"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis, and Commentary
"Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World"
STEEL MILL BRINGS MASSIVE PRICE OF $4.84 BILLION
Read what the world is saying about the auction: Dow Jones
Newswires, Financial Times, Wall Street Journal, London
Independent, the press in Ukraine and Russia, FirsTnews
"THE ACTION UKRAINE REPORT - AUR" - Number 590
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., Kyiv, Ukraine, TUESDAY, October 25, 2005
--------INDEX OF ARTICLES--------
Major International News Headlines and Articles"
1. UKRAINE REAPS MASSIVE PRICE FOR KRYVORIZHSTAL
By Geoffrey T. Smith, Dow Jones Newswires
Moscow, Russia, Monday, October 24, 2005
2. KRYVORIZHSTAL STEEL ASSETS AUCTION:
MITTAL STEEL WINS WITH $4.84B BID
By Steve McGrath and Poul Funder Larsen, Dow Jones Newswires,
Frankfort, Germany, Monday, October 24, 2005
3. MITTAL WINS UKRAINE STEEL MILL AUCTION $4.8BN BID
By Tom Warner in Kiev and Rebecca Bream in London
Financial Times, Front Page, First Section, Tue, October 25 2005
4. UKRAINE STEEL MILL AUCTION DELIVERS SURPRISES
Almost nothing happened as expected
Valentina Semenyuk: head of State Property Fund resigns
By Rebecca Bream and Tom Warner
Financial Times, London, UK, Tuesday, October 25 2005
5. MITTAL WINS UKRAINE STEELMAKER AUCTION
By Paul Glader & Geoffrey T. Smith, Staff Reporters
The Wall Street Journal, NY, NY, Tuesday, October 25, 2005
6. MITTAL SPLASHES OUT 2.7BN LBS FOR UKRAINE'S
BIGGEST STEEL BIGGEST STEEL PRODUCER
By Saeed Shah, Independent, London, UK, Tuesday, 25 Oct 2005
7. UKRAINE MEDIA UPBEAT ON STEEL GIANT SALE
BBC Monitoring research in English 24 Oct 05
BBC Monitoring Service, United Kingdom, Mon, Oct 24, 2005
8. RUSSIAN TV HINTS AT PROBLEMS FOR UKRAINE
DESPITE STEEL AUCTION SUCCESS
BBC Monitoring Service, UK, Tuesday, October 25, 2005
9. UKRAINIAN EXPERTS WARN OF REPRIVATIZATION
DANGER IN WAKE OF STEELWORKS SALE
Ukrayina TV, Donetsk, Ukraine, in Russian 1800 gmt 24 Oct 05
BBC Monitoring Service, UK, in English, Monday, Oct 24, 2005
10. UKRAINIAN PRIVATIZATION CHIEF SAYS RESIGNATION
DUE TO "DIRTY INTRIGUES"
Era, Kiev, Ukraine, in Ukrainian 1300 gmt 24 Oct 05
BBC Monitoring Service, UK, in English, Mon, Oct 24, 2005
11. UKRAINE TO SET UP FUND TO BUY OUT UNFAIRLY
SOLD STATE PROPERTY
Interfax-Ukraine news agency, Kiev, in Russian 0859 gmt 24 Oct 05
BBC Monitoring Service, UK, in English, Monday, Oct 24, 2005
12. UKRAINE: ANALYSTS SAYS SECOND SALE PROVES
TRUE WORTH OF KRYVORIZHSTAL STEEL MILL
By Alla Vetrovcova, FirsTnews
Kyiv, Ukraine, Tuesday, October 25, 2005
13. EQUITY CONFERENCE ON INVESTMENTS INTO RUSSIA:
IMPLICATIONS AND LESSONS FOR UKRAINE
ANALYSIS: By Walter Prochorenko, PhD.
The Action Ukraine Report (AUR), Number 590, Article 13
Washington, D.C., Tuesday, October 25, 2005
14. NAFTOGAZ ATTRACTS HUGE CREDITS
WITH HIDDEN PURPOSE
Roman Bryl, Ukraine Analyst, IntelliNews - Ukraine This Week
Kyiv, Ukraine, Monday, October 24, 2005
15. UKRAINE DEFENSE CHIEF: ALL TROOPS TO
LEAVE IRAQ BE DEC 30
Associated Press (AP), Kiev, Ukraine, Monday, Oct 24, 2005
16. TODAY: OCTOBER 25th: MURDER IN KYIV
Myroslava Gongadze attempts to discover the truth
PBS's Frontline/WORLD on Ukraine and Gongadze Case,
The Action Ukraine Report (AUR), Issue 590, Article 16
Washington, D.C., Tuesday, October 25, 2005
17. UNDER WESTERN EYES:
UKRAINE'S CRISIS AND UKRAINE'S PROSPECTS
ANALYSIS & COMMENTARY: By James Sherr (1)
Zerkalo Nedeli, Mirror-Weekly, No. 41 (569)
International Social Political Weekly
Kyiv, Ukraine, Sat 22-28, October, 2005
18. PARTIES ON THE MARK-THE TRAJECTORY OF RACE TRACKS
Ukrainian writer analyses chances of key players in parliamentary polls
ANALYSIS: By Ulyanna Kyryyenko, Institute of Global Strategies
Den, Kiev, Ukraine, in Ukrainian 21 Oct 05; p 4
BBC Monitoring Service, UK, in English, Sun, Oct 23, 2005
19. CALL FOR PAPERS: 11TH ANNUAL WORLD CONVENTION
ASSOCIATION FOR THE STUDY OF NATIONALITIES (ASN)
"Nationalism in an Age of Globalization"
Proposal Deadline Reminder: Wednesday, 2 November 2005
Dominique Arel, Chair of Ukrainian Studies, University of Ottawa
Ottawa, Ontario, Canada, Tuesday, Oct 25, 2005
====================================================
1. UKRAINE REAPS MASSIVE PRICE FOR KRYVORIZHSTAL
By Geoffrey T. Smith, Dow Jones Newswires
Moscow, Russia, Monday, October 24, 2005
MOSCOW -- Ukraine's government sold steelmaker Kryvorizhstal to an
arm of Mittal Steel Co NV (MT) Monday for an eye-popping $4.84 billion,
providing a much-needed political and financial boost for President Viktor
Yushchenko's administration.
The price for a 93.02% stake, which values the whole of the company at over
$5.2 billion, was far in excess of even the most optimistic analysts'
forecasts, and more than six times what was paid last year at an auction won
by relatives and associates of former president Leonid Kuchma.
That auction had come to symbolize the endemic corruption in the Kuchma
regime on which Yushchenko had based his election campaign in 2004. Its
cancellation had been one of his first steps after taking power.
Yuschenko said Monday's sale "showed that Ukraine is able to conduct an
honest privatization according to the law," capable of generating enough
money to fund major social spending.
Analysts were flabbergasted by the price, which appeared to underline the
massive premiums that strategic steel investors are willing to pay for such
assets as are available. Mittal was pushed to the last by a consortium of
Arcelor SA (5786.FR) and Industrial Union of the Donbass, a group of
local tycoons.
"This defies the logic of consolidation," said Rob Edwards. "I don't see
where they're getting the value from." Edwards pointed out that the implied
$5.2 billion valuation is more than the market capitalization of Russia's
OAO Severstal (CHMF.RS), which makes over twice as much steel as
Kryvorizhstal, and which is streets ahead of the Ukrainian company in
overhauling outdated production facilities.
Kryvorizhstal accounts for around 20% of Ukraine's steel production and
had sales of $1.9 billion last year.
"I want to say they're overpaying, but the fact is that they are paying
cash," said Vasily Nikolayev, an analyst with Troika Dialog. "Obviously
there is a big premium for control...but the price suggests there is upside"
for Russian steel stocks.
Shares in OAO Novolipetsk Iron & Steel Works (NLMK.RS) surged 7.1%
in Moscow after the sale, on hopes that the company will now command a
much higher valuation if it now goes ahead with its delayed initial public
offering. Severstal and Evraz Group (EVR.LN) shares were up 2.7% and
2.3% respectively at 1025 GMT
At 1040 GMT, Netherlands-listed Mittal was down 0.2% at EUR20.02.
In a statement, Arcelor Chief Executive Guy Dolle said the price had gone
too high and wouldn't have offered value to its shareholders. The company
will continue to seek new acquisitions, he said.
For the bidders, Kryvorizhstal represented a low-cost steel producer with
access to high-growth markets in the former Soviet Union.
Bear Stearns analyst Tim Ash noted that the deal is a crucial fillip for
Yushchenko, who is struggling to keep his "Orange Revolution" on course
after firing his Prime Minister and his closest adviser.
Not only does it improve the former Soviet republic's balance sheet at a
stroke - the proceeds to the government amount to over 20% of outstanding
public debt, he notes - even after its reimbursement of $800 million to the
winners of last year's auction.
Ukrainian Eurobonds also rose, as fears about the government's ability to
cover its $1.3 billion budget deficit this year receded. -30-
Company Web site: http://www.kggmk.dp.ua
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By Geoffrey T. Smith, Dow Jones Newswires (+7 095) 974 8055;
geoffrey.smith@dowjones.com
====================================================
2. KRYVORIZHSTAL STEEL ASSETS AUCTION:
MITTAL STEEL WINS WITH $4.84B BID
By Steve McGrath and Poul Funder Larsen, Dow Jones Newswires,
Frankfort, Germany, Monday, October 24, 2005
FRANKFURT -- Mittal Steel Co. NV (MT) Monday won the hotly
contested privatization auction of the Kryvorizhstal steel assets in
Ukraine, with a $4.84 billion bid that was well above market expectations.
Mittal Steel Germany, a subsidiary of Mittal Steel, outbid both the
Industrial Group, an investment vehicle for Luxembourg-based Arcelor SA
(5786.FR) and Ukrainian industrial conglomerate the Industrial Union of
Donbass; and Ukrainian firm LLC Smart Group.
Initial sealed bids were tabled at just over $2 billion but the price soon
escalated during an open bidding round. Analysts had expected the 93.02%
stake in Kryvorizhstal, Ukraine's largest steel-maker, to fetch between $2.5
billion and $3 billion at the auction.
The asset accounts for around 20% of the country's steel production and
had sales of $1.9 billion last year. It is already established on
international steel markets and low-cost raw materials, fuel and labor made
it highly sought-after.
Many industry experts had expected Arcelor to win the auction after it
teamed up with its Ukrainian partner, Industrial Union of Donbass.
For Mittal, the acquisition of Kryvorizhstal will add volume to its global
production, cementing its positions in the global steel market, and also
provide an opportunity to expand eastward, closer to growth markets in the
former Soviet Union.
Mittal Steel is already the world's number one steel producer by volume,
ahead of Arcelor.
Recently, Arcelor and Mittal were among foreign steel giants that lost out
in the televised auction of a 49.93% stake in Turkey's number one steel
producer Eregli Iron and Steel Works Co. (EREGL.IS), or Erdemir, which
was won by Turkish industrial conglomerate OYAK for $2.96 billion.
For Ukraine, the country's largest-ever privatization is being seen as a key
test for President Viktor Yushchenko, who has pledged to pursue economic
reform and fight corruption.
Kryvorizhstal's price tag will help Yushchenko's government plug its $1.3
billion budget deficit and also revamp its image, which has been badly
bruised by infighting among lawmakers over reprivatization of large parts of
the country's industry.
If the sale is judged a success it could help relaunch Ukraine's stalled
privatization effort.
