The CEO of the flagship of Ukraine’s post-Soviet privatisation programme, the Krivorizhstal steel mill, has sharply criticised proposed increases in resource taxes, suggesting it runs against his company’s plan to invest $ 1 billion to prolong the plant’s operating life and improve its “green” profile.
Privatisation in post-Soviet Ukraine was always a subject of controversy and suspicion and Krivorizhstal was involved in the country’s most celebrated – and perhaps most notorious — privatisation – process.
Its initial selloff in 2004 for $800 million to a group of highly visible business magnates was declared rigged and annulled after President Viktor Yushchenko’s election that year and the plant was bought at a new auction a year later for $4.8 billion by international steel giant MittalArcelor.
Mauro Longobardo, the plant’s CEO, told the website Ekonomychna Pravda that proposed legislation raising a resource “rent” on iron ore mining by 1.5 times was unfair and would place too great a financial burden on the plant located in President Volodymyr Zelensky’s home town of Kryviy Rih.
And the proposal, now before parliament, was at odds with a pledge MittalArcelor’s boss – Lakshma Mittal – made in talks with Zelensky to sink that $1 billion into the plant.
“Everyone is business opposes this proposal,” Longobardo told the website. “For us, it creates and additional financial burden in producing iron ore and is at odds with the opportunity to invest $1 billion.
“Should this proposal be approved, our steel would become less competitive. We do not understand why ore, an intermediate good, has to impose a financial burden on us.”
Iron ore prices were high at the moment, he said, but what might the government do if they began to fall? “Will the government then ask us for something more in order to increase revenue for the country?”
Longobardo said Mittal had pledged the $1 billion dollar investment – which had not previously part of the company’s plans — at the second of his two meetings with the Ukrainian president in April.
“This investment was not planned. Part of it is to be directed at extending the life of our plant for another 25 to 30 years,” he said. “We are also thinking about how to introduce ‘green’ technology.”
Some commentators have said the new tax – part of a series aimed at protecting natural resources – was aimed at Ukrainian metals magnate Rinat Akhmetov – who owns a long list of companies inside Ukraine, including the giant Metinvest concern, and elsewhere. Zelensky has introduced legislation to parliament intended to reduce the outssize influence of “oligarchs” on Ukraine’s economy and politics.
Krivorizhstal was the subject of an investigation by Ukraine’s SBU Security Service in 2019 into its environmental practices and, with the company accused of “ecocide”. It has also been subject to allegations – as recently as earlier this year — of violating tax laws.
“(From 2005), many environmental points were carried out. Some of our obligations were delayed in their implementation, but now we have started to complete everything as promised. Everything will be fulfilled by 2023,” Longobardo said.
“Everything that happened in 2019 was excessive political pressure. Everything discussed in public was known to everyone. That public discussion created a very uncomfortable situation for the company.”
Asked why Krivorizhstal had been subjected to such difficulties, rather than Akhmetov’s plants, he said: “As we are an international company, we are more vulnerable.”