Books on Ukraine
Update No: 299 - (28/11/05)
Yushchenko banks on steel deal
The re-privatisation of Ukraine's largest steel plant provides a much-needed
lift for President Viktor Yushchenko in all sorts of ways, at a time when the
country is languishing. But the deal will go only so far toward offsetting his
steadily sagging popularity and abandonment by many allies from last year's
After being swept to power on outrage from rigged elections, a corrupt
government and an economy dominated by cabals, Mr. Yushchenko promised
Ukrainians a clean break from the past. He vowed a reversal of crooked
privatisations and the prosecution of crimes tied to the prior regime, including
his own attempted assassination and the murder of a high-profile opposition
journalist five years ago.
But Mr. Yushchenko has appeared irresolute about how many privatisations to
reverse and how many crimes to investigate. His sinking popularity has
highlighted fears that Western-style democratic movements in former Soviet
states that bloomed during the past two years are beginning to splinter and
Mr. Yushchenko's former prime minister, whom he fired in a cabinet reshuffle
amidst allegations of corruption in October, has emerged as a rival in vital
parliamentary elections scheduled for March, forcing Mr. Yushchenko to pursue
alliances with pro-Moscow politicians.
The disarray in Ukraine comes amid tensions in the former Soviet state of
Georgia, where a revolution two years ago swept another Westward-leaning
president, Mikheil Saakashvili, into office. Mr. Saakashvili's popularity also
has been sinking; recently he fired his foreign minister, who later warned that
the revolution there is at risk of being derailed.
Part of Mr. Yushchenko's problem, analysts say, is that the rhetoric of
revolution has been bad for the economy. Earlier this year his cabinet scared
off foreign investment in a contentious debate over how many companies they
would nationalise to reverse suspect privatisations. Ukraine's economic growth
is expected to slow to 2% this year from 12% last year.
The sale of the Kryvorizhstal steel plant ensures the government will remain
solvent at least until the March elections, according to Katya Malofeeva, an
analyst at Renaissance Capital brokerage in Moscow. Mittal Steel Co. of the
Netherlands paid US$4.8 billion for a 93% stake, more than five times the amount
paid last year at an outrageous auction whose winners included relatives and
associates of former President Leonid Kuchma. Yet, the re-privatisation debate
has so damaged the economy that many analysts believe the auction will be the
last major sale of Mr. Yushchenko's presidency.
"This was a very successful auction, and a very big vote of confidence from
investors in the Ukrainian government," said Ms. Malofeeva. But given the
broader upheaval, "we hope that it is the last."
In October, Mr. Yushchenko signalled he wanted to scale back talk about
privatisation reviews when he fired his cabinet and replaced his prime minister
with a technocrat and former professor, Yuri Yekhanurov. Since then, Mr.
Yekhanurov has put criminal probes on the back burner and said he is focusing on
getting Ukraine into the World Trade Organization and reviving economic growth.
But Mr. Yushchenko's problems appear to add up to more than flawed economic
policy. Though a popular icon during the Orange Revolution, he has been an
obtuse and often absentee president, Western diplomats and analysts say.
Meanwhile, some high-profile crimes have been left unsolved. A test case for
most Ukrainians has been the murder of opposition journalist Hiorhiy Gongadze,
whose headless body was discovered in a forest outside Kiev. Audio tapes
smuggled from Mr. Kuchma's office suggest he ordered the killing. So far, Mr.
Yushchenko's government has arrested three former police officers who are
expected to testify they were taking orders from above, yet nobody responsible
for ordering the killing is expected to be arrested anytime soon.
The government also seems to have balked at prosecuting last year's vote fraud.
Dozens of low-level officials were arrested, but none of the masterminds. Even
Mr. Yushchenko's poisoning during last year's campaign remains unsolved.
Western diplomats say there are practical reasons for stalling the probes: Much
of the election tinkering, and even the assassination attempt, could lead to
suspects in Russia, a major trade partner and the supplier of the bulk of
Ukraine's energy needs. Kiev and Moscow -- which favoured Mr. Yushchenko's
political rival -- currently are in talks over winter fuel deliveries.
But Ms. Malofeeva, of Renaissance Capital, says the Kryvorizhstal auction will
give Mr. Yushchenko a response to allegations that he hasn't corrected some
wrongs of the past. "His opponents are taking the political campaign very
seriously," she said. "Now he has to do the same."
