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23 February, 2011  ▪  Yurii Nikolov

Yushchenko no fighter in political tug-of-war

While prime minister, Viktor Yushchenko helped Konstyantin Zhevago get the Zaporizhia Aluminum Plant, but Mykhailo Chechetov gave it instead to the Russians, yielding to the heavy lobbying by President Leonid Kuchma’s son-in-law

 

A year ago, Mr. Yushchenko, 56 at the time, lost the presidential office almost exactly on 23 February, his birthday and Soviet Army Day, a traditional men’s holiday. Despite this coincidence, everyone knows that he has as much to do with testosterone as Yulia Tymoshenko with the stronger sex. The following story dug up by The Ukrainian Week is proof again of this. Mr. Yushchenko has always been a weakling, even when he could help people close to him get rich(er).

A decade ago, Mr. Yushchenko, the prime minister at the time, became very actively involved in the privatization of the Zaporizhia Aluminum Plant (ZAlK). The State Property Fund put it up for sale, and Mr. Zhevago’s KrAZ badly wanted to obtain the asset. But the Russian Auto-VAZ-Invest came off the winner, later selling the plant to Viktor Vekselberg’s SUAL. This victory was preceded by a long period of hand-twisting by the premier.

“Long as I was the head of the State Property Fund, I don’t recall Mr. Yushchenko to ever favor one competitor so fiercely,” says Oleksandr Bondar, now a NU-NS MP. “There were talks lasting hours, exhortations, and official letters aimed at convincing the Fund to review its position. I didn’t even have a clear idea precisely why this case attracted so much of his attention.”

Initially, Mr. Zhevago won the bidding. But the Russians sued and forced the Fund to sell the plant to them. During the entire procedure Mr. Yushchenko tried on numerous occasions to publicly and officially influence the course of events.

“But we had a simple reality: KrAZ indeed had legal problems, so the Russians won clearly,” says Party of Regions MP Mykhailo Chechetov, acting head of the State Property Fund at the time, while Mr. Bondar was on a sick leave.

Of course, this victory can be called “clean” only out of great love for the art of the impossible. The Russians were heavily lobbied for by Viktor Pinchuk, President Leonid Kuchma’s son-in-law who acted as an intermediary in big-money talks.

It was Mr. Pinchuk who met with Mr. Yushchenko several months after the latter won the presidential elections following the dramatic Orange Revolution. It was then that the new president looked at the Russian owners of ZAlK in more favorable light. He even issued a decree to supply the plant with electricity at a discount price, something Ms. Tymoshenko vehemently opposed. And it was then that Mr. Zhevago decided to side with Ms. Tymoshenko as an MP representing her bloc.

But why did Mr. Yushchenko fight so fiercely for Mr. Zhevago? Mr. Bondar admits that this is still a mystery to him. He was surprised to learn about their joint business project which at the time of ZAlK’s privatization had been around for years, kept away from the public eye.

This project was First Investment Bank (PIB) founded in 1997. In late 1999, when the ZAlK privatization story was unfolding, the 30 founders of this bank included Mr. Yushchenko’s brother Petro Yushchenko, Vadym Hetman’s daughter Iryna Polovko, Petrivka Tsentr Ltd. (part of the Russian Luzhniki group which bought several regional energy supply networks in opposition to the interests of Hryhoriy Surkis and Igor Kolomoisky), and people from other financial institutions who were close to Mr. Yushchenko.

Even more intriguingly, several ZAlK top managers, including CEO Ivan Bastryha, the plant itself and Mr. Zhevago’s Poltava Ore Mining Plant were among the bank’s founders.

First Investment Bank has been known primarily for being picked by Mr. Yushchenko, then the chief of the National Bank, as the designated bank for floating 750 million hryvnias’ worth of internal bonds. This was an astronomical amount at the time – the entire 1998 state budget was less than UAH 30 billion.

This transaction did not really involve any schemes with the loan. After all, even Mr. Yushchenko’s long-time enemies who have consistently accused him of machinations with the Ukraina Bank and IMF loans have not mentioned any backroom deals involving PIB. The only accusation was that when the internal bonds market crashed in 1998, the government was forced to pay for the unwise floatation of these superexpensive bonds – with an annual yield of 70% they allowed the holders to reap sky-high profits directly from the state budget. Who these holders were is only known to those who really controlled PIB, among them Viktor Yushchenko (he was in this capacity for just one day in order to sign the charter of the newly created bank) and his patron, Vadym Hetman, who was killed after the internal bonds market crash.

In any case, it’s not that Mr. Yushchenko violated law in the ZAlK deal. First, no court or investigator has proved this. Second, he acted as everyone else did under President Kuchma – helping a business partner of his brother, lobbying for a controlled bank, as much as he could.

Mr. Yushchenko followed the prevalent pattern. This is what Ms. Tymoshenko did and Viktor Yanukovych is doing now.

For example, six months after Mr. Yanukovych’s inauguration, the Russian owners of ZAlK received a notification from the Prosecutor General’s Office which cited violations of the privatization procedure and demanded that the plant be returned to the state of Ukraine.

At the same time, Mr. Zhevago’s MP card was used back then to vote, in urgent need, in unison with the Party of Regions, which suggested banal reprivatization. However, the topic of nationalization later disappeared from the media. Our sources link this development to the fact that the Russians and their unsinkable lobbyist, Mr. Pinchuk, met with people on Bankova Str., as was the case in 2005.

In general, the Zaporizhia privatization story is proof again that Viktor Yushchenko has never been much of a fighter on his own. As premier, he failed to turn a process worth many millions of dollars in the direction favored by his partners. As president, he failed to secure a discount on electricity for the plant now owned by the Russians with whom he had by then settled all accounts.

This leads us to the conclusion that even if Mr. Yushchenko were “the Lord of the Rings,” he would not be able to solve issuing involving even just one plant, not to mention promises like “Bandits will go to prison!” which would benefit all of Ukraine. Especially today.


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