Publication: Eurasia Daily Monitor Volume: 2 Issue: 131

A shadow has been cast on the integrity of Ukrainian Prime Minister Yulia Tymoshenko, as two “oligarchs” vie for control over a lucrative steel business. For the past several weeks the Ukrainian media has been rife with a rumor saying that the Dnipropetrovsk-based Privat group was buying Ukraine’s second-most popular TV channel, 1+1, for Tymoshenko, in exchange for the government taking the Nikopol Ferroalloys Plant (NFZ) from “oligarch” Viktor Pinchuk and passing it to Privat. Tymoshenko has been too slow to deny this allegation, which may damage her reputation ahead of next year’s parliamentary elections. Ukrainians do not like their oligarchs, and the allegations against Tymoshenko of conniving with one tycoon against the other are sure to damage her popularity.

In mid-June several Ukrainian and Russian websites reported that television manager Oleksandr Rodnyansky and his German partner, Boris Fuchsmann, had sold their minority stakes in 1+1, a business that they co-own with Ronald Lauder’s Central European Media Enterprises (CME), to Privat. This was confirmed by Ihor Kurus, a member of the Ukrainian National Council for TV and Radio Broadcasting, which regulates the media. Ukrainian websites circulated the rumor that Tymoshenko was somehow involved in the negotiations. But on June 22 Rodnyansky, who is chair of the 1+1 board of directors, issued a statement for the media saying that nothing has changed in the structure of 1+1’s ownership. Rodnyansky advised Kurus to “use competent and reliable sources of information.” But on June 24 CME said that it was going to consolidate its ownership of 1+1 to 60%, thereby indirectly confirming that something was going to change at 1+1.

On June 23 an anonymous source from Yushchenko’s secretariat was quoted by Telekritika as saying that Privat was finalizing the purchase of Rodnyansky’s and Fuchsmann’s shares in 1+1. Then, according to the source, Privat would pass the 40% stake in 1+1 bought from them to “one of the companies controlled by Tymoshenko personally” in exchange for the government passing control over NFZ to Privat. Telekritika, a news outlet for media specialists, does not target wide audiences, and the report might have passed unnoticed but for the newspaper Fakty, which quoted Telekritika as a source for its own article repeating the allegation. Fakty, which is one of Ukraine’s most popular dailies, is linked to former President Leonid Kuchma’s son-in-law, Viktor Pinchuk, who bought NFZ from the state in 2003. Pinchuk’s ownership of NFZ has been disputed in court, and Privat, which is a minority holder in Nikopol, does not conceal its intention to acquire NFZ by purchasing it from the state in a re-privatization tender if Pinchuk fails to prove that he bought NFZ honestly.

On June 28 Russia’s Renova management group announced that, together with Yevrazholding, it was buying a controlling stake in NFZ. Apparently Pinchuk used a recess between court hearings in order to get rid of the political hot potato by selling it to the Russians. Privat has protested against the planned transaction, recommending that the buyers thoroughly check whether NFZ’s sellers had the right to sell it in the first place. Tymoshenko also warned the Russian businesses that they might face legal problems over NFZ. Tymoshenko’s interference has been a boon to her critics, who claimed her warning was proof of connivance with Privat’s boss, Ihor Kolomoysky, against Pinchuk.

On July 2, asked by journalists about her relations with Privat, Tymoshenko denied having special sympathies for this oligarchic group. “My relations with all representatives of businesses are absolutely official,” she said. Speaking in a televised interview on July 3, Tymoshenko vehemently denied reports saying that she planned to take control over 1+1 in exchange for helping Privat buy NFZ from the state. She noted that this allegation had been disseminated by Pinchuk-controlled media. “In order to protect his turf, he slings mud at the government,” she said. Tymoshenko was probably too late with her denial, and the resulting media storm will be hard to quell.

The Ukrainian edition of the Russian magazine Ekspert wrote on June 27 that Privat was going to take control over 1+1 in order to influence next year’s parliamentary elections in Ukraine. Ekspert called Privat “the Orange oligarchs,” and claimed that Privat had contributed to financing the youth organization Pora, which was a key player for Tymoshenko and President Viktor Yushchenko in the Orange Revolution last December. And muckraking Obkom website wrote, “Obviously, after re-privatization Tymoshenko will ensure priority treatment for Privat in a tender for the state-owned stake in NFZ.” Furthermore, “If Privat pays more than Pinchuk, everybody except the latter will be satisfied — the budget will get funds, Tymoshenko political assets, and Kolomoysky a lucrative property,” Obkom concluded.

(Ukrrudprom.com, June 16; Rupor.ru, June 21; Ukrayinska pravda, June 22, July 2; Telekritika.kiev.ua, June 23; Korrespodent.net, June 25; Expert-Ukraina, June 27; Interfax-Ukraine, June 28; Fakty, July 2; Inter TV, July 3; Delovaya stolitsa, Obkom.net.ua, July 4)