Ukraine, TNK-BP discuss issues of oil industry
Ukrainian President, Victor Yushchenko, recently met with the top managers of
the international holding TNK-BP to discuss the situation in Ukraine's oil
market, development of oil processing industry in Ukraine and its transit
capability, the TNK-BP Ukraine press service recently said, Interfax News Agency
The meeting was attended by chairman of the TNK-BP board of directors, Mikhail
Fridman, executive director, German Khan, and President of the TNK-BP Ukraine,
Alexander Gorodetsky. During the meeting, both sides discussed coordination of
activity from the point of view of stipulating the flow of investments for
modernisation of refinery capacities and ensuring long-term stability of the
Ukrainian oil product market. They agreed to step up a dialogue with regard to
protection of domestic oil producers.
Naftogaz Ukrainy receives 3m Euro credit
Naftogaz Ukrainy Ukrainian National Oil and Gas Company plans to attract a
credit line from Credit Suisse First Boston amounting to 3m Euro, New Europe
"In the near future this month or at the start of next month. I will sign
another credit line for 3bn Euro with Credit Suisse First Boston on October
1st," Ukrainian First Deputy Fuel and Energy Minister and also CEO of
Naftogaz Ukrainy, Oleksiy Ivchenko, said. He said that earlier Naftogaz Ukrainy
attracted a credit line of 2bn Euro from Deutsche Bank and 2.5bn Euro for 5
years, with the possibility of extending it to 7-9 years, at 8% per year from
France's Societe Generale. Regarding the proposed credit line, Ivchenko said,
"I am doing this consciously, and will continue to do so. This makes it
possible to put creditor banks in competition. This does not mean that I will
take all this money and spend it."
Ruhrgas interested in Ukraine gas transport
Ukrainian Prime Minister, Yury Yekhanurov, has discussed possible investment in
the gas sector with representatives from the German business community, the
government press service said in a statement, New Europe reported.
During the meeting representatives from E.ON Ruhrgas AG said that the company is
interested in stepping up cooperation with Ukraine, particularly for the
transportation of gas through the republic, and also in the production and
storage of gas.
"Ukraine should hold on to its position as a powerful transit
country," company executive Hilmar Enke said.
He said that Ruhrgas is also ready to take part in modernizing the Ukrainian gas
system and implementing joint projects with Ukrainian gas companies.
Kiev places US$250-mln in 10-year Eurobonds at 7.98%
Kiev has placed US$250-million in 10-year Eurobonds at an annual rate of 7.98
per cent, Kiev Mayor Oleksandr Omelchenko said at a meeting with union leaders.
"We received confirmation at 9:00 p.m. last night of a 10-year discount
loan for US$250 million at an annual 7.98 percent," he said. Citigroup and
Credit Suisse First Boston are the lead managers of the loan. Most of the loan
will be used to finance the construction of the Podolsk pedestrian bridge and
US$30 million will be used to build a second cardiological centre, New Europe
South Korea, Ukraine to triple volume of trade
The trade between South Korea and Ukraine will triple the amount of annual
bilateral trade to US$3bn by 2010, South Korean officials said on October 20th,
New Europe reported recently.
The agreement was reached at a meeting between South Korean Prime Minister Lee
Hae-chan and his Ukrainian counterpart Yuri Yekhanurov. The bilateral trade
volume reached US$1.07bn in 2004. During the one-hour talks the 2 sides decided
to allow South Korean travellers to visit Ukraine for 90 days without a visa as
part of measures to streamline visa-issuing procedures. They also agreed to
extend the term of validity of multiple visas from the current one year to 5,
exempt visa processing fees and waive visas for diplomats, on a mutual basis.
Both sides shared opinions on the need to settle the dispute over North Korea's
nuclear weapons program for the world peace and stability and cooperate to set
up a permanent peace regime on the Korean Peninsula. Lee expressed thanks for
Ukraine's support for Seoul's efforts toward the peaceful settlement to the
nuclear disarmament issue. After the talks, South Korea's Vice Foreign Minister
Yu Myung-hwan and Ukraine's Minister of Transportation and Communication Viktor
Bondar and Economy Minister Arseny Yatseniuk signed an agreement on maritime
cooperation, economic aid and technical cooperation.
MINERALS & METALS
Mittal grabs Ukraine steel mill for US$4.7 billion
Mittal Steel recently bought a controlling stake in a giant Ukrainian steel
mill, setting a new record high price for a privatisation in the former Soviet
republic, Deutsche Presse-Agentur (dpa) reported.
