles (some big troubles) with State Property Fund Chairwoman Valentyna Semenyuk. Taking into account that she fought against the privatization to Mittal Steel from the beginning (preferring, implicitly, the much less economically beneficial, nontransparent, and suspicious privatization to Akhmetov and Pinchuk), this was not an unexpected attack. However, her accusation that Mittal wasn't keeping the promises regarding wages that were part of the privatization deal did not seem to have been refuted by the company in the Ukrainiska Pravda article above, thought the company resolved to do better. Two days later, according to this article, the company raised the wages it pays its employees to the highest in the entire metallurgic sector.

Things also seem to have improved in fall of 2006, when Mittal Steel got a loan from the European Bank for Reconstruction and Development for $500mn to modernize the facilities. The company claimed to have already invested a further $85mn of its own money in the same effort. This article in New Europe states that the company managed to increase sales by 16% as the result of its efforst in 2006.

In 2007, the company bought a new coke battery, increased production in the first quarter, and submitted plans for further investment and growth, especially growth in sales in the Ukrainian market. A January 2008 report states that the company lifted output for 2007 year by 7%. 

Finally, the company is cited in this report on the Ukrainian steel market as the major factor in increasing competition in the Ukrainian steel production, and thus improving the market overall.

2008 

For it in 2008 is this conflict, in which it seems the company has defaulted on one promise to improve the situation for workers, as well as a number of lesser articles in the privatization agreement of 2005 (again coming into conflict with Semenyuk).

I originally looked back into this issue, because a friend of mine who knows people working in or around Mittal Steel Kryvy Rih told me that his acquantences were complaining that the new company was worse than the old one.

Does anyone else have more information on this? The track record in the articles of continued investment and growth looks good from a business standpoint. However, is this be happening without greatly improving the situation for workers? What's happened to the high wages they were reported to have been earning in 2006?

Thanks in advance for any article links you might have! 

Tymoshenko and Yushchenko's Loudest Confrontation Yet: Privatization

It used to be that Yushchenko would send uncountable directives over to Tymoshenko and she would blithely ignore most of them and work towards her own purposes while saying she "admires" the president. He would veto what she did, issue a new directive, and the process would start again.

Recently, things have degenerated.

The major sticking point is Tymoshenko's extensive privatization plan, the proceeds from which she intends to use mostly for government remunerations (or handouts) to holders of Soviet bank accounts made worthless in the aftermath of the fall of the Soviet Union. Yushchenko considers this an irresponsible use of the money, and accuses her of privatizing into the hands of her allies--the claim made by pretty much every party against a privatization by one of its opponents.

So, for example, since State Property Fund Chairwoman Valentyna Semenyuk has been one of the main agents blocking Tymoshenko's privatizations, Tymoshenko kicked her out and installed her own chairman, Andriy Portnov. Yushchenko reinstated Semenyuk, cancelled the privatizations, and issued a "yellow card" warning to Tymoshenko's government. The Constitutional Court overturned his decision, and Tymoshenko told Portnov to ignore it. Along a parallel track, the privatization of, for example the Odesa Pre-Port Plant has been ordered, suspended, ordered again, and again suspended. The Eurasia Daily Monitor has a summary of all the tit-for-tat.

In retaliation, it seems, BYT lined up with the Party of Regions and Tymoshenko said she supports a vote to decrease the President's power in favor of the Parliament (and she's been taking on a number of advisors from the defunct and unmourned SDPU(o) of Viktor Medvedchuk, though this may not be a retaliatory gesture as much as a tactical one). However, when Yushchenko saw that he lacked the support of the Constitutional Court and the Parliament, he backed down. His statement is a classic one of a politician accidentally saying the truth:

Let us not put to question which organization [of power] we need, but focus on the task of achieving, through dialogue, through the work of public commission, through public referendum, a system of counterweights which would ensure serene future for us and our children.

Exactly. Now why have you been wasting your time on this issue practically since you got into office?

Not that Tymoshenko or Yanukovych are any less to blame. The last link goes to an article in Dzerkalo Tizhnya: it's wordy, but overall a great article. The line that pretty much sums everything up:

Each of the three top Ukrainian political players more or less realize the need of the reforms, but all explain their slackness by the following logic: “Now preparations for the decisive battle are going on. What is of critical importance now is to garner as much resources and voter support as possible. It is imperative that sufficient financial, media and electoral reserves be built up. I will begin attending to the country’s salvation and development once I take the country’s top office for a long enough period”. The result is that Tymoshenko and Yushchenko are competing in populism, while Yanukovych, in the absence of State resource, is busy with NATO and language-related issues. This provides an explanation as to why we keep making the same mistake, which is because we make no headway. A country cannot move ahead unless and until the main state and public challenges are correctly identified and begun to be dealt with. Purely personal and corporate interests of policy makers cannot provide enough progress to drive us away from the same old mistake.

Speaking of wasting their time on political games while gas and inflation crises loom...

