Ukraine Rethinks Plan to Reverse Sell-Offs

KIEV, Ukraine -- Viktor Yushchenko, Ukraine's president, may drop plans to renationalise and auction dozens of companies that he believes were sold too cheaply by the former government, according to one of his advisers.

Faced with mounting concerns over the re-auction plan among foreign investors, and the prospect that his government would become bogged down in years of court battles, Mr Yushchenko is weighing alternative proposals that would seek to forge "voluntary" settlements, according to Olexander Paskhaver, a liberal economist who is advising the president on the issue.

The compromise plan, still being drafted, faces strong resistance from people close to the president, according to Mr Paskhaver.

But it comes amid an outbreak of peacemaking gestures from both Mr Yushchenko's administration and the "oligarchs" who dominated privatisation under his predecessor, Leonid Kuchma.

Mr Paskhaver said he believed Mr Yushchenko was looking for a way to scale down his plans without dropping them altogether.

"I'm actively against compulsory revision, which I think would decrease confidence in property rights and cause long-term damage to Ukraine's image," Mr Paskhaver said.

Yulia Tymoshenko, prime minister, said yesterday she saw room for a "peace agreement" over the largest disputed privatisation - last year's $800m (€655m, £442m) sale of the Kryvorizhstal steel mill - but only if the buyers allowed the government to re-auction the mill in an unrestricted tender.

Mr Yushchenko made similar comments on Thursday.

The two main business groups involved in the consortium that bought Kryvorizhstal said they welcomed the offer to start talks. Both System Capital Management (SCM), controlled by industrialist Rinat Akhmetov, and Interpipe, controlled by Mr Kuchma's son-in-law, Viktor Pinchuk, are worried that other companies they acquired separately through privatisation could be taken away if the re-auction plan goes forward.

Mr Paskhaver said Kryvorizhstal was being treated separately from the other sales, since a court challenge to the Kryvorizhstal sale was already under way before Mr Yushchenko came to power.

On Thursday Kiev's Economic Appeals Court upheld a lower court ruling that declared the sale illegal. SCM and Interpipe said they would appeal to the Supreme Court.

Source: Financial Times