Publication: Eurasia Daily Monitor Volume: 5 Issue: 80

Ukrainian President Viktor Yushchenko and Prime Minister Yulia Tymoshenko have demonstrated that they would not stop short of open confrontation when big property is at stake. Yushchenko cancelled Tymoshenko’s orders to replace the head of the privatization body, the State Property Fund (FDM), and to privatize one of the last big factories still remaining in state ownership, the Odessa Portside Plant (OPZ). Tymoshenko, with the courts on her side, disobeyed and instructed her subordinates, perhaps for the first time ever, to ignore Yushchenko’s orders. Yushchenko sent his guards to protect the FDM from Tymoshenko’s team, and confrontation between the Presidential Guard and police was barely avoided.

Yushchenko opposes Tymoshenko’s efforts to privatize big industry assets in 2008. Tymoshenko makes no secret of her plan to spend money raised from privatization on compensations to those Ukrainians who lost their savings in the defunct Soviet state savings bank and on other social programs. Yushchenko says that Tymoshenko’s plan is tantamount to squandering national wealth. His team suspects that Tymoshenko wants to use privatization proceedings to buy popular support for the 2010 presidential election.

The Tymoshenko cabinet approved a privatization plan for 2008 in February. It provides for raising some $1.8 billion by privatizing assets in electricity companies, the Ukrtelekom fixed-lines operator, the Turboatom manufacturer of equipment for nuclear plants, and OPZ, which is the key producer of ammonia and carbamide. OPZ is probably the most attractive of those assets. Tymoshenko plans to sell it for over $500 million. From February to April 2008, Yushchenko issued several decrees suspending Tymoshenko’s privatization orders, including OPZ privatization.

Tymoshenko tried to replace FDM head Valentyna Semenyuk, who has survived several cabinets from 2005 to 2008 in this position. She believes that Semenyuk has been torpedoing her privatization efforts on orders from Yushchenko. On February 6 Tymoshenko suspended Semenyuk and appointed Andry Portnov, a member of her party, to replace her. However, Yushchenko decreed on February 7 to suspend Semenyuk’s dismissal and requested the Constitutional Court (KS) to check the legality of Tymoshenko’s order. He recalled that in 2007 he had decreed that the FDM was not part of the executive, so Tymoshenko could not replace its head.

Yushchenko lost to Tymoshenko in the KS, which threw out his appeal on April 17; but Yushchenko appealed again on the same day. Tymoshenko argued that Yushchenko could not appeal on the same matter twice, and she reportedly decided to replace Semenyuk by force. Yushchenko warned her against this at his press conference on April 24. He said that only parliament could replace Semenyuk.

Yushchenko slammed Tymoshenko’s privatization policy. “What’s happening to privatization in Ukraine now reminds me of a seasonal sale at a Kiev supermarket,” he said, “but in our case national security is at stake.” He warned against “sweet populism.” He said that he was not against OPZ privatization but that OPZ should be privatized without its transshipment facility, which was also used by other companies in the region. Therefore, according to Yushchenko, it was of strategic importance for Ukraine.

On April 23 Yushchenko ruled to replace the Interior Ministry’s security guards at the FDM with the Presidential Guard in order to prevent the FDM’s takeover by force. The Interior Ministry reportedly had not been warned of that decision so that its security could offer resistance; but common sense prevailed. The FDM passed under Yushchenko’s armed control without violence. When a district court in Kyiv confirmed Semenyuk’s suspension on April 24 and Tymoshenko arrived at the FDM on April 25 personally to install Portnov in Semenyuk’s place, Semenyuk, protected by Yushchenko’s guards, did not move.

The same court ruled to continue OPZ privatization, but on April 25 Yushchenko decreed it suspended again. Tymoshenko instructed Portnov to disobey Yushchenko’s decrees and to carry on with OPZ privatization. This time the Prosecutor-General’s Office intervened, canceling Semenyuk’s suspension by Tymoshenko. In response, the Yulia Tymoshenko Bloc threatened to launch a no-confidence motion against Prosecutor-General Oleksandr Medvedko in parliament.

First Deputy Prime Minister Oleksandr Turchynov, speaking in a TV interview, accused Yushchenko of pursuing “private interests” in privatization. Turchynov did not specify what those interests were. Zerkalo Nedeli quoted “rumors” suggesting that OPZ was contested by the Ukrainian tycoons Kostyantyn Zhevaho and Ihor Kolomoysky. Zhevaho is a member of Tymoshenko’s party, while Kolomoysky pledged in a recent interview that he would back Yushchenko in a presidential election.

Speaking at a talk-show on Inter TV, Semenyuk said that she would not go until parliament replaced her. Semenyuk knows that parliament will not do that any time soon, as the biggest caucus in it, the opposition Party of Regions, will hardly back Tymoshenko in her dispute with Yushchenko. Semenyuk accused Tymoshenko of trying to sell OPZ “for a song” in order to “pay the oligarchs” for political support. Semenyuk also said that OPZ should not be privatized at a time when “world prices and the Ukrainian stock market are falling” (Ukrainska Pravda, April 2, 26; UT1 TV, April 24; Channel 5, Inter TV, April 25; Zerkalo Nedeli, April 26).