Ukraine. Sins of the fathers-in-law

The white heat of a Ukrainian revolution

A privatisation that could mark a fresh start for Victor Yushchenko

THERE were no bow-tied auctioneer, and no pouting beauties bidding for phoney companies. It lasted longer than big Russian privatisation auctions tend to. But the televised sale in Kiev on October 24th had its own quirks. There was real competition, and a final price more than double the starting one. And the winner was foreign: Mittal Steel, the world's biggest steelmaker, which paid a hefty 24.2 billion hryvnas ($4.8 billion) for 93% of Kryvorizhstal, Ukraine's biggest steel mill.

Before and during the "orange revolution" that brought him to power, President Victor Yushchenko made Kryvorizhstal a totem of the corruption that prevailed under Leonid Kuchma, his predecessor. The mill had been flogged for just under $800m, shortly before last year's presidential election, to a consortium that included Victor Pinchuk, Mr Kuchma's son-in-law. The courts returned the stake to the state in June. Mr Yushchenko hailed the resale as proof that his country was capable of staging honest privatisations.

More than that, the event had become a test of the president's ability to get anything done. His first government was crippled by personal and financial rivalries. In September, amid an orgy of corruption allegations, he fired Yulia Timoshenko, the formidable demagogue he had appointed as prime minister, and lots of other people. Since then, the intra-government rifts have migrated to an already-fractious Rada, Ukraine's parliament. With typical patriotic zeal, the Rada last week passed several resolutions aimed at stalling the steel auction. Oleg Rybachuk, Mr Yushchenko's new, straight-talking and (it seems) clean chief of staff, says the government feared that communists, socialists and oligarch fellow-travellers would disrupt the event.

In the end, the few protesters only booed and flew communist flags. And despite these efforts, the sale price exceeded expectations, though the Mittal men seem pleased too. Attending in an uncertain capacity, Mrs Timoshenko made sure she was first to congratulate them. "It was like a football game," she gushed.

The most palpable result is the $4.8 billion. Though tax and customs receipts have risen, Mrs Timoshenko's rash policies contributed to a slowdown in growth. Stretched by the cost of electoral promises, the government needs the Mittal cash, which is more than all Ukraine's previous privatisations put together have raised.

Will this be a turning-point for Mr Yushchenko? Probably not. The "re-privatisation" of enterprises sold off under Mr Kuchma - part of a broader question over how to address past injustices - was the hottest issue for the short-lived Timoshenko government. It was her aggressive bid to take back a big ferro-alloy plant (controlled by, er, Mr Pinchuk) that sealed her fate. The new sale didn't resolve that dilemma; it may have worsened it.

Mr Rybachuk says that from now on the "basic principle" in addressing controversial deals will be "amicable agreement" with the current owners. But there is as yet no clear policy, and the case for taking back and reselling companies might now look stronger. Unfortunately, with this parliament and these oligarchs, that would be perilous.

Parliament is itself Mr Yushchenko's biggest problem. Even before he sacked Mrs Timoshenko, he struggled to control the Rada: witness the palaver over the laws needed for Ukraine to join the World Trade Organisation. Conventional wisdom says life will get easier for him after the parliamentary election due next March; some presidential powers are set to pass to the Rada and a new prime minister.

Conventional, but optimistic. Current polls show roughly equal numbers for Mrs Timoshenko's block, Mr Yushchenko's supporters and the party led by Victor Yanukovich, his opponent in the presidential vote. Predictions are risky in Ukrainian politics, but it seems Mr Yushchenko's team will be obliged to choose between two unpalatable options. One is a rapprochement with Mrs Timoshenko, who would almost certainly want her old job back. The other would be a parliamentary coalition with Mr Yanukovich, with whom the president was obliged to cut a mini-deal to secure the appointment of an interim prime minister. "Pragmatic compromise", says Olexiy Haran, a political analyst, "is part of Ukrainian politics;" but for many who stood in the snow last year to keep Mr Yanukovich out, that would be a compromise too far. It would also slow Ukraine's limping westward integration.

It isn't all bad. The country has freer media than under Mr Kuchma, and a more assertive citizenry. It has seen a government sacked over corruption (which is better than a corrupt government that isn't sacked), and got $4.8 billion for a steel mill. But the steely-nerved protesters who led the orange revolution deserved more.