The Kyiv Mayoral Election vs. Macroeconomics

Taras Kuzio, writing in the Eurasia Daily Monitor, thinks BYT's candidate in the Kyiv mayoral election, Turchynov, will be able to get past Klitchko and Chernovetsky, citing corruption charges against both of the latter. I still fail to see how Turchynov is going avoid similar charges sufficiently to overcome the huge gap in public support between himself and the main contenders--particularly since there will be no runoff. Not that we should want Chernovetsky to win (which recent polls think he might, using the same tactics as last year).

This mayoral election is the biggest distraction from the two main problems for Ukraine, both of which are economic: inflation and fuel price hikes. 

While Tymoshenko was certainly overstating things when she said her government was getting the highest appreciation in the world and holding inflation policy unchanged will be enough, it is true that she was praised by the WTO.
The IMF was more moderate in its praise. In this report it did not actively argue against her privatization plan, but it definitely suggested holding back at least some of the money thus earned to promote a more balanced budget (meaning less going to Tymoshenko's handouts). Another one of its main points is that the hryvnia should be allowed to float against the dollar (meaning appreciate, in the current economic climate). According to the Ukrainian Journal, the NBU seems interested and Tymoshenko has reigned in her criticism of the bank on at least this issue. The WTO and IMF both make the situation with inflation seem less dire than Dzerkalo Tizhnya seems to think it is, but DzT bases more of its assessment on an expected massive fuel price hike from Russia (something I also think is imminent, and the IMF notes as a potentially major problem).

Two More Good Items 

One alternative to politics-watching is this entry on Ukrainiana about Chernobyl. It includes Taras's own story from living (six years old) in Kyiv at the time. It also is heavily laden with YouTube videos related to the event.

Another wonderful and unrelated article by John Marone at Eurasia Home praises the introduction of national standardized university examinations. One step forward for transparency, one step backward for corruption.

BYuT and NUNS fight over city politics, the nation gets closer to crisis

February and part of March were the Party of Region's chance to waste everyone's time blocking parliament with their NATO Circus of Obstructionism. The end of March seems to have been burnt up looking for the next issue for politicians to focus on. Now it's April and they've finally found something to keep themselves from addressing any of the multiple looming disasters—the Kyiv Mayoral Election.

NUNS is the less popular party, but is pushing for the vastly more popular candidate in this election: Klitchko. BYuT's candidate is Turchynov, who has about 6% popularity to Klitchko's 31%. That means that if Tymoshenko wants him to win she'll have to spend massive amounts of time and political capital to do so. So far she doesn't seem to have been deterred at seeing what PoR earned for its anti-NATO efforts on a national level—a ten percent drop in popularity and repeated local election losses to Bloc Yulia Tymoshenko.

Certainly Baloha and his new gang (a breakaway from NUNS) haven't acted constructively and won't do so in the future. But NUNS bleeds votes every election because of their pettiness and unprofessionalism. It's BYuT, which is stronger and more politically savvy that will need to compromise here, because there are much bigger national problems her Cabinet needs to be addressing.

Inflation

Thank's to IIU's blogging, readers here already know that inflation is a big problem that's getting worse. Years without reform, worldwide price increases for foodstuffs, government-on-government increases in unsupported payouts to voters (the most recent being Tymoshenko's payments on Soviet accounts) have all resulted in 26% inflation this March.

As with other issues, NUNS and BYuT are working at cross-purposes. Tymoshenko's payouts went through, but the privatizations she proposed to use to generate the money to pay for them were vetoed by Yushchenko. She's tried to get rid of a longstanding land auction ban which she also thinks could improve economic growth (I do, too) and has again been vetoed by Yushchenko. I would be less apt to think Yushchenko was simply playing spoiler if I saw any indication that he has a better plan instead of his usual vague generalities.

Tymoshenko has said the government going to stop inflation in five to six months. To do this will take actual reforms, though, and that means working with NUNS. That may not be possible under any circumstances, but fighting over the Kyiv mayor is the one way to ensure defeat.

Gas Price Hikes

RosUkrEnergo is still hanging on in Ukraine-Russia gas deals despite Tymoshenko's opposition. She is claiming a victory anyway by saying that the deals will happen on Russian soil so it is technically "out of the Ukrainian market", but it looks from this angle like she's trying to save face after failing to eliminate it.

Though Russia has been able to keep its intermediary (and its active push to keep RosUkrEnergo throughout the negotiations last month confirms that it is, indeed, Russia's preferred intermediary), this won't stop Ukraine's gas prices from increasing significantly in the next few months. The ultimate driving force will be simple, rational self-interest: why sell at under $200 per m³ to Ukraine when Europe will soon be paying over $300 per m³ to Europe?

The price rise has already been foreshadowed: a month ago Russia increased the price it pays Central Asia for gas. This was not out of generosity: it was a revision to preempt hard bargaining by Central Asia, or (much worse for Russia) actual progress on alternative gas routes to Europe that don't include it (one of them is Tymoshenko's White Stream project, lauded by The Economist, which would be a great use of her considerable political skills if she weren't too busy in Kyiv). Russia's price increase is likely to be passed on to Europe in the near future, and Ukraine should not expect to be far behind.

