Fire Sale, Everything Must Go! Ukraine Puts 345 State Firms Up For Sale

Ukrainian Economic Development Minister Aivaras Abromavicius clarified exactly how many state companies would be offered up for sale to US and European investors at the upcoming Ukrainian-American investment conference in Washington D.C on Monday, stating that 345 state-run firms would be put on offer to the highest bidder.

Speaking before reporters on Thursday, Abromavicius noted that the 345 firms offered for sale "will be included in the first wave of privatizations," which he earlier confirmed would begin in the fourth quarter of this year.

Kiev's effort is ostensibly aimed at raising billions of dollars for the country's cash-strapped budget, as the economy, hit by a decline in trade with Russia, financial panic, and civil war, lies in tatters and on the verge of default.

Companies on the docket include the electricity generation firm Tsentrenergo and six of its regional distributors, gas transportation companies, the Odessa Port Plant, mining operations and agricultural holdings, which together are projected to bring 17 billion hryvnia (about $790 million) into the country's coffers.

Earlier this year, Ukrainian officials held similar conferences in Washington, Berlin and Paris. As late as last month, Prime Minister Arseniy Yatsenyuk met with Ukrainian-Americans in Washington, telling them that his government wants "to see American owners on the territory of Ukraine," stating that "they will bring not only investment, but also new standards, new ways of managing the companies, and a new investment culture."

But with the IMF (conservatively) projecting a 9 percent decline in Ukraine's GDP in 2015, with inflation hitting nearly 50 percent and the country approaching debt levels amounting to 100 percent of GDP, analysts warn that the present may be the worst possible time for Kiev to sell off its large, state-owned firms. The country's economic decline, political instability and the war in the east have hit property values hard, which means that Kiev is unlikely to collect significant sums for the large, valuable, strategic assets offered up for sale.

Analysts also suggest that Western investors will have little appetite for the purchase of the unwieldy, heavily-indebted state firms, many operating at a loss since the collapse of the Soviet Union, noting that the most profitable companies were already bought up in crooked schemes by the country's oligarchs a long time ago. In this connection, AFP recently reported that Rada MPs connected with the country's oligarchic clans are likely to use their influence to prevent the sale of the profitable state assets under oligarchs' influence. Moreover, Frankfurter Allgemeine Zeitung columnist Konrad Schuller recently poured cold water on the entire privatization initiative, noting that in an environment of speedy, murky, clan-dominated privatization, Western investors will have no time to assess whether the state companies offered up for sale are truly lucrative or not.

Furthermore, while Yatsenyuk recently announced that over 150 major investors have already RSVP'd to attend the Washington conference, he has already been hit by dissention from within his own cabinet, with officials from the Energy Ministry and the State Property Fund challenging the pace and scale of privatization.

In April of this year, Ukraine agreed to an International Monetary Fund-monitored austerity program, which called for the shedding of 24,000 government jobs, higher taxes, privatization of state assets and the withdrawal of subsidies on utilities in exchange for a total of about $40 billion in IMF-led foreign assistance over the coming four years.