Kryvorizhstal's privatization has not been without incident. The steelmaker
was originally sold last year in a rigged auction to a consortium backed by
two of Ukraine's richest men, Rinat Akhmetov and Viktor Pinchuk, the
son-in-law of then-president Leonid Kuchma.
Foreign bidders were effectively barred from participating, and the stake
fetched only some $800 million, far below most valuations. However, the
sale was annulled earlier this year by a Kiev court which cited
"irregularities" in the auction process. -30-
-------------------------------------------------------------------------------------------
By Steve McGrath and Poul Funder Larsen; Dow Jones Newswires;
+49-69-29725-508; steve.mcgrath@dowjones.com
====================================================
3. MITTAL WINS UKRAINE STEEL MILL AUCTION $4.8BN BID
By Tom Warner in Kiev and Rebecca Bream in London
Financial Times, Front Page, Tue, October 25 2005
Mittal Steel, the largest steel producer, won the auction for Ukraine's
Kryvorizhstal mill after bidding $4.8bn in a televised privatisation auction
designed to underscore the country's new openness to foreign investment.
Mittal's bid, driven up by competition from its arch-rival, Luxembourg-based
Arcelor, valued the mill at almost double the market price of
Kryvorizhstal's locally traded shares at Friday's close. It is the highest
price fetched by an ex-Soviet state in a single privatisation.
Analysts said the price, higher than expected, included a big premium for
the mill's strategic value as the giants of the steel industry strove to
stay on top in a wave of global consolidation. Rod Beddows, at Hatch
Beddows consultancy, said: "It seems expensive for what it is."
Lakshmi Mittal, chairman and chief executive of Mittal Steel, said: "We paid
the right price. This is the last large privatisation in the European steel
industry and it is one of the few vertically integrated steel plants; it is
sitting on iron ore reserves and is self-sufficient in coke."
Kryvorizhstal's operations also had excellent infrastructure and links to
ports in the Black Sea, he added.
Viktor Yushchenko, Ukraine's president, said the result proved "Ukraine is
capable of staging honest privatisations".
The auction capped more than a year of controversy over the mill, which
Ukraine's former president, Leonid Kuchma, sold last year for $800m to
local businessmen including his son-in-law, Viktor Pinchuk.
Mr Yushchenko denounced the sale as "theft" and had it cancelled by the
courts after he swept to power in last year's Orange Revolution.
Mr Mittal said he expected to close the deal by the end of next month. He
said he was also interested in buying an unfinished ore mine and dressing
mill near Kryvorizhstal.
Yuri Yekhanurov, the prime minister, said the unfinished mine would be the
next asset privatised by his government.
The deal comes as Ukraine is struggling to pry open access for its steel to
European Union markets, in part by applying for membership of the World
Trade Organisation. The EU restricts Ukrainian steel imports with a
combination of small quotas and high tariffs. -30-
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4. UKRAINE STEEL MILL AUCTION DELIVERS SURPRISES
Almost nothing happened as expected
Valentina Semenyuk: head of State Property Fund resigns
By Rebecca Bream and Tom Warner
Financial Times, London, UK, Tuesday, October 25 2005
Almost nothing happened as expected in yesterday's auction for Ukraine's
flagship steel mill, Kryvorizhstal.
The auction was held in a small room in the State Property Fund, and most
of the agency's top officials were there - except the chief, Valentina
Semenyuk, who had checked into hospital that morning with "high blood
pressure", according to the agency's press service.
Ms Semenyuk is a high-ranking member of the Socialist party, which is part
of President Viktor Yushchenko's governing coalition but had strongly
opposed his decision to sell the mill. She announced her resignation later
in the day.
Nor was Mr Yushchenko present, although he and his prime minister, Yuri
Yekhanurov, were shown on television striding past Communist party
picketers and into the building just before the auction began.
Instead, Yulia Tymoshenko, the former prime minister, now a bitter rival to
the president, was sitting demurely under one of the windows, just in front
of the Mittal table. Even though she was sacked last month, she seemed to
be saying with her presence, this was still her sale.
The two bidders, initially, were Arcelor, the Luxembourg-based steel giant,
and Smart Group, a Russian-owned Ukrainian mining company, whose
representatives chuckled every time they raised their bidding card, as if
they knew something nobody else did.
Mittal Steel's man seemed to have no interest in bidding at all. Only when
Arcelor's bids approached the $3bn mark and Smart Group started to look
dazed did Mittal finally enter the bidding.
Then it turned into a long back-and-forth volley between Mittal and Arcelor,
the bids notching up just $20m each time, until Arcelor finally conceded to
Mittal at 24.2bn hryvnya, a little less than $4.8bn.
Mr Yushchenko appeared again outside the building to boast that the price
was 20 per cent more than all previous privatisation proceeds put together.
The price gives him the best argument possible against his leftist critics,
both inside and outside his coalition, as well as against the mill's former
owners, who bought the mill last year for $800m after Mittal and Arcelor
were barred from bidding.
Yesterday's auction was made possible after Mr Yushchenko came to power
in last year's Orange Revolution and set about cancelling last year's sale.
The former owners, who include Viktor Pinchuk, son-in-law of the former
president, Leonid Kuchma, insisted yesterday they had been wronged. They
issued a press release pledging to battle on in the courts to get the mill
back.
Together with last week's $1.03bn acquisition of Ukraine's second-largest
bank, Aval, by Austria's Raiffeisen International, the Kryvorizhstal sale
sets a new price standard for Ukrainian assets.
Dragon Capital, a Ukrainian brokerage, said Kryvorizhstal was valued at a 16
per cent discount to Turkey's recent sale of its Erdemir steel mill, using
an average of standard valuation methods.
Tomas Fiala, Dragon's managing director, said: "The live auction process
really motivates people to come up with their best price. It's much better
than sealed bids."
But confronted with the charge he had overpaid, Lakshmi Mittal maintained:
"We have paid the right price"
The deal has cemented Mittal Steel's dominant position in the fast-growing
east European steel industry. The group already owns steel assets in Poland,
Romania, the Czech Republic, Bosnia and Macedonia.
Ukraine's PFTS stock index, which has been wobbly this year after tripling
in a five-month period around Mr Yushchenko's rise to power, rose 1.4 per
cent yesterday.
Luc Pez, a steel analyst at Société Générale in Paris, said: "At this price,
to what extent is it possible to make a value-accretive acquisition?" He
added that Arcelor shareholders would be relieved that the group had lost
the auction.
But Morgan Stanley analysts said if Mittal Steel could create synergies
through the deal, the price would be justified. Kryvorizhstal was one of the
world's lowest cost steel producers with an ebidta margin of 35 per cent, it
said.
Mittal Steel's shares fell 0.3 per cent to euro 20, while Arcelor's shares
rose 3 per cent to euro 18.81. -30-
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5. MITTAL WINS UKRAINE STEELMAKER AUCTION
By Paul Glader & Geoffrey T. Smith, Staff Reporters
The Wall Street Journal, NY, NY, Tuesday, October 25, 2005
Mittal Steel Co. NV, the world's largest steel company by production, bought
Ukraine steelmaker Kryvorizhstal for about $4.8 billion in a tense televised
auction that set a new benchmark for acquisitions in the steel industry and
provided a much-needed political and financial boost for President Viktor
Yushchenko's administration.
The price for a 93.02% stake, which values the entire company at more than
$5.2 billion, far exceeded many analysts' forecasts and was more than five
times as much as parties paid last year at an auction whose winners included
relatives and associates of former President Leonid Kuchma.
Mr. Yushchenko said the resale "showed that Ukraine is able to conduct an
honest privatization according to the law."
The sale underscored the increasing premiums being paid for prices of former
state-owned steel plants. "What we are seeing is a shift in the valuation on
steel mills" as the industry enters a third year of unprecedented earnings,
said Mark Parr, a steel analyst at Key/McDonald in Cleveland.
The price exceeded the $4.5 billion Mittal Steel of Rotterdam paid in 2004
for steel-making assets in the U.S. with capacity to produce 16 million
metric tons of steel a year -- more than twice the capacity of
Kryvorizhstal.
During a conference call with investors on Monday, however, London
billionaire and company Chief Executive Lakshmi Mittal said that the plant
is a low-cost producer, and the purchase comes with significant raw-material
reserves and has the potential to produce higher-quality steels that fetch
higher prices.
In an interview, Mr. Mittal conceded that "at one point we were definitely
getting nervous because we didn't have much flexibility to go up" in price
but said he doesn't believe the company overbid "our own internal limit."
Mr. Mittal and his son and chief financial officer, Aditya, watched the
bidding from a room at the Premier Palace Hotel in Kiev, calling in bids and
strategy via telephone to their representative at the auction.
The price was pushed up in equivalents of $20 million increments in feverish
bidding with a consortium of Arcelor SA of Luxembourg, the world's
second-largest steel producer, bidding with the Industrial Union of the
Donbass, a group of Ukrainian industrialists. A third Ukrainian bidder, LLC
Smart Group, dropped out early in the bidding.
Arcelor Chief Executive Guy Dolle issued a statement saying the Luxembourg
company would continue to pursue strategic acquisitions, but "will not
compromise shareholder value in pursuit of this goal."
In trading yesterday, Mittal shares finished at euro 20.72 ($24.75), up 67
European cents, or 3.3%, while Arcelor was unchanged at euro 17.08.
----------------------------------------------------------------------------------------------
Write to Paul Glader at paul.glader@wsj.com and Geoffrey T. Smith at
geoffrey.smith@dowjones.com
====================================================
Send in a letter-to-the-editor today. Let us hear from you.
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6. MITTAL SPLASHES OUT 2.7BN LBS FOR UKRAINE'S
BIGGEST STEEL BIGGEST STEEL PRODUCER
By Saeed Shah, Independent, London, UK, Tuesday, 25 Oct 2005
Lakshmi Mittal, Britain's richest man, added to his global steel empire
yesterday by paying $4.8bn (£2.7bn) for a Ukraine steel maker, after
winning a live television auction for it.
Mr Mittal, the world leader in steel, added about 10 per cent to the
production capacity of Mittal Steel with the purchase of the mill.
Analysts were astonished at the price paid for the Kryvorizhstal plant,
which was expected to fetch $3bn. Ukraine's President, Viktor
Yushchenko, hailed the deal as the start of a new economic era for
his country.
He told reporters: "The amount we will receive for this company will be
20 per cent higher than all the proceeds received in all the years of the
Ukrainian privatisation. What happened today shows Ukraine is capable
of staging honest privatisations, observing all vital legal procedures."
Mittal Steel triumphed after a feverish auction was televised live to allay
corruption fears. The company beat Europe's No 1 player, Arcelor, in
almost an hour of fast-moving bidding.
Ukraine was selling the mill for the second time - it annulled a rigged
auction that took place last year under the government of Leonid Kuchma.
On that occasion it was sold for $800m to a consortium led by Mr
Kuchma's son-in-law. Mittal had bid $1.5bn.
The sale of Kryvorizhstal, which produces 20 per cent of Ukraine's metal
output, is the biggest-ever foreign investment ever in Ukraine - equivalent
to 20 per cent of this year's anticipated budget revenues.
Mr Mittal, the chairman and chief executive of Mittal Steel, admitted he
felt "a little bit nervous" at the size of the investment. Asked if he
overpaid, he said: "I can say that the Ukrainian administration has been
very lucky to receive this price." Asked when he expected a return on his
investment, Mr Mittal said: "The sooner, the better."
Mittal Steel tapped into $2.7bn it had in cash, together with credit worth
$5.2bn, to cover the cost, according to its president, Aditya Mittal, the
29-year-old son of Lakshmi.