We should not be distracted from this issue. Yes, another Russian general has threatened to attack Ukraine militarily (and with "other methods" as well), and responding in a professional manner was important. Yes, Kommersant claims Putin said Ukraine "isn't a real nation" and it will "cease to exist" if it joins NATO (a claim his government has not refuted). Ukrainian politicians should remember this when dealing with Russia (Hey, Yanukovych, you've been shouting a lot about Ukrainian national sovereignty at anti-NATO rallies—refresh my memory, when did any NATO ally threaten that as much as Putin just did?). Nevertheless, the real motive force in the gas sphere will be the $100 per m³ price differential. Either Russia will take payment in cash, or in ownership of Ukrainian energy assets, but it won't sit for long without payment.

I don't know when the hike will come. Gazprom may not know, and maybe not even the Russian government. But since the Russian government doesn't like NATO and doesn't think Tymoshenko is going to give it anything in exchange for the discount pricing, the hike will certainly come this year. If Russia is looking to improve its chances of getting paid, it may hike them this summer or wait until inflation is more under control, so it doesn't catch Ukraine when it is more desperate. If it wants to shake Ukraine up more it may load on the hike about the same time that inflation problems come to a head.

Not Even Together Enough To Host A Soccer Match

Inadequate preparation for Euro 2012 should be a big issue. There is $25 billion more investment that needs to be made, Ukraine's reputation is on the line—this should be a cause for major concern. But, because the government has gotten into an inflationary and budgetary mess that dwarfs even this event, all that I'll do is note that it's still a problem. I will add, though, that it particularly unhelpful to see Yushchenko blithely state that everything is going smoothly despite warnings from Ukraine's host partner Poland and the Euro 2012 committee.

Tymoshenko Should Support Klitchko 

Below inflation, gas prices, Euro 2012, somewhere under corruption in public transportation, is the Kyiv mayoral election. And yet, the politicians of an entire nation are occupying themselves with this single city election.

Tymoshenko doesn't need to look very far to know what she should do in this situation: all she needs to do is remember her own decision ahead of the 2004 presidential election.

In 2004 she gave up her own candidacy in order to support Yushchenko, despite her ego and despite the animosity between them that is unlikely to have emerged fully-formed in January of 2005. The reason she did so was that she did not have a real chance at the presidency (her public popularity was in the low teens, I believe), but Yushchenko needed help to overcome his opponent Yanukovych. Divided, their two parties could have both lost a legitimate election to Yanukovych. In doing the right thing, Tymoshenko also earned enough voter support to improve her political rating far beyond anything she had had thusfar.

Tymoshenko should support Klitchko. Like Tymoshenko in 2004, Turchynov in 2008 is little more than a spoiler. This is especially true since the mayoral election, unlike the presidential, is decided without a runoff (though BYuT is trying to change this). If Turchynov and Klitchko fight one another, it is likely that both will lose to to Chornovetsky, whi is still polling above 30% popularity.

In a real, monetary way, Ukrainians cannot afford to watch BYuT and NUNS continue to squabble. If Tymoshenko makes the magnanimous step here, not only will it improve the nation's chances in the upcoming crises, but likely result in voters rewarding her as they did after 2004.

"The political honeymoon between Ukrainian President Viktor Yushchenko and Prime Minister Yulia Tymoshenko appears to be over. Yushchenko has thwarted Tymoshenko’s planned visit to Moscow, torpedoed planned appointments to her government, disagreed with her privatization plan, and come up with a package of bills aimed at diminishing the role of the prime minister and the Cabinet." (Read on for rest of EDM article here)

Today UNIAN reported that Yushchenko stated that the money from mass privatizations must not be used for social grants-in-aid. 

One note is that in regards to the "package of bills" - "The BYT faction in Parliament will vote in favor of the presidential version of the law on the Cabinet of Ministers. Yulia Tymoshenko admits she could run for presidency, after all." ("Of Cabinet's Bondage")

(It is interesting for me to note that during the time of Yanukovych as PM when Yushchenko was forceful, he was applauded for finally behaving like a President and taking charge and his ratings went up. But at this time with Tymoshenko as PM he is imho going to be facing a lot of flack and his ratings will go down. Out of interest, I wonder how much of it may be caused by a "gender bias", if at all.)

Title of the report is "Tymoshenko did not listen to Yushchenko: assets under dispute will be sold first". While it is reported that PM Tymoshenko is very sick and will not be attending today's Security meeting. In her place will be Turchynov. 

The following state assets are slated to go on the auction block - держпакети акцій ВАТ “Укртелеком” (67,79%), ВАТ “Одеський припортовий завод” (99,57%), ВАТ “Турбоатом” (75,22%), Криворізького гірничо-збагачувального комбінату окислених руд (незавершене будівництво), ВАТ «Прикарпаттяобленерго» (25,02%), ВАТ “Львівобленерго” (26,98%), ВАТ “Енергопоставляюча компанія “Одесаобленерго” (25,01%), ВАТ “Полтаваобленерго” (25%+1 акція), ВАТ “Київський завод реле і автоматики” (58,9%), ВАТ “Київський мотоциклетний завод” (100%, продаж із земельною ділянкою), ВАТ “Тернопільське об`єднання “Текстерно” (25%+1 акція), ВАТ “Херсонський бавовняний комбінат” (25%+1 акція), ВАТ “Науково-виробнича фірма “Луганські акумулятори” (25%+1 акція), ВАТ “Завод “Маяк” (100%), ВАТ суднобудівна компанія “Феодосії “Море” (100%), ВАТ “Науково-виробничий комплекс “Київський завод автоматики імені Петровського” (93,07%), ВАТ “Науково-дослідний інститут електромеханічних приладів (44,44%), ВАТ “Енергопоставляюча компанія “Чернігівобленерго” (25%+1 акція), ВАТ “Сумиобленерго” (25%+1 акція)

