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Last Updated: Saturday, 12 March 2005, 18:28 GMT
Orange clean-up looms in Ukraine
By Marina Denysenko
BBC Ukrainian Service

"My government will not take bribes. My government will not steal", Ukraine's new liberal President Viktor Yushchenko proclaimed as the new cabinet was triumphantly voted in by parliament last month.

Ukraine PM Yulia Tymoshenko
Yulia Tymoshenko has been a fierce critic of corruption
Yulia Tymoshenko, nicknamed "the goddess" of the Orange Revolution and now Ukraine's prime minister, spoke of separating Ukraine's "Siamese twins" - business and politics.

Other key changes were looming: reviewing controversial privatisations, weeding out unfair tax privileges and improving the management of state monopolies by hiring new staff in open tenders.

The ambitious plans are causing a stir in Ukraine's business community and among the public at large.

Ukrainians accustomed to the cronyism and corruption associated with Mr Yushchenko's predecessor, Leonid Kuchma, were stunned by the new government's pledges.

It was hard to believe that the interests of the powerful oligarchs controlling large chunks of Ukraine's economy could be trampled upon.


As in most other former Soviet countries, during Mr Kuchma's reign ministerial offices were often viewed as a mere extension of the oligarchs' business empires, competing for markets and influence.

Crowds in Independence Square, Kiev
Mr Yushchenko's supporters have high expectations

Some have already hailed the new government for transparency.

"They are already more open than the previous Ukrainian governments, they are talking more openly and publicly about the reforms, explaining what they want to do and why they want to do it," said economist Edilberto Segura at the Kiev offices of SigmaBleyzer Investment Bank, in a newspaper interview.

But others see confusion and internal strife within the government about how the reforms should proceed.

The policy of re-privatisation is highlighted: President Yushchenko said some 30 dubious privatisation deals would be revoked, while Ms Tymoshenko said some 3,000 deals had irregularities.

According to Gennady Bogolubov, of the Privat Group industrial holding, "the biggest blow is occurring now, in the uncertain time between the declaration of their privatisation plans and the announcement of the list".

But Russia's Lukoil group announced it was increasing its investment in Ukraine by $300m, while the stock market reported a 200% rise in some shares.

Test case

It is almost certain that top of the list will be the Kryvorizhstal steel mill, which in 2004 went to two Ukrainian business tycoons with close links to the government for some $800m.

Ex-Ukrainian President Leonid Kuchma
The Kuchma years are now under close scrutiny
One was Viktor Pinchuk, Mr Kuchma's son-in-law. The other was Ukraine's richest man, Rinat Akhmetov, who bankrolled the campaign of Mr Yushchenko's rival, Viktor Yanukovych.

The deal was rigged, according to the new government: the LNM Group and US Steel offered twice as much. Ukraine's Supreme Court has ruled the sale of the mill invalid.

"Kryvorizhstal is doomed," says Andriy Blinov of the International Centre for Policy Studies.

"It is about political face. But it is important that everything is resolved through courts, within the legal framework."

The Supreme Court's ruling could be the beginning of a protracted legal battle to return the giant to state hands. Some argue that if applied on a larger scale, it could clog up Ukraine's legal system.

Vested interests

Many Ukrainians remain sceptical about the leadership's willingness to separate business from politics.

Ministers should hand their businesses over, President Yushchenko insisted - and not just to their families, but to outside managers.

Last month the pledge was tested when a scandal erupted over the newly appointed justice minister, Roman Zvarych.

The Ukrainian media claimed that the minister's wife was a top manager in an oil exporting company with illegal multi-million profits.

For the first time Ukraine witnessed a widely publicised conflict of interest concerning a government official. It was not resolved and the minister stayed in the government.

"Double standards are inherent to this government," Andriy Blinov says. "Something is happening, but there is no public information. The government promised to declare the incomes of their family members, but this has not been done."

There are considerable business interests behind several government members, like Petro Poroshenko, head of Ukraine's Security Council, and David Zhvaniya, minister for emergencies.

It is unclear whether any of them has relinquished control over these interests.

Meanwhile, many members of parliament also have strong business interests.

Ms Tymoshenko, who was known to be one of the richest women in Ukraine in the 1990s, insists that her business was destroyed under Mr Kuchma's reign.

"My past and my future testify that I love my country and want to serve its interests," she told Time magazine.

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