Big privatization without big investors and for little money...

An auction for the sale of 100% of the state stake in United Mining and Chemical Company JSC is planned for early October this year. The starting sale price is 3 billion 900 million UAH, that is, a little more than 95 million dollars.

To understand whether this is a little or a lot and whether this company should be sold right now, we must take into account the fact that until recently the company was one of the largest miners and exporters of titanium raw materials in Europe.

Titanium, as you know, is not only the “metal of war” from which missiles, airplanes, infantry fighting vehicles, ships and helicopters are built, which Ukraine urgently needs on the battlefield today. Titanium is also the “metal of the future”, from which modern gadgets, prosthetics, implants, welding electrodes, paint pigments, turbines, high-strength coatings, robots, spacecraft and many other useful high-tech things are made.

Moreover, there is now a fierce war going on between the world's leading economies for titanium. American and European manufacturers of titanium products are experiencing a shortage of raw materials and are trying to get rid of dependence on Chinese and Russian exports. For several years now, our country has been included in the list of technologies, materials and supply routes critical to the US economy, which is compiled by the US National Security Council. It is obvious that American and European companies are perhaps the most interested parties in the privatization of the OGKhK, but... none of them is in a hurry to buy this potentially interesting asset.

Firstly, the Americans already have negative experience of cooperation with Ukraine. In particular, together with specialists from the Zaporozhye Titanium-Magnesium Plant (ZTMC), a revolutionary technology for the production of titanium metal was developed in the 2010s. Then Yanukovych’s government did everything to kill this project in the interests of the Russians and transfer the plant into the ownership of Dmitry Firtash.

Secondly, in Ukraine there are still no favorable conditions for running a global capital-intensive business, large investments in production, transparent export and independent financial and economic activities. It will not be news to anyone that our ministers, deputies, officials and generals are still fed from big business, and the smaller ones are “gnawed” by everyone else, from governors to law enforcement officers and controllers.

Thirdly, the Ukrainian bureaucracy itself has never been really interested in attracting powerful investors who will not indulge corruption and are capable of radically changing the existing rules of the game in the market. In our country, at most the people in power and around power can change, but not the foundations of the oligarchic-corrupt system.

Fourthly, if you pay attention to the pre-sale profile of the UMCC on the website “Prozorro.sales”, then instead of documentation on the financial and economic condition of the company, its debts, real estate, mineral reserves, etc. there is only a quick reference and OLX style photos. There are no estimates of reserves using the JORC system, which is used by foreign investors. English version does not work. Is this really supposed to be a presentation for a reputable Western investor?! This clearly expresses the attitude towards both privatization and buyers.

What the privatization consulting company receives money for and what the Georgian “reformer-privatizer” D. Kalandadze, specially appointed to the board of the UMCC, has been doing for two years is unknown.

Fifthly and most importantly, due to negligence, corruption motivation and betrayal of the interests of the state, UMCC has problems with its own reserves of titanium raw materials. Back in 2010-2014. It was calculated that the Volnogorsk MMC has balance reserves until 2030, and the Irshansky MMC until 2040. The OGKhK always knew this and never denied it, but nothing was done to solve this problem.

Thus, in 2021, after a fierce struggle with Dmitry Firtash, the UMCC received a special permit to develop the Selishchanskoye titanium ore deposit in the Zhytomyr region. Group DF began to challenge this decision in court, but the new composition of the OGKhK board has not shown any legal activity in this matter for three years. The deposit has every chance of being lost to the state.

In July 2024, the day after the decision of the National Security and Defense Council on 10-year personal sanctions against D. Firtash, a special permit for the use of the subsoil of the Malyshevskoye field in the Dnepropetrovsk region. was sold to a buyer unknown on the market, who will now legalize his rights in court and leave the state with nothing. Even earlier, this deposit was illegally seized by D. Firtash’s “Crimean Titan” when the lease of VGMK was terminated and illegally re-registered to the subsidiary company Matronovsky GOK. According to the law, the license should have been immediately issued for the UMCC back in 2009, but until now this issue has not been officially raised by anyone.

Therefore, without the return to state ownership of all those mineral resources that were previously illegally alienated by clever businessmen, the OGKhK, together with its branch plants, will very soon turn into a complex of administrative buildings with a pile of scrap metal. Respected foreign players are well aware of this. The management of the State Property Fund and the OGKhK also understands this. Then why was it necessary to start this whole epic with the privatization of the OGKhK?

As for me, there may be several answers. Or they decided to “finish off the enterprise through privatization” in the interests of competitors, as was the case with the Zaporozhye Aluminum Plant and dozens of other large industrial enterprises in the early 2000s. Or it will be acquired by some “tramps” with nominal European owners and Ukrainian roots in order to squeeze the last juice out of the existing mineral resources and equipment in the coming years. It is possible that offshore companies will become the new owners in order to hold the asset until the end of the war and wait for the easing of international sanctions, and then again supply raw materials to Russia. Some more optimistic options are somehow not visible and it is obvious that the leadership of the SPF is happy with this.

Otherwise, why sell a unique asset for the price of one five-star hotel? Is this amount really not covered by the value of real estate of sanctioned persons at the disposal of ARMA? Or maybe the state, which is going to raise taxes by several hundred billion UAH at once. These 95 million dollars are sorely lacking.

As for me, the announced privatization is “big” because in addition to attracting considerable funds, it must also solve strategic problems. In our case, it should open the doors to Ukraine for such companies as the American chemical giant Chemours, which has been building its resource portfolio for many years thanks to the products of the UMCC. This division of the world's largest chemical corporation DuPont (which created napalm, Kevlar, nylon, Teflon) works in the automotive industry, electronics, construction, energy and communications and can bring not only financial investments, but also new production, technology, knowledge, jobs, culture business, etc. The presence of American assets in regions that constantly suffer from enemy shelling would only strengthen our position in matters of military-technical assistance and the transfer of modern weapons to us. But for this, again, the state must restore order in subsoil use and return what was stolen. At least take on such obligations.

We must finally start thinking about future generations of Ukrainians!