Monday, October 31, 2005

Ukraine's State Enterprises to be Privatized

KIEV, Ukraine -- Ukraine's new government will move quickly to privatize certain state enterprises and end a cozy relationship between business and government, Prime Minister Yuriy Yekhanurov said ahead of a visit to Washington.

PM Yuriy Yekhanurov

Mr. Yekhanurov, who took charge in August after President Viktor Yushchenko dismissed his previous Cabinet amid charges of corruption, said he also will seek improved trade ties with the United States.

Mr. Yekhanurov arrives tomorrow for a two-day stay, during which he is scheduled to meet with Vice President Dick Cheney, Secretary of State Condoleezza Rice and other officials.

August and September were the most difficult," Mr. Yekhanurov said of the events that brought him to the prime minister's office. "It's always hard when there are arguments in the family."

But, encouraged by the successful sale of a state-owned steel mill last week, he said that he was "a very big optimist of what is happening" in Ukraine.

In Washington, Mr. Yekhanurov said, he will seek an end to restrictions under the 1975 Jackson-Vanick amendment, which denies normal trading status to countries that restrict emigration. He also is likely to ask the United States to sign a bilateral protocol advancing Ukraine's bid to join the World Trade Organization (WTO) in December.

Mr. Yekhanurov, 57, also wants the United States to recognize his country as having a market economy, a designation that would help it attract foreign investment and integrate into the West.

"Ukraine has several strategic assignments," said the prime minister, who holds a doctorate in economics. "Fulfilling those depends on Ukraine entering the WTO."

Mr. Yushchenko won a major political and financial victory last week with the sale of Kryvorizhstal, the country's largest steel-making plant, to Mittal Steel Co. in a nationally televised auction.

The mill sold for $4.8 billion, almost six times the price paid in an earlier sale to two of Ukraine's wealthiest men during the corruption-tainted administration of President Leonid Kuchma. That sale later was ruled illegal and voided by Ukraine's courts.

Mr. Yekhanurov said his government was so pleased with the auction that it is moving ahead with plans to sell three more state enterprises, including Ukrtelecom, the country's phone monopoly.

The president and Mr. Yekhanurov also have talked with some of Ukraine's wealthiest business leaders who acquired state enterprises during the Kuchma administration about paying the difference between the sale prices and realistic market values.

Mr. Yekhanurov was personally involved in the sale of state-owned enterprises as head of the State Property Fund during the 1990s. But he has a reputation as a champion of small- and medium-sized companies and an advocate of honest business.

Mr. Yekhanurov said his government is "looking at the experiences of other countries" to ensure that businessmen who enter politics will be unable to use their influence to profit financially.

"We don't have enough laws and practices of transferring [businesses] into blind trusts," he said.

Mr. Yushchenko fired the government of former Prime Minister Yulia Tymoshenko in part because of charges of corruption on the part of government officials with outside business interests. Despite Mr. Yushchenko's pledges to end such practices, critics say, he still hasn't done enough to separate business from government.

Mr. Yekhanurov said some Ukrainians have grown disillusioned with the government in recent months, presenting a challenge for pro-presidential forces as they approach parliamentary elections in March.

Mrs. Tymoshenko will contest the elections at the head of her own party but is expected to cooperate with Mr. Yushchenko's Our Ukraine party in the next parliament.

"The only question for her is that she shouldn't set ultimatums," Mr. Yekhanurov said.

Source: The Washington Times

Ukraine Marks Anniversary of Prelude to Orange Revolution

KIEV, Ukraine -- A year ago, Ukraine went to the polls to elect a new president, but it also marked the beginning of the drive toward radical changes in the country which culminated in the "orange revolution."

Viktor Yuschenko (C) campaigning on October 15, 2004

After the vote On October 31, 2004, the republic's Election Commission, unable to sum up the results for several days, caused public resentment and suspicions regarding their authenticity.

Two more rounds were held to determine the winner. Viktor Yuchchenko who eventually won the race, and his government are credited by a majority of Ukrainians with considerable success in the provision of pensions, freedom of expression and the strengthening of Ukraine's international image, according to the latest study conducted by the Razumkov center.

More than 37 percent of the respondents said the situation with the provision of pensions had changed for the better; 32 percent of those polled praised Yushchenko for ensuring the freedom of expression while 30.5 percent noted improvements in Ukraine's image.

At the same time, sociologists detected decreasing confidence in the government. Almost 30 percent of the respondents attributed the falling confidence in authorities "to power abuse and corruption in higher echelons of power," 26 percent blamed the conflicts between top officials and related rows, while 13 percent blamed the slower economic growth.

The country is gearing up for the parliamentary election on March 26, 2005. The Central Electoral Commission requested more than 110 million dollars, its head Yaroslav Davydovich said.

The system of information protection during the voting will be certified at Ukraine's Security Service.

The investigation into the case of counting fraud at the presidential election has stalled, Davydovich said.

In May, the Ukrainian Interior Minister claimed that more than 500 cases involving 6,000 suspects had been opened over election fraud. Of those, 111 cases have been sent to court.

Source: Itar-Tass

Washington to Host Ukraine's New PM Yekhanurov

WASHINGTON, DC -- Washington will host Ukraine's new Prime Minister, Yuriy Yekhanurov, on November 1 and 2nd. This is the first official visit to Washington by Prime Minister Yekhanurov who arrives in Washington late on Monday.

Prime Minister Yekhanurov (R) with President Yushchenko

The Prime Minister will hold a series of meetings with top U.S. government officials, Congressional leaders, business executives, private voluntary organization officials, representative of the mass media, leaders of the Ukrainian-American community and lay flowers at the monument in Washington of Ukraine's national hero and most famous person, Taras Shevchenko.

According to government sources in Ukraine Prime Minister Yekhanurov plans to discuss the bilateral agreement Ukraine needs with the U.S. related to admission to the World Trade Organization (WTO) and granting it the status of a market economy country by the U.S. Department of Commerce.

Yekhanurov also intends to discuss Ukraine's graduation from the Jackson-Vanik amendment, the lifting of certain trade sanctions against Ukraine, and U.S. assistance for the country's further integration into the Euro-Atlantic communmity and the world economy.

Ukraine's energy independence will also be a major issue in Washington. Such topics as the Odesa-Brody pipeline, potential alternative sources of energy for Ukraine, and the U.S. government's decision to terminate funding for the Ukrainian Nuclear Fuel Qualification Program, which was designed to assist Ukraine in developing an alternative source for its nuclear fuel needs.

Ukraine now buys all of its nuclear fuel from Russia. Russian fuel runs Ukraine' nuclear power stations which provide over half of the electricity in the country.

On October 24, at a meeting with representatives of the diplomatic corps accredited in Ukraine, Yekhanurov said that Ukraine "is counting on broad U.S. participation in the Black and Caspian Sea regional cooperation, especially in the economic and energy spheres."

The United States intends to bring up with the PM the very high tariff imposed by Ukraine on the import of poultry which at the present time has shut down the export of poultry from the U.S. to Ukraine. Poultry has been the largest U.S. export to Ukraine.

The U.S. has also been concerned about the slow rate of progress being made in Ukraine regarding the implementation of reforms needed to improve the business and investment climate and also the lack of reforms in commercial law and improvements needed in the courts.

While in Washington Prime Minister Yekhanurov is reported to be meeting with such top U.S. government officials as Vice President Richard Cheney; U.S. Secretary of State Condoleezza Rice; Secretary of Agriculture Mike Johanns (former Governor of Nebraska), Secretary of Energy Samuel Bodman; and U.S. Trade Representative Rob Portman.

Plans indicate the Prime Minister will meet with Senator Richard Lugar, Chairman of the U.S. Foreign Relations Committee, and other Senators at a meeting on the Hill and also meet then with members of the Ukrainian Congressional Caucus.

Yekhanurov will meet the leaders of U.S. businesses who are active in Ukraine in a meeting at the U.S. Chamber of Commerce. Members of non-governmental organizations and others will meet the Prime Minister at a meeting sponsored jointly by the National Democratic Institute (NDI) and the International Republic Institute (IRI).

A presentation will also be made by the Prime Minister at the US-Ukraine Energy Dialogue conference in Washington.

Source: UNIAN

Yushchenko Son Says Bentley Arson Accusations Aimed Against Father, While President Loses People Trust

KIEV, Ukraine -- Ukrainian President Viktor Yushchenko’s son, Andriy Yushchenko, has told a local on 5 Kanal TV that accusations of organizing the burning of a Bentley car that belonged to the publisher of a celebrity photo magazine could be aimed against his father’s image.

Paparazzi photos of Andriy Yushchenko and friend

He denied threatening the publisher, Walid Harfouche, who has repeatedly claimed that Andriy warned his brother, Omar, against publishing any more of his pictures, threatening he will make him “disappear”. Andriy denies even the fact of conversation with Omar.

“I learnt about the arson from the media, as anyone else. It was a big surprise when there was an attempt to connect me with the arson. As regards the photos, I can say that for this people do not usually burn cars. This is simply an attempt to improve Harfouche’s image or an act by my father’s opponents,” the president’s son commented on the Oct. 2 attack.

“If this situation concerned only myself I would not care. But this hits my father. We should understand that there will be more Harfouches and more scandals like this. My father’s opponents have enough imagination to continue this for a long time,” Andriy concluded.

Meanwhile since Yushchenko’s coming to power in January 2005 his trust ratings have first fallen to less than 50 per cent. Although 51 per cent of Ukrainians believed the president in September, now their number has fallen to only 44 per cent.