Lakshmi Mittal insisted all 56,000 employees would be retained - a
condition of the purchase - and said he had plans for long-term investment.
Mittal Steel had 179,000 workers prior to this acquisition.
The Kryvorizhstal mill, a giant integrated plant, produces 7 million tons of
steel a year but has the capacity to make 10 million. Mittal Steel said it
would raise output levels and boost productivity, although the costs at the
plant are well below the European average.
The purchase of Kryvorizhstal was the biggest of a state asset by a private
investor in Eastern Europe or the former Soviet Union. Mittal Steel already
had a strong presence in the region, with plants in Poland, the Czech
Republic, Kazakhstan and Romania.
The Romanian plant was acquired after Tony Blair, whose party received a
donation from the Mittal empire, provided a letter of recommendation to the
Romanian authorities.
Vasily Nikolayev, of thew Russian investment group Troika Dialogue,
suggested Mittal Steel had overpaid by some 70 per cent.
"This shows that strategic investors value this sector," he said. "Very few
unconsolidated large assets remain in the world. People are prepared to pay
big prices for consolidation."
Mittal lost out in an auction for a 49 per cent stake in a Turkish steel
mill this month. -30-
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http://news.independent.co.uk/business/news/article322002.ece
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7. UKRAINE MEDIA UPBEAT ON STEEL GIANT SALE
BBC Monitoring research in English 24 Oct 05
BBC Monitoring Service, United Kingdom, Mon, Oct 24, 2005
The leading Ukrainian media have offered detailed and generally upbeat
coverage of the sale of the steel giant Kryvorizhstal at a televised auction
on 24 October, describing it as a major victory for the Yushchenko
administration.
Commentators said the price of 4.8bn dollars paid by the world's leading
steel company Mittal Steel had surpassed even the most optimistic
expectations, and was much higher than what the previous owners had
paid for the plant under the previous government.
"PROMISE FULFILLED"
Two national TV channels, the private 5 Kanal and the state-owned UT1
television, carried a live broadcast of the auction.
Deputy State Property Fund chairman Oleksandr Bondar, invited to the UT1
studio to provide a running commentary on the auction, described the final
price as "fantastic" and said all Ukrainians had cause to celebrate.
Kryvorizhstal topped the evening news bulletins on all national TV channels.
The leading private channel Inter said President Yushchenko's election
pledge to reprivatize Kryvorizhstal had been fulfilled. "President
Yushchenko did not try to conceal his satisfaction as he was leaving
the privatization agency building.
His promise given during the Orange Revolution has been fulfilled. The new
owners of Ukraine's steel giant have paid for it six times as much as the
previous ones."
Inter highlighted the social and environmental commitments undertaken by
Mittal Steel. It said the previous owners, Ukrainian tycoons Viktor Pinchuk
and Rinat Akhmetov, were still waging a legal battle with the government to
keep the plant, but showed a privatization agency official saying that
there's little chance that the repeat sale of Kryvorizhstal will be
reversed.
The second most popular TV channel, One Plus One, said the money paid
for Kryvorizhstal by Mittal Steel would prop up Ukraine's social spending
and send a positive signal to foreign investors.
"A record price was obtained in a record-short time. After an hour of
bidding, the price offered for Kryvorizhstal was two and a half times higher
than the starting price, which some experts said was unrealistic.
The repeat sale of Kryvorizhstal has brought the country 20bn hryvnyas more
than the previous owners had paid. The money received for the plant is
one-fifth of Ukraine's budget."
"Experts have praised the sale of Kryvorizhstal," the channel said. "First,
it is a step towards restoring Ukraine's credentials as an investment
destination. Second, the money paid for the plant will rescue the state
budget, especially social spending."
"END OF THE ERA OF OLIGARCHS"
In its main evening news bulletin, UT1 hailed the sale of Kryvorizhstal as
an end of an era when well-connected tycoons ruled Ukraine.
"The price of Kryvorizhstal was rising at a rate of 250m hryvnyas per minute
during the auction, reaching a fantastic figure of 24.2bn hryvnyas, six
times as much as businessmen Pinchuk and Akhmetov paid in 2004.
Political analysts say today marks the end of the era of oligarchs in
Ukraine."
The ICTV channel, owned by Viktor Pinchuk, welcomed the transparent
nature of the competition for Kryvorizhstal.
"Millions of TV viewers watched the unique event live on air. It was a real
auction, where the richest bidder won. It has been the most transparent
privatization in Ukraine's history\ Mittal Steel will open the way to new
markets for Kryvorizhstal produce, upgrade its production facilities and
lead to a rise in steel prices in Ukraine."
Ukrayina TV, owned by Rinat Akhmetov, also welcomed the openness
of the sale. "The action took place despite all obstacles. Its organizers
believe it was a landmark event for Ukraine - for the first time the
privatization process was based on the principles of transparency and
openness.
The plant was sold for a record price of 24.2bn hryvnyas. Members of the
privatization commission admit that it beat even their most optimistic
expectations."
And the influential daily Den said in its 25 October edition that the
successful sale of Kryvorizhstal would improve the investment climate in
Ukraine.
"The price of all Ukrainian assets went up after the sale of Kryvorizhstal,"
the paper said in its front-page article. "The president has fulfilled his
promise made during the Orange revolution to return to the state a company
he said was stolen from the people by the previous government. And then
he went a step further by securing its sale for a record price." -30-
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8. RUSSIAN TV HINTS AT PROBLEMS FOR UKRAINE
DESPITE STEEL AUCTION SUCCESS
BBC Monitoring Service, UK, Tuesday, October 25, 2005
Russian TV channels have recognized the financial success of the auction of
the Ukrainian steel company Kryvorizhstal. However, they also highlighted
opposition to the deal and hinted that the sale could result in political
and economic problems.
Privately owned Ren TV was alone in praising the transparency of the auction
and comparing it favourably with the sell-off of a major Russian oil company
in 2004.
All the major Russian TV channels recognized that the sale of Kryvorizhstal
for 4.8bn dollars was a financial success. Gazprom's NTV was the most
unequivocal in its assessment of the deal.
"From the economic point of view, it has been an undoubted success for the
Ukrainian authorities," the channel's main evening news said.
State channel Rossiya (RTV) could not quarrel with hard figures. After all,
as its correspondent noted, "the maximum predictions for the sale price had
been 800m dollars less". However, it highlighted the opposition to the
transaction.
"The bitter critics of the re-sale of Kryvorizhstal, the socialists and
communists, held a picket outside the auction. When they heard that an
Indian from Germany had bought it and not a Ukrainian or a Russian, they
were even more angry," the correspondent observed at the top of his
dispatch.
He returned to the political opposition at the end of his report, pointing
out that parliament had voted against the auction. "Whether this price will
be the final one is still open to question.
Before the auction, deputies voted against the re-sale of Kryvorizhstal, and
for it to remain a state company. The majority think the auction is illegal,
and therefore the deal will be contested again in the courts," he said.
State-owned Channel One also played up the parliamentary opposition to the
Kryvorizhstal auction. "Experts say that today's proceedings could cause a
new political crisis in Ukraine. The Communist faction has said it will call
for a vote of no-confidence in the government at the next session of
parliament," the correspondent commented.
By contrast the threat from parliamentary opposition was dismissed by Ren
TV. "The budget needs money, and that is why no-one is paying heed to these
trifles," the channel pointed out. Indeed, it saw the political aspect of
the deal in a positive light. "
Kryvorizhstal is not just economics, it is politics. Yushchenko vowed on the
maydan that he would return the plundered money. This was the first step,"
the correspondent said.
Russia's state channels also cast a sceptical eye on the long-term economics
of the transaction. "Kiev intends to spend the proceeds, despite the fact
that the World Bank is warning it not to do this, and to use the money for
domestic investment," RTV's analytical programme Vesti Plyus commented.
Channel One said spending the proceeds on social spending is in effect
"redistribution of wealth". "Businessmen are wondering who is next," the
correspondent noted.
Russian liberal politician Boris Nemtsov evidently had this concern in mind
when speaking on Ren TV. "I think Yushchenko has discharged his political
obligations, and property should now be completely immune," he said.
The previous history of the purchaser, Mittal Steel, was the subject of
negative speculation on Channel One. It showed a representative of the
previous owners of Kryvorizhstal saying that Mittal had failed to pay the
sum agreed for the metal company Huta Czestochowa in Poland.
Ren TV also hinted that all might not be well from the point of view of the
purchaser. Its correspondent noted that because of the terms of the auction,
a number of possible buyers, including Russia's Severstal and Evrazholding,
had pulled out. "They said that Kryvorizhstal would not be profitable," he
explained.
Ren TV was alone in highlighting the transparency of the Kryvorizhstal
auction. "The auction was televised to demonstrate its transparency, and
billboards were put up in Kiev saying that the proceeds will go to the
people," the correspondent reported.
Following his report, presenter Olga Romanova compared the openness
of the Ukrainian auction with the sell-off of the Yukos production arm
Yuganskneftegaz in December 2004. Here there were no TV cameras or
VIPs present, just "speechless men about whom no-one knew anything",
Romanova recalled.
Her remarks were backed up by economist Yevgeniy Saburov who said
that the Ukrainian and Russian transactions were "two completely different
things that cannot be compared". -30--
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9. UKRAINIAN EXPERTS WARN OF REPRIVATIZATION
DANGER IN WAKE OF STEELWORKS SALE
Ukrayina TV, Donetsk, Ukraine, in Russian 1800 gmt 24 Oct 05
BBC Monitoring Service, UK, in English, Monday, Oct 24, 2005
[Presenter] Ukrainian political scientists are saying that the repeat
privatization of Kryvorizhstal [steelworks] is a search for additional funds
ahead of the [2006] parliamentary elections.
Some of them fear that this will be a step towards a global reprivatization.
The head of the Political Values Research Centre, Oles Doniy, thinks that
the sale of profitable companies is a dangerous means of lugging holes in
the budget.
[Doniy] The situation is quite catastrophic, it is a crisis. All economic
indicators have gone down in the past six-eight months, and the country is
facing a catastrophic lack of funds.
The state [leadership] decided to resort to an easy means, that is, let's
sell something, some part of state property and will get a share of it. A
danger and a temptation will then appear to make handouts ahead of the
election, as any authorities do, in the form of insignificant and temporary
increases in pensions and wages.
We know that this will be eaten up by inflation or food price rises in a
couple of months. If funds are spent only on consumption and if they are not
spent on restructuring and on investment in the future and in science but
only on temporary handouts, this will be a deadlock.
It will be necessary to sell part of state property next year, in a year's
time, and at some stage Ukraine will find itself a beggar, sold out and
bought up, and this will be a collapse.
[Vadym Karasyov, captioned as director of the Institute of Global
Strategies, in Russian] [Sacked Prime Minister Yuliya] Tymoshenko
proposed the process of large-scale privatization - lists of thousands
of companies, about 30,000 of them, if I am not mistaken.
[Current Prime Minister Yuriy] Yekhanurov offered the option of small-scale
privatization - about five or six [companies to be put up for resale]. This
shows that, first, the current government views the process of
reprivatization, including to replenish the budget, as an important area of
its work.
