November 20 is the deadline for a commercial tender to sell a 68.01% share in the Zaporizhzhia Aluminum Combine (ZALK). ZALK’s fate will be ultimately sealed in February. The enterprise’s general manager, Ivan Bastryha, feels an evil presentiment. Despite the president’s support Mr. Bastryha enlisted the week before last, the State Property Fund of Ukraine has turned down the aluminum workers’ plea to include a factory’s representative in the tender commission.
“Leonid Kuchma said I’ve taken a pro-state stand,” Mr. Bastryha said at a press conference. “The head of state instructed Messrs. Bondar and Yekhanurov to take into account this opinion and accept the ZALK management’s proposal. However, they killed this alternative. What we demand is a concrete investment program supported by guarantees from prominent European banks to grant the combine an investment loan. Privatization should become a turning point for the enterprise rather than another recurring bluff.” The general manager believes, “Even now there are some serious investors prepared to make contributions to the combine’s development. Kaiser Aluminum, a US corporation, has recently presented a reconstruction project, which envisions tremendous changes, such as retooling the electrolysis-based production; building dry gas- purifiers, a sintered-anode shop, an aluminum foil plant, etc. Kaiser guarantees the involvement of Europe’s largest banks in the project. But we see today that the government ignores our opinion. What worries Messrs. Bondar and Yekhanurov most is how big a jackpot they will try to hit at any price in order to get the privatization revenues the Cabinet has projected for 2001. In all probability, industrial development is secondary for them.
“I know all the tender participants,” Mr. Bastryha said. “It would be unethical to name them now. Registration is still continuing. I know the financial capacities of each. Most of them are unable to invest in the aluminum industry. And those who are able (Mr. Bastryha must mean Siberian Aluminum — Author) are not interested in seeing us as competitors. The government- proposed privatization scheme is destructive. Of decisive importance in the tender will be the value of the state-owned share. This is typical Soviet mentality: grab everything at once and then don’t care. I take an opposite stand. For example, a plant like ours was bought in Sweden for one krona. But the government set a number of conditions for the new owners: to keep jobs and tax revenues intact, raise wages, and improve the environment. And what about us? The starting price of a block of shares in the aluminum works is $31.7 million. Suppose it will be bought for $50 million. That will be the end of it. The new owners will begin to recover the money invested and then suck profits out of the enterprise as long as it is able to provide them. But I think they can sell the stake at a starting price but then they should require concrete investment commitments, including annual profit growth.”
Mr. Bastryha also said the government had opted for an ill-considered approach to the solution of energy problems: “The integrated works never ran up debts in the first six months. We paid on the dot. Still, we were underfunded! Last year ZALK was denied UAH 55 million and used 25 million to repair equipment that broke down ahead of time due to power outages. Who was held responsible for this? All my appeals to prosecutors and the government remained unanswered. There was nobody to punish! No sooner had we made a money-free settlement, than the government issued a resolution on a price rise and settlement, based on money. In a matter of two months, the works became a debtor. Well, let them cut the power! After all, this is a state-run business. I am tired of fighting the Cabinet. I have repeatedly suggested to Yuliya Tymoshenko that she entrust a government commission with looking into and analyzing the situation and make sure that ZALK is unable to buy electric power, which accounts for 40% of our product cost, at such prices. However, this suits the government just fine. Not so long ago, oblast governor Oleksiy Kucherenko and I met Viktor Yushchenko. I asked him: ‘Are we in a market economy?’ He replied that we are. ‘Then why am I, an economic entity, being strictly told by Ms. Tymoshenko where and at what price to get gas?’ I also told her: my dear Ms. Tymoshenko, please stay out of my affairs. I will buy gas at a price favorable for the seller and suitable for me, the buyer. Aluminum is the same throughout the world. So the price for it cannot vary much. But we still think we are the wisest and hope to maintain the price at three cents a kilowatt.
“I sat with Ms. Tymoshenko and said: ‘I understand that you are Vice Premier. You are responsible for the fuel and energy complex. This is your pain. But there is also the state. You must, after all, reconcile your actions with its interests! You are solving your own problem by everything else go down the drain! Nobody needs your electric energy at such prices because nobody needs our products at these prices. Besides, you cannot guarantee uninterrupted supply.’ The generation facility director bears no responsibility. He’s got accidents, his units break down! But what has this got me? I paid! Suppose a unit goes out, and ZALK incurs losses: let the generating facility pay me. No, the government is sitting pretty and ‘carrying out reforms:’ as soon as frequency drops, they cut us off. This is utter irresponsibility!”
The government categorically refuses to accept the Zaporizhzhia oblast governor’s idea of establishing an independent regional energy market. According to Mr. Bastryha, this is crystal clear. If a region assumes responsibility for fuel procurement and rational distribution among consumers, the government will lose levers of power. On the other hand, the situation is reaching absurdity. “If formerly,” Mr. Bastryha continues, “in the Soviet period, electric power suffered losses, God forbid, up to 7% in the mains, the government would immediately dismiss, expel from the Party, and even put behind bars a number of officials. But today, Ukraine’s Cabinet sets pre- planned losses as high as 15%! As to ZALK, it loses 0.7% in the summer and 0.3% in the winter. Does this mean the government is trying to cover, at our expense, the losses incurred on the state due to its own incompetence? Absurd! Yet, I haven’t lost hope. I think Mr. Kucherenko and I will be able to wrest privileges for such energy-intensive enterprises as ZALK. I am not clinging to my chair. I am an industrialist who knows the true honor and value of the works. But, as long as I am director, my stand remains unshakable. It is based on the protection of both regional and national interests. Will they cut us off the electric mains? Well, I’ll take my briefcase and go for a walk. The workers will be on the street. The equipment will again break down. Then let the government decide whether the state has gained or lost.”
The threat of an energy blockade hangs not only over the aluminum combine but also on other metallurgical plants. Power was cut off for several days from the Dniprospetsstal, Zaporizhzhia Ferroalloy Plant, and a series of other facilities. The managers categorically refuse to comment on the premier’s policies. Do they fear it will get even worse?