Yushchenko’s teenage son sparked a scandal earlier this summer when a Ukrainian Internet site reported on his allegedly lavish lifestyle, sparking an angry outburst from Yushchenko. The president later apologized, claiming Andriy has all copyright for Orange revolution memorabilia that lets him lead such a life. Later young man and his girlfriend were photographed by Harfouche’s reporters in Turkey, at a luxury resort.

This week Victor Yuchenko has made his annual income public to avoid further accusations. The chief of his staff Oleh Rybachuk told local media that last year the president made $12,000. The joint income of his wife Kateryna, daughters Sofiya and Khrystyna and son Taras slightly exceeds $40,000. The family also has about $200,000 in foreign bank accounts out of Ukraine. The issue of income declarations of Andriy Yushchenko, elder presidnt’s daughter Lina and the other adult members of the Yushchenko family is to be resolved by these people, Rybachuk said.

Source: MosNews

Sunday, October 30, 2005

Ukraine Torn by Broken Promises

KIEV, Ukraine -- A year after the first round of the presidential election that set in motion Ukraine's Orange Revolution, few Ukrainians see much to cheer about.

The Orange Revolution millions on Independence Square

The millions who stood for weeks on Kiev's Independence Square to demand a free and fair vote achieved their main goals.

They kicked out a corrupt leadership, won freedom of speech and set the country on a path towards Europe.

But many feel let down by the politicians they put their trust in.

The dream team of Viktor Yushchenko and Yulia Tymoshenko - hero and heroine of the revolution, who became president and prime minister - proved incapable of fulfilling their promises.

They pledged an end to Ukraine's notorious cronyism, but after a few months officials were openly trading allegations of abuse of power for personal gain.

"The government acquired many new faces," Mr Yushchenko said as he responded to the crisis by sacking Ms Tymoshenko's government in September.

"The paradox is that the face of the government itself did not change."

Quest for power

He admitted frankly that he and millions of other Ukrainians had begun to be disappointed.

Most of those who are not disappointed are those whose hopes were not high in the first place.

"In a word, I am upset," says Marina Makarchuk, a 60-year-old retired nurse hurrying through Kiev's cobbled streets to her new job as a cleaner.

"I was counting on those promises that were made being fulfilled, but now that seems unlikely. I am disappointed. All governments are the same, everyone just wants power."

Lyudmila Les, a 43-year-old nursery school teacher, clutched her head as she struggled to find words for her frustration.

"Sometimes it almost seems as though the mafia has come to power," she said.

Despite a pledge to separate business from politics, Mr Yushchenko's first administration included three prominent business tycoons.

Ms Tymoshenko herself is rumoured to have made a vast fortune in gas before entering politics, but as prime minister she pushed policies that business disliked - including a review of thousands of privatisations.

Tycoons

This brought her into conflict with some of her pro-business ministers - and in the case of one reprivatisation, the two sides of the government openly backed rival bidders.

Ultimately, Mr Yushchenko accused Ms Tymoshenko of using her position to repay her debts - an accusation she rejected as nonsense.

[Viktor Yushchenko] has quarrelled with his friends and made peace with his enemies. I don't understand it

But Mr Yushchenko himself has not emerged entirely unscathed.

Few supporters objected that much when the tycoons who bankrolled his campaign received government jobs.

But as unconfirmed allegations of corruption swirled around the sacked government, the closeness of Mr Yushchenko's relationship with the tycoons - one is godfather to his son, and he is godfather to another's daughter - began to seem a liability.

The lifestyle of Mr Yushchenko's eldest son has also left journalists asking questions.

A $30,000 Vertu Mobile Phone

Where does a 19-year-old get a Vertu mobile phone and a $100,000 BMW, while paying a peppercorn rent to "friends" for a luxury flat? Might someone be trying to buy influence with the president by providing his son with these riches?

Old friends

They have received no answers, Mr Yushchenko angrily declaring his son's life off limits on grounds of privacy. However, officials say the car is no longer in Kiev.

Cynics also point out that Mr Yushchenko's nephew has become deputy governor of the Kharkiv region at a very young age, and that his son-in-law took over a corrugated iron factory when its previous boss - a friend of the family - was appointed minister of industry.

These presidential relatives may have earned their positions on their own merits, but many Ukrainians have an uncomfortable feeling that may not be the full story.

Plenty of other reasons are given for disappointment:

- Price rises and slowing economic growth

- The increasing size of bribes demanded by middle-ranking officials

- A justice minister (now replaced) who exaggerated his qualifications

- Continued failure to find the killers of a beheaded journalist

- The granting of immunity from prosecution to local councillors

- Reports of campaign funding from a Russian oligarch.

However, the continuing entanglement of business and politics tops the list.

The only other issue that causes as much frustration among former Orange Revolutionaries is the deal Mr Yushchenko struck with his old rival for the presidency, Viktor Yanukovych, in order to get his new prime minister approved by parliament.

"He has quarrelled with his friends and made peace with his enemies," says Lyudmila Les, the nursery school teacher.

"I don't understand it."

Source: BBC

Rich Mourn, U.S. Bans all Beluga Caviar

WASHINGTON, DC -- The government banned imports of beluga caviar and the sturgeon that produces the expensive eggs originating from the Black Sea basin.


Imports of beluga sturgeon, both its meat and eggs, will no longer be allowed from Bulgaria, Georgia, Romania, the Russian Federation, Serbia and Montenegro, Turkey, and Ukraine, the Interior Department's Fish and Wildlife Service said.

The ban is in addition to the agency's announcement on Sept. 30 that it was suspending all trade in the beluga sturgeon's caviar and meat from the Caspian Sea.

Interior Secretary Gale Norton said the bans would continue "until there is significant progress" with conservation programs in the Caspian and Black Sea regions.

"That's the key to the ultimate recovery of this threatened species," she said. "We're hopeful that this action will bring renewed attention to the plight of the beluga sturgeon, and that it will encourage the range countries to work to ensure its conservation."

A year ago, Fish and Wildlife officials listed all beluga sturgeon populations as "threatened" under the Endangered Species Act, a lesser category than "endangered." The decisions came in response to a December 2000 petition from a U.S.-based environmental coalition, Caviar Emptor.

Most of the world's beluga caviar is imported by the United States, usually originating from the Caspian and Black seas. Trade in beluga caviar is overseen by the United Nations' Convention on International Trade in Endangered Species of Wild Fauna and Flora, or CITES, based in Geneva, Switzerland.

Source: AP

Saturday, October 29, 2005

Ukraine Property Firm to List on London Stock Exchange

KIEV, Ukraine -- One of the Ukraine’s largest property developers, XXI Century, is set to float on the London Stock Exchange by the end of this year, in a move that will value the company at as much as £300m (E440m, $530m).


The company, the second ever Ukrainian firm to seek a London listing, has hired Dutch bank ING to prepare it for the float, The Business has learnt. XXI Century is expected to be the first in a series of Ukrainian entrepreneurial firms the bank will bring to market over the next year.

XXI Century, founded by Ukrainian-born Georgian Lev Partskhaladze, has seen the value of its portfolio expand eightfold in five years, and floating it on the London exchange will allow it to raise its international profile.

It develops shopping centres, high-end apartment blocks, business centres, and fast food restaurants, predominantly in Ukraine’s capital Kiev.

“They’ve been looking at raising capital on western financial markets for a while,” said a Kiev-based corporate financier.

“It’s like Ukrproduct. They’re just a small dairy company, but now they are in London, they are serious. That’s probably worth the hundred thousand dollars it cost,” added the financier.

Ukrproduct, which makes processed cheese and butter, raised £6m on London’s Aim growth market in February, drawing in 18 investment funds and 33 private investors.

ING has been targeting Ukrainian businesses built from scratch by their owners. It argues that the country’s industrial conglomerates, which would generate far larger fees, pose too many problems, because of the complicated way many of them gained the assets from the state.

Source: The Business Online

MSF Hands Over Ukraine HIV/Aids Programme

KIEV, Ukraine -- After a presence of six years in the Ukraine, the international medical aid organization Mèdecins Sans Frontiéres (MSF) is now handing over its HIV/Aids programme to the Ukraine Ministry of Health and national NGOs as LifePlus, Alternativa, UNITAS and Time to Live.

Ukrainian volunteer doctors at a MSF centre

Since 1999 MSF has set up a model for HIV/Aids patients that focused on offering ongoing care from the moment of the pre-HIV test counselling all the way to providing daily lifelong medication to the patients. With special attention to the medical care and the psycho-social support for patients.

This 'continuum of care' model has been developed and implemented with the Ministry of Health and the NGO partners. With increased international financial commitment to HIV/Aids and training of the staff of the Ministry of Health the ongoing care for these patients is now ensured.

"One of the remaining challenges is to combat the stigma and the discrimination that still surround the HIV/Aids patients in Ukraine, only then the HIV/Aids programme can be really successful. With strong leadership and further investment the model we have set up can be extended across the country," says Zahedul Islam, the departing MSF head of mission in Ukraine.

"Ukraine has one of the highest rates of HIV/Aids in Europe and only a small amount of people is aware of their status. To break through the stigmas that still surround the disease is the only way to offer the patients good treatment and a dignified way of living."

MSF's programmes were running in Odesa, Mykolayiv and Simferopol and concentrated on cutting the transmission of HIV/Aids from pregnant women to their babies; providing life-saving antiretroviral (ARV) treatment and establishing psychosocial programmes to help patients to adhere to their treatment.

In addition the organization trained up to 1,500 staff members of the Ministry of Health to ensure ongoing care. MSF participated in a national campaign to raise awareness about HIV/Aids and to reduce the stigma still surrounding the disease.

Source: Brama

Friday, October 28, 2005

Yushchenko Marks 61st Anniversary of Liberation From Nazis

KIEV, Ukraine -- President Viktor Yushchenko marked the 61st anniversary of Ukraine's liberation from the Nazis, laying flowers Oct. 28 at the Tomb of Unknown Soldier in a solemn ceremony.

