MMK to be reprivatized?

Last Wednesday it was announced that the Ukrainian Consitutional court is to examine a law passed in the VR in 2002 to permit privatization of a controlling block of shares in the giant Mariupol metallurgical combine im. Ilyich. [MMK], and determine if it was legal. MMK's owners, a worker's collective could be deprived of its ownership, and the the entire corporation reprivatized.

When Yuliya Tymoshenko's government reprivatized another Ukrainian steel giant, Kryvorizhstal, and resold it in an open auction in 2005 there were many weeks of sensational pro- and anti-government headlines. In the case of MMK, a comglomerate of similar magnitude and importance, there has hardly been a ripple of discontent even though some fear that the possible recovery of MMK by the state, now led the Yanukovych government, could lead to a new series of reprivatizations in the country. Why is this?

First a bit of history:

MMK im. Ilyich is one of three most important metallurgical enterprises in Ukraine. In 2006 its net income was 14,3 billion hvn ($2,83 billion), profits 1,7 billion hvn ($336 million). More than 90% of MMK shares are controlled by Socialist party VR deputy Vladimir Boyko. Apart from steel-making, MMK includes ship repair yards, an airline, food processing factories, farms, publishing houses, retail outlets including supermarkets and pharmacies, insurance companies..even a sausage factory!

Privatization of MMK im. Ilyich began in 1996 with 42% of shares being passed over to the workers' collective, the rest of the company remaining state-owned. Later the shares of the collective were transferred to "Ilyich- steel" PLC. On 2nd November, 2002, the VR passed a law on the privatization of MMK enabling 50%+1 of shares belonging at that time to state to be purchased by "Ilyich- steel" at the once-only 'special knock-down price' of 454 million hvn.

Some observers say that the 'attack' on MMK has several motives apart from obtaining a fairer price for the state coffers. Its CEO Vladimir Boyko is the major financial sponsor of the Ukrainian Socialist Party, so there is a political angle to this. In recent elections Socialist candidates in Mariupol performed much better than their PoR counterparts.

If MMK were to be reprivatized, Ukrainian's largest Financial Industrial Groups, Rinat Akmentov's SCM, and also Taruta's and Hayduk's IUD would dearly love to buy it up [particularly at a 'comfortable price' which could, no doubt, be arranged]. Rinat Akmetov is PoR's main financial sponsor - some estimates say 60 - 100 PoR VR deputies are 'his people'.

There is even some talk of these two leading FIG's even working together on the deal. I have posted previously on how sustained commercial pressure has been applied to MMK by its competitors for many months. Now the possibility of reprivatization seems to be quite high.

At first sight it seems risky that PoR's sponsors SCM would use their muscle to grab MMK and cause PoR to fall out with the Socialists, on whose votes they depend in their VR anti-crisis coalition. But if Socialist leader and VR speaker Oleksandr Moroz and his associates are already 'compromised' having accepted a 'bung' [bribe] to go into a coalition with PoR, and if IUD's Gayduk, now secretary of the National Security and Defence Council, and close to Yushchenko, were to be part of the 'carve-up'...

Hundreds of millions of dollars would be involved in any deal. Can the judges be trusted to be impartial?

Doesn't look good for MMK..