Probe into Ukraine election called after slow count

By bne IntelliNews October 2, 2007

Roman Olearchyk in Kyiv -

Ukraine's Central Election Commission was on Tuesday, October 2 still counting the results of the high-stakes snap parliamentary elections, two days after the vote took place and a day after pro-Western President Viktor Yushchenko called for a probe into the unexpected delays and possible vote-rigging.

The 4% remaining to be counted will be key in determining whether the pro-Western blocs of Yushchenko and opposition leader Yulia Tymoshenko will have enough support to oust the Moscow-friendly governing coalition of Prime Minister Viktor Yanukovych.

Early on Tuesday, election officials reported they had received nearly over 96% of the ballots from 34,000 stations across the country. The delays in counting the votes has sparked fears of voter fraud, prompting Yushchenko to call for an investigation.

The delays renewed fears that the election could be marred by vote-rigging, much like that seen in the 2004 fraudulent presidential election, which sparked the Orange Revolution. Back then, Tymoshenko played a major role in rallying support for Yushchenko's presidential bid over Yanukovych. The Orange Revolution heroes reunited this summer after a bitter falling out in 2005, with the aim of ousting Yanukovych's coalition. Yushchenko dissolved parliament this spring, in his words, to end political corruption in the Yanukovych-loyal parliament and to prevent the coalition from usurping power.

Bloc Yulia Tymoshenko and Yushchenko's Our Ukraine-People's Self Defence bloc claimed victory after exit polls predicted they would have a hairline majority in the new parliament. Yet since then it looks as though the two sides are in a dead heat, and that fraud could give either side the edge.

Preliminary findings by more than 3,000 observers ruled out widespread violations in the voting process. But concern grew on October 1 with the unexpected delays in the vote counting process.

Tymoshenko warned that the vote delays were caused by attempts by Yanukovych's camp to rig the election in their favour. The expectations are that now the contest will be won in court, with the reunited Orange allies canceling out votes allegedly rigged in Yanukovych's favour. Tymoshenko has pledged to challenge alleged vote rigging in court.

Much of delays were blamed by Yushchenko on eastern provinces loyal to Yanukovych. Election commission figures, however, showed that vote counting was even slower in Ukraine's capital city, Kyiv, where support for the Orange blocs is higher.

"I am deeply worried by the delay in counting votes from the eastern and southern provinces - this process bears the signs of purposeful delays. Fraudsters will be punished," Yushchenko said.

Yanukovych remained defiant and urged his opponents to wait until all the votes had been counted. He insisted his coalition still had an equal chance at victory and in coalition negotiations.

"The Orange [forces] rushed to conclusions and are trying to divide the country with their rushed announcements," he said.

Preliminary vote count figures showed that Yanukovych's Region's party had 34%, followed by Tymoshenko's with almost 31%. The president's party trailed in third with 14% of the vote; the Yanukovych coalition allied Communists had 5% and the bloc of former speaker Volodymyr Lytvyn, potentially kingmaker in coalition talks, had 4%. In a result that appeared to contradict exit polls, Yanukovych's other coalition allies, the Socialists, had just below the 3% cut-off.

Implications of Tymoshenko's return

Alfa Capital reckons that, "the likelihood of Tymoshenko returning as PM is quite high." One of the implications of that will be reprivatization, higher imported natural gas prices supplied from Russia and Central Asia, and stricter competition in the metals sector.

"Certain stocks and business holdings could be affected more than others, including Luganskteplovoz, Dniproenergo, and Metinvest," say analysts at Alfa.

The camps of Yushchenko and Tymoshenko have sharply criticized the Yanukovych coalition government's recent privatisation of locomotive producer Luganskteplovoz, alleging the sale price was low and that the tender was rigged in favour of the buyer, Russia's Transmashholding.

Tymoshenko has also pledged to support a reversal of a suspect debt-for-equity deal at Dniproenergo, in which power holding DTEK, controlled by Ukraine's richest tycoon Rinat Akhmetov, acquired a more than 40% stake at an allegedly privileged price through a bankruptcy settlement deal.

Metinvest, the steel holding controlled by Akhmetov, could also be negatively affected, according to Alfa Capital. "While there is hardly a company as hotly disputed in Metinvest's portfolio as Kryvorizhstal in 2004, the main consequence of a change in the political landscape could be the deceleration of Metinvest's burgeoning growth," it says.

Last week, Smart Group (owned by Russia's Vadym Novinsky) and Metinvest announced a merger of the two companies. As Smart Group owned Ukraine's largest iron ore mining company Inguletsky GOK (IGOK), the merged company now owns more than 60% of iron ore concentrate made in Ukraine, which is used in steel production. "The merger has riled regional steel companies such as Mariupol Metals Plant Ilich, Alchevsky Metals Plant, which is owned by Industrial Union of Donbass, and Zaporizhstal, for which IGOK was a major supplier. Given these dynamics, we certainly do not rule out the possibility that the merger be overturned by Ukraine's Antimonopoly Committee," Alfa said.

Alfa expects a Tymoshenko government to equate to, through various means, a "much harder competitive environment for all companies in the steel sector, reinforced both by the absence of government backing (with the arrival of Tymoshenko) and real market forces brought back into the industry through growing competition."

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