Tomb of Unknown Soldier

"With the deepest sincerity, we express our thanks to our fathers and grandfathers, who with their own blood and unbelievable suffering won the right to live and be free," Yushchenko wrote in an address to the nation.

The low-key commemorations contrasted sharply to how the date was celebrated last year in the midst of Ukraine's bitter presidential election.

Former President Leonid Kuchma had hosted a big, Soviet-style parade in downtown Kyiv, attended by Russian President Vladimir Putin. The televised event - the first time that date was celebrated in such style - was widely seen as the Kremlin's political endorsement of Yushchenko's opponent, then Prime Minister Viktor Yanukovych.

Yushchenko, a pro-Western reformer, went on to win the hotly contested race in an unprecedented court-ordered third round as tens of thousands of his supporters gathered in downtown Kyiv for what became known as the Orange Revolution.

This time, Yushchenko's brief commemorations were attended by Prime Minister Yuriy Yekhanurov, Kyiv Mayor Oleksandr Omelchenko and other officials.

Ukraine saw some of World War II's fiercest battles, when German troops and their allies seized its territory and were later driven out by the Red Army. Kyiv and many other cities suffered massive damage.

An estimated 7 million Ukrainians died in the war, and 2.4 million Ukrainian residents were sent to Nazi concentration camps.

Source: AP

Owners of Seized Ukrainian Ship to Pay Ransom to Pirates off Somali Coast

ODESSA, Ukraine -- The Ukrainian company that owns the cargo ship seized 10 days ago by pirates off the Somali coast will pay a ransom to free the 22 sailors, President Viktor Yushchenko's chief-of-staff said Oct. 28.


The pirates hijacked the vessel, Panagia, on Oct. 18 about 100 miles (160 kilometers) off the Somali coast.

The company is ready to pay the $700,000 (585,000 euros) ransom demanded by the pirates, Oleh Rybachuk told reporters, but refused to name the company, saying only that it was based in Ukraine's southern city of Odessa.

"The crew members are in normal conditions and face no threat to their lives," Rybachuk said, adding that Ukraine's Foreign Ministry would continue negotiations with the pirates.

The ship - which had been sailing under a Liberian flag and carrying iron ore from South Africa to Turkey - is currently anchored a few miles (kilometers) off Somalia's east coast.

Piracy is rampant near the coast of Somalia, an important shipping route. The African nation has had no effective central government since opposition leaders ousted dictator Mohamed Siad Barre in 1991. The opposition then turned on each other, transforming the nation of 7 million into a patchwork of battling fiefdoms ruled by heavily armed militias.

Pirates have launched 23 attacks against ships off Somalia's coast since March 15, according to the London-based International Maritime Bureau, which tracks piracy around the world. Experts argue against paying ransom, warning that it only encourages the pirates, but many companies resort to the payments, saying that they have few other alternatives.

Source: AP

Thursday, October 27, 2005

Hritsenko: Military Must Help End Stereotype of NATO as Aggressor

KIEV, Ukraine -- Ukraine's defense minister asked the military Oct. 27 to help end the stereotype of NATO as an aggressor, as the ex-Soviet republic's leadership continues to press its goal for NATO membership.

Ukrainian Defense Minister Anatoly Hritsenko, front right, shares a lighter moment with NATO Secretary General Jaap de Hoop Scheffer

Anatoliy Hritsenko told top military officers that unnamed political forces were spreading fears about the Western alliance. He asked the military's leadership to play a role in ending negative opinions, the Defense Ministry said.

President Viktor Yushchenko has made NATO membership a top goal. The alliance has said it will help Ukraine push through the necessary reforms, but has dodged questions about when it might offer membership to this nation of 47 million.

Many Ukrainians view NATO with hostility, fearing alliance membership would worsen relations with Moscow and ruin the defense industry, which has close links to Russia. Hritsenko also cited fears that NATO would put nuclear weapons in Ukraine, and that troops would be sent off to trouble spots worldwide.

Ukraine had 1,650 troops serving Iraq as part of the U.S.-led military operation there, but the move was highly unpopular and Yushchenko has order the contingent's pullout. The country, however, has participated in numerous other international peacekeeping missions, which Ukrainians generally support.

The defense minister told officers that the parliament would still oversee decisions like sending troops abroad, and said alliance membership would open up new markets to the defense industry.

Russia is wary about Ukraine's flirtations with its former Cold War foe, and opinion polls show that most Ukrainians also are concerned about possible membership.

During a visit by a senior NATO delegation last week, a small protest was held in eastern Ukraine and an opposition political party has called for a referendum on membership.

Source: AP

Orange Revolution Turns to Rot

KIEV, Ukraine -- No bad deed, it seems, goes unrewarded. Ukraine President Viktor Yushchenko recently received the Philadelphia Medal of Liberty and a prize from Britain's Royal Institute of International Affairs, both honors bestowed for his efforts to advance democracy.

Victor Yushchenko receives the Philadelphia Liberty Medal, September 17, 2005

Ukrainians can be forgiven their puzzlement. Not long ago, they were ecstatic. Their Orange Revolution in the winter of 2004-2005 quashed an attempt by apparatchiks and oligarchs to preserve the corrupt status quo by rigging the presidential election. The revolution forced a new, closely monitored election, won by Yushchenko with his promises of democracy, economic reform and an end to cronyism and corruption.

But today, despite Yushchenko's continuing accolades outside Ukraine, hopes inside the country have been dashed. To survive a burgeoning corruption scandal and a major political fight between two of his top appointees, Yushchenko made a Faustian bargain. He joined in an alliance with Viktor Yanukovich, the Russian-backed candidate whose rigged victory in 2004 had touched off the revolution.

On one level, the disarray in Ukraine is not terribly surprising. Leaders of the Orange Revolution had little in common except their determination to scuttle the odious system erected by then-President Leonid Kuchma, who had chosen Yanukovich to succeed him.

But few supporters expected that less than a year after Yushchenko's election, his inner circle would be accused by his own chief of staff, Oleksandr Zinchenko, of massive corruption. Zinchenko resigned, but his charges triggered a barrage of mutual accusations and recriminations.

Yushchenko tried to contain the damage last month with a housecleaning that included the removal of his two most powerful lieutenants. He fired the telegenic and popular prime minister, Yulia Tymoshenko, and accepted the resignation of Petro Poroshenko, secretary of the Security and Defense Council. The two had been locked in a struggle to advance their political power and their own economic interests.

Tymoshenko's camp retaliated, accusing Yushchenko of accepting millions of dollars to finance his presidential campaign from the exiled Russian oligarch Boris Berezovsky. The president's acolytes accused Tymoshenko of incompetence and corruption, even though Yushchenko had consistently praised her and the Cabinet's performance. The accusations sullied the reputations of both the president and the ex-premier.

Yushchenko ordered the state prosecutor's office to look into the corruption allegations, but he quickly undermined the investigation by insisting that members of his administration, though not his Cabinet, were above reproach. When the prosecutor agreed, finding no wrongdoing by administration officials, the public reacted with broad skepticism, just at a time when the government needed public trust above all.

In an effort to salvage the situation, Yushchenko appointed Yuri Yekhanurov as prime minister. Honest, pragmatic and nonpartisan, Yekhanurov had previously headed the Ministry of Economics and was widely seen as perfect man for the job. However, with Tymoshenko's bloc voting against him, he failed by three votes to win parliamentary approval.

Yushchenko then turned to his nemesis in the 2004 election, Yanukovich. The two men cut a deal. On a second parliamentary vote, Yanukovich's Party of Regions, which had abstained in the first vote, cast 50 votes to approve the new prime minister.

Yushchenko supporters were incensed. They had demonstrated for countless hours in the dead of winter to overturn Yanukovich's victory. Now their leader had not only bargained with him but agreed to halt any punishment of officials who rigged the first presidential election. Yushchenko gave an across-the-board amnesty to officials involved in falsifying the results of that election or who had since been accused of criminal misconduct.

This is tantamount to legitimizing criminal activity of the Kuchma-Yanukovich clan, and it further erodes Yushchenko's popularity and effectiveness.

Source: Los Angeles Times

Wednesday, October 26, 2005

In Troubled Ukraine, These Heroes Keep Battling

NEW YORK, NY -- First came the punch: “I just had some Chicken Kiev prepared for him, because I am so happy he's not chicken anymore." Then the counter-punch: “That's not true. I bring you dessert on November 12th!"

Brothers Wladimir and Vitali Klitschko with Ukrainian President Viktor Yushchenko (L) during the Orange Revolution last year in Kiev

Those fighting words were exchanged recently by U.S. boxer Hasim Rahman and Ukrainian heavyweight Vitali Klitschko as Rahman presented the defending World Boxing Council champion with Ukraine’s signature dish at a press conference ahead of their November fight, which had twice been postponed because of injury.

Klitschko's snappy comeback is emblematic of a man who, together with brother and fellow heavyweight fighter Wladimir, have become the most popular goodwill ambassadors for change in Ukraine.

And, perhaps, the first siblings to simultaneously hold boxing's three top heavyweight titles.

It would certainly be a shot in the arm for their homeland. On the eve of the one-year anniversary of Ukraine’s Orange Revolution, President Viktor Yushchenko’s approval rating is at a 19.8 percent low and much of the country’s leadership is mired in corruption allegations.

The brothers are on track for the titles. Last month, Wladimir, 29, defeated Nigerian Samuel Peter to become the number-one contender for both the World Boxing Organization (WBO) and International Boxing Federation (IBF) titles. He expects to fight a championship contest in December. Meanwhile, Vitali, 34, will defend his WBC title against Rahman on November 12 in Las Vegas.