Open JSC “Ukrtelecom” (UTEL) (67,79%), open JSC the “Odessa Shipbuilding factory” (99,57%), open JSC “Turboatom” (75,22%), Krivoriz'kogo ore mining and processing combine of the oxidized ores (building is uncompleted), open JSC «Prikarpattyaoblenergo» (25,02%), open JSC “L'vivoblenergo” (26,98%), open JSC  “Odesaoblenergo” (25,01%), open JSC “Poltavaoblenergo” (25%+1 action), open JSC “Kyiv factory of relay and automation” (58,9%), open JSC “Kyiv motor cycle factory” (100%, sale with lot land), open JSC “Ternopil'ske association of “Teksterno” (25%+1 action), open JSC “Kherson cotton combine” (25%+1 action), open JSC firm “the Lugansk accumulators” (25%+1 action), open JSC “Factory “Lighthouse” (100%), open JSC shipbuilding company “Feodosii “Sea” (100%), open JSC manufacturing complex “the Kyiv factory of automation of the name of Petrovskogo” (93,07%), open JSC “Research institute of electromechanics devices (44,44%), open JSC “Chernigivoblenergo” (25%+1 action), open JSC “Sumioblenergo” (25%+1 shares).

I remember this dance from 1994

On Aug 21, Ukrainian authorities found the bullet-ridden body of the top anti-organized crime official in Donetsk, Roman Yerokhin, just a week before erecting a new monument to Vyacheslav Chornovil, nationalist politician (who died sandwiched between long-haul trucks a few months before the presidential election in which he was to run). So while Yushchenko tries to convince Ukrainians he's going to launch a new inquiry into Chornovil's murder, another skeleton walks to the end of the line. (Foreign Notes has been all over this case, describing: Lutsenko's typically vague statement that "we know he's a Donetsk businessman", his claim that the murders have been detained, the small likelihood those that orderd the hit will be prosecuted by the do-nothing PG Medvedko, and more of the usual you-know-who ridiculousness Ukrainian news agencies are always panning off as news rather than gossip (this time that the person who ordered the hit was a BYUT deputy whose name begins with "Sh"). As soon as I get my hands on a picture of the guy, I'll get him up on Skeletons.

In industrial news: as expected, the Yanukovych Cabinet is also putting a stop to any further privatization of Ukrainian state assets like the hugely successful Krivoryzhstal (re-)privatization. Meanwhile the actual campaign promises Yanukovych and his party made have all gotten sidelined, as I pointed out a few weeks ago, and Tymoshenko mocked him for yesterday.

The only solid blow against corruption has landed, though. It fell on Pavlo Lazarenko, former PM, who was convicted of money laundering and sentenced to nine years in prison. Oh... wait, Lazarenko was convicted in the US. Pretty sad for Ukraine that the only bandit to go to prison was living abroad. On the other hand, I'm proud of my country for nailing the bastard. My congratulation to the US judicial branch and San Francisco circuit court in specific.

"Grand Coalition" Not Yet Finalized

So, pretty much a full return to the Kuchma era. But don't worry, says Yushchenko, if the ministers in the Cabinet get out of line I'll make sure they resign. What power he's going to use to do this is unclear, but not nearly as unclear as how he plans to fulfil his promise that all state money be used "for the benefit of the poor, social programs, the army, in other words – for the welfare of Ukraine". Let me get this straight: he can't keep his own party in line, he couldn't stop his opponent from getting into power, but now we're supposed to believe he's got the power to coerce the Party of Regions into becoming a philanthropic government?

Yushchenko's party, meanwhile, seems to be attempting to make the coalition with PoR-Socialists-Communists as unproductive as the Orange coalition. In fact, the coalition is apparently still under discussion. Maybe this is supposed to be a sneaky way to cut down on corruption: drag out discussions so long that no one can get anything done (For a prediction of what the final outcome will look like, I recommend the Kyiv Post's article on Kyiv politics as a possible foreshadowing).

Natural Gas Prices Not Finalized, Either

Regional governments will get a say in the planning of the 2007 budget, promised Yanukovych. Ukraine won't steal any gas this winter, he also promised, but he wouldn't speculate on what price the country is going to be paying (though hinting it might rise "a little" due to world price trends). First Vice PM Azarov was less optimistic, saying the price won't be less than $135/1000cu m.