Second, this is also a preventive statement, a preventive blow against
so-called oligarchs or national financial and industrial groups which, in
the opinion of government officials and government leaders, have too
much influence on the Ukrainian politics. -30-
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10. UKRAINIAN PRIVATIZATION CHIEF SAYS RESIGNATION
DUE TO "DIRTY INTRIGUES"
Era, Kiev, Ukraine, in Ukrainian 1300 gmt 24 Oct 05
BBC Monitoring Service, UK, in English, Mon, Oct 24, 2005
KYIV - [Presenter] The head of the State Property Fund of Ukraine,
Valentyna Semenyuk, has tendered her resignation. The press secretary
of the Ukrainian presidential secretariat, Svitlana Zalishchuk, confirmed
to Radio Era FM that the secretariat does have her resignation letter.
[Zalishchuk] The presidential secretariat has the resignation letter. It
came here at about 1230 [0930 gmt]. It is now directly in the president's
[Viktor Yushchenko's] hands, and it is up to him to decide whether or not
this resignation letter should be signed.
[Presenter] Ms Semenyuk herself said that she tendered her resignation
because of, I quote, dirty intrigues aimed at discrediting the fund, the
Socialist Party of Ukraine and her personally. This is what Semenyuk's
address to Ukrainians says.
Semenyuk was forced to write this address by her constitutional duty,
Socialist convictions and responsibility to the state and the people, who
elected the new authorities a year ago, the address says.
The address also says that Ms Semenyuk is willing to continue her work if
laws on the State Property Fund, on management of state-owned property
and on joint-stock companies are approved.
I recall that the Socialist Party leadership earlier insisted on Semenyuk's
resignation, saying that the privatization of Kryvorizhstal [steelworks]
runs counter to the party's principles.
[Semenyuk is a Socialist Party member. Kryvorizhstal was sold today in a
tender for 24.2bn hryvnyas (about 4.8bn dollars) to Mittal Steel Germany
GmbH (Duisburg)]. -30- [Action Ukraine Report Monitoring Service]
=====================================================
11. UKRAINE TO SET UP FUND TO BUY OUT UNFAIRLY
SOLD STATE PROPERTY
Interfax-Ukraine news agency, Kiev, in Russian 0859 gmt 24 Oct 05
BBC Monitoring Service, UK, in English, Monday, Oct 24, 2005
KIEV - Ukrainian Prime Minister Yuriy Yekhanurov has said that the
Cabinet of Ministers will initiate the creation of a fund to accumulate
resources which can be used to buy out state-owned shares in
companies which had been privatized in non-transparent conditions.
Yekhanurov was addressing a meeting at the Industrial Policy Ministry in
Kiev on Monday [24 October]. "After the competition (to privatize
Kryvorizhstal [steelworks] - Interfax-Ukraine) I will put forward a proposal
to earmark resources so that we could buy out the companies which were
sold unfairly," Yekhanurov said.
He added that various courts have been considering cases involving about
five-six companies which were not privatized transparently. "So it is
probably necessary for the state to have resources to buy them out.
If the budget receives resources above target (from Kryvorizhstal's
privatization - Interfax-Ukraine), the government will initiate creating
funds which we could use to buy out state shares," Yekhanurov said.
[Kryvorizhstal was sold today in a tender for 24.2bn hryvnyas (about
4.8bn dollars) to Mittal Steel]. -30- [Action Ukraine Report Monitoring]
=====================================================
12. UKRAINE: ANALYSTS SAYS SECOND SALE PROVES
TRUE WORTH OF KRYVORIZHSTAL STEEL MILL
By Alla Vetrovcova, FirsTnews
Kyiv, Ukraine, Tuesday, October 25, 2005
The consensus among analysts contacted by FirsTnews was that Monday's
very public auction of Kryvorizhstal proved what the true value of the steel
mill was, and disproved any claim that the first sale was proper and
legitimate.
The auction may also raise in the minds of citizens the issue of what other
Ukrainian state assets might have brought to the state budget, had similar
procedures been put in place early in Ukraine's independence.
KYIV, Oct. 24 (FirsTnews) -- Despite attempts by the Socialist and
Communist parties to derail the government's plan to sell Ukraine's giant
steel mill, and a Parliamentary resolution urging postponement of the
auction until after the elections next March, the Kryvorizhstal auction went
off without a hitch on Monday, with the result to be a windfall of $4.8
billion coming to the state budget.
News sources quoted Ukraine President Viktor Yushchenko as saying that
the sale netted 20 percent more than the combined total from all other
previous privatizations in Ukraine.
Vitaliy Palamarchuk, a local political analyst, is sure that the successful
sale "is the main victory, not only economic but also political, for all of
[President] Victor Yushchenko's team." According to Palamarchuk, the
auction was conducted transparently and honestly.
Vadim Novinsky, owner of the Russian-Ukrainian LLC Smart-Group that
participated in the auction, also said that the auction was fair, according
to a liga.net Internet Web site report today. When asked why his company
stopped at UAH 17.7 billion, Novinsky said, "We simply did not have the
resources." Runner-up Donbas Industrial Union continued to raise their
stakes up to UAH 24 billion.
"Secondly, the sale of Kryvorizhstal proved that the mill was worth much
more than the price paid for it by its previous owners. It cost six times
more now," Palamarchuk said.
Rajesh Saraiya, CEO at Kyiv-based Ultratest, a British company that trades
steel in CIS markets, said the sale of Kryvorizhstal mill is good news for
his company, "and the price of the sale speaks for itself."
At the same time, Saraiya was worried whether the contracts his company
has already signed for steel supplies in November and December would be
honored.
"Kryvorizhstal is under the charge of the Ministry of Industrial policy, so
we expect them to explain and assure us what will happen next," Saraiya
told FirsTnews.
Palamarchuk also stressed that the auction can serve as a starting point
for price revision for a number of other objects of privatization.
"I think that now it is very important that the president of the country
should stop all political speculation for this reason and prevent possible
reprivatization again," Palamarchuk added.
Olexiy Plotnikov, head of the department of International Financial
Relations at the Institute of World Economy, who was from the very
beginning against reprivatization and thought that the mill should have
stayed as a state property, nevertheless thinks that it's good that it
finally was sold and to move beyond all the debate about it.
"But the bad thing is that it was sold to a foreign investor, not to a
local. Moreover, Mittal Steel company's owner so much wanted to be
a part of the local market that he overpaid a lot for it," Plotnikov said.
He said that he thought Mittal would fulfill obligations to the plant's
employees, but whereas Ukrainian investors would also help fund the
social, medical and cultural needs of the city, he doubted the foreign
owner would be as generous.
As for attempts of the Communist Party to prevent the sale and their
reaction to it, Plotnikov said that the Communist Party would play this
card for a long time, as they were against privatization of the steel plant.
Plotnikov explained that the Socialist leader Valentyna Semenyuk, who was
said to have submitted her resignation today and was reported by media
sources to be under care for high blood pressure, was unable to prevent the
tender. As a result, socialists are staying silent for the moment.
"Socialists have decided to distance themselves from the Kryvorizhstal sale,
because people would remember and criticize them a lot, because the auction
happened while their representative was head of the State Property Fund".
Calls to Communist Party headquarters revealed that its leader, Petro
Symonenko was also at a local hospital, this according to party head Victor
Alexeyev, who also refused to comment on the issue of the privatization
saying he's not aware of what communist MPs of his party have planned in
response to the Kryvorizhstal mill sale. -30-
--------------------------------------------------------------------------------------------
LINK: http://www.firstnews.com.ua/en/article.html?id=116032
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13. EQUITY CONFERENCE ON INVESTMENTS INTO RUSSIA:
IMPLICATIONS AND LESSONS FOR UKRAINE
ANALYSIS: By Walter Prochorenko, PhD.
The Action Ukraine Report (AUR), Number 590, Article 13
Washington, D.C., Tuesday, October 25, 2005
On October 20th Renaissance Capital Securities sponsored the 4th annual
Equity conference on investing in Russia at the Metropolitan Club in New
York City. Aside from a first class venue and exceptionally well presented
documentation, the conference provided a good look at what are the issues
facing investors that want to venture into Russia.
The conference provided not only a good overview on the companies that
made their presentations, but also enabled opposing views from experts like
Michael McFaul of Carnegie Endowment, to be presented thus making for
some lively discussions.
Before going into some details on the companies that participated in this
conference, I would like to explore the consequences for Ukraine of Russia's
present political and business related situation. These views were derived
strictly from the views expressed at the conference proceedings.
Former USSR President Mikhail Gorbachev, who gave a short but down to
earth speech at a reception following the conference, brought out an
interesting and according to his own words - paradoxical - dilemma facing
Russia today.
As Russia seeks investment capital from the industrialized world for its
emerging industries and businesses, it is awash with cash and funds that are
being generated from its oil and gas revenues.
Russia still has not learned how to manage this windfall and how to create a
system whereby these funds could somehow trickle down to the millions of
its citizens that are living in sub-standard conditions and at poverty
levels.
The biggest recipient, however, of these excess funds (aside from Swiss,
Cypriot, and UK off-shore banks) appears to be Ukraine.
Russians find that Ukraine presents them with the unique opportunity to
funnel these funds into purchasing cheap industries and thus securing future
revenues with a minimum of oversight and regulations as opposed to that of
the Russian government which has recently started to impose strict
requirements on its domestic industries.
This again may be a paradoxical situation since Ukraine is known for
substantial governmental interference in the business affairs of private
enterprises, but Russian investors (like Ukrainian oligarchs) have found,
and continue to find, ways to circumvent these minor headaches and are
thus able to operate with virtual impunity.
It should then follow that if Russians see Ukraine as such a prime market
for its investments, the rest of the industrialized world should also.
Unfortunately this is not the case.
Ukraine's convoluted and conflicting system of laws, rules, regulations, and
bureaucracy scares Western investors but provides a fertile soil for its
northerly neighbors to take advantage of this environment.
The risk is that if only Russians will be the major investors in Ukraine,
which could eventually lead to the imposition of undue influence on
Ukraine's
economic, political and social structure and may, and I strongly prefix
this - may, cause Ukraine to become simply a satellite state of a new
Russian economic superpower.
It was interesting to learn that already many Russian firms ranging from
coal, steel, and other metal producers to telecommunications and media
giants are already deriving a large part of their revenues from Ukrainian
enterprises.
The list of companies if far too great to list for this article, but there
is a definite correlation between Ukraine's business and economic growth
and Russian investments.
Many Western investors expressed a concern with President Putin's
actions in relation to the Yukos bankruptcy, frozen assets, and virtual
re-nationalization, but the panel and participating analysts provided an
insight into this debacle.
Again here we can see a parallel to the Kryvorizhstal situation in Ukraine.
The actions of the government and particularly those of Mr. Putin, were
seen as a necessary step to bring the oligarchs in line.
These Russian oligarchs were building unprecedented political and economic
influences in the regions of their operations through outright corruption
and favoritism. Thus the Yukos move was necessary to re-establish the
authority of Moscow's central government to the rest of the country.
Putin's actions actually caused the other oligarch controlled oil, gas, and
media companies to go from paying little or no tax to an average of 25-30
percent tax across the board. This is more in line with what the rest of
Russian businesses now pay.
During the last Presidential elections in Ukraine we saw how much influence
the oligarchs had in areas such as Ukraine's Donbass industrial region.
This same influence could very well have destabilizing effects on any
country which should have the population as a whole, rather than just
regional priorities, on its agenda.
Throughout the conference, whenever I mentioned that I was interested in
Ukrainian issues, one consistent comment, which I parlayed into a general
consensus, was that as Russia goes, Ukraine will also go, but within a 10
year interval.
When I was working in Ukraine, this same generality was expressed to me
by a number of Ukrainian business people, so I was surprised that it is also
the feeling of Russian businessmen and as well as foreign investors.
