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Ukraine prosecutor drops case against steelmaker

KIEV - Ukraine’s state prosecutor on Tuesday dropped a legal action against steelmaker ArcelorMittal which the company had feared could lead to the renationalisation of a plant it bought for $4.8 billion.

The case had prompted speculation Yanukovich could roll back privatisations undertaken during the presidency of predecessor Viktor Yushchenko, to favour Ukrainian entrepreneurs.

“The commercial court has taken the decision to end the case because of the withdrawal of the suit,” said commercial court judge Oleh Khripun, reading out his decision.

Rinat Starkov, chief executive of the Kryvy Rih steel mill, welcomed the court’s decision, saying it would help restore the ex-Soviet republic’s image as a place to invest.

“At first, one can say, its image suffered. But today’s decision, the speed of the hearing and the speed with which the decision was taken suggest that (Ukraine’s) image has been restored,” he told reporters.

The state prosecutor’s representative declined to comment.

Shares in ArcelorMittal pared losses after the news and traded down 1 percent after earlier sliding as much as 3.3 percent.

The court’s decision coincided with a government statement on the sell-off of Ukraine’s biggest telecommunications firm, Ukrtelecom , at a starting price of $1.3 billion, in line with plans announced late last month.

Some commentators had said foreign investors would be scared of participating in any auction of Ukrtelecom if the court case had gone against ArcelorMittal.

DELAYING INVESTMENT

The prosecutor had alleged that ArcelorMittal violated terms of its 2005 purchase of the eastern Ukrainian plant by subsequently delaying investment in it without valid permission.

ArcelorMittal said it reached a legal agreement with Ukraine’s State Property Fund to put off investment commitments after declaring force majeure in the global downturn of 2008-9.

Some commentators had linked the case to the political change of guard in Ukraine, in which Yanukovich took over last February from Yushchenko, and speculated that the plant could be renationalised and put up for sale again.

But Yanukovich, speaking last Friday on an official visit to Paris, appeared to rule this out. He said there was no question of “any rupture in the privatisation agreement of this factory”.

The company had warned that if the court case went against it, foreign investor confidence could be shaken in Ukraine which is striving to get its economy back on its feet after being hit hard by the global crisis.

Re-nationalised, then re-privatised

Ukraine first privatised Kryvy Rih in 2004 selling it to local industrialists for $800 million in a move that drew sharp criticism from the opposition and fanned the flames of the “Orange Revolution” which brought Yushchenko to power.

In 2005, acting on its anti-oligarch agenda, Yushchenko’s government re-nationalised the plant after a court ruled that the initial sale had been made at an artifically low price.

It was subsequently bought by Mittal Steel, now known as ArcelorMittal, for more than five times the $800 million which oligarch groups had paid.

CEO Starkov said after Tuesday’s hearing that the company was ready to discuss fulfilment of its obligations with the Ukrainian government.

“We are ready to return to a normal dialogue and if the Cabinet of Ministers has any proposal or criticism we are always ready to sit down at the table for open dialogue and work out a compromise.

“What does not suit us is administrative pressure ... and an attempt to settle things through the court,” he said.