Friday, October 13, 2006

FIGs and centres of power

President Yushchenko, with his recent appointments and reshuffles has brought into his presidential administration and into the National Security and Defence Council (which he chairs), persons associated with one of the largest Ukrainian Financial and Industrial Groupings, 'Industrial Union of Donbas' [IUD].

He has done this, according to most analysts, to counteract the influence of the largest Ukrainian FIG, Rinat Akhmetov's System Capital Management [SCM] which dominates Ukraine's largest political party - Party of Regions.

Newly-appointed NSDC secretary Vitaliy Hayduk, and Serhiy Taruta between them own almost all of IUD shares. Not so many years ago Akhmetov, Taruta, Hayduk, and Yanukovych co-operated together in a scheme by means of which they amassed their initial wealth.

In simple terms, the steelmaking factories of Akhmetov received coke at ridiculously low prices, settling their debts with mines and coke producers by means of barter or by laughably low cash payments. The coke-producing enterprises which supplied them became hopelessly uneconomic, but with the connivance and lobbying of the Oblast administration, led by Yanukovych and Hayduk, they received subsidies from the national budget [again with strings attached in the form of political support]. In just a few years IUD gained control of the industrial plants of Eastern Ukraine which were being sold off by the Ukrainian State Property Fund.

In 2002, Akhmetov decided to 'cash in' and take out what was reputedly a 25% stake in IUD. He received Azovstal, and the Khartsizk pipemaking plant as well as other assets which formed the core of SCM.

No-one knows for sure if, or how closely, SCM and IUD will co-operate again in the future, but some observers envisage Ukraine developing along the same lines as South Korea, whose economic and political spheres are dominated by just a small number of FIGs.

The separation of business and political power, of which there was much talk when the orange government of Tymoshenko was appointed, seems a long way in the past.

ps Quote from Rayisa Bohatyrova, leader of the PoR fraction in the VR, in a interview in 'Oboz' yesterday:

"Large business cannot actually work in the opposition, this is simply unnatural. The logic of the deputies mentioned by you [BYuT deputies who voted against their block to resist a moratorium on utility pricing] was obvious even without the link to their entreprenurial activity."

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