It would be a shame if this were true since Ukraine has an exceptional
opportunity to break this line of thinking if it could only accomplish the
mandate so firmly given by its populace during the Orange Revolution.
Russia is still seen in the industrialized world as a vast source of raw
materials. This was well but somewhat dryly presented by Igor Rogachev
who was the former Russian Ambassador to China.
China needs Russia's raw materials to sustain its phenomenal growth, but
Russia does not want to be simply a raw materials supplier. This is partly
what worries Ukraine in its own dealings with China.
However, Russia can expand its own influence on China if it supports
companies like FESCO who are already establishing a trans-Siberian
container transport system from China to Western Europe thus providing
both savings in time and money over similar sea routes with such transports.
Ukraine should also consider this in its own dealings with the GUAM group
of nations and if indeed such transport is effective, it could initiate with
its Caucasus and Central Asian partners an alternate southern route from
India, China, Southeast Asia, and the Middle East.
The conference itself was an example of utmost professionalism and
provided an exceptional venue for continuous and effective interaction
by the participants and the guests. -30-
----------------------------------------------------------------------------------------------
NOTE: Walter Prochorenko is a businessman who spent several years
working and investing in Ukraine. He lives in New Jersey and he has
recently been working on an advanced educational degree which he has
just finished. He is now writing a book. Walter is a regular contributor
to The Action Ukraine Report (AUR). Contact: prowalt@yahoo.com
=====================================================
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14. NAFTOGAZ ATTRACTS HUGE CREDITS WITH HIDDEN PURPOSE
Roman Bryl, Ukraine Analyst, IntelliNews - Ukraine This Week
Kyiv, Ukraine, Monday, October 24, 2005
State oil and gas monopolist Naftogaz Ukrainy attracts too many credits----
The total volume of credits received by oil and gas major Naftogaz Ukrainy
amounts to EUR 7.5bn and exceeds its annual turnover.
Many politicians and experts argue that the company's uncontrolled credit
policy may lead to the Ukrainian gas transportation network being passed to
foreigners or to a technical default of the state's oil and gas monopolist.
Last week Naftogaz opened another EUR 3bn credit line in CSFB ----
Last week Naftogaz president Olexiy Ivchenko informed about Credit Swiss
First Boston Bank (CSFB) opening a EUR 3bn credit line. The credit line is
opened without any guarantees, be it guarantees from the state or other
institutions.
In June Ivchenko also announced the opening of another EUR 3bn unsecured
credit line in French Bank Societe Generale. Experts doubt that such large
credits can be given without any pawn. Such rock-solid trust of
international banks in the Ukrainian state monopolist is surprising.
There are suspicions that Naftogaz attracts credits collateralized by its
profits from transiting Russian gas to EU or pledging its oil and gas fields
in Ukraine.
Naftogaz's liabilities on foreign credits cannot exceed USD 1.9bn ----
Moreover, there are doubts whether Naftogaz can receive and use these
credits. In Oct 2004 the company issued EUR 500mn Eurobonds. The
Eurobonds have a 5-year maturity period and are circulated on the
Luxemburg stock exchange.
Underwriter of the issue ABN Amro, pushing for high liquidity of the bonds,
demanded that the volume of Naftogaz's foreign liabilities should not exceed
USD 1.9bn.
Otherwise the bank would remove its responsibility for supporting the bonds'
price and then a technical default on Naftogaz's Eurobonds could be
announced.
At present the volume of foreign liabilities makes up USD 1.1bn and,
accordingly, the entity can attract only extra USD 800mn of credit funds.
MP asks General Prosecutor's Office to investigate credit and financial
policy of NaftogazAnother question is how rationally Naftogaz uses own and
attracted funds.
On Oct 21, MP Stepan Gavrysh sent an interpellation to General Prosecutor's
Office, head of state security service, and state property fund, demanding
to examine the credit and financial policy of Naftogaz.
According to Gavrish's own investigation, Naftogaz's financial standing is
critical and unstable, which might lead to a downgrade of the company's
credit ratings.
Naftogaz said to have liquidated foreign investment department ----
Such declaration hints at a possible shift in the credit and investment
strategy of Naftogaz. In 2004 when the company received a USD 1bn loan
from Deutsche Bank it determined 4 projects for investing these funds.
he projects were: construction of exploring capacities in UAE and producing
oil there; building a gas pipeline in Bosnia and Herzegovina; exploration of
oil fields in Libya; acquisition of Russian company Kalmykoil.
International experts assisted in creating business plans for these
projects. The study of the projects' efficiency took 2 years. It was
expected that in 3-4 years return on investments would be received.
It was planned that these and other projects would turn Naftogaz into an
international energy group and would increase its capitalization.
But now, according to unconfirmed information from a source close to the
company, all projects on investing abroad were cut and the department for
foreign investments was liquidated.
Naftogaz may be getting credits to provide payments to state budget ----
If Naftogaz stopped its international projects a question appears: what
needs the company has to open several multibillion credit lines for? There
are several possible answers.
FIRST, providing payments to the state budget.
Over Jan-Sep 2005 the company transferred about UAH 8bn (USD 1.3bn)
to budgets of various tiers (state, regional, and municipal), according to
state tax authorities' data.
The figure exceed 2-fold the payments in the same period of last year. It is
expected that Naftogaz will soon raise tariffs for using gas and oil to
cover its deficit that appeared after the budget payments.
Naftogaz can lose control over gas transportation network ----
SECOND, it may be an attempt to lower the price of the credit from Deutsche
Bank. A declaration about cheaper loans from Societe Generale and CSFB
may be regarded as pressure on Deutsche Bank to lower its interest rate.
But by trying to attract extra credits to re-pay an expensive credit from
Deutsche Bank, Naftogaz increases the possibility of a technical default. If
the company fails to return credit funds during the period of technical
default, a real default will be declared. In this case the state ranks only
5th in the list of creditors.
It is unclear how Naftogaz will redeem the loans. Though Naftogaz CEO stated
the loans were attracted without any pawn, in September ex-head of national
security service Olexander Turchinov informed the pawn had been the
Ukrainian gas transportation network. Turchinov also added that entities
affiliated with Russian Gazprom bought Naftogaz debts to receive a
possibility to control the gas network.
Is Naftogaz paying for Europe to promise gas supplies
to EU via Ukraine? ----
Of course, we cannot determine with certainty whether Naftogaz really
pledged the gas network to receive loans. More possibly, the credits were
extended to secure transportation of gas from Russia to EU thought the
territory of Ukraine.
Russian gas is now transported to Europe mainly via Ukraine, and decreasing
transport volume by 10% can result in an energy crisis in EU. We recently
examined the rows over the price and utilization of Russian gas by Ukraine.
The conflict remains unresolved, and can endanger gas supplies to Europe
this winter. Increasing Ukraine's liabilities, Europe can minimize the risk
of Naftogaz making unexpected moves that can reduce the transportation
volume.
Ukraine may lose profit from gas transportation in the future ----
The rising dependence on European credits can be minimized by higher
efficiency of Naftogaz operations. The company can invest the attracted
funds in various projects, for example in development of its gas transit
network.
But Naftogaz still does not comment the purposes of attracting the credits.
It seems that for mitigating the economy's current problems (i.e. lowering
the state budget deficit), Ukraine will pay by decreasing its profit from
gas transit in the future. -30-
=====================================================
15. UKRAINE DEFENSE CHIEF: ALL TROOPS TO
LEAVE IRAQ BE DEC 30
Associated Press (AP), Kiev, Ukraine, Monday, Oct 24, 2005
KIEV - Ukraine's defense minister said Monday that the 800 troops
remaining in Iraq will be withdrawn following Iraq's December elections.
"We will fulfill our tasks until the election campaign concludes, which is
scheduled for Dec. 15," Anatoliy Grytsenko said, according to a Defense
Ministry statement. "And then from Dec. 20-30, according to plan, the
Ukrainian contingent will be withdrawn." He spoke on the sidelines of a
NATO-Ukraine meeting in Lithuania.
At its height, Ukraine's 1,650-troop contingent was the fourth largest
non-U.S. military grouping in Iraq. About 800 Ukrainian troops remain
there, the ministry said.
Ukraine began withdrawing its troops in March, and President Viktor
Yushchenko has promised they would be out by the end of the year.
=====================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
=====================================================
16. TODAY: OCTOBER 25th: MURDER IN KYIV
Myroslava Gongadze attempts to discover the truth
PBS's Frontline/WORLD on Ukraine and Gongadze Case,
The Action Ukraine Report (AUR), Issue 590, Article 16
Washington, D.C., Tuesday, October 25, 2005
WASHINGTON - The show "Murder in Kyiv" will air on the Public
Broadcasting Service's (PBS) Frontline/WORLD on Tuesday,
October 25th. The show takes an in-depth look at political reform
in Ukraine through the lens of the well-known 'Gongadze case.'
The 'Orange Revolution' has finally given Myroslava Gongadze the
chance to return to the country to get answers about her husband's
death.
Frontline/WORLD correspondent Brian Knappenberger not only
follows Myroslava as she attempts to discover the truth in the crime
but also tries to learn if the dramatic changes the country has gone
through live up to the promises of the 'Orange Revolution.'
WETA TV 26 - Washington
CHANNEL 26 Tuesday, October 25, 9:00pm
Maryland Public Television
CHANNEL 67 Tuesday, October 25, 10:30pm
WETA PRIME
[D] Tuesday, October 25, 9:00pm mpt DT
[D] Tuesday, October 25, 10:30pm mpt Select
[D] Wednesday, October 26, 9:00am
====================================================
17. UNDER WESTERN EYES:
UKRAINE'S CRISIS AND UKRAINE'S PROSPECTS
ANALYSIS & COMMENTARY: By James Sherr (1)
Zerkalo Nedeli, Mirror-Weekly, No. 41 (569)
International Social Political Weekly
Kyiv, Ukraine, Sat 22-28, October, 2005
In one respect summits are like revolutions. Even the most hopeful are
followed by disappointment. Will President Yushchenko's summit in the UK
conform to this pattern, or will it provide the impulse needed to rekindle
Western optimism about Ukraine's prospects and restore the momentum lost
during the past nine months?
The visit was an obvious success, and it was meant to be. It was launched,
after all, by the decision of the Queen to confer the coveted Chatham House
award upon Viktor Yushchenko as the statesman who 'made the most
outstanding contribution to the improvement of international relations in
the previous year'.
It confirmed the intention of the UK, as current holder of the EU
presidency, to launch visa facilitation negotiations before the EU summit in
December and secure Market Economy status during the summit itself. It
provided the President with a commanding platform to set out his vision of
Ukraine and reaffirm its Euro-Atlantic course.
On Yushchenko's part, the visit was also designed to ensure that the EU
summit revives his political capital at home before the parliamentary
election campaign begins.
Ukraine has high expectations of Britain's EU presidency, and although these
expectations are probably too high, there is sound reasoning behind them.
From the mid-1990's, the UK went out of its way to recognise Ukraine as a
'pivot' in the future structure of Europe.
Its vision of the European Union-globalist rather than protectionist,
contagiously democratic, open to new influences and new members-has
made it instinctively prone to support Ukraine's aspirations and reinforce
tangible commitment and success.
Of all EU members, the UK is also the country most convinced that
integration of Ukraine and partnership with Russia are not contradictory
goals, but complementary and reinforcing ones.
Not least important, the UK invested real political capital to help ensure
that Ukraine's 2004 electoral contest would remain peaceful as well as
democratic-and having made that investment, it does not want to abandon it.