Regions of Ukraine deputies suddenly sound like a bunch of Kuchma acolytes

What a difference power makes! Gone is the Party of Regions (PoR) that stumped it for all the hot-button issues in the East. Gone is the party that represented "half of a divided country" as so many AP articles told me. In its place is a whole horde of little(-er) Kuchmas willing to drop any demand so long as it doesn't threaten their power or avenues for graft.

In the process, they're making all those PoR voters look like suckers. As expected.

First the bad news, and there's quite a bit of it: journalists are feeling the pinch again as "incidents" against them increase, Yanukovych has recently signed through a Cabinet decree allowing civil servants to be fired with less warning, Akhmetov is threatening to try to get Krivoryzhstal back, and (as I describe below) WTO accession is looking shakier and gas issues hazier. (thanks to Foreign Notes and frequent commenter IIU for most of these points)

WTO Accession - Like a Software Release Date

I've got to admit: I am in the dark about what's going on with Ukraine's WTO bid. According to UNIAN, on 8 Aug, Yanukovych suggested Ukraine might not join until 2007, while Tarasyuk was still adamant that accession will happen this year. The next day, Kinakh managed to agree with both of them; how's that for a political trick! (Ok, factually he only agreed with both that it should happen "soon", but still...) "Soon," says Yushchenko's Economic secretary, too.

And then a couple days ago, a new word from Yanukovych, more optimistic than the last. Now he is saying that Ukraine's been trying so long, it really should make it into the WTO this year, though "It would be wrong if we conceded on positions which would damage our market and our manufacturers."

The vagueness makes me suspicious that the deal won't go through until 2007.

Natural Gas For Influence
gas price extended through the end of the year. This despite Turkmenistan's stated aim of increasing its own price to Russia to $100/1000cu m. Should that take place, The Russian government will be selling gas to Ukraine at rates below the price it pays to suppliers. This before Yanukovych has even made it to Russia to negotiate. (although I'm also reading that this is not yet an agreement, but just a pronouncement from Yanukovych without official Russian confirmation yet, or something "being agreed upon")One other thing Yanukovych has decided: RosUkrEnergo is probably not so bad after all.failed to secure a deal on gas. Large price hikes and shortages are now imminent. I'm inclined to believe it, considering the thrust of the other two puzzling articles I placed after EDM. Looks like I'm going to have to downgrade my estimations of EDM, huh. In their defense, for quite some time they've been very reliable. I sincerely hope this doesn't indicate a downward trend.

The new news, of course, is great. If Yanukovych is having difficulties in negotiations and even he is suggesting price hikes to $150/ 1000cu m minimum, that means Russia is demanding real-world rates. A real, economically-based, agreement would not presuppose any backroom sell-out. It would mean clear negotiation based on national (and business) self-interest.

I can quote the same article referenced below, but now from the most optimistic option, rather than second-best:

Outcome 1: The Russian government takes the principled position that Russia should be selling gas to Ukraine openly at market rates - good policy which moves Ukrainian-Russian relations in a positive direction, good for forcing Ukrainian development along a sustainable route, good for reinforcing Ukrainian independence, and damaging to Yanukovych's credibility (as a bonus).

The following conclusions are therefore, happily, no longer applicable. Very comforting.

A couple postings ago I described what [a maintained $95 price] would mean: the Russian government is not interested in transparent economic relations with its neighbors. When it looked like the former orange blocs would continue in power, Putin repeatedly threatened to hike the price and now: suddenly the Russian government has decided it didn't really want to make an (economic) profit after all.

The price that will be paid will instead be determined in backroom deals. Russia will sell at ostensibly cut-rate prices expecting non-economic returns that are never announced to Ukrainian citizens (or any others, for that matter, including Russians). With all the secrecy, it doesn't require a terribly suspicious mind to wonder if unscrupulous Ukrainian politicians (like Boyko, back to his oily, gassy business as Minister now) might be selling out their nations at a discount, in exchange for kickbacks.]

A Couple Happy Side-Effects of the PoR Resurgence

There aren't many, granted, but there are some. Most of them got helpfully summed up by Vitrenko in her whine about how Yanukovych betrayed PoR voters. Essentially, while RoU will be concentrating its efforts on corruption and corrosion of the rule of law, it won't be focusing on any of the divisive issues it campaigned about.

Chief among its shifts is its quick backpedaling on the language issue. Like I said from the start: the language issue was just vote-gathering rhetoric with no real RoU deputy support. Tossing it to Yushchenko like a bone was the easiest decision they made. Of course the best option is if the language issue remains on the table enough to reach some sort of compromise, but I'd take neglect over a quickie conversion to dual state languages.

the port's quiet, the protests are over, and NATO is backAnother is that NATO military exercises got ok'd by the Rada and are happening again in Crimea. This is great. Regardless of whether or not Ukraine eventually joins (which I believe has always required a referendum, though perhaps this might have been a RoU win), it's a better diplomatic stance to at least look amenable. Vitrenko can't be to happy to see RoU voicing support for Crimean Tatars, either. (pic: VOA)

And finally, the Constitutional Court is back in action. 