“That has always been our goal,” said Wladimir, a former WBO champion who won the super-heavyweight gold medal for Ukraine in Atlanta’s 1996 Olympic Games. “We have come close before. But when Vitali had the title, I did not, and when I had the belt, he did not. He is the WBC champion, and will be for a long time. Now, it is up to me again.”

More than just boxers

But boxing alone does not define the Klitschko brothers. “Boxing is our life, but our life is not only for boxing,” said Wladimir.

The brothers are smart (both have PhDs); worldly (they speak Ukrainian, Russian, German and English); and published authors (they co-wrote “Fitness Together With Us,” a best-seller in Germany). They’ve even made a splash in Hollywood (bit parts in “Ocean’s Eleven”) and they dabble in magic tricks.

And they have been doing their best to bring Ukraine from Soviet satellite to modern nation.

In last winter’s Orange Revolution, they played a prominent role — standing shoulder-to-shoulder with Ukrainian President Viktor Yushchenko on Kiev’s Independence Square, they rallied protesters who camped out for weeks in freezing temperatures to challenge a fraudulent election.

Humanitarian work sets an example

The brothers transfer the same focus that earns them success in the boxing ring to their goodwill programs around the world.

Through the Klitschko Brothers Foundation, they have raise AIDS awareness in Ukraine, where in a population of 48 million an estimated 360,000 people are infected with HIV — 60,000 of them under the age of 15.

In post-Soviet Ukraine, where the concept of community service has not fully blossomed, the Klitschkos understand their position as role models. They filmed a made-for-Ukrainian TV public service message in which they urge kids to stay off drugs.

The Klitschkos like to play a hands-on role in their philanthropy. When they helped fund the rebuilding of Kiev’s golden-domed St. Michael’s Cathedral, they took part in reconstructing the mosaic decorating the ceiling of the ancient church, which was razed in the 1930s by the Soviets in order to build its headquarters.

(And their humanitarian work is not restricted to Ukraine — they visited schools in Brazil’s slums through UNESCO’s “Education for Children in Need” program.)

Political activism

Vitali is the more politically active of the pair. He had to be talked out of canceling his fight against American Danny Williams last December when political tensions were heating up in his homeland after a fraudulent presidential election.

“I am a sportsman,” explained the older brother, who lives in Los Angeles with his Ukrainian wife and three young children and, at 6’8,’’ is two inches taller than his unmarried sibling. “But it was very difficult and painful for me to see what was happening in my country.” He wore an orange sash on his trunks during his victorious fight in support of the West-leaning candidate Viktor Yushchenko.

Instead, the brothers recruited a host of friends — from Sting to Joe Cocker — to voice their support to the crowds on Independence Square. It was important, Wladimir said, to show the protesters that the world was watching.

“With one single shot, the whole Revolution could have been different. That’s why we did this.”

At president's side

The older Klitschko travels with President Yushchenko and gives speeches on his behalf, and when the Ukrainian leader addressed the U.S. Congress in Washington in April, he was there with him.

“Wherever (Vitali) goes, people just huddle around him,” said Walter Nazarewicz, president of the Ukrainian Institute of America, which earlier this year presented its “Man of the Year” award to the Klitschko brothers. “[The two] really are all that they appear to be. There’s no question they could have a future in politics if they wanted one.”

Although the Klitschkos now live and train in the U.S. and in Germany — where they are wildly popular and are featured in television ads for Hugo Boss, Proctor & Gamble, Kellogg’s and Ferrero — they spend as much time as they can in Ukraine.

“We’re athletes. We spend a lot of time out of the country,” said Wladimir. But we’re following everything that’s going on.”

And Ukraine follows the Klitschkos. “Everyone knows them. In one way, as sportsmen. In a more important way, from the Orange Revolution, when they stood with Yushchenko on Maidan [Independence Square],” said Olena Litvak, a native Kievite.

If theirs seems like a formidable sibling act, like Serena and Venus with gloves, it is. But unlike the Williams sisters, you won’t find this duo in a head-to-head match-up.

“We love our mother too much to do anything like that,” said Vitali.

Source: MSNBC

Ally Cleared of Criminal Charge - A Trap for Yushchenko?

KIEV, Ukraine -- The Ukrainian Prosecutor-General's Office closed a criminal case against former National Security and Defense Council (NRBO) secretary Petro Poroshenko on October 20.

This was the only case launched against a member of President Viktor Yushchenko's inner circle following the accusations of corruption against his team in early September and the subsequent dismissal of Prime Minister Yulia Tymoshenko, whose allies had leveled the accusations.

Caretaker chief prosecutor Serhy Vynokurov closed the case against Poroshenko, officially, due to the absence of corpus delicti, less than a week after Yushchenko dismissed Sviatoslav Piskun from the post of prosecutor-general.

This move was obviously ill timed, as accusations are now mounting against Yushchenko of covering up for his crony (Poroshenko is the godfather of one of Yushchenko's children). Yushchenko's rivals from Tymoshenko's camp also claim that he fired Piskun for opening the case against Poroshenko.

Ironically, Yushchenko had to task a Tymoshenko ally, Piskun, with investigating the corruption accusations leveled against his team. Thus on September 20, Piskun reported that five criminal cases had been opened against NRBO officials, but not against Poroshenko personally, he stressed.

Then Piskun attended the debates on Ukraine at the Parliamentary Assembly of the Council of Europe, where he was harshly criticized for mishandling the investigation into the September 2000 murder of journalist Heorhiy Gongadze. After that, Piskun's dismissal was only a matter of time, as the Gongadze case is a very sensitive issue for Yushchenko, who last spring promised that it would be solved within a few months.

But on October 10, Piskun sensationally charged Poroshenko with "hampering a legitimate business activity of two companies constructing a building," a crime carrying a 5-10 year prison sentence. The case centered on a scandal-ridden construction project in Kyiv. A high-rise residential building, whose construction was launched under former president Leonid Kuchma, dominates the right bank of the River Dnieper in Kyiv, dwarfing the nearby historic landmark, the Monastery of the Caves, an imbalance that apparently violates building codes.

Shortly after coming to power, Yushchenko promised to check the site and reportedly pledged to demolish it if courts ruled that the building was unlawful.

Poroshenko claimed that in March the construction companies offered him a bribe in order to save the skyscraper, which, he said, he indignantly refused and "sent them packing." But the companies offer a different story, claiming that Poroshenko demanded a share in the project in return for allowing the construction to continue -- a charge that Poroshenko repeatedly denied. But this charge served as the basis for the criminal case against him.

Yushchenko sacked Piskun on October 14 without explanation, which was probably a mistake. Yushchenko's foes and their media might have interpreted subsequent developments differently, had he openly blamed Piskun for mishandling the Gongadze case or for failing to punish the officials who were involved in election rigging last year.

On October 19, Tymoshenko's right-hand man, former Security Service (SBU) chief Oleksandr Turchynov, released a statement for the media, saying that Yushchenko had urgently ordered Vynokurov to close the case against Poroshenko. Turchynov forecast that the criminal case would be "closed quietly today or tomorrow."

The case was closed the following day, just as he predicted. Speaking in an interview with Segodnya, Vynokurov denied that he was ordered to do so by Yushchenko. And Poroshenko told a news conference on October 22 that a court had cleared him of the charge on October 21.

But this will not prevent rumors and new allegations about Poroshenko's influence on Yushchenko from spreading. Piskun told Inter channel that he would sue Yushchenko for firing him, which, he claimed, was illegal. But Piskun made a point of not directly accusing Yushchenko, suggesting that Yushchenko was prompted to fire him by people from his entourage "who are dishonest and indecent." He also insisted that there was no reason to close the case against Poroshenko.

Piskun's story was fully in line with the myth portraying Yushchenko as a weak, indecisive, and easily manipulated character, which media outlets linked to Tymoshenko have contributed to spreading since long before the Orange Revolution.

And Poroshenko, who was Tymoshenko's main rival in the under-the-carpet struggle for the post of prime minister after the revolution, has been demonized as the eminence grise manipulating Yushchenko behind the scenes.

These myths have only been fuelled by the speed of the recent developments involving Poroshenko: October 10 – the prosecutor-general charges Poroshenko with corruption; October 14 – Yushchenko fires prosecutor-general without explanation; October 20 – the caretaker chief prosecutor closes the case against Poroshenko; October 21 – a court clears Poroshenko.

Source: Eurasia Daily Monitor

Pyskun Files Appeal Challenging Dismissal

KIEV, Ukraine -- Ukraine's former top prosecutor filed an appeal against President Viktor Yushchenko's decision to fire him, a presidential adviser said Oct. 26.


Canned Prosecutor Svyatoslav Pyskun

Svyatoslav Pyskun asked a Kyiv court to return him to the powerful post of prosecutor general, said Mykola Poludenniy, a legal adviser to Yushchenko.

Pyskun was sacked earlier this month and Yushchenko's office later accused the prosecutor of dragging out important investigations.

"Everything was done according to the law," Poludenniy told The Associated Press.

Pyskun, who could not be reached for comment, had been an unpopular figure and many of Yushchenko's Orange Revolution supporters criticized the president for not dismissing Pyskun earlier.

He claimed that he was sacked because of a criminal investigation into one of the president's closest allies, Petro Poroshenko. The abuse-of-office case against Poroshenko was closed last week after Pyskun was fired.

Pyskun had also served as the country's top prosecutor under former President Leonid Kuchma, but was fired in 2003 after Kuchma accused him of trying to politicize the powerful office.

Pyskun countered that Kuchma fired him because he had come close to making key arrests in the 2000 killing of investigative journalist Georgy Gongadze, a murder that Kuchma's critics accused him of ordering.

Pyskun also challenged that dismissal and a court ordered his reinstatement.