Yet there is a delicate balance of forces in the UK, as there is in the West
as a whole, and Ukraine would be very unwise to ignore it. The UK's global
focus sustains global commitments (in Iraq, Afghanistan and Africa) and
exposes it to global dangers-not only abroad but, since the events of 7
July, at home.
Ukraine is not the centre of British attention, and disillusionment with
Ukraine can in future (as in the past) move it swiftly to the margins of
interest. Whatever views the British hold, their centre of gravity is
pragmatic and, like other northern Europeans, they approach life's
challenges with a weighty measure of prudence.
They are suspicious of grand declarations and 'grand designs', more
impressed by deeds than words and reluctant to assume obligations
unless they can be met.
For every enthusiast about Ukraine's membership of the EU, there are two
grey-suited pragmatists advising caution and pointing out in damning detail
that the difficult business of integrating the most recent EU members has
hardly begun.
Nevertheless, Yushchenko chose to deliver a visionary rather than a
pragmatic speech in London. After seven months without discernable reform
and two months of demoralising political drama, the audience wanted, even
needed him to own up to his mistakes and affirm his determination to learn
from them.
Instead, he spoke of mistakes that were clearly Tymoshenko's rather than his
own. The audience would have appreciated a positive, but balanced account
of the measures Ukraine had taken towards NATO membership (i.e. [t.e.]
substantial defence reform) and of the work that was still needed (i.e.
systematic reform of the security sector and law enforcement).
Instead, Yushchenko advanced a timetable towards membership which almost no
NATO member regards as practical. The audience also would have appreciated
a sign that this Ukrainian president, unlike the last, understood the
difference between belonging to European civilisation and becoming a member
of the European Union.
Instead, Yushchenko declared that 'Ukraine is at the heart of Europe', as if
the challenge were to integrate Europe with Ukraine rather than the other
way round.
It was, by turns, a compelling and bewildering speech, full of the language
of conviction, but short of the common language that today is so desperately
needed if Ukraine is to achieve its goals.
In its public and more private manifestations, the visit did much good. But
will it do lasting good? Will it do enough to offset what is already
becoming evident: a new reserve and scepticism about Ukraine in the West?
The challenge is not only to overcome this scepticism, but ensure that it
does not turn into another round of 'Ukraine fatigue', reviving an
altogether different vector of Ukraine's policy.
FROM EXPECTATION TO DISAPPOINTMENT
Months before Oleksandr Zinchenko presented his spectacular allegations at
his September press conference, most of those who provide advice to Western
politicians-diplomats, NATO and EU officials, independent consultants and,
not least significantly, investors and businessmen-had been warning them
that 'not all is well in the Orange kingdom'.
To political establishments who had always been sceptical about Ukraine's
prospects-not to say those emphatically uninterested in them-these
allegations and the dismissal of the government which followed were greeted
with resignation. To those who believed in the Orange Revolution's
prospects, they were a bolt from the blue.
Those in the latter camp rightly, Britain amongst them, regarded the Orange
Revolution as the culmination of a perilous and historically significant
struggle, with momentous implications for Europe and, possibly, Eurasia.
But outside the Baltic states and the former Warsaw Treaty countries, few
understood that it also marked the start of a fresh struggle-and on terms
distinctly less straightforward and advantageous than Poland, Hungary and
the (then) Czechoslovakia faced in 1989.
Nevertheless, within six months, the mood in the West had swung from
expectation to disappointment. With varying degrees of emphasis, the
community of experts cited a number of factors explaining the gap between
the new political order's potential and its very visible shortcomings.
FIRST, the objective and unavoidable factors:
[1] Dependence of the new authorities on dubious allies in the anti-Kuchma
coalition that helped bring them to power;
[2] The fact that these authorities, too, were brought up in the inbred
'culture of power', whose instincts and habits extended well beyond Kuchma
and his supporters;
[3] Ukraine's inheritance of a pathologically cumbersome legal system and an
oppressively meddlesome (and anti-market) bureaucracy;
[4] Forbidding economic conditions, thanks to the pillaging of state
property and budgets by Kuchma/Yanukovych, significant energy price rises
and the continued Russian proclivity to extract political gains from
economic dependency and weakness.
Experts and officials also called attention to difficulties of the new
leadership's own making:
[5] Failures in leadership, blind defence of 'one's own' [svoi], distrust of
people outside the magic circle and (especially at the RNBO) a failure to
understand the difference between coordination and control [NB! upravlenie,
not kontrol', which in Russian means something much more passive than it
does in English];
[6] Absence of institutional reform, or any systematic planning for it, and
a failure to recognise that bad institutions will never be able to implement
good policies;
[7] Failure to address, and often understand, the underlying causes of
corruption, as well as the multiple linkages between politics, business and
crime;
[8] Damaging economic policies and a failure to appreciate the importance
of predictability in the economic sphere (for which the majority of Western
experts, believed that Tymoshenko rather than Yushchenko was primarily to
blame).
Finally, many inside the Western community also highlighted the features of
the Orange order that were positive and were likely to remain so:
[9] The emergence of an unmistakeably democratic framework, backed by
vigilant citizens and a media establishment jealous about its freedoms;
[10] The profound disorientation of the Yanukovych based opposition (and
that of the USDPo), despite the former's retention of a solid constituency
in the country;
[11] The final burial of the 'multi-vector' policy and the establishment of
a clear course of Euro-Atlantic integration.
TYMOSHENKO AS SCAPEGOAT?
In the wake of Yushchenko's decision to dismiss Prime Minister Tymoshenko
and most of her ministers, many Ukrainians perceive that the West, unjustly,
has blamed her for the crisis and unwisely exonerated Yushchenko.
Many also fear that the West now prefers 'stability' to the rooting out of
corruption and the redress of past injustices. Are these perceptions
accurate?
In one unfortunate respect and several eminently sound respects, they
probably are. One of the most regrettable characteristics of Western
politicians is the tendency to personalise relations between countries.
After all, people are what politicians understand best. Foreign countries
are what they understand least.
Moreover, contrary to the mythology about the 'immorality' of politics,
politicians tend to attach considerable importance to personal loyalty (an
attachment that Yushchenko has demonstrated to occasionally harmful effect).
The fact that, as early as 1999, many Western governments perceived
Yushchenko as the most promising alternative to President Kuchma is not a
failing, and certainly it was not an error.
The failing with regard to Yushchenko (or Gorbachev or Yeltsin) lies in the
difficulty many have in judging a friend's limitations as acutely as his
strengths-and not anticipating the effect that trials and traumas have on
even the most noble and courageous of people.
The West supports Yushchenko and would like to continue supporting him.
But this does not mean that the West cannot distinguish between Yushchenko
and Ukraine. The West's fundamental focus and interest is Ukraine.
Western governments are probably on stronger ground in connecting
Tymoshenko's economic policies and style of management to Ukraine's
precipitous economic downturn.
This does not mean that people underestimate the tenacity of Tymoshenko's
enemies, the duplicity of many of her subordinates or the lack of support
she has had from the President.
It means they recognise that the policies responsible for economic
uncertainty-the re-valuation of the hryvnya, the elimination of tax
privileges, the introduction of the oil cap and imposition of price
controls-were policies that she initiated and championed.
Moreover, they were policies which, for the most part, were imposed
without consultation and without warning to those who would be affected.
In the United Kingdom, one or two years notice is provided before tax
changes take effect.
What are businesses to conclude when they wake up to a new set of price
controls? What conclusions are they expected to draw when a tax regime,
integrated into marketing, pricing and investment strategies, is changed
virtually overnight?
Moreover, is it wise-is it even just?-to pick apart and prosecute a fixed
assortment of corrupt practices in what was a pervasively corrupted
economy, or would it not be wiser to focus energies on establishing rules
and institutions designed to make such practices unnecessary and
unattractive in future?
Is it possible to 'eliminate corruption' in Ukraine or even in Britain? Or
is it better to try to establish a state of affairs in which corruption is a
matter of choice rather than a matter of survival and where (properly
reformed) structures of law enforcement have a war against organised
crime that they can actually fight?
Given the conditions that Ukraine inherited, is it any surprise that the
debate about privatisation lacked agreed criteria and limits, that it
stretched on for months and that it aroused charges of villainy and double
standards on all sides?
With conditions not half as bad as those that the Orange leadership
inherited, the new democracies of Central Europe wisely decided not to
open the Pandora's box of anti-corruption investigations that have sent
investment confidence spiralling downwards in Ukraine.
Western governments also need not apologise for the priority they attach
to economic stability-or, more accurately, confidence.
That priority has no affinity with 'stabilisation', the code word of those
in Ukraine who would re-establish the hegemony of oligarchs and the
restoration of oligarchic norms.
Instead, it is the precondition for any policy designed to foster honest
entrepreneurship and devolve economic power from the state's trusted
associates to independent actors and ordinary people.
There is no certainty that economic confidence will do this, but without it,
we can be certain that these aims will not be realised. Economics may be
a 'dismal science', but it is also a moral issue, inseparable not only from
human welfare but the survival of Ukraine's democracy and national
independence.
For all of this, Western governments do not underestimate Tymoshenko's
ability or her indispensability to the future of Ukraine. Today as opposed
to January, there is awareness of the Orange Revolution's fragility and
concern about its prospects if the 'war of the entourages' creates an
irreparable breach between its two principal architects.
There is also concern that the 22 September pact between Yushchenko and
the Party of Ukraine's Regions has launched a new and dangerous dynamic.
What were the initial terms of this pact, and what will be its final terms?
Is immunity for deputies of local parliaments one of its terms?
Will there be others if Yushchenko's political capital continues to erode,
if efforts to secure an understanding with Tymoshenko fail and if
Yanukovych's support is again required to secure Yekhanurov's election
by the Rada in March?
Alongside those in the West who fear this outcome, there are those who fear
another: Tymoshenko's election as Prime Minister, but on the basis of clear
opposition to the President and, hence, with every risk of open conflict
between the structures of executive power.
Because these risks are so apparent, a growing number of players inside the
EU and NATO (and Ukraine itself) recognise the importance of restoring a
basis of understanding between Yushchenko and Tymoshenko, whether the
latter remains in opposition or not.
If there is no basis for understanding inside government, then it is clearly
desirable that Tymoshenko, rather than Yanukovych, remain the key force
outside government with whom accommodation and compromises are
negotiated.
The only formula which will secure this is 'march separately and fight
together'. Is there anything that the EU or NATO can do to give an impulse
to this dynamic?
Is there anything that they can do to offset that which, once again, is
becoming ominous: the Russian factor? If few Westerners worried about the
re-emergence of the multi-vector policy in June, a larger number worry about
it now. Do they not have reason?
[1] Despite Yekhanurov's best efforts in Moscow, the energy card has been
slapped on the table, and within the past few days, even the mercurial
Turkmenbashi has announced that implementation of the new bilateral
agreement on gas supplies depends upon Russian consent;
[2] Is Yushchenko retreating from the MFA's ironclad formula: 'integration
with Europe, strategic partnership with Russia'? At least some in London
inferred that Yushchenko was speaking about reconciling two contradictory
processes of integration, EU and SES (???), and several more were struck by
his references to being part of the SES, rather than simply cooperating with
it.
[3] Has someone in Ukraine agreed to provide crumbs of support for the
forces of the status quo in CIS countries and deny encouragement to
'coloured' forces there?
Why did Ukraine fulfil an Azeri request to detain Rasul Guliyev,
leader of the Azerbaijan Democratic Party, when Yushchenko and Tarasyuk
were in London, and who apart from Ukraine's Minister of Interior decided to
fulfil it?