Lutsenko Is Still Better Than Any Other Cabinet Member

As I said in my last entry, I was disappointed to see Lutsenko go back on his word by continuing to serve as Internal Affairs Minister under Yanukovych. It would have been nice to have seen a Ukrainian politician keeping his word for a change. (here's his excuse - short version, and his excuse - long version; for a fun comparison, here's Moroz's excuse for cutting a deal with Yanukovych. A question for you, Mr. Frosty: If you're so opposed to Yanukovych's policies, why didn't you just refuse to support any candidate?)

But I can't say I'm devastated Lutsenko will still be around. After all, he was a decent Minister; certainly I'm a lot happier to see him still there than to see Zvarych back in the Cabinet. It also looks like he may just be able to use his powers as a check against other Cabinet members.

Because there's nothing going on in political news

The coalition talks are still going on at about the pace they were last week. This article in Zerkalo Nedeli, goes into all the mucky business in great detail. It's highly informative, but rather short on predictions. Another great articleis this one, criticizing NU for trying to weasel out of making Tymoshenko Prime Minister by selectively using Germany as an example.  (hat tip to Foreign Notes, which has already posted both these links; they've been postings some excellent coverage in this post-election period and I suggest reading their entry on Yushchenko's declining popularity)

The Back-And-Forth

As of last week, the bickering continued, with NU and Yushchenko repeating their pathetically obvious attempts to lure Tymoshenko and her bloc into joining a coalition before she locks in the PM position. The electorate's wishes are clear, they'd like to see either Yanukovych or Tymoshenko as PM, and for that reason, so would I.

Tymoshenko said resolution was near, and an agreement would be ready Monday, then repeated that she should be PM and Moroz speaker, which of course NU couldn't tolerate, so they broke off negotiations. Then yesterday Yushchenko again tried to make resolving the coalition conflict the prerequisite for, rather than the desired outcome of meeting with Tymoshenko and Moroz. About the only thing he's contributed so far is optimism (and the rather audacious notion that he considers himself kingmaker in this regard), but hopefully he will follow through and meet with the orange coalition leaders next week. On the up side, the negotiations may be over soon, if only because the 60-day deadline is coming up.

SPF Head Semeniuk - The Underminer

According to the Kyiv Post, State Property Fund head Valentyna Semeniuk (Socialist Party) has decided to fire up the rhetoric against Mittal Steel. She has always hated this business, and hated the deal that privatized Krivoryzhstal (now Mittal Kryvy Rih) into its hands. She resigned over the matter. The stance is not an aberration, she has been trying to stifle privatization for over a decade.

So it may come as no surprise to y'all that I treat her accusations of contract violation against Mittal with the deepest skepticism. Much worse than her complaint is her solution:

Semeniuk also threatened to strip the Ukrainian metallurgical plant from the hands of the investors should they fail to fulfill their obligations, adding that other companies have offered to buy the factory for more money.

“If the obligations are not fulfilled by June 6, they will face a trial on June 7,” she said.

Her retalitory measure is to strip Mittal of its holding? Does she truly believe the business will be worth more than Mittal paid (they were top bidder) once foreign buyers see Ukraine is willing to expropriate major industrial holdings on a technicality? This woman is a disgrace, a sapper undermining the support beams of the Ukrainian economy. May she be left out of whatever coalition gets formed.

The Party of Regions Was Serious about the Russian Language Issue?

Before the March election, I'd thought the issue of making Russian a second state language would disappear afterwards. But PoR continues to pursue it, at least on a local level. I'm certainly happy to see an issue of such importance to Ukrainians remain in play after the March election, but it is sad to see decisions made by fiat in local councils on the presumption (probably correct) that Yushchenko is too indecisive a leader to do anything to hinder them on the national level.

As with the NATO issue, the status of the Russian language has never been subject to national scrutiny in a way that would produce either progress or positive compromise.

Officially today has been declared "Freedom Day" by Yushchenko, to celebrate the beginning of the Orange Revolution. On November 21, 2004, the second round of the Ukrainian election was held, and on November 22, when it became clear than Yanukovych and pals had stolen it, people started taking to the streets.

The Orange Revolution was certainly successful in that the fraudulent result was overturned, and in the rerun the guy who should have won Round 2 finally got his win.

However, a number of my Ukrainian friends have been depressed recently about Yushchenko firing Tymoshenko, the "Memorandum of Understanding" with Yanukovych, the rising cost of everything (having to do with Ukraine's current economic difficulties), and the recent poll figures suggesting that Regions of Ukraine might get enough votes to put Yanukovych in as newly-empowered Prime Minister in March 2006. "What did we (and a third of the nation) have the Orange Revolution for?" they ask.

This is what.

Things to Celebrate on Orange Day

1. Democratic Choice: As I will say a million times if I have to - throughout the Orange Revolution, precedent was more important than President. The results on November 22 were very straightforward, Yushchenko had won more of the votes, and the results had been falsified. There had been numerous violations of election law on polling day against Yushchenko, during a process even more suspect than the October vote. Ukrainians had been cheated.
   
   Maybe Yanukovych and the Party of Regions will win big in March. He did get 44% of the electoral vote in round three of the presidential election, so somebody was voting for him. But if his party does win in March, it will be based on votes, not administrative influence. In contrast, the SDPU(o) is hated by the people; it won't be able to win anyway.
   
