Privatization battles to come

Last week the State Property Fund threatened to suspend the planned privatization of several state-owned companies by the Tymoshenko government.

This from 'Kyiv Post':

"The Ukrainian government, led by Prime Minister Yulia Tymoshenko, planned in its 2008 state budget to raise about $1.8 billion in revenue by privatizing strategic state-owned companies such as Ukrtelekom, Turboatom, six oblenergos and the Odesa Portside Plant, whose tender was planned for early May.

With the Fund led by Valentyna Semeniuk, a presidential ally, the announcement [to suspend the privatizations] is viewed by political observers as the latest obstacle thrown by President Viktor Yushchenko in the path of Tymoshenko, who is looking for funds for her ambitious social spending programs.

The situation is “rather serious” and Tymoshenko might not be able to raise the financial resources necessary for her social spending programs since “the Secretariat is ready to fight this issue until the very end,” said Mykhailo Pohrebinskiy, director of the Center of Political and Conflict Studies in Kyiv, which is financed by its private clients.

Ever since the Cabinet of Ministers dismissed Semeniuk on Feb. 6, accusing her of corruption, and tried to replace her with Tymoshenko ally Andriy Portnov, the Fund has been a key battleground in an ongoing struggle between Yushchenko and Tymoshenko. The next day, Yushchenko vetoed the Cabinet’s decision to dismiss Semeniuk..."

Last week, Tymoshenko declared: "..privatization has been brought to a stop...I don't want to say which people are ruining privatization." She threatened that: "if the process continues, I, as premier, will name names, show documents and name the interests of people who are sabotaging privatization."

Today 'Ukrainska Pravda' publishes leaked documents from the head of the President's secretariat, Viktor Baloha, to Tymoshenko, which explain her outburst last week.

U.P. reveals the causes for the President/Prime minister conflict, are centred on the privatization of three enterprises: Turboatom, Dniproenergo, and and the Krivorih ore enrichment plant.

The President wants to retain the loyalty of Socialist Valentyna Semenyuk [for reasons I explained in an earlier posting].

Turboatom, in the last few years has been run under the patronage of the Socialists. Its long-time boss entered parliament in the 2006 elections on the Socialists' list. The new head of the company is a former Socialist leader in Kharkiv, and was appointed by Semenyuk, rather than by existing shareholders. There are suspicions that he may have been using a bank, with which he is associated, to handle company funds at reduced interest rates.

Also, Russian businessman Konsyantin Grigorishin is interested in gaining control of Turboatom; and it so happens that he is on good terms with Ukraine's Communists. Because of the paper-thin orange majority in the VR, Tymoshenko needs the the Communists - they have supported her once already, when calling for early mayoral elections in Kyiv. With assistance from the Communists she will be able cover for any possible votes lost in the VR due to renegade Balohaistas.

The President and his secretariat are against privatization of four electicity generating companies, and Dniproenergo in particular. This may be because Rinat Akhmetov obtained a fair chunk of the the company last year as a reward for supporting early VR elections.

The Kryvorih ore enrichment plant, during Yuriy Yekhanurov's stint as PM, was earmarked to be a JV shared between Russian oligarchs Alisher Usmanov, Vadim Novinksy, and Rinat Akhmetov, who were to complete the plant's construction and bring it to order. Serhiy Taruta and other business rivals of Akhmetov convinced Yushchenko to to scrap this idea at that time, and now the President has other ideas again.

The head of the State property fund, Valentyna Semenyuk, is supporting the secretariat, citing rulings of the State anti-monopoly committee which is chaired by PoR parliamentary deputy Oleksiy Kostusyev. U.P. reveals that a mutiny has taken place in the State property fund and many of its managers have switched their allegiance to Tymoshenko and will carry out directives from the KabMin, whilst some still remain loyal to Semenyuk.

There does not seem to be much 'wriggle room' available for compromise between the president's office and the KabMin right now.