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Romania: Government Refuses To Cave In To Union Pressure

  • Eugen Tomiuc

For more than a week, workers at one of Romania's biggest steel mills have been staging daily protests against a U.S. company that bought the factory a year ago. Union leaders at the Resita Steel Works say that the new owner, Noble Ventures, Inc., has not paid salaries for two months and has failed to come up with promised investments. The union wants the deal canceled, but the Romanian government says it will not take the plant back and is reluctant to take action against the U.S. investor. RFE/RL correspondent Eugen Tomiuc reports.

Prague, 14 June 2001 (RFE/RL) -- Workers at a steel mill in Resita in southwestern Romania have been protesting for more than a week against their new employer, a U.S. company called Noble Ventures, Inc., which took over the plant a year ago.

The workers are angry that the new management has not paid their salaries since April and has stopped production because of repeated energy shortages and lack of raw materials. They also say Noble Ventures has not lived up to its promise to bring investment capital to the plant.

Protesters have staged daily demonstrations in Resita and blocked a main road after heated -- and sometimes violent -- negotiations with the company's representatives. Similar protests took place in January and early April, but the unions are now threatening to continue the protest indefinitely unless the government annuls last year's purchase and takes the factory back.

Union leader Iancu Muhu says Noble Ventures did not fulfill any of its obligations. He tells RFE/RL that the plant's 3,850 employees have not been paid regularly since January and that production has now again been halted.

"The employees have wanted the same things since January: to be paid their wages, to resume work in the plant, and to see that the labor contract and the privatization deal have been observed -- [all] things that did not happen."

Under the deal closed in June of last year, Noble Ventures -- which is based in Bethlehem, Pennsylvania -- bought almost 95 percent of the Resita Steel Works (Combinatul Siderurgic Resita) for some $85 million. The third largest Romanian steel factory, Resita is also the oldest in the country, dating from the late 18th century. Its sell-off was hailed at the time as one of the largest U.S. investments in Romania.

The deal provided for some $60 million in investments, of which $24 million were due in the first year. Noble Ventures also pledged to repay the factory's $45 million debt and freeze any layoffs for five years.

But Romania -- one of the poorest former communist countries in Eastern Europe, with a monthly per capita income of just $100 -- had to offer incentives to win a buyer for the troubled plant. Romania has attracted relatively little foreign investment over the last 10 years -- only some $7 billion.

Michael McNutt, who represents Noble Ventures in Resita, says the Romanian government offered to reschedule the factory's debt over a five-year period in order to make it more attractive to his company.

"The first condition was that the debt -- in particular, the [plant's] debt to the state -- would be restructured over a five-year payment period and the penalties in interest written off -- which would provide this company with a balance sheet that could be financed and that could really be a basis for a viable entity."

Romania's Privatization Minister Ovidiu Musetescu said the government fulfilled its part of the contract by rescheduling the company's debts late last month (29 May). Musetescu said the government will wait to see whether the U.S. firm will now meet the August deadline for a $24 million investment, and stressed that it might begin legal procedures against Noble Ventures if the company does not meet the deadline.

But McNutt says it was the Romanian government that first violated the contract by not rescheduling the factory's debts on time. He says the government has no legal grounds to annul the contract.

"The government was supposed to fulfill the rescheduling last June and July. It was only done in the last month, and it still hasn't been implemented. So, if anybody could take anybody to court right now, we could take them to court -- [but] nobody wants to take anybody to court."

McNutt says Muhu and his union do not represent all the plant's workers and have a personal interest in perpetuating the protests. McNutt also says that he has twice been beaten up and that that he filed a complaint with the police after Muhu incited workers to attack him last month.

Noble Ventures yesterday (13 June) announced a $13 million investment in a new oxygen factory for the plant. McNutt says the project -- to be realized over a 14-month period -- is meant to show that the company will fulfill its commitments. He says salaries will be paid as soon as workers end their protest.

But union leader Muhu says McNutt is only trying to buy time for Noble Ventures. Muhu says he is convinced that the U.S. company does not have the financial resources for its promised investments.

The local union and a larger union confederation (Metarom) yesterday asked Prime Minister Adrian Nastase to meet with the workers' leaders and with Noble Ventures' representatives. The workers want the prime minister to intervene on their behalf.

But Nastase appears determined to stay out of the dispute. Romania's six-month-old left-wing government has made clear on several occasions that even if Noble Ventures fails to fulfill its obligations and the courts reverse the deal, it does not intend to take over the Resita steel mill again.

Since he took office in December, Nastase has sought to reform the ruling Social Democracy Party. During an earlier six years in power (1990 to 1996), the party was regarded by many Western governments as strongly populist and incapable of implementing necessary free-market reforms.

With Romania now trying to regain lost ground in its efforts to join both the European Union and NATO, Nastase is keen to improve his government's image abroad. The government scored an important point last week (7 June), when the respected international agency Standard and Poor's upgraded Romania's loan-eligibility ratings. The upgrading was based on reform progress and improved economic performance. Romania last week reported almost 5 percent growth in its gross domestic product (GDP) during the first quarter of the year.

The government also appears determined to make an example out of the way it handles the dispute at the Resita steel mill. Privatization chief Musetescu says that, even if the contract with the U.S. firm is cancelled, the state does not intend to give the plant any more subsidized energy. And Public Administration Minister Octav Cozmanca said last week said that the time has come for the unions to understand that the government can not pay their salaries and that they have to "get back to work."

But the real test of the Romanian government's determination to cut off subsidies for loss-making state enterprises is yet to come. Only a third of Romania's economy has been privatized, with crucial oil and energy sectors still controlled by the state.