   This doesn't mean that Ukrainians will necessarily have pleasant choices to make when elections roll around, but they can trust that they live in a democracy, and the results will reflect their vote. If Yanukovych had won based on fraud, then their democratic powers would have been strongly curtailed.
   
   
2. Actual Freedom of Speech: There are no more temnyky. You hear again and again, but I want to remind us what it was like before all these changes.
   
   According to the OSCE: in the period they covered, about 43% of news was covered in such a similar manner across numerous sources that they believed those sources could only have been given the same guidelines to follow. This was verified by reporters standing up on Independence Square to renounce the temnyky guidelines they had been following. All major media sources were pro-government, with the exception of Channel 5, which had been shut down, or threatened with being shut down, three times over the course of the year. When they were shut down in October, the month of the first round of the election, they went on hunger strike to protest and gain enough attention to get put back on. They only made it back on the air just before the election.
   
   My favorite fact from the OSCE, though, is its breakdown of the coverage on UT1, Ukraine's public television station, the equivalent of PBS or the BBC. That station gave 64% of its political and election prime time coverage to Yanukovych, and portrayed him positively or neutral 99% of the time. Yushchenko got 21% of its time, and 46% positive or neutral coverage. Some regional sources were even worse, with Zaporizhzhya state TV giving Yanu 100% of its coverage, and 100% either positive or neutral.
   
   Now you have news stations that hate Yushchenko and Tymoshenko, ones that love them, and ones that are more measured in their attitudes; there are stations all over the map.
   
   
3. Reduced Corruption: The Tymoshenko and Yushchenko people have slung accusations of corruption against one another, and invoked the Orange Revolution in the process. The government still can't carry out a high-profile court case in a respectable manner. And Poroshenko isn't out yet, despite voter opinion. The situation is still loads better than in 2004.
   
   The rules and regulations governing entrepreneurial ventures have been drastically simplified. Tax dodging has shrunk considerably. The corrupt traffic police are gone. And when voters protested against poor regional officials, those officials generally didn't keep their jobs. Even Poroshenko has been demoted in the NSNU party (thanks for the link, LEvko!). He may not be out, but he's down.
   
   Modest progress? Of course, very modest. But compare: Under Kuchma in 1998, Lazarenko was Prime Minister despite being the most hated man in the nation. He stole millions from the economy using his position during the negotiation of oil deals with Russia to do it. How has Poroshenko thusfar been able to use his position for personal advantage? Possibly something, but nobody really knows, and he's out of the government.
   
   Kuchma gave away Krivoryzhstal to his son-in-law. The windfall money from the resale may not all go to voters, but it will certainly be better for the nation than the original sale. Kuchma was a president who based his government in corruption. Yanukovych was his successor, and gave no indication he would change that behavior until he lost the election. Now the way he's trying to get back into politics is by claiming he will fight the corruption in the current administration.
   
   Corruption is on the agenda in a way in never was under Kuchma, and would not have been without the Orange Revolution.

These three items have lead to another benefit Ukrainians will get from the Orange Revolution.

A Parliamentary Election Based on Parties and Platforms

In 1994 there were dozens of possible parties to choose from, most of which appeared just before the election. In 1998, same problem, in 2002, same problem. Just before each election, a new group of deputies would come up with a new name for themselves and go to voters, who would have no idea what their underlying ideology would be. Were they liberal? conservative? free-market? state-control?

No one would be able to tell a thing about them, except, perhaps, for the sadly short-lived "Beer Lovers' Party". But in this Parliamentary election Ukrainians can count on access to a wider range of media sources, providing better information on candidates, with parties competing for their votes whose voting record they can see. And when they vote, they can be much more sure that it will be their votes that determine the winners.

That's worth celebrating.

For my part in the celebration, here's that old Yanukovych Egg Incident video. (6mb avi)

[Taras Kuzio has a list of accomplishments in the Eurasia Daily Monitor (problem areas coming tomorrow). I referenced his when making mine.]

State Enterprise Resold for Big Money

On October 25, Kryvorizhstal, the Steel Plant privatized to Viktor Pinchuk (former President Kuchma's son-in-law and Ukrainian media mogul) and oligarch Rinat Akhmetov for $800 million in an obviously fixed privatization tender, was finally reprivatized.

for $4.8 billion.

That's more than Ukraine has earned from all previous privatization tenders since independence. It's also the equivalent of 6% of GDP or 20% of the 2004 budget. The buyer is the (Indian-owned Dutch company) Mittal Steel, the company that submitted the highest bid in the tender stolen by Pinchuk and Akhmetov. So it's nice to see them getting the asset they should have won the first time.

It's nice to see them bid $4.8 bn, when last time they bid less than half that much. It's nice to see the price wildly exceed expectations, (which Forbes capped at $3.5 bn before the sale). And it's also nice to see the privatization tender... live; it was televized nationally.

The Financial Times, Wall Street Journal, Economist, and lots of others gave the privatization a hurrah. (though all sources gave reasons to believe Krivoryzhstal was a one-off)

In the words of the FT:

Mittal Steel's successful bid is the best possible start [to improving the country's economy through privatization] - tribute both to the global clout of Asia's diaspora entrepreneurs, and the real opportunities for credible international investors in post-Soviet states.

