The Constitutional Court of Ukraine is once again reviewing the constitutionality of the privatization of Ukrrudprom. Unlike the previous attempt, which ended in failure in May 2019, the hand of Ihor Kolomoisky, rather than Viktor Pinchuk, is clearly visible behind this case.
As a reminder, the first attempt to challenge the privatization of key mining enterprises occurred immediately after the Orange Revolution. However, on October 12, 2005, the Constitutional Court refused to consider the constitutionality of the Law on the Privatization of the State Joint-Stock Company "Ukrrudprom."
Clearly, the waters were stirred by those Ukrainian oligarchs who had little to show for their efforts in the carve-up of this strategically important asset. In the early 2000s, the state-owned joint-stock company Ukrrudprom held controlling stakes in iron ore mining and processing plants (MPPs).
In fact, only two large iron ore producers remained outside the perimeter of Ukrrudprom: Poltava Mining and Processing Plant (at that time already controlled by Konstantin Zhevago) and Zaporizhzhia Iron Ore Plant (privatized by the Slovaks).
For Ukraine, iron ore is practically as important a raw material as hydrocarbons are for Russia. Our country consistently ranks among the top ten globally in terms of both proven reserves and iron ore production volumes. However, unlike Russia, where oil and gas exports are the main source of revenue for the state budget, iron ore royalty rates in Ukraine are meager. This is unsurprising, given that Rinat Akhmetov has been the main beneficiary of this resource's production for a decade.
On the eve of the end of Leonid Kuchma's second presidential term, the state-owned company's assets were finally privatized by the largest players in the Ukrainian metallurgy market.
On March 23, 2004, at the initiative of Rinat Akhmetov, Akhmetov (who also represented Oleksandr Yaroslavsky), Igor Kolomoisky (who represented Vadym Novinsky), Viktor Pinchuk, and Grigory Surkis gathered at the Deportivo La Corunas vs. Milan match. They reached the following agreement regarding the acquisition of Ukrrudprom assets:
— Rinat Akhmetov receives the Northern and Central Mining and Processing Plants;
— Igor Kolomoisky — Southern and Ingulets Mining and Processing Plants;
— Victor Pinchuk — Krivoy Rog Iron Ore Plant;
— Grigory Surkis, for his part, asked other financial-industrial groups not to interfere in his fight for the property of Konstantin Grigorishin.
As a result, on April 9, 2004, the Verkhovna Rada of Ukraine adopted the Law "On the Specifics of the Privatization of Enterprises of the State Joint-Stock Company Ukrrudprom," and on April 29, this law was signed by President Leonid Kuchma. Article 2 explicitly states that the purpose of the privatization is "to prevent internal corporate disputes at Ukrrudprom enterprises."
In 2004, Akhmetov's companies acquired 50% plus one share of the Central and Northern Mining and Processing Plants for 106 million hryvnias and 207,6 million hryvnias, respectively. Privat Group acquired 25,78% of the Southern Mining and Processing Plant for 60 million hryvnias and 25,1% of the Sukha Balka Mining and Processing Plant for 18,13 million hryvnias; plus 93% of the Kryvyi Rih Iron Ore Plant for 689,5 million hryvnias, which went to Viktor Pinchuk. Novinskyi, meanwhile, diluted the state's 50% plus one share stake in the Inhulets Mining and Processing Plant through an additional share issue and acquired the remaining 37,5% for 162,9 million hryvnias.
As is typical among Ukraine's nouveau riche, not everything agreed upon was fully implemented. Ihor Kolomoisky, as usual, proved the main troublemaker. In the changed circumstances (the Orange Revolution), he decided to abandon the son-in-law of the now-defunct president and refuse to hand over Kryvyi Rih Iron Ore Plant to him. As a result, nine years later, Viktor Pinchuk was forced to appeal to the London High Court, demanding a whopping $2 billion for the Kryvyi Rih Iron Ore Plant, purchased from the state for less than $140 million. In 2016, the parties reached a settlement agreement, under which Kolomoisky and his traditional partner, Gennady Bogolyubov, transferred their London property to Pinchuk.
