Shaken oligarchs keep their money on Yanukovich

Shaken oligarchs keep their money on Yanukovich
By Stefan Wagstyl and Tom Warner
Published: November 25 2004 19:40
Last updated: November 25 2004 19:40
http://news.ft.com/cms/s/25bfb1fa-3f18-11d9-8e70-00000e2511c8.html

The sight of hundreds of thousands of protesters in Kiev has rocked
Ukraine's business oligarchs who mostly backed the bid by Viktor
Yanukovich, prime minister, for the presidency.

Business leaders assumed the authorities would deliver the required
result and deal effectively with any public backlash in favour of the
opposition candidate, Viktor Yushchenko.

But the scale of the demonstrations, road blocks and strikes has shocked
them, and their influence is critical, as they have acquired their
wealth and power by working closely with Leonid Kuchma, the outgoing
president.

Most remain wedded to Mr Yanukovich, especially the barons of his
political heartlands in the industrialised Donetsk region. But a few are
beginning to wonder whether Mr Yanukovich still offers the best
protection for their interests.

Many are also coming under pressure from employees who are openly
supporting Mr Yushchenko - putting up posters in factories and
workplaces and taking time off for demonstrations.

Much will hinge on the attitudes of the country's two wealthiest men.
One is Viktor Pinchuk, Mr Kuchma's son-in-law and head of a business
empire that ranges from manganese to media, including the Novy Kanal,
STB and ICTV television channels.

The other is Rinat Akhmetov, the chief of a steel and coal empire based
in Donetsk and Mr Yanukovich's main business backer.

Mr Pinchuk has profited hugely from his relationship with Mr Kuchma and
has encouraged his broadcasters to back Mr Yanukovich.

However, Mr Pinchuk has in past Financial Times interviews portrayed
himself as a middle-of-the-road figure interested in integrating
Ukraine's economy with the west as well as with Russia.

Olexander Tkachenko, the head of Mr Pinchuk's Novy Kanal, said on
Thursday that business people such as Mr Pinchuk could "act as a bridge
between those who are in power now" and Mr Yushchenko and his allies. "I
believe they want to have a consensus," he said.

Mr Tkachenko, who has previously backed Mr Kuchma and almost certainly
voted for Mr Yanukovich, said he would now support Mr Yushchenko.

He criticised the authorities for confirming Mr Yanukovich as the
official election winner on Wednesday, thereby reducing the scope for
compromise. This was not the way to promote stability, he said.

Mr Tkachenko's views are widely shared by people employed in the media,
financial services and other sectors in central Kiev.

But backing away from Mr Yanukovich would be risky for Mr Pinchuk. Mr
Yushchenko has pledged to review the controversial privatisation of
Kryvorizhstal, Ukraine's biggest steel mill, which was sold to Mr
Pinchuk and Mr Akhmetov earlier this year for $800m (€604m, ?424m), far
less than foreign bidders were prepared to offer.

If Mr Pinchuk has little room for manoeuvre, Mr Akhmetov has even less.
Having backed Mr Yanukovich to the hilt he stands to gain if his man is
confirmed as president.

One of his executives on Thursday told the FT: "This looks like
hysteria. Yushchenko should take his complaints to the courts. But I
think Yanukovich's victory will be validated."

However, even Mr Akhmetov might be concerned if the crisis brings a
collapse in relations with the west.

In a recent interview with the FT, he said he was modernising his
businesses by developing ties with western-educated managers,
consultants and banks.

Elsewhere in the Ukrainian business elite, a few individuals have long
been sympathetic to Mr Yushchenko, notably Sergey Taruta, head of the
Donbas Industrial Union. Most, though, have seen backing Mr Yanukovich
as the best way of retaining money and power. So have Russian business
people who have invested heavily in Ukraine.

As a last resort, they may ditch Mr Yanukovich but would fight to retain
the system he represents. Alexander Rahr, director of the German Council
for Foreign Relations, says bluntly: "The oligarchs will see how things
develop. But they have put too much into backing Yanukovich to pull back
now."