Is it coincidental that Prime Minister Yekhanurov signed four
cooperation agreements with Belarus the following day, and what does this
suggest about Ukraine's willingness to respect Poland's concerns about
relations with Belarus?
A EURO-ATLANTIC INITIATIVE?
Emboldened by these stakes, can NATO and the EU maintain their realism and
also meet the expectations of democratic forces in Ukraine? They have some
time to answer the question, but not much.
For NATO the question is easier to answer. What was once the hope of some
allies and the openly expressed hope of President Yushchenko in his London
speech-an invitation to submit a Membership Action Plan in April 2006-today
appears rather less realistic than it recently did.
Even the most optimistic allies hoped that Ukraine might meet some
additional 'benchmarks' by then. Today, there is everything realistic about
this expectation except its timing.
The solution for NATO, and for the April NATO-Ukraine summit, is not hard
to discern: clear language on NATO's part that it looks forward to inviting
Ukraine to join the MAP process 'at the earliest possible opportunity' (and,
to anyone capable of reading between the lines, by December of that year).
For the EU the question is, as ever, more complicated and cumbersome. The
disgracefully overdue granting of Market Economy status should not be hard
to fulfil, but it is unlikely to be enough to attract the attention of
Ukraine's electorate. ? strong and positive signal on free trade would
attract attention, but it is unlikely to be given.
Yet a stronger signal, of immense moral and practical significance to
ordinary Ukrainians, is more realistic, namely visa liberalisation: and not
just negotiations about liberalisation but the first tangible measures of
it, however modest they might be.
The UK is in a unique position to exercise leadership and courage on the
issue, for if its leadership of the EU presidency fails to move the EU (and
the weighty Schengen system), its own independence of the Schengen
system afford it an opportunity to act bilaterally. Whether it will do so
remains to be seen.
Whether the Euro-Atlantic community can give a renewed impetus to
Ukraine's democratic forces also remains to be seen. -30--
---------------------------------------------------------------------------------------------
FOOTNOTE: (1) The views expressed are those of the author and not
necessarily of NATO or the British Ministry of Defence.
--------------------------------------------------------------------------------------------
James Sheer is a Fellow at the Conflict Studies Research Centre
Defence Academy of the United Kingdom. Contact James Sheer:
e-mail: james.sherr@lincoln.oxford.ac.uk)
--------------------------------------------------------------------------------------------
FOOTNOTE: The English version of the article above was obtained
directly from the author. Format editing by The Action Ukraine
Report (AUR). We appreciate James Sheer sending us his writings
on a regular basis.
-------------------------------------------------------------------------------------------
LINK: http://www.mirror-weekly.com/ie/show/569/51581/
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18. PARTIES ON THE MARK-THE TRAJECTORY OF RACE TRACKS
Ukrainian writer analyses chances of key players in parliamentary polls
ANALYSIS: By Ulyanna Kyryyenko, Institute of Global Strategies
Den, Kiev, Ukraine, in Ukrainian 21 Oct 05; p 4
BBC Monitoring Service, UK, in English, Sun, Oct 23, 2005
Prime Minister Yuliya Tymoshenko's dismissal has weakened President
Viktor Yushchenko's party ahead of the 2006 parliamentary elections but
it is quickly recovering, a Ukrainian daily has said.
Tymoshenko's own party lacks support from among the influential elites,
but will actively seek votes by campaigning in the regions, the paper said.
The opposition Party of Regions also has problems with partners, but can
make use of strategic partnerships to take votes from traditional leftist
parties.
The bloc of parliamentary speaker Volodymyr Lytvyn will have to compete
with the Socialists in central Ukraine and with Party of Regions in the
east, but can rely on its leader's reputation as a force for peace.
The following is the text of the article by Ulyana Kyryyenko of the
Institute of Global Strategies, entitled "Parties on the mark: the
trajectory of race tracks", published in the Ukrainian newspaper Den on 21
October; subheadings have been inserted editorially:
The parliamentary elections of 2006 promise to be no less brutal than the
presidential election last year.
The balance of political forces does not exclude the prospect of a win by
the contra-elite headed by [former Prime Minister] Yuliya Tymoshenko or the
opposition - the old-regime's elite headed by [former Prime Minister and
presidential candidate in 2004] Viktor Yanukovych, neither of whom, by the
way, cannot really count on converting their victories into real influence.
The main intrigue stems from a coalition of these parties being a winning
coalition.
Political reform due from 1 January 2006 [transferring some powers of the
president to parliament and the prime minister], which will increase the
worth of a win since it will enable the winner to use resources in both the
legislature and the executive, will make the elections even more dramatic.
In light of this, the fundamental peculiarity of the upcoming elections will
be the fact that the main fight will be fought on the level of the elite,
including within the ruling layer. And the "prize" in this fight will be not
so much victory in the elections, as an institutional win - authoritative
powers in favourable institutional conditions.
The fight for power on the elite level and the conditions for realizing that
power can lessen the role of the "democracy of the Maydan [venue of the
Orange Revolution]" in the elections. At the same time many participants in
the elections will appeal to these values from the Maydan.
But it is clear that President Yushchenko needs to rise to a new level after
the legitimacy of the Maydan - the legitimacy of recognition on the level of
the elite. It is these elections which, in conditions of a successful
coalition format, will help the president strengthen himself politically
despite a certain weakening institutionally.
Dismissing the Tymoshenko cabinet in fact set off an early start to the
election campaign. Who ended up winning from this? Factually, the
president's Our Ukraine People's Union [OUPU] party won, since the
time and opportunities which have appeared will be used by the OUPU
for institutionally strengthening the position of the president ahead of the
elections as well as for building a campaign.
The Party of Regions [led by Yanukovych] also won as it gained the status
of a public player in the elections after signing a memorandum with the
authorities and voting for Yuriy Yekhanurov as prime minister.
Another party bloc, the People's Party [of Ukraine - PPU, led by
parliamentary speaker Volodymyr Lytvyn], actively got involved in the
process of forming an independent bloc, since the concept of a tripartite
bloc of OUPU-the Yuliya Tymoshenko Bloc-PPU has disappeared.
For now we will discuss the political capital of the key players in the
future elections - the OUPU, the Yuliya Tymoshenko Bloc, the Party of
Regions and the PPU.
PRESIDENT'S PARTY RECOVERING
The OUPU's starting position cannot be called very good. After dismissing
the Tymoshenko government the party suffered certain losses in personnel
and image - such figures as [former National Security and Defence Council
Secretary Petro] Poroshenko, [Presidential First Aide Oleksandr] Tretyakov,
[former Minister of Emergency Situations Davyd] Zhvaniya and [former
Transport and Communications Minister Yevhen] Chervonenko are no longer
public politicians.
At the same time, the party demonstrated an ability to quickly replace those
gone, something which shows the presence of a certain personnel reserve.
FIRST, the make-up of the new cabinet showed that most of the ministers are
either members of the party or people with the status of "the president's
man".
SECOND, the president's dismissal of Prosecutor-General Svyatoslav Piskun
became the next step (after dismissing the cabinet) in depoliticizing the
key uniformed agency in the country.
THIRD, in putting together an election campaign - which is traditionally
headed by Roman Bezsmertnyy, while giving up the role of head of the HQ to
Roman Zvarych - the young "face" of Mykola Katerynchuk was brought in.
It is worthy to note that leading lawyers Zvarych and Katerynchuk will be
key figures in the president's campaign. It is apparent that this is linked
to the fact that the legal component should exclude new corruption scandals,
since the opponents' game is most likely to be concentrated on this field.
In this way, the party will finish building new capital that is important to
it - administrative and legal.
The party has also got active in the search for other capital - financial.
Taking into account that the conditions of an elite fight exclude the chance
of "taking" the elite's resources away from them, a certain step has been
taken towards concluding a union with big capital.
A clear signal was given at a meeting between President Yushchenko and
representatives of domestic business groups - a guarantee of immunity in
return for paying taxes. This put a "comma" to the threat of reprivatization
(we'll only be able to speak of a "full stop" after the case of
Kryvorizhstal is closed).
Besides, in giving business certain guarantees, the authorities are trying
to attract them to their side and in so doing "keep" opposition projects
from being financed.
It is clearly too early to speak of business giving financial support to the
OUPU after this step, but fully including business in the economy can
probably provide that positive economic growth which in the end will reflect
on voters.
The mobilization of resources on the level of the executive, or more
exactly, their centralization, risks making the OUPU the party of Bankova
Street [location of the presidential secretariat]. Why?
FIRST, the election campaign on the regional level, while leaving the
cabinet outside the campaign, will be concentrated on the party-president
level, that is, the Bezsmertnyy-Yushchenko level. In other words, the
regional administrative resource is not strong enough to carry out its own
game in the regions.
SECOND, the proportional electoral system accommodates strengthening
central party bodies and concentrating party initiative and instruments in
the capital.
THIRD, the weakness of regional party cells, which were also sometimes
formed with scandals, merely strengthens the centralization of resources. In
this way, the OUPU risks crossing the border of centralization of political
resources beyond which it cannot be a fully-fledged "party of power", but
will end up being a party of the place where decisions are made - the party
of Bankova Street.
One other important capital which will be worth something in these elections
is coalition capital. The strategic policy of the OUPU illustrates that the
approach to coalition partners remains undefined.
Recent statements on the need to resurrect a coalition in the likeness of
the one in 2002 can be viewed as a revanche of the "old" democratic
parties - the People's Movement of Ukraine and the Ukrainian People's Party.
However, it is not likely that these parties will repeat the "mistake of
2002" and agree to forming a bloc without guarantees of post-coalition
profit. And one other statement on a government coalition with the Party of
Regions, the bloc of Lytvyn and even the Yuliya Tymoshenko Bloc, is
symptomatic here.
As we see, wavering between the two levels of campaign and post-campaign
coalitions could turn out to harm the party.
TYMOSHENKO'S ELECTION CAMPAIGN
It would seem that Yuliya Tymoshenko's dismissal from the position of prime
minister provoked her early entry into the election campaign. Nevertheless,
after her departure "show", the impression formed that the party had gone
into a latent phase of preparation and was not going to rush with any public
electoral start.
It is clear that in losing the administrative resources of the centre,
Tymoshenko will strive to build micro-strategies on the regional level in
order to consequently come out with a weighty electoral result.
Pushing Tymoshenko from the centre and to a certain extent from the elite
level will most likely push the party into creating micro-party coalitions
on the regional level. Such coalitions could be serious barriers to the
OUPU's mobilization.
The Yuliya Tymoshenko Bloc can compensate for a lack of administrative
resource with good PR, whose arsenal is large and whose influence on the
electorate has not yet run out.
Besides, attracting former leaders of uniformed agencies to the campaign -
[former Security Service of Ukraine chief Oleksandr] Turchynov and [former
Prosecutor-General Svyatoslav] Piskun (in light of Piskun's
media-accompanied dismissal, by media close to Tymoshenko, Piskun's
political sympathies are quite clear) shows that the campaign agenda will
include the fight against corruption and emphasize politicians with "clean
hands", that is, politicians belonging to the Yuliya Tymoshenko Bloc.
However, it would be simplistic to view the electoral reserves of the Yuliya
Tymoshenko Bloc only in terms of anti-corruption. One can expect "a big
game" from Tymoshenko herself in both the political and institutional plans.
Both unexpected coalitions and non-standard political moves could crop up
here. What Tymoshenko and her bloc are missing now is support among the
elite, including on the international level. It was no coincidence that
Tymoshenko used an opportunity to appear in Moscow in order to explore
the ground.