Source: AP

Ukraine Says Has No Bird Flu, But On Alert

KIEV, Ukraine -- Ukraine has no recorded bird flu cases but has tightened its border controls as the deadly virus spreads in neighbouring Russia and Romania, senior officials said on Wednesday.


"Over the last month or month and a half we have implemented a number of measures to prevent the spread of bird flu to Ukraine," Yuri Melnik, deputy prime minister, told a news conference.

"There are no registered cases of bird flu in Ukraine for now. But the disease is on our southern and northern borders. All our institutions are ready to prevent or limit it."

Ukraine's neighbours -- Romania, Russia and Turkey -- have confirmed the presence of the deadly H5N1 strain of bird flu.

Parliament last week imposed a six-month ban on imports of poultry from all countries.

The government tightened controls over farmers living near the borders and ordered them to keep birds indoors.

The Agriculture Ministry, the Health Ministry and veterinarians are also testing wild birds and established special telephone lines to coordinate preventive measures.

Source: Reuters

Yushchenko Says a Tenth of Ukrainian Population May Die of AIDS in 5 Years

KHARKIV, Ukraine -- Ukrainian President Viktor Yushchenko said that the rate at which AIDS is spreading in the country has reached a "frightening" level and that the situation requires immediate reform of public health.


Yushchenko said that, in five years, the number of AIDS-infected people will increase 2.5 times and reach a mortality rate of 26 infected per 100,000 citizens.

"The rates at which the disease is spreading are awful. If the rates remain constant, then Ukraine will loose 10% of its population by 2010," Yushchenko said at the all-Ukrainian meeting of family physicians in Kharkiv.

The president said that he is worried by the increase in the number of those who suffer of cancer, cardiovascular diseases and tuberculosis.

The tuberculosis mortality rate is now 80 cases per 1,000 people, compared with five years ago when it was 60 cases per 1,000 people, the president said. Yushchenko said that the disease is spreading in "poorly monitored social groups.""This is a challenge to society and we should face it," Yushchenko said.

Yushchenko said that "malign diseases" are responsible for 12% of deaths in Ukraine. He said that the problem of the spread of cancer can no longer be ignored. Yushchenko said that "political means" in fighting these diseases should be worked out.

Source: Daily News Bulletin

Yushchenko: UkrTelekom Should Probably be Next Privatization

KIEV, Ukraine -- UkrTelekom, the national phone company, should probably be the next in the list of state-owned assets that will be sold to investors, President Viktor Yushchenko said Tuesday.


UkrTelekom, which operates local and long-distance and international telephony, has been losing its market share due to the booming cell phone markets, Yushchenko said explaining why the assets must be sold fast.

“There is a list of strategic companies whose privatization is a pressing matter,” Yushchenko said. “I would start this list with UkrTelekom.”

Prime Minister Yuriy Yekhanurov said Tuesday his government has been already looking into ways of privatizing UkrTelekom, but refused to provide any details.

The comments may provide clues to investors and analysts that are speculating which assets will Ukraine sell next following the successful privatization of steel giant Kryvorizhstal.

Mittal Steel, the world’s biggest steelmaker, agreed Monday to pay $4.79 bln for 93% stake in Kryvorizhstal, Ukraine’s largest acquisition deal ever, exceeding the government’s original price expectation of $3 billion.

“The modernization that has taken place on [telecommunications] market day after day is narrowing room for maneuver by UkrTelekom,” Yushchenko said. “Unless we conduct privatization fast and effectively, we’ll be losing potential that could bring financial benefits.”

Ukraine’s telecommunications market has been increasingly turning mobile and dominated by two cell phone operators, UMC, owned by MTS of Russia, and Kyivstar, majority owned by Telenor of Norway.

Considering attractiveness of the cell phone segment, the government has been considering allocation of a cell phone license to UkrTelekom before to increase its value before the privatization.

The government owns 92.8% stake in UkrTelekom, while the privatization of 42.8% stake has been repeatedly debated and delayed for almost a decade.

Last time the government planned to sell the stake was in August 2004, but the privatization had been delayed to prevent any fraud and manipulation ahead of the last year’s presidential election.

Source: Ukrainian Journal

Tuesday, October 25, 2005

U.S. Supports Ukraine's Aspirations, Says State's Kramer

WASHINGTON, DC -- The United States remains committed to supporting Ukraine’s political and economic transformation and is stressing the “urgent need” for Ukraine to press forward with economic reforms and “redouble efforts to combat corruption,” says a State Department official.

David Kramer, deputy assistant secretary of state for European and Eurasian affairs, made these remarks at a panel discussion hosted by the Johns Hopkins University School of Advanced International Studies (SAIS) in Washington.

Speaking on a panel titled “After the Orange Revolution: the U.S. and Ukraine,” Kramer said bilateral relations “are on a new track, characterized by open dialogue and closer cooperation.”

He said that during the preceding week, he and Assistant Secretary of State for Economic and Business Affairs E. Anthony Wayne went to Kiev, Ukraine, to meet with current and former Ukrainian officials and members of the Rada (Ukraine’s parliament), and to convey messages of continued U.S. support.

Wayne said in a speech at Kiev International University that the United States is optimistic “that with the confirmation of Prime Minister Yekhanurov and other new Cabinet members, the process of economic reform is back on track.”

Yekhanurov was appointed after Ukrainian President Viktor Yushchenko dismissed much of his original Cabinet in September, amidst internal divisions and accusations of corruption.

Kramer told the SAIS audience that “we stand ready to help through support for the development of democracy, for help with anti-corruption efforts, and for economic reforms. Ukraine can count on the continued support of the United States.”

He said he remains optimistic about the future of the former Soviet republic. “The atmosphere in Ukraine is very different today. ... The media operate more freely, respect for citizen’s rights has improved and the courts appear to be more independent.”

He cited as proof of the new atmosphere the extensive Ukrainian press coverage of the corruption allegations, as well as reporting on the lavish lifestyle of Yushchenko’s son. He added that “no country has made the transition from communism to democracy without ups and downs. … We need to have realistic expectations.”

Although Kramer acknowledged that factions and personal rivalries present significant challenges for Yushchenko’s government, he called threats of separatism “over-exaggerated” and “a red herring.”

Kramer said he had been impressed while in Ukraine with the government’s commitment to economic reforms and anti-corruption measures, and to setting aside personal animosities to cooperate on these issues. The new prime minister “said all the right things,” he noted. “There is some hope that the new government … will act as a cohesive team.”

ECONOMIC REFORMS

Kramer described progress on economic reform as “slow,” noting that now that Yushchenko no longer has a majority in the Rada, the passage of crucial legislation “will be considerably more difficult.”

One area where this could hurt Ukraine is in its bid for World Trade Organization (WTO) membership, Kramer said. Calling Ukraine’s admission “the priority of the year,” the deputy secretary personally met with Finance Minister Victor Pynzenyk, as well as former presidential candidate Viktor Yanukovych during his recent trip.

Ukraine’s admission to the WTO “is a priority for us,” Kramer said. “The U.S. will not be able to complete bilateral negotiations with Ukraine if the government does not work with the Rada” to approve a package of reforms required to meet WTO norms. Today, I read that Mr. Yanukovych – after telling me last week that he was supportive of WTO -- is now attaching significant conditions to the support of WTO passage.”

During Yushchenko’s visit with President Bush in April, the Ukrainian president himself called corruption the Number 1 problem at home. Kramer said that while he and Wayne were in Kiev, they reinforced the importance of taking corruption seriously.

“We feel an obligation to stress to the Ukrainian government that its reputation and image are extremely important,” he said. “And both of those are founded on the fact that [the Yushchenko government] was going to be a new, different, clean team. The government needs to translate words and intentions into actions and accomplishments. ... This is going to be a very tall order.”

“Of course,” he added, “that’s very easy for me to say sitting here in Washington.”

Source: U.S. Department of State

Ukraine Discusses Spending Windfall Funds

KIEV, Ukraine -- Lawmakers on Tuesday argued over how to spend the massive windfall earnings from the privatization of Ukraine's flagship steel plant - the single largest foreign investment ever for the former Soviet republic.

Ukraine's Verhovna Rada or Parliament

The world's largest steel producer, Mittal Steel, acquired Kryvorizhstal for 24.2 billion hryvna (US$4.8 billion, euro4.04 billion) Monday, well above what analysts had predicted. The sale of the mill, which produces 20 percent of Ukraine's entire metal output, is equivalent to about 20 percent of this year's anticipated budget revenues.

Ukraine has no experience with receiving such a windfall, and lawmakers are divided over whether to use the money for social needs, cover the budget deficit or to develop the country's economy.

"We are creating a mechanism so that this money is used to benefit every Ukrainian," President Viktor Yushchenko said, according to his office.

He mentioned a number of projects, including modernizing apartment buildings, offering support to villages and developing high technology and science.

Finance Minister Viktor Pinzenyk said the government also plans to cover the budget deficit and pay off state debt. However, Socialist and opposition lawmakers, who opposed the sale, proposed compensating Ukrainians who saw their bank savings wiped out during the Soviet collapse.

"Money must be given to Ukraine's people who really owned Kryvorizhstal," said opposition lawmaker Nestor Shufrych.

"Every Ukrainian citizen must feel that the state sold their property and everyone must receive something from it," said Socialist lawmaker Mykola Rudkovsky.

Others pleaded for restraint.

"The main thing is not to eat up the money instead of putting it toward economic development," said Kost Bondarenko, a political analyst at Kiev's Institute of National Strategy.

Pinzenyk insisted that all new spending would only be done within the framework of the budget, rejecting concerns that the money would be "eaten up."