Shortly before this, in March 2015, Ihor Kolomoisky (attempting to pressure Pinchuk in their London dispute) spoke at a meeting of the Verkhovna Rada Privatization Committee about violations in the sale of Ukrrudprom enterprises and even demanded the reprivatization of these assets. However, Benya didn't go beyond making loud statements in parliament. But Pinchuk, apparently, was taken with the idea.
As a result, on April 6, 2018, 54 Verkhovna Rada deputies filed a motion with the Constitutional Court requesting that the law on the privatization of Ukrrudprom enterprises be declared unconstitutional. And by April 18, it became known that The Constitutional Court accepted this document for consideration..
The initiators of the consideration of the issue in the Constitutional Court were the people's deputies Pavel Rizanenko and Victoria Voitsitska. Besides this pair, the list of signatories to the Constitutional Submission also included Viktor Pinchuk's virtually official representative in parliament, Olga Belkova, her former assistant (and later MP) Natalia Katser-Buchkovskaya, and a dozen other Euro-optimists. "on grants" from Kuchma's son-in-law.
However, on May 28, 2019, just as the presidential mace was being transferred from Petro Poroshenko to Volodymyr Zelenskyy, the Constitutional Court rejected 54 MPs' requests to declare the law on the privatization of Ukrrudprom enterprises unconstitutional and closed the case.
And yesterday, November 10, the Grand Chamber of the Constitutional Court of Ukraine (CCU) once again considered a similar case in the open part of its plenary session, based on a constitutional motion filed by 45 members of parliament. Unlike last time, the CCU waited more than two years before deciding to review the legality of the privatization of Ukrrudprom.
Perhaps because Ihor Kolomoisky, long perceived as the current president's puppeteer, is behind this initiative. And only now, after the de facto nationalization of Ukrnafta and Ukrtatnafta, can Volodymyr Oleksandrovych afford the luxury of ignoring offensive nicknames like "Benin."
This time, the initiator of the petition to the Constitutional Court is MP Max Buzhansky, who is part of the informal group led by Oleksandr Dubinsky, Kolomoisky's "black media strategist." Besides these two, a third of the 45 MPs who signed the petition are members of parliamentary lobbyists whom the media exposed a year and a half ago as systematically working on behalf of the oligarch: from Andriy Gerus to the infamous Oleksandr Trukhin.
It's clear that Ihor Kolomoisky will no longer receive his share of the proceeds from the latest review of the Ukrrudprom privatization he initiated. It's no coincidence that Justice Minister Denys Maliuska was present at yesterday's meeting. Most likely, everything will be done in the interests of the de-oligarchization announced by the Presidential Office.
And judging by the list of enterprises whose privatization is actually being contested in the Constitutional Court:
• Sukha Balka, 25,1% (currently the beneficiary is Alexander Yaroslavsky);
• Southern Mining and Processing Plant, 25,78% (Rinat Akhmetov, Vadim Novinsky and Roman Abramovich);
• “Northern Mining and Processing Plant”, 50% plus one share (Akhmetov, Novinsky);
• Central Mining and Processing Plant, 50% plus one share (Akhmetov, Novinsky);
• Ingulets Mining and Processing Plant, 37,57% (Akhmetov, Novinsky);
• Krivoy Rog Iron Ore Plant, 100% (Akhmetov, Igor Kolomoisky);
• Dokuchaevsky Flux-Dolomite Plant, 100% (Akhmetov, Kolomoisky, the enterprise is currently located in the occupied territory);
• Novotroitskoye Mining Administration, 100% (Akhmetov, Kolomoisky);
• “Balaklava Mining Administration named after A.M. Gorky”, 100% (Novinsky transferred the enterprise to his brother Malkhasyan after the Russian Federation’s occupation of Crimea);
• Industrial and production enterprise Krivbassvzryvprom, 100% (Akhmetov, Novinsky).
The main loser will be Akhmetov and Novinsky's Metinvest. After all, most of the iron ore enterprises that were part of Ukrrudprom are owned by the "richest Ukrainian," effectively forming the core of his business.
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By topic: The privatization of Ukrrudprom brought oligarchs more than $6 billion.
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