Ukrainian steel corp. dispute widens

IEV, Ukraine - Hundreds of workers lined up outside a major steel factory amid barbed wire and police barricades Thursday as tensions spiked in a dispute involving dueling shareholders in the lucrative factory, which the government alleges was improperly privatized.

Officials from Interpipe Corp. - Ukraine's largest steel corporation and owner of the Nikopol Ferroalloy plant - charged that a government agency and an allied bank was trying to take over factory in Nikopol.

Neither officials at the state-run State Property Fund nor officials with the Kiev-based Privat Bank, a minority shareholder in the factory, could be reached for comment Thursday.

But Viktor Pinchuk - a top official at Interpipe and son-in-law of former President Leonid Kuchma - flew with his associates to the southwestern city to stop what they said was a hostile takeover at a meeting to which Pinchuk and the board of directors had not been invited.

"This is a factory in Ukraine, a democratic Ukraine that is at the threshold of the 21st century. I came here and there is barbed wire. What are we doing? Who needs this? " Pinchuk said in comments broadcast on Russian state-run television.

Pinchuk's spokesman, Laurent Dondey, said workers from nearby mines were being used by the government to cause trouble at the plant.

"They could try to start a fight with workers from the factory in order to bring police to the scene which would then clean up the area and take over the factory," Dondey said.

The dispute in the latest skirmish involving key Ukrainian industries, businesses and enterprises that were privatized under Kuchma. His successor - Viktor Yushchenko - has said many of the enterprises were illegally or improperly privatized and pledged to undo suspect deals that put state property in the hands of people close to the previous regime.

Interpipe was sold to Pinchuk during Kuchma's term in office. Yushchenko's allies have suggested its privatization was suspicious and prosecutors are investigating.

Russian television showed hundreds of workers lined up outside the plant with flags on Thursday. Barbed wire was strung outside the main entrance of the factory, along with police barricades.

"(The workers) are patrolling the plant day and night and they have set up tents. People just want to live normally," said Yevgeny Bazorkin, a labor union spokesman.

Interpipe produces steel pipes and the Nikopol plant serves at least 15 of the world's leading steel conglomerates including U.S. Steel Corp. and Germany-based ThyssenKrupp.

Interpipe's first deputy chairman, Maksim Basov, said Wednesday that the privatization of the Nikopol plant "was done legally" and that the company insists that any review "be done within the bounds of the law, not for somebody's business interest or because of political motives."

Pinchuk is a Kremlin Krook who stole what he has and he belongs in jail.

"MAJOR STEEL GROUPS LINE UP TO BID ON UKRAINE'S
BIGGEST STEELMAKER KRYVORIZHSTAL

By Rebecca Bream in London, Tom Warner in Kiev and Arkady Ostrovsky in Moscow Financial Times, London, UK, Wednesday, May 26, 2004

LNM, the world's second largest steel producer, is to bid against Severstal of Russia in the politically sensitive $1bn privatisation of Ukraine's biggest steelmaker.

As well as competing with each other for a 93 per cent stake in Kryvorizhstal, the foreign groups will be pitted against Ukrainian metals group Interpipe.

Severstal has complained that the terms of the privatisation favour Interpipe, which is controlled by Viktor Pinchuk, the son-in-law of Leonid Kuchma, Ukrainian president. One requirement is that bidders must have produced at least 1m tonnes of coke in Ukraine for the last three years, a requirement only Interpipe could meet.

The Ukrainian government has set a starting price of $714m for the tender but it is thought that the bidders will be prepared to pay up to $1bn for Kryvorizhstal's iron ore mines and 6m tonnes of annual steel production. Bids are to be submitted by June 4 and the government is expected to make a decision by June 11.

Severstal has formed a consortium with minority partner Arcelor to bid for Kryvorizhstal. "We think that these terms prevent an honest competition and the participation of foreign investors in this tender," the company said. "Ukraine is missing a chance to attract capital which it needs so badly and to develop its metallurgy industry."

Guess you didn't get the note from Tymoshenko, she's planning on nationalizing the asset, part of her capitalist drive, right along with price settings on oil, gas, meat and milk. Talked an hour yesterday night with friends in Dnepepitrovsk. They said that the local butcher shops were closing up as the government mandated price for meat is just at or below cost. Further, the new minimal wage is probably going to bankrupt them. They own a shoe factory and rent space to other shoe makers. They are in shock over this and can't make payroll anymore. What a great capitalist system Ukraine now has. Why Uncle Yuschenko knows just what price everything should be, better then the government.

The best kicker now is that the Russian oil companies are talking about fully pulling out of Ukraine as the new government price for gasoline is killing any profitability.

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