The Netherlands-headquartered consortium's winning bid for the Krivorizhstal
steel works was equivalent to US$4.74 billion. Once the takeover is completed,
Mittal will become by far the largest single foreign investor in Ukraine.
"This single sale is worth 20 per cent more than all of the income of all
of the state privatisations, in all of Ukraine's history," said Ukrainian
President Viktor Yuschenko, in press comments.
"This is proof that Ukraine can conduct a fair and open privatisation,"
he added. Two Ukrainian industrial conglomerates - the French-Ukrainian Smart
Group and the Donetsk-based Industrial Group - also participated in the bidding.
It was the first time any Ukrainian state company had gone on the block on live
The German branch of Mittal Steel, Mittal Steel Germany GmbH, submitted the
winning bid. Mittal will obtain a 93 per cent share in the mill. Starting offers
were equivalent to US$2 billion. The price increased to US$3.4 billion halfway
through some forty minutes of energetic bidding. The seriousness of Mittal's
intention to acquire the plant was clear early on in the auction, with CEO
Lakshmi Mittal on hand at the bidding, and repeatedly taking the initiative to
Industrial Group, an alliance between French Arcelor and Ukrainian industrial
tycoon Rinat Akhmetov, fell out of the competition first.
The pure-Ukrainian Smart Group consortium lasted longer until defeated by
Mittal's winning bid. Mittal is the world's largest steel company, followed by
Arcelor. Senior members of Yushchenko's administration, and even his
recently-sacked former Prime Minister Julia Timoshenko, were present in a State
Property Fund (SPF) auction room packed with media and dignitaries.
"We have proved Ukraine can be a place for honest business, and not tycoon
insiders," a jubilant Timoshenko told reporters afterwards. "This sale
gives Krivorizhstal back to the people." Ukrainian Communist leader Petro
Symonenko called the auction "a crime ... theft of the jewel of Ukrainian
metallurgy by capitalists".
Krivorizhstal with 7.1 million tonnes of annual production accounts for 20
percent of Ukraine's steel output. Ukraine is the seventh- largest steel
exporter in the world.
Yushchenko's reform government had made the sale of Krivorizhstal a flagship
project for the administration's effort to increase foreign investment. The sale
is however unlikely by itself to repair fully Ukraine's battered reputation as a
place where privatisations are fixed in favour of government insiders, and
frequently challenged in court by losing bidders.
The government's decision to go ahead with the auction came in the face of a
parliament resolution earlier in October placing the sell- off on hold, pending
a legislative review. It is unclear whether the Ukrainian executive branch may
override parliament in such a case.
Another possible challenge to the Mittal acquisition could come from a still in
progress suit over the failed sale of Krivorizhstal to a group of Ukrainian
investors last year.
The Yushchenko administration earlier this year cancelled the 2004 transfer on
grounds the previous government sold off the steel mill at an artificially low
price. Lower courts upheld the government move, but the case is on appeal, with
a decision expected in coming months.
Ukraine ups iron ore exports 3.9% in 9 mths
Ukraine increased iron ore exports 3.9 per cent year-on-year to 14.24 million
tonnes in January-September. Rudprom, the Russian agency that collates
statistics about FSU iron ore producers, said that Ukraine exported 7.02 million
tonnes of pellets, up 24.2 per cent, but 2.45 million tonnes of concentrate,
down 18.7 per cent, and 4.65 million tonnes of sintering ore, 4.9 per cent less,
Interfax News Agency reported.
The bulk of the exports were to countries outside the CIS. Ukraine exported 1.75
million tonnes of pellets and 113,000 tonnes of concentrate to Russia in the
eight months. Ukrainian iron ore production grew 3.4 per cent to 50.74 million
tonnes in the period.
Ukraine reduces steel roll output 1% in 10 months
Ukraine's steel industry produced tentatively 26.49 million tonnes of finished
roll in January-October, 1 per cent less than in the same period of last year,
the Industrial Policy Ministry said, Interfax News Agency reported.
Crude steel production fell 2 per cent to 31.79 million tonnes and pig iron
production was also down 2 per cent, to 25.35 million tonnes, the ministry said.
But steel pipe production jumped 13 per cent to 1.91 million tonnes, the
ministry said. Scrap metal supplies to steel mills fell 8 per cent to 5.22
million tonnes in the ten months. Iron ore concentrate production rose, by 4 per
cent to 43.84 million tonnes. Sinter production was up 1 percent to 39.22
million tonnes, pellet production grew 7 per cent to 14.54 million tonnes and
crude ore production grew 4 per cent to 56.66 million tonnes.