The Constitutional Court of Ukraine is once again examining the legality of Ukrrukprom's privatization. This time, Igor Kolomoysky is more involved than Victor Pinchuk, unlike the previous attempt in May 2019.
It's important to note that the first challenge to the privatization of major mining industry enterprises occurred right after the Orange Revolution. However, on October 12, 2005, the Constitutional Court declined to review the constitutionality of the Law on Specifics of Privatization of Ukrrrukprom.
Clearly, the Ukrainian oligarchs didn't stand to gain much from devaluing this strategically important asset. In the early 2000s, the state-owned company Ukrrrhudprom held controlling stakes in iron ore mining and processing plants (GOKs).
At that time, only two major iron ore producers were not part of Ukrrrukprom: Poltava Mining and Processing Integrated Works (already controlled by Konstantin Zhevago) and Zaporozhye Iron Ore Works (privatized by the Slovaks).
Iron ore is crucial to Ukraine, much like hydrocarbons are to Russia. Ukraine consistently ranks in the world's top ten in proved reserves and iron ore extraction. In contrast to Russia, where oil and gas exports are the primary source of state budget replenishment, Ukraine's iron ore resources yield minimal rent, largely benefiting Rinat Akhmetov for the past decade.
On the eve of the end of Leonid Kuchma’s second presidential term, the state-owned company’s assets were finally privatised by the biggest players in the Ukrainian metallurgy market.
On March 23, 2004, Rinat Akhmetov, Ihor Kolomoiskyi, Victor Pinchuk, and Grigory Surkis met and reached an agreement to acquire the ownership of Ukrrrukprom's assets:
– Rinat Akhmetov acquired Northern and Central Mining and Processing Plants;
– Igor Kolomoyskyy got South and Ingulets GOKs;
– Viktor Pinchuk obtained the Krivoy Rog iron ore plant;
– Grigory Surkis requested other FIGs not to interfere in his fight for the property of Konstantin Grigorishin.
As a result, on April 9, 2004, the Verkhovna Rada of Ukraine passed a law “On the Specifics of the Privatisation of Ukrrrrukprom Enterprises,” and on April 29, President Leonid Kuchma signed it. Article 2 openly states that the purpose of the privatization is “to prevent internal corporate disputes at Ukrrrukprom enterprises…
In 2004, Akhmetov’s companies bought 50%+1 share in Central and Northern Mining for UAH 106m and UAH 207.6m respectively. Privat Group bought 25.78% of shares in Yuzhny Mining for UAH 60mn and 25.1% in Sukhaya Balka for UAH 18.13mn; plus 93% in Krivoy Rog iron-ore plant for UAH 689.5mn in favor of Victor Pinchuk. Novinsky diluted a state-owned stake of 50%+1 share in Ingulets GOK by issuing additional shares and bought the remaining 37.5% for UAH 162.9 million.
In line with typical behavior among Ukrainian nouveau riche, not all aspects of the agreement were fully implemented. Igor Kolomoisky was a major disruptor, choosing to act against his son-in-law, the incumbent President, following the Orange Revolution. Victor Pinchuk later went to the High Court in London, demanding as much as $2 billion for the Krivoy Rog iron ore plant, which was purchased from the state for less than $140 million. In 2016, they reached a settlement agreement, and Kolomoisky and his traditional partner, Gennady Bogolyubov, gave Pinchuk the London property they owned.
Shortly before that, in March 2015, Igor Kolomoisky said at a meeting of the Verkhovna Rada Privatisation Commission that there were problems in the sale of Ukrrrukprom companies and even demanded that the assets be sold again. However, at that time Benya only made loud statements in the Parliament. On the other hand, Pinchuk seemed to like the idea a lot.
As a result, on 6 April 2018, 54 MPs of the Verkhovna Rada submitted a motion to the Constitutional Court to declare the law on the privatisation of Ukrrrukprom companies unconstitutional. And on 18 April it was announced that the Constitutional Court accepted the document for consideration.
The MPs Pavlo Rizanenko and Viktoriya Voytsitskaya initiated the Constitutional Court's consideration of the issue. In addition to them, the list of signatories to the Constitutional submission also included Viktor Pinchuk’s almost official representative in parliament Olga Belkova, her ex-assistant (and later MP) Nataliya Katser-Buchkovskaya, and several more Eurooptimists “on grants” to Kuchma’s son-in-law.
However, on 28 May 2019, just as the presidential mace was passing from Petro Poroshenko to Volodymyr Zelensky, the CC rejected 54 MPs’ requests to declare the law on the privatisation of Ukrrrukprom enterprises unconstitutional and closed the case.
Yesterday on 10 November, the Grand Chamber of the Constitutional Court of Ukraine (CCU) was considering a similar case based on the constitutional motion by 45 MPs in an open plenary session. Unlike last time, the CCU waited more than two years to hear the issue of the legality of the privatization of Ukrrrukprom.
Perhaps because Igor Kolomoisky, who has long been seen as the puppeteer of the current president, is behind this initiative. And only now, after the de facto nationalization of Ukrnafta and Ukrtatnafta, Vladimir Oleksandrovych can afford the luxury of ignoring hurtful nicknames like ‘Benin’.
This time the initiator of the submission to the CC is MP Max Buzhansky, who is part of the informal group of Oleksandr Dubinsky, Kolomoisky’s “black media technologist”. Among the 45 MPs-signatories, a third are among those parliamentary lobbyists whom the media has accused of working in the interests of the oligarch: starting with Andriy Gerus and ending with Oleksandr Trukhin.
It's clear that Igor Kolomoysky will not benefit anymore from another review of the Ukrrrukprom privatization results initiated by him. That's probably why the Minister of Justice Denis Malyuska attended yesterday's meeting. Most likely everything will be done in line with the de-oligarchization announced by the Presidential Office.
And looking at the list of companies whose privatization is actually being challenged by the CC:
– “Sukhaya Balka, 25.1% (Oleksandr Iaroslavskyi is now the beneficiary);
– “Southern Mining and Processing Plant”, 25.78% (Rinat Akhmetov, Vadim Novinsky and Roman Abramovich);
– “Northern Mining and Processing Combine”, 50% plus one share (Akhmetov, Novinsky);
– “Central Mining and Processing Plant”, 50% plus one share (Akhmetov, Novinsky);
– “Inguletskiy Mining and Processing Combine”, 37.57% (Akhmetov, Novinskiy);
– “Krivoy Rog Iron Ore Plant”, 100% (Akhmetov, Igor Kolomoysky);
– “Dokuchaevskiy Flux-Dolomitny Combine”, 100% (Akhmetov, Kolomoisky, the enterprise is now in occupied territory);
– “Novotroitskoye Rudoupravlenie”, 100% (Akhmetov, Kolomoisky);
– “Balaklavskoe Rudoupravlenie named after A.M. Gorky”, 100% (Novinskiy transferred the enterprise after the Russian occupation of Crimea to his brother Malkhasyan);
– “Kryvbasvzvzryprom Industrial and Production Enterprise”, 100% (Akhmetov, Novinsky).
Akhmetov and Novinsky’s Metinvest will be the main casualty. After all the biggest part of the iron ore enterprises belonging to Ukrrrukprom belongs to “the richest Ukrainian” making, in fact, the basis of his business.
Oleg KALITA, Nikita AFANASYEV
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