Ukrainian President Viktor Yushchenko, left, welcomes Lakshmi Mittal, chairman and CEO of Mittal Steel

Ukraine has sold its largest steel mill to the world's top steel maker in a hotly contested re-privatization auction seen as a key test for the new government.  President Viktor Yushchenko says the sale proves honesty and transparency is possible in Ukraine.

The auctioneer's gavel fell after more than an hour of open bidding, shown live on Ukrainian television, with German-based Mittal Steel walking away the winner.

Mittal beat out three other competitors to secure a 93 percent stake in the formerly state-owned Kryvorizhstal steel works, for just under $5 billion. 

Mittal was competing against an alliance of the Donbass Industrial Union, the world's second-biggest steel producer, Arcelor, and a group of investors from eastern Ukraine's mining heartland of Dnipropetrovsk.

Kryvorizhstal produces eight million metric tons of steel each year and was returned to Ukraine's State Property Fund in June, after President Yushchenko successfully challenged its privatization under former-president Leonid Kuchma, as he had repeatedly promise to do during last year's political revolution.

President Yushchenko told reporters the open auction confirms that honest privatization is possible in Ukraine.  Others expressed delight that the price paid was five times that paid during last year's flawed sale to a consortium owned by Kuchma allies, which President Yushchenko earlier called "a theft."

Kiev-based independent analyst Ivan Lozowy tells VOA the sale could go a long way toward improving Ukraine's reputation as a country safe for large-scale foreign investment.  But Mr. Lozowy warns there are still several hurdles to be crossed.

"The big question is, and the big problem, I think, that we are already seeing develop is the spoilers.  Namely, [Alexander] Pinchuk and [Renat] Akhmetov two of Ukraine's richest businessmen,  who were the previous privatizers of Kryvorizhstal, have already declared that they are going to create problems in various judicial fora and I think we can expect to see that continue, unfortunately," said Mr. Lozowy.

Mr. Lozowy says the two have already taken their case before the European Court of Human Rights in an attempt to win a reversal of the Ukrainian court ruling that allowed the re-sale to go forward.

He says the government will need to keep a close eye on the oligarchs to make sure they do not disrupt the Mittal deal.

"They [the oligarchs] thought that this was their territory and that they were going to grab up all the cream of the largest industries in Ukraine," he added.  "And with this case the new government has shown that that is not the case, that it is going to be a relatively fair and open process."

Mr. Lozowy notes President Yushchenko has promised an end to any further re-privatizations in Ukraine, as the process is seen as unsettling to many potential investors.