Nevertheless, it is clear that she will not get this resource. One more
dilemma for the Yuliya Tymoshenko Bloc is indecision with regard to
competing parties in the electoral game overall. What position does the bloc
need to take? Will the bloc be in opposition, semi-opposition or
contra-elite or radical elite?
It is clear that an appeal to the instruments of the Maydan is probably not
expedient in these elections, since a certain amount of tiredness from the
revolution has piled up and other parties will be appealing to stability and
agreement. In essence, the bloc's further prospects - both politically and
electorally - depend on answering these questions.
OPPOSITION
The Party of Regions can consider that its campaign started when its leader
signed a memorandum with the president, after which Viktor Yanukovych
returned to public politics. In fact this laid the beginning to the process
of filling the niche of "systemic opposition".
The Party of Regions is one of the bridges over which there can be a link
between big business, which ended up distanced from Yushchenko's team after
the Orange Revolution, and the authorities who have already stepped away
from revolutionary mechanisms towards evolutionary ones.
Besides, the Party of Regions' "entering the system" in the role of the
opposition is advantageous today to the party itself.
First, the Party of Regions cannot count on any kind of serious support from
the Kremlin, since elections to parliament are not a bet on a winner who
will get everything.
We are more likely talking about the search for an optimal model of power
and institutional formats of coalition relationships in which various points
of view can co-exist, and this means political flexibility.
Second, entering the system gives the party the chance to work in its base
regions - the east and the south and somewhat in the centre - without
hindrance, while carrying out a policy of peace and agreement which is
advantageous to the centre.
Third, with an electoral majority behind it, and it will be concentrated in
its own regions in any case, the party can legally expect weighty
participation and influence in both the parliamentary majority and in a
government coalition.
What makes Viktor Yanukovych's party uncomfortable today? To a great
extent, the situation with possible coalition partners remains undetermined.
If before signing the memorandum the Party of Regions was supported by the
consistently anti-Orange United Social Democratic Party of Ukraine [USDPU],
then in the situation "after" the issue of searching for moderate partners
has arisen.
With their radicalism, yesterday's comrades in the form of the Progressive
Socialist Party of Ukraine [PSPU] of Nataliya Vitrenko can only break the
moderation of the Party of Regions.
In this situation, the Party of Regions will have to pay attention to
smaller regional parties. Recent contact between the Party of Regions and
[former Kharkhiv Region governor] Yevhen Kushnaryov's New Democracy
party illustrates this tendency.
A tandem of the Party of Regions, which is influential in Kharkiv Region,
and Kushnaryov's regional-size party can show a large coefficient of
positive actions, squeezing out the traditional leftists and disrupting the
action of administrative resource.
SPEAKER'S BLOC
The increase in strength of another party player who will influence the
balance of power became possible as a result of the evolutionary
strengthening of the Supreme Council [parliament] against the background
of the weakening of other institutions in Ukraine's traditional triangle of
power - the president, the cabinet and parliament.
After the noticeable role of speaker Lytvyn during the revolution, his
status of political stabilizer continues to survive. Getting out of the
governmental crisis without any losses, the speaker actively began building
his own bloc.
The formation of the People's Bloc of Lytvyn (by the way, it would be a good
idea to decide whether the bloc is the people's or Lytvyn's) appears to have
promise, since he can compete with the Party of Regions in the south and
east and with the Socialist Party of Ukraine in central regions.
Besides, a fairly interesting situation is possible in the competition
between Lytvyn's party and the president's OUPU, which is close to its
"spirit".
If Yushchenko ends up not heading the electoral list, then the People's
Party has good chances of showing how the head of parliament can also
handle the role of party leader and the party obligations which go along
with that. Especially since this will be essential in post-reform
conditions.
As far as the electoral strength of the People's Bloc, it has an optimum
starting position and certain potential for growth. The position of mediator
between the authorities and the opposition can bring good electoral profit.
It is interesting that Lytvyn has also become something of a centre for
consolidation for the elite and business on the regional level.
As far as the bloc's possible partners, the party's latest blunder involving
the "Forward, Ukraine" which in negotiations suddenly refused to form a
bloc, will be a serious caution in choosing partners. -30-
=====================================================
19. CALL FOR PAPERS: THE 11TH ANNUAL WORLD CONVENTION
THE ASSOCIATION FOR THE STUDY OF NATIONALITIES (ASN)
"Nationalism in an Age of Globalization"
Proposal Deadline Reminder: Wednesday, 2 November 2005
Dominique Arel, Chair of Ukrainian Studies, University of Ottawa
Ottawa, Ontario, Canada, Tuesday, Oct 25, 2005
OTTAWA - "Nationalism in an Age of Globalization" will be the theme
for the 11th Annual World Convention of the Association for the Study
of Nationalities (ASN) which will be held at the International Affairs
Building, Columbia University, NY, 23-25 March 2006 and will be
sponsored by the Harriman Institute.
There will be 100 panels on the Balkans, the Baltics, Central Europe,
Russia, Ukraine, Belarus, Moldova, the Caucasus, Central Asia, Turkey,
Greece, Afghanistan, Pakistan, Kurdistan, China, and Mongolia.
The conference will include a special section on Theoretical Approaches
to Nationalism. There will be THEMATIC panels on Islamic Movements,
Genocide and Ethnic Violence, Anthropology of Identity, Citizenship and
Nationality, Conflict Resolution, Gender, and EU Expansion. Awards
will also be given for the best graduate student papers and there will be
the screening and discussion of new film and documentaries.
The ASN Convention, the most attended international and inter-disciplinary
scholarly gathering of its kind, welcomes proposals on a wide range of
topics related to national identity, nationalism, ethnic conflict,
state-building and the study of empires in Central/Eastern Europe, the
former Soviet Union, Eurasia, and adjacent areas.
Disciplines represented include political science, history, anthropology,
sociology, economics, geography, socio-linguistics, psychology, and
related fields.
For a third consecutive year, the 2006 Convention will feature a section
devoted to theoretical approaches to nationalism, from any of the
disciplines listed above. The papers in this section do not necessarily have
to be grounded in an area of the former Communist bloc usually covered by
ASN, provided that the issues examined are relevant to a truly comparative
understanding of nationalism-related issues.
In this vein, we are welcoming theory-focused and comparative proposals,
rather than specific case studies from outside Central/Eastern Europe and
Eurasia.
Since 2005, the ASN Convention is acknowledging excellence in graduate
studies research in offering Awards for Best Graduate Student Papers in five
sections: Russia/Ukraine/Caucasus, Central Asia/Eurasia, Central Europe,
Balkans, and Nationalism Studies.
The winners at the 2005 Convention were Lisa Koriouchkina (Brown U,
Anthropology, Russia/Ukraine/Caucasus), Evangelos Liaras (MIT, Political
Science, Central Asia/Eurasia), Shannon Woodcock (U of Tirana,
Anthropology, Central Europe), Jessica Greenberg (U of Chicago,
Anthropology, Balkans), and Bijita Majumdar (Rutgers U, Sociology,
Nationalism Studies).
Graduate student applicants whose proposals will be accepted for the 2006
Convention, and whose paper is delivered by the deadline, will automatically
be considered for the awards.
The 2006 Convention is also inviting submissions for documentaries or
feature films made within the past year and available in VHS or DVD format.
Most videos selected for the convention will be screened during regular
panel slots and will be followed by a discussion moderated by an academic
expert.
The 2006 Convention invites proposals for INDIVIDUAL PAPERS or
PANELS. A panel includes a chair, three presentations based on written
papers, and a discussant. Proposals using an INNOVATIVE format are also
particularly encouraged.
Examples of new formats include a roundtable on a new book, where the
author is being engaged by three discussants; a debate between two panelists
over a critical research or policy question, following rules of public
debating; or special presentations based on original papers where the number
of discussants is equal or greater than the number of presenters.
The 2006 Convention is also welcoming offers to serve as DISCUSSANT
on a panel to be created by the program committee from individual paper
proposals. The application to be considered as discussant can be
self-standing, or accompanied by an individual paper proposal.
There is NO APPLICATION FORM to fill out in order to send proposals to
the convention. All proposals must be sent by email to Dominique Arel at
darel@uottawa.ca (backup address: darel@brown.edu). The DEADLINE for
proposals is Wednesday, 2 November 2005.
INDIVIDUAL PAPER PROPOSALS must include the name and affiliation
of the author, a postal address for hard mail, the title of the paper, a 500
word abstract and a 100 word biographical statement that includes full
bibliographic references of your last or forthcoming publication, if
applicable (graduate students can indicate the title of their dissertation
and year of projected defense)
PANEL PROPOSALS must include the title of the panel; a chair, three
paper-givers, and a discussant; and the name, affiliation, postal address
and 100 word biographical statement of each participant (same
specifications as above).
PROPOSALS FOR FILMS OR VIDEOS must include the name and
affiliation of the author, a postal address for hard mail, the title and 500
word abstract of the film/video and a 100 word biographical statement.
PROPOSALS USING AN INNOVATIVE FORMAT must include the title
of the panel; the names, affiliations, postal addresses and a 100 word
biographical statements of each participant (same specifications as above)
and a discussion on the proposed format.
INDIVIDUAL PROPOSALS TO SERVE AS DISCUSSANT must
include the name, affiliation, postal address, and areas of expertise of the
applicant and a 100 word biographical statement (same specifications as
above).
All proposals must be included IN THE BODY OF A SINGLE EMAIL.
Attachments will be accepted only if they repeat the content of an email
message/proposal, and if all the information is contained IN A SINGLE
ATTACHMENT.
DEADLINE for proposals: 2 November 2005 (darel@uottawa.ca, backup
address: darel@brown.edu)
Participants are responsible for covering all travel and accommodation
costs. ASN has no funding available for panelists.
An international Program Committee will be entrusted with the selection of
proposals. Applicants will be notified in December 2005 or early January
2006. Information regarding registration costs and other logistical
questions will be communicated afterwards.
The full list of panels from last year's convention, for the geographical
and thematic sections, and the section on Theories of Nationalism, can be
accessed at http://www.nationalities.org/ASN_2005_Final_Program.pdf.
The film/video lineup can be accessed at
http://www.nationalities.org/asn_2005_final_film_lineup.pdf. The programs
from past conventions, going back to 2001, are also online.
Several dozen publishers and companies have had exhibits and/or advertised
in the Convention Program in past years. Due to considerations of space,
advertisers and exhibitors are encouraged to place their order early. For
information, please contact Convention Executive Director Gordon N.
Bardos (gnb12@columbia.edu).
People are invited to join ASN by logging in to
http://www.nationalities.org/member_Info.asp. A yearly membership to ASN
is $65 ($35 for students). Members receive the journal Nationalities Papers
quarterly, a registration discount at the ASN Annual World Convention, and
other perks.
We look forward to seeing you at the convention! The Convention organizing
committee: Dominique Arel, ASN President; Gordon N. Bardos, Executive
Director David Crowe, ASN Chair of Advisory Board; Sherrill Stroschein,
Program Chair.
The ASN convention's headquarters are located at the: Harriman Institute,
Columbia University,1216 IAB, 420 W. 118th St.. New York, NY 10027,
212 854 8487 tel; 212 666 3481 fax; gnb12@columbia.edu.
====================================================
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Director, Ukrainian Federation of America (UFA)
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Chairman, Executive Committee, Ukraine-U.S. Business Council
Publisher, Ukraine Information Website, www.ArtUkraine.com
Member, International Ukrainian Holodomor Committee
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=====================================================