The government is currently trying to figure out what to do with the money, but it looks like Yushchenko favors investment in economic growth. Whatever that means.

As an odd little side note, the BBC has taken this chance to run an article on... t-shirt sales in Kyiv? What oddly lazy journalism. They've got BBC Monitoring, why the fluff?

Red and Black Baggage

As if I needed another reason to like the bid, Valentyna Semenyuk tried to resign over it. (but Yushchenko rejected her resignation) Let her go!

Semenyuk was not alone is making useless gestures of opposition against the privatization. A Parliamentary bill against the privatization united 257 deputies (out of of 450) behind the principles of oligarch-dominated anti-competition and lack of transparency as well as reactionary leftism. The same folks tried to stop two recent WTO bills from passing and failed. May their streak continue.

Yanukovych vs. the Imperial Netherlands

But the news of the privatization isn't all good, as we learn from Yanukovych's words of caution:

[Yanukovych, in Russian] If Ukraine chooses the path of selling its plants then we will lose independence completely very soon, because after the economic dependence of our country we will have political dependence too.

We should understand clearly who will come to Ukraine to buy our companies and with what money. They will be buyers from the world's top league, those who have enormous capital. They will come and buy Ukraine up.
[Ukrayina TV, Donetsk, via BBC Monitoring and AUR]

Ukrainians have been warned: soon the wily Dutch with own the whole country!

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.

[Steven Lee Myers, NYTimes, 9 Sep]

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.

Now that I've vented at those who are quite happy to gloat over this massive failure of the Yushchenko government, it's time to get back to the crisis at hand.

Right off the bat I want to draw your attention to the latest from EDM: Yushchenko Finally Acts to Clean Up His Government by Taras Kuzio. It's a solid big-picture article, as always. They've also got one on the potential for another oil crisis if Russia feels able to manipulate Ukraine's current political woes.

I really wanted to include the following quote in with the previous list of compromised politicians, but I have to give Nemtsov credit. He's correct about the situation, even if he's always been out to get Tymoshenko.

Russian Adviser to Yushchenko Boris Nemtsov: “Tymoshenko’s government has led Ukraine to an economic crisis,” he said in an interview with the Rosbalt news agency. “Sustained recession has been seen in all the economic spheres over the last few months, the outflow of foreign capital has become stronger…an extremely hostile investment climate has emerged. There is a need to take responsibility for such a policy.”

Never mind that I think she deserved more than this abrupt boot to the hindquarters. Josef K., a friend of the site and no enemy of Tymoshenko, has an interesting link suggesting she brought the sacking on herself by letting her ally Tomenko get out of control and resign.

The Economist and the Financial Times also believe that Tymoshenko deserved to be fired, though they spread the blame to Yushchenko and the rest of the ministers a little more fairly. You can read the opinions of Ukrainian experts who spoke with Ukrainska Pravda here. (translation thanksto the Ukraine List)

Tymoshenko's Legacy As Prime Minister

I am quite curious to learn what readers here on Orange Ukraine believe Tymoshenko's legacy will be. She held a press conference at 1700 GMT today, (9AM California time, I believe). Here are some highlights from Reuters. She said "He practically ruined our unity, our future, the future of the country. I think this step is absolutely illogical," of being fired and said her party would now go its own way, but that doesn't seem to be into the opposition, yet.

I have to say that her site is really lagging, she must be getting tons of hits.

I let Nemtsov wail away on her, but here are some good points we should remember:

1. I see no evidence that she is a corrupt PM, despite (or perhaps because of) all the money she has from back in the bad old days when Lazarenko was Prime Minister. In all the calculations about Poroshenko, Zinchenko, Tomenko, and the rest of them, Tymoshenko is one politician that you can count on to be working above board. If anyone has evidence to the contrary, I'd be happy to read about it. If she's excessively populist, that's not a terribly bad thing in a country full to bursting with grey politicians of highly questionable motives.
2. Yes, her two great mistakes (trying to impose price controls on Russian oil and quoting huge privatization numbers) were shocking to businesspeople, she did not pursue them after Yushchenko corrected her. The February privatization claim could fairly be attributed to inexperience, only noticable due to the skittishness of foreign investors. That leaves one great error that must be accounted for.
3. 
   
   She earned her populist credentials in anti-corruption measures under Kuchma, then imprisonment and a long, long fight against him afterward. I can't say it (or show it) as well as Abdymok did here.
4. 
   She re-earned her populist credentials in the Orange Revolution.

Add to her big error over oil her contribution to the deadlock in the Cabinet and the bickering that was the cause of it. Putting all that together, I would still call her a good PM. However, if she nails Yushchenko too hard for this, goes into a form of opposition and lets the country go to hell without trying to help, I'm probably going to amend my verdict.  But I highly doubt she would let Ukrainians down.

[Reuters]

Your thoughts?

related question: How much of the blame for ineffective ministers belongs on Yushchenko for poor leadership and how much on the ministers themselves?