"When we pay a salary to a teacher, we are spending money on the country's economic development," Pinzenyk told The Associated Press in a telephone interview.

When the mill was first sold off in a murky deal in 2004, Ukraine received five times less. That sale to former President Leonid Kuchma's son-in-law Viktor Pinchuk and tycoon Rinat Akhmetov was annulled earlier this year.

Oleksandr Peklushenko, an ally of opposition leader Viktor Yanukovych, argued that the money should be used to improve the country's investment climate, but he warned the government not to hurry to spend it.

The mill's former owners still have legal appeals pending before the European Court of Human Rights. Mittal Steel also still has 60 days to deliver the cash.

Economics Minister Arseniy Yatsenyuk warned such a huge influx of cash into the economy could trigger inflation.

Monday's televised auction was hailed as a huge success for President Viktor Yushchenko, who held it up as a show of transparency. Pinzenyk said it should be a good sign for investors.

"I hope it will become a new era of privatization in Ukraine," he said.

Source: AP

Yushchenko Re-Affirm's Ukraine's Euro-Atlantic Goals

KIEV, Ukraine -- Last week President Viktor Yushchenko took steps to re-affirm Ukraine's desire for Euro-Atlantic integration. "Ukraine is a European country. I will never accept the idea that it is not," he told London's Royal Institute for International Affairs.

President Viktor Yushchenko

Western governments and international organizations heard these claims many times under former president Leonid Kuchma. But by his second term, they were seen as little more than empty rhetoric.

Ironically, some West European governments now fear that Yushchenko is actually serious in his endeavor to bring Ukraine into Euro-Atlantic structures. This fear is especially acute within "old Europe," where EU enlargement fatigue set in after last year's expansion.

The failure of referenda on a new EU constitution in France and the Netherlands, coupled with stalling over accession talks with Turkey, are products of this fatigue, and Ukraine's Orange Revolution did not ease this pre-existing condition.

The United States and Poland continue to be Ukraine's strongest supporters. The recent rightward shift in Poland's elections will only increase Warsaw's support for Ukraine's Euro-Atlantic integration. Ukraine is set to create a joint battalion with Poland and Lithuania (UkrPolLitBat) based on the Ukrainian-Polish battalion (UkrPolBat) performing peacekeeping operations in Kosovo.

In London at the Royal Institute and in Kyiv at a joint Ukraine-NATO commission, Yushchenko outlined three phases for Ukraine's Euro-Atlantic program.

First, Yushchenko hopes that the EU would grant Ukraine market economic status while Britain holds the rotating presidency. According to British Ambassador to Ukraine Robert Brinkley, London hopes that the EU will grant this status before the December EU-Ukraine summit in Kyiv.

Securing WTO membership should facilitate relations with the EU. Yushchenko predicted that market-economy status and WTO membership would lead to the signing of a Ukraine-EU free-trade agreement in 2006. Such a free-trade agreement would reinforce the limited nature of Ukraine's involvement in the CIS Single Economic Space.

Nevertheless, WTO Director-General Pascual Lami is pessimistic about Ukraine achieving WTO membership in December. If Ukraine fails in its WTO drive this year, it will be because Yushchenko and his government did not sufficiently ensure that parliament adopted all WTO-required legislation before the summer recess on July 8.

Clouding the issue further is National Security and Defense Council Secretary Anatoly Kinakh's statement supporting a synchronized Russian-Ukrainian WTO membership drive.

Second, Yushchenko plans to move from a NATO Intensified Dialogue on Membership Issues to a Membership Action Plan (MAP) in May 2006. Speaking at the Ukraine-NATO commission, Yushchenko was equivocal, "Arising from the fact that NATO is an active guarantor of stability in Europe, Ukraine is preparing for full membership in this organization".

NATO has reiterated its open door policy, which has always distinguished that institution from the EU. NATO Secretary-General Jaap de Hoop Scheffer outlined Ukraine's membership in NATO as a stepping-stone to EU membership, as it traditionally has been for past aspirants. "NATO is ready to assist in providing all manner of assistance and support to this state [Ukraine] in this area," de Hoop Scheffer declared.

Scheffer and the chairman of the NATO Parliamentary Assembly, Pierre Lellouche, both said that Ukraine had every chance of joining NATO in the future. But receiving a MAP in 2006 does not provide a membership date. Such a date is more realistically situated in Yushchenko's second term (2009-14), rather than the over-optimistic 2008 or 2009 put forward by Foreign Minister Borys Tarasyuk and the Ukrainian media.

NATO has emphasized that it wants concrete action, not empty rhetoric. NATO specified three areas for Kyiv to target in addition to holding free and fair elections in 2006. Ukraine should also take more resolute action against corruption, improve the rule of law, and raise public support for NATO membership (Reuters, October 7).

According to surveys by the Democratic Initiatives foundation, only one in ten Ukrainians know what NATO is and why Ukraine should join it. One-third of Ukrainians support membership, one-third are opposed, while and the final third are unsure.

Third, EU membership remains the most difficult component of Ukraine's Euro-Atlantic integration process. After a firm closed-door policy under Kuchma, the EU has slightly warmed toward Kyiv. EU Commission President Jose Manuel Barroso told visiting Prime Minister Yuriy Yekhanurov, "Our door remains open".

In the same manner as NATO, Barroso reiterated the importance of "action" to back up membership goals. Specifically, Ukraine should "show its commitments to European values and standards," Barroso advised.

Yushchenko is also hoping that the EU takes three steps: market economic status in 2005, a free trade regime in 2006, and an association agreement in 2008.

The September cabinet crisis has not altered Yushchenko's support for closing the gap between Ukraine's domestic policies and its foreign policy goals. This determination makes Yushchenko different from Kuchma, who allowed a gulf to form between his pro-Eurasian domestic policies and his rhetoric in support of Euro-Atlantic integration.

Three concrete steps that might satisfy both the EU Commission President and the NATO Secretary-General would be for Kyiv to move urgently to appoint Ambassadors to the United States, Britain, and France, three key Euro-Atlantic countries.

Source: Eurasia Daily Monitor

Monday, October 24, 2005

Mittal Steel Wins Crucial New Auction of Ukraine Giant

KIEV, Ukraine -- With a bid of 4.8-billion dollars, the world's top steel maker Mittal Steel won a re-run auction of Ukraine's Kryvorizhstal giant, in a sale the "orange revolution" government hopes will calm investor jitters and attract foreign investment.

Kryvorizhstal steel mill in Krivoy Rog

Mittal was declared the winner of the 93.02-percent stake in Ukraine's largest steelworks after a bidding war with a consortium led by France's Arcelor pushed the price up by more than one billion dollars in an auction televised live on two national channels.

President Viktor Yushchenko, for whom the sale was a key test of his government's avowed commitment to transparency and free market, hailed the result, saying that the sale price exceeded by 20 percent all privatization proceeds in post-Soviet Ukraine.

"What happened today shows that Ukraine is capable of holding an honest privatization," Yushchenko, who was present in the building where the auction took place though he did not attend the sale itself, said in televised comments.

At his side, a jubilant Prime Minister Yury Yekhanurov echoed the sentiment.

"International investors today have felt that the climate in Ukraine has changed," he said.

The winning price far exceeded expectations that the plant would be sold for slightly higher than three billion dollars.

"It was a huge sum... a fantastic sum," a beaming Dmytro Parfenenko, deputy head of the State Property Fund who oversaw Monday's auction, told reporters afterward.

After the sale, Yushchenko met with Lakshmi Mittal, the Indian-born British billionaire whose family owns the Netherlands-based Mittal, whose German affiliate was the buyer during Monday's auction.

Mittal told reporters later in the day that the new owners intended to raise annual production to 10 million tons, up from current seven million tons, and that the mill's entire 56,000 workforce would keep their posts.

"I'm really a bit nervous," he said. "We're a foreign company, we have to learn more about the country, more about the people... (but) we're very confident of what we're doing, we're the most successful steel company in the world."

Kryvorizhstal's current output boosts by 10 percent Mittal's worldwide production capacity, which stood at 70 million tons before the sale. In 2004, the giant delivered 42.1 million tons to the international markets.

The stakes of Monday's highly-scrutinized sale for Yushchenko and his team are high.

The authorities hope to use the funds to plug a budget deficit and to increase social spending ahead of a key parliamentary vote next year, and also aim to convince foreign investors to put aside doubts and pour badly-needed funds into the country.

Analysts hailed the auction as a major victory for Yushchenko ahead of crucial legislative elections next March.

"The sale of Kryvorizhstal demonstrates that... Ukraine is entering a post-oligarchal era," said Vadim Karasyov, a political analyst in Kiev. "The position of the president and the new government are quite strong."

Yushchenko came to power early this year after leading last year's "orange revolution" on vows of fighting corruption and carrying out reforms necessary to set ex-Soviet Ukraine firmly on a pro-Western path.

But despite massive positive sentiment that followed the "orange revolution," investors have stayed away, spooked by contradictory messages from the government on reviewing past questionable privatizations, and foreign direct investment dropped by 14 percent during the first half of this year.

Kryvorizhstal was initially privatized last year in a contest that saw the nation's largest steelworks sold to two top insiders of the former regime for 800 million dollars.

The sale became a symbol of the corruption and cronyism that was rampant under former president Leonid Kuchma, and Yushchenko vowed to review the auction after he assumed power earlier in the year.

A court in April ruled last year's auction unlawful and ordered the stake returned to the government.

The repeat sale has been vigorously opposed by several factions in parliament, including opposition Communists and the Socialists, which have several members in the current government.

Last week the chamber passed a non-binding resolution demanding the steelworks remain in state hands, and following Monday's auction the chief of the State Property Fund Valentina Semenyuk, a Socialist, said she was resigning from her post in protest of the sale.

