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Ukraine oligarch calls for nationalisation of industrial assets

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Ukraine oligarch calls for nationalisation of industrial assets

One of Ukraine’s most powerful oligarchs has called for some of the country’s prized industrial assets to be nationalised, claiming that their privatisation was a criminal conspiracy to rob the state of billions of dollars.

Igor Kolomoisky, a billionaire businessman, told the Financial Times that Ukraine should not receive any new funds from the International Monetary Fund until all “illegally” privatised property had been restored to state ownership.

“Ukraine is going round begging for money . . . and here is money that is due to the state. Return these enterprises, put them up for sale in an open tender and you will get 10 times more than you did [before],” he said, adding that any new auctions could raise tens of billions of dollars.

Ukraine has secured a $17.5bn rescue package from the IMF, and last week started talks on restructuring $15bn in debt, as it seeks to plug a $40bn hole in state finances over the next four years.

Mr Kolomoisky’s proposal represents a political bombshell, and a direct challenge to his fellow oligarchs who scooped up state assets at often knockdown prices in the privatisations of the 2000s. Critics say his motives may be less patriotism or a sense of fair play than a desire to gain advantage over his business rivals in the febrile atmosphere of post-revolutionary Ukraine.

But opening up past privatisations could raise concerns over the sanctity of property rights in Ukraine and destabilise its already fragile business climate, experts warn, at a time when the country is struggling to cope with a deep economic crisis brought on by the war against Russian-backed separatists in the east.

Arseniy Yatseniuk, Ukraine’s prime minister, reacted cautiously to Mr Kolomoisky’s proposal, telling the FT it could “open a Pandora’s box” if the decision on whether privatisations were right or wrong were made by a “corrupted judiciary”.

Mr Kolomoisky’s call comes amid intensifying disputes between Ukraine’s oligarchs. The most public of these is the multibillion-dollar legal battle being heard in the High Court in London that pits Mr Kolomoisky against Viktor Pinchuk, a rival tycoon.

The two are fighting over ownership of a Ukrainian iron ore mine, KZhRK, part of a state-owned conglomerate known as Ukrrudprom sold off in 2004. The case is being closely watched amid concern it could set a precedent for disputes over further assets.

Mr Pinchuk, son-in-law of Leonid Kuchma, Ukraine’s then-president, claimed in his lawsuit that Mr Kolomoisky and business partner Gennady Bogolyubov bought the stake in KZhRK on his behalf, but then reneged on an agreement to transfer ownership of the shares to him.

However, Mr Kolomoisky said both he and Mr Bogolyubov reject this version of events. In court filings, Mr Kolomoisky claimed Mr Pinchuk demanded the stake in KZhRK in return for Mr Kuchma signing the legislation privatising Ukrrudprom. Speaking in parliament, he accused Mr Pinchuk of effectively trying to “extort a bribe”.

In a statement to the FT, Mr Pinchuk’s office said he rejected “all suggestions of wrongdoing”. Mr Kolomoisky’s allegations were “simply the latest stage . . . [of] an improper campaign to put pressure on Mr Pinchuk to call off his lawsuit”, the statement said. “As with previous attempts, it will not work”

Rinat Akhmetov, Ukraine’s richest man, who also bought a stake in KZhRK and other iron ore mines, said all his group’s assets were acquired “lawfully and properly”. Mr Kuchma could not be reached for comment.

Mr Kolomoisky is himself a controversial figure in Ukraine with a reputation for aggressive business tactics. On Friday, lawmakers appealed to Petro Poroshenko, Ukraine’s president, to fire Mr Kolomoisky from his post as a regional governor after he attempted to block management changes at a state energy company and subjected a journalist, who was making enquiries, to an expletive-laden rant.

Mr Kolomoisky’s criticism of the Ukrrudprom process has added resonance because of the fact he was a beneficiary of it. He told a Ukrainian parliamentary committee this month that the privatisation procedure was designed to restrict the number of potential bidders and ensure the assets ended up in “the right hands”.

“The law [on Ukrrudprom] was shameful, humiliating and criminal,” Mr Kolomoisky told the FT. “This was a planned conspiracy to commit a crime.”

Mr Kolomoisky intends to submit evidence of the alleged wrongdoing to Ukrainian prosecutors, in the hope they will launch an investigation into the sell off of Ukrrudprom. He also said that if local prosecutors confirm evidence of collusion, bribery and tender rigging, all the Ukrrudprom mines privatised in 2004 should be “expropriated”, without compensating their current owners.

Assets sold off under the ousted president Viktor Yanukovich in privatisations that were widely criticised at the time as rigged should also be “returned to the people”, Mr Kolomoisky said, including utilities such as Dniproenergo and the country’s main fixed-line telecoms group.

“Until we cleanse ourselves of the past, we won’t be able really change this country for the better,” he said.

http://www.ft.com/intl/cms/s/0/77ed11d2-ce57-11e4-86fc-00144feab7de.html#axzz3me86TYcU

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