Source: AFP

NATO to Give Kiev a Hand With Reforms

VILNIUS, Lithuania -- NATO pledged Monday to help Ukraine push through military reforms seen as essential to prepare the country for membership in the Western alliance -- a prospect viewed with concern by Russia.

Ukrainian Defense Minister Anatoly Gritsenko (R), shakes hands with NATO Secretary General Jaap de Hoop Scheffer (L), after NATO members signed a 'Letter of Intent' to provide extensive training to rapidly enhance the professional skills of key civilian officials in Ukraine's Ministry of Defense

The alliance, anxious not to alarm Moscow, dodged questions at a meeting of defense ministers about whether Ukraine might be included in 2008, when NATO is expected to take in new members from the Balkans.

"NATO reaffirmed its open-door policy and intends to offer maximum help in the implementation of the necessary reforms" to Ukraine's oversized armed forces, NATO Secretary General Jaap de Hoop Scheffer said. "A timetable, I can't give you."

Ukrainian Defense Minister Anatoly Gritsenko said he had won over NATO allies to the cause of Ukraine's membership, which he said could not be stopped, despite Russia's concerns and widespread opposition among Ukraine's public opinion.

"Ukraine's foreign policy course towards NATO, I believe, is irreversible," Gritsenko said at a news conference. "After today's discussion, we changed the position of those that were more skeptical."

Gritsenko said the pace of military modernization would make it ready to join in 2008. "I am certain that, on the Ukrainian side in the military sphere, we'll be prepared by then," he said.

Ukraine's NATO ambitions are strongly supported among the 10 former communist nations that have already joined the alliance. Some other allies are more wary about expanding so far eastward into former Soviet territory and insist the government in Kiev must first push through reforms to underpin a fragile democracy, tackle widespread corruption and streamline the outdated Soviet-era military apparatus.

Apart from U.S. Defense Secretary Donald Rumsfeld -- who left early -- defense ministers from the old Western members of NATO kept away from the talks, sending lower-level officials.

However, allies did commit to helping Ukraine with issues such as retraining officers discharged after military cuts and disposing of surplus weapons. Britain engaged to lead a program training Defense Ministry officials to ensure effective civilian control over Ukraine's forces.

"This is a crucial element in any part of security sector reform," British Armed Forces Minister Adam Ingram said. "If you don't have civilian control ... the security sector reform will not succeed."

Monday's meeting was the latest in a series of contacts that underline NATO's drive to improve relations with Ukraine since last year's Orange Revolution, which brought in pro-Western President Viktor Yushchenko. He has made membership in NATO a key goal despite opposition from Russia and many Ukrainian citizens.

Gritsenko, a key ally of Yushchenko, sought to allay the fears of both, saying NATO membership would not lead to nuclear weapons being stationed on its territory and would not destroy jobs in Ukraine's important arms industry.

He said the Russians could see that Poland, Lithuania and other former Soviet bloc states that joined NATO over Moscow's strong objections did not pose the kind of security threat that Moscow once feared.

Source: The Moscow Times

President Celebrates as Sale Shows Change From Old Guard to the New

KIEV, Ukraine -- The re-privatisation of Ukraine’s biggest steelworks was President Yushchenko’s first big victory in his quest to rid Ukraine of the corruption and economic mismanagement that have plagued it since 1991.

Victor Yushchenko meets with Lakshmi Mittal

And it came just in the nick of time. Mr Yushchenko came to power in last year’s Orange Revolution, pledging to eradicate official graft, overhaul public finances, attract more foreign investors and take Ukraine into Nato and the European Union.

He highlighted last year’s sale of Kryvorizhstal for a fraction of its market value as one of the worst economic abuses committed under Leonid Kuchma, the former President, and pledged to reverse the deal.

Until yesterday, however, almost all of his reforms had been stalled by a power struggle between the Orange Revolution’s leaders, which sent his popularity ratings plunging.

The infighting and intrigue burst into the open last month when he was forced to sack Yuliya Tymoshenko, the Prime Minister, and her entire Cabinet. With crucial parliamentary elections looming in March, many Ukrainians started to grumble that the new government was no better than the former one.

Yet yesterday’s auction demonstrated live on Ukrainian television the fundamental difference between the old guard and the new.

Under Mr Kuchma, a crown jewel of Ukrainian industry was sold at a knockdown price to two Ukrainian oligarchs with close links to the presidential administration. One of the oligarchs is Mr Kuchma’s son-in-law. Under Mr Yushchenko, the same company was sold for six times that to a major international company.

That one deal brought more money into the federal budget that all the other privatisations since Ukraine won independence from the collapsing Soviet Union in 1991.

The Ukrainian Government plans to use the proceeds to plug a budget deficit and increase social spending, a move that will boost Mr Yushchenko’s standing for the parliamentary polls.

And according to the State Property Fund, it is already planning its next major privatization. Dmitry Parfenenko, the Property Fund’s deputy chairman, identified the incomplete Krivy Rih Oxidized Ore Mining and Enrichment Combine as the next on the list.

Mittal Steel and Sinosteel are believed to be interested, as are Ukraine’s Inhulets and Poltavsky iron ore producers and Russia’s Magnitogorsk Iron & Steel Works (MMK).

Source: The Times

Mittal Steel Buys Kryvorizhstal for $4.8 Billion

KIEV, Ukraine - The world's largest steel producer, Mittal Steel Co., bought Ukraine's flagship steel plant Kryvorizhstal from the state in a televised auction Monday for more than $4.8 billion.

In this image taken from video provided by Ukraine government representatives of the world's largest steel producer, Mittal Steel, celebrate after they successfully bought Ukraine's Kryvorizhstal Steel Mill

The high-stakes auction had been a campaign promise of President Viktor Yushchenko, part of his bid to prove to investors that the former Soviet republic is committed to transparency and open for foreign investment. Yushchenko was there to watch.

Mittal Steel bought the mill for 24.2 billion hryvna, well above what analysts had predicted and more than five times what former President Leonid Kuchma's son-in-law and another Ukrainian tycoon paid for the mill in 2004 — a sale that Yushchenko called a theft and that was annulled after he became president this year.

"Today you saw the evidence that if Ukrainian privatization had occurred honestly, we could have received big financial opportunities to solve all kinds of concerns, including social concerns," Yushchenko said. "What happened today showed that Ukraine is able to conduct an honest privatization according to the law."

The sale of Kryvorizhstal, which produces 20 percent of Ukraine's entire metal output, becomes the single largest foreign investment ever in this former Soviet republic. It also brought in 20 percent more cash than all of Ukraine's other privatizations combined, Yushchenko said.

Competing against Netherlands-based Mittal was the Industrial Group Consortium, which brings together the Industrial Union of Donbass and the world's second-largest steel producer, Luxembourg-based Arcelor SA, as well as the Ukraine-registered LLCSmart-Group.

The auction began with all three companies sticking sealed envelopes in a glass bin. State officials pried open the case and using scissors and sliced apart the envelopes to read the starting bids. The consortium linked to Arcelor had offered the highest starting price, 12.6 billion hryvna (about $2.5 billion).

The sale then went to an open auction.

Bidding was feverish. Representatives of the three competing companies sat at separate desks and raised white placards to hike the price up in 100 million hryvna ($20 million) increments. The main bidding soon was between Mittal and the Arcelor consortium.

As the bidders raised the price, people in their teams frantically worked the phones. The mood was tense, with the auctioneer repeatedly going down to "one ... two ..." before a bidder stepped in and raised the price again.

Former Prime Minister Yulia Tymoshenko, who had spearheaded the privatization effort, flashed a huge smile when the bidding ended.

The decision to sell such an industrial gem, however, was not universally popular. Some 150 protesters gathered outside the State Property Fund, which conducted the sale, chanting and holding placards reading: "The People Own Kryvorizhstal." A metal fence was erected around the building, with police and community volunteers, wearing orange, standing guard.

Parliamentary critics twice last week mustered enough votes to press the government to halt Monday's sale of the 93.02 percent stake in the mill, but Yushchenko shrugged off their nonbinding appeal, just as he has the legal challenges waged by the mill's former owners.

The head of the State Property Fund, Valentyna Semenyuk, a Socialist Party member, has also made her displeasure over the sale known. She was hospitalized over the weekend, her office said, and did not participate.

The mill, which produces 8 million metric tons (8.8 million short tons) of steel a year, was returned to the state in June after the government challenged its privatization under Kuchma.

Legal appeals by the Pinchuk-Akhmetov consortium were rejected, but one appeal is pending before Ukraine's Supreme Court. The two tycoons have also launched a challenge before the European Court of Human Rights.

Last week, a U.S.-based investment group, acting on behalf of the former owners, sued in U.S. District Court in Manhattan in a bid to stop the resale.

"The investors must stop and think," Pinchuk was quoted as telling the news Web site Ukraynska Pravda. "Say you want to buy an apartment but you are told this apartment is the subject of a court case. Will you risk buying this apartment? I don't think so."

The government's policy of rolling back questionable privatizations, spearheaded by Tymoshenko, was canceled last month, but Kryvorizhstal's resale never was put in question.

Source: AP

Sunday, October 23, 2005

Ukraine's Yushchenko Banks on New Steel Mill Sale

KIEV, Ukraine -- Ukraine's largest steel mill goes on the auction block for a second time on Monday, a sale touted by President Viktor Yushchenko's liberal administration as a milestone in coaxing back wary investors.

Three firms are in the running to buy the Kryvorizhstal plant in central Ukraine and have submitted sealed bids to be opened in an open tender, broadcast live from 0800 GMT.

The starting price for Ukraine's biggest post-Soviet sell-off is 10 billion hryvnias, although authorities hope the sale will bring in half as much again.

Each entrant, once the envelopes are opened, will have the chance to bid up the price.

In the running are the world's top steel maker Mittal and two Ukrainian firms -- LLC Smart Group, with Russian links, and Industrial Group, controlled by France's Arcelor.

The auction is seen as a key event in defining the reformist agenda of the administration propelled to power by last year's "Orange Revolution" rallies.

Throughout the long campaign that ultimately led to his victory, Yushchenko denounced as "theft" the plant's original sell-off in June 2004 for $800 million, below other offers.

Court rulings struck down the sale won by a group led by industrialists with close links to Yushchenko's predecessor Leonid Kuchma. The president described the new privatization as a "moral obligation" last week.

Ukrainska Pravda, the country's most authoritative Internet news site, said at the weekend Industrial Group was the favored candidate for an administration which has predicated all decision-making to a long-term drive for European integration.

"A success for Arcelor would be a signal for other Western giants that one can invest billions in Ukraine," it wrote. "It would also serve as a political beacon."

Jolted by eight months of infighting that culminated in his dismissal of radical Prime Minister Yulia Tymoshenko, the president has vowed to proceed with a new sale.

But he promised an end to "reprivatizaton", the watchword for a mass review of sell-offs while Tymoshenko was in office. Together with new premier Yuri Yekhanurov, he faced down two votes in parliament last week demanding a halt to the sale.

Western investors mostly stayed away from Ukraine during Tymoshenko's term in office. Growth over the first nine months of 2005 slowed to 2.8 percent -- its lowest level in five years.
About 10 companies had expressed an interest in the sale for a time. But the field was reduced, analysts say, by conditions on production imposed by authorities and by the worsening of conditions on world steel markets.

Source: Reuters

Rumsfeld Applauds Ukraine's NATO Progress

VILNIUS, Lithuania -- Ukraine, the former Soviet republic whose aspirations to join NATO are opposed in Moscow, is making strong strides toward reforming its oversized military and meeting the alliance's criteria for membership, U.S. Defense Secretary Donald H. Rumsfeld said Sunday.

U.S. Defense Secretary Donald Rumsfeld, left, walks with Lithuanian Defense Minister Gediminas Kirkilas prior to a meeting at a NATO-Ukraine High-Level Consultation at the Presidential Palace in Vilnius

"Progress has been made and we encourage it," Rumsfeld said at a news conference with Lithuanian President Valdas Adamkus, who also expressed optimism that Ukraine eventually would join NATO.

On the final stop of a weeklong trip that began in Asia, Rumsfeld joined the defense ministers of nine other NATO countries for a conference Monday to review Ukraine's progress and examine how they can keep Ukraine on track to overhauling and reducing its military.

Washington is pushing hard to help Ukraine, but enthusiasm seems weaker among NATO's other members. Fewer than half of the 26 member countries sent their defense ministers to Vilnius for the conference, which is the fourth in a series of annual meetings.

After meeting with Rumsfeld, Ukrainian Defense Minister Anatoly Gritsenko told reporters that he is confident his government can overcome two other major obstacles to NATO membership: the low opinion that most Ukrainians have of NATO and the opposition in Moscow.

"I don't see it as a really serious issue," Gritsenko said, referring to Russian objections.

He said the Russians have seen that the Baltic states, which joined NATO in 2004 over Moscow's strong objections, do not present the kind of security threat that the Russians had once feared. Lithuania, Latvia and Estonia were part of the Soviet Union until it crumbled in 1991.

In a separate news conference with Rumsfeld, Lithuanian Defense Minister Gediminas Kirkilas said his country's success in raising the level of domestic public support for NATO could provide lessons for Ukraine.

"Right now in the Ukraine public opinion, unfortunately, supporting NATO is very, very low, about 20-25 percent," he said. "They have to make a lot of effort" to overcome that, he added.

Kirkilas said the people of Ukraine have been subjected to years of anti-NATO propaganda.

The Ukrainian defense minister made a similar point in his comments about strengthening public support. He said the government needs to undertake a more vigorous public education effort and address what he called old stereotypes about NATO that he predicted would be "easily broken."

Among the mistaken stereotypes, he said, is that NATO membership would mean the stationing of nuclear weapons on Ukrainian soil.

At his news conference with the Lithuanian president, Rumsfeld was asked whether the United States, as the leading power in NATO, should take responsibility for the anti-NATO sentiment in countries such as Ukraine. "It seems to me that NATO's polices stand on their own," the defense secretary replied.

NATO has been working to build closer ties with Ukraine since last year's "orange revolution" that brought too power pro-Western President Viktor Yushchenko.

But NATO has stopped short of giving Ukraine a date for opening official talks on membership, saying the timetable depends on the pace of reforms to modernize the military, tackle corruption and strengthen democracy.

Yushchenko has made membership in NATO a major goal, but many Ukrainians, particularly in the Russian-speaking east, are less happy about joining their former Cold War foe.

A small group of protesters shouting "NATO Out!" greeted NATO Secretary-General Jaap de Hoop Scheffer in the eastern city Donetsk on Thursday when he led an alliance delegation on a visit to Ukraine.

During the trip, de Hoop Scheffer repeated his promise that NATO's doors will remain open for Ukraine if it completes the necessary reforms. Yushchenko last week expressed hope that membership talks could begin next spring and some Ukrainians are hopeful it could be included when NATO nations are expected to decide on the alliance's next expansion at a summit meeting in 2008.

But de Hoop Scheffer refused to discuss a timeline.

Source: AP

Ukraine Prepares for Steel Mill Auction

KIEV, Ukraine -- For the first time in this ex-Soviet republic's history, a major industrial enterprise is slated to go under the hammer live on television.

Mittal Steel

Ukrainian President Viktor Yushchenko has staked his reputation on the auction to privatize the Kryvorizhstal steel mill, Ukraine's biggest. His opponents are determined to block it.

Parliamentary critics twice last week mustered enough votes to press the government to halt Monday's sale of the 93.02 percent stake in the mill, but Yushchenko shrugged off their nonbinding appeal, just as he has the legal challenges waged by the mill's former owners.

"There won't even be talk of reconsidering the decision," Yushchenko said Friday, adding that a repeat auction was necessary "first of all, morally and politically."

"We want the repeat sale to show one thing: breaches in the law ... will be corrected," Yushchenko said.

Kryvorizhstal, which produces 20 percent of Ukraine's entire metal output, was sold last June by the state for US$800 million (euro665 million) in a privatization widely condemned as rigged. The buyers: Former President Leonid Kuchma's son-in-law, Viktor Pinchuk, and coal-and-steel-magnate Rinat Akhmetov.

During last year's Orange Revolution, Yushchenko called the sale a "theft" and pledged it would be reversed.

Oleh Rybachuk, Yushchenko's chief-of-staff, said that "if (the auction) is successful, it will show that you can trust what the Ukrainian government says."

The world's two largest steel producers, Mittal Steel and Arcelor, are expected to participate.

The opening price is 10 billion hryvna (US$2 billion, euro1.6 billion) but analysts expect the price could be driven as high as 17.7 billion hryvna (US$3.5 billion, euro2.9 billion). The sale could generate 10 percent of the country's annual budget revenues - a huge cash influx that Yushchenko's government desperately needs.

But the 450-member parliament is determined to put the brakes on. This week, it passed repeated appeals to the government to stop the auction and hold on to what is considered Ukraine's flagship mill. Even the head of the State Property Fund, which is conducting the auction, has made little secret of her displeasure at having to surrender this valuable state enterprise.

"I stood for and I still stand by the position that such profitable factories must remain in the hands of the state," said State Property Fund head Valentyna Semenyuk, a member of the Socialist Party, which has led the parliamentary challenge to Monday's sale.

The mill, which produces 8 million tons (8.8 US tons) of steel a year, was returned to the state in June after former Prime Minister Yulia Tymoshenko's government successfully challenged its privatization under Kuchma.

Legal appeals by the Pinchuk-Akhmetov consortium were rejected, but one appeal is still pending before Ukraine's Supreme Court. The two tycoons have also launched a challenge before the European Court of Human Rights.

Last week, a U.S.-based investment group, acting on behalf of the former owners, sued in a U.S. District Court in Manhattan in a bid to stop the resale.

"The investors must stop and think," Pinchuk was quoted as telling Ukraine's Ukraynska Pravda Web site. "Say you want to buy an apartment but you are told this apartment is the subject of a court case. Will you risk buying this apartment? I don't think so."

His lawyers have dispatched letters to the potential bidders warning them of the situation, Pinchuk said.

The three confirmed bidders, however, don't seem scared. Mittal Steel, the world's largest steel producer, had been blocked from participating in last summer's auction for what it claimed were dubious reasons.

This time, Mittal will be competing against the Industrial Group consortium, which brings together the Industrial Union of Donbass, Ukraine, and the world's second-largest steel producer, Arcelor.

The third bidder is the Dnipropetrovsk, Ukraine-registered LLCSmart-Group, reportedly linked to a Russian steel magnate.

Originally, the Ukrainian government had hoped for at least 10 bidders, but analysts said the smaller number isn't much of a disappointment.

"Mittal and Arcelor were considered the favorites anyway and the government would like to sell it to a multinational Western-based company," said Tomas Fiala, managing director of the Kiev-based investment bank, Dragon Capital.

The government's post-Orange Revolution re-privatization policy, spearheaded by Tymoshenko, was canceled last month, but Kryvorizhstal's resale never was put in question. Yushchenko has said it is a matter of honor.

Government officials have already begun salivating over the extra funds the mill's sale will bring. Security Council head Anatoliy Kinakh promised that the money would go toward social programs, while other officials have bandied about ideas such as redeeming some domestic debt and boosting the share capital of the two state-owned banks.

Source: AP