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5 October, 2019  ▪  Denys Kazanskyi

“Dismissed” from the mines

What the supporters of DNR and LNR feared most, the closure of the mines, was accomplished by their terrorist leadership, not by the “junta” in Kyiv

In spring 2014, when the mining towns of the Donbas were overcome by pro-Russian demonstrations and disturbances, the leaders of the anti-Ukrainian putsch often scared locals with tales of how the new Ukrainian government, under pressure from the EU, was about to eliminate all the mines in the region. Scaremongering about the destruction of the coal industry was one of the mobilizing factors that the separatist leaders used to ensure widespread support.

“Europe doesn’t need our mines,” “America dreams about the ruin of the powerful industrial potential of the Donbas,’ and “Westerners wish us ill and will shut down our mines like in the 1990s” were messages that regularly echoed in the spring of 2014 during rallies in Luhansk, Donetsk, Horlivka, Alchevsk, and other cities in Donetsk and Luhansk Oblasts.

In the five years that have passed since then, Ukraine no longer controls a large part of the Donbas and the residents of mining towns are now not threatened with visa-free travel to the EU or “homodictatorship” – the other popular horror stories at that time. They are safely separated from the rest of Ukraine by a line of trenches and minefields. Thousands died over these years in order to prevent “banderovtsi” from getting at the Donbas mines. Alas, all these sacrifices failed to save the Donbas coal industry from damage and depredation. The horror that was supposed to be visited on the region by Europeans and Americans, in the end, was visited by their own “liberators” and “defenders” – under the tutelage of their handlers in Moscow.

In the pseudo-republic media, objective information about the state of the coal industry is almost entirely absent. Real statistics are not being published and any difficulties are mentioned in passing in the vaguest possible terms. Instead papers are flooded with articles about the “growth of extraction”, “early accomplishment of production plans,” and the “resurrection of the coal industry.” But a determined reader can find data about the real state of affairs in ORDiLO can be found between the lines in various sources, data that testifies that the branch is in the hands of marauders who have been literally trashing Ukrainian enterprises trapped on the other side of the line of contact.

RELATED ARTICLE: Industrial reset

According to the “Bulletin of the Institute of Economic Studies” published in Donetsk, which is available online but generally only read by a narrow circle of professional economists, coal extraction in the territories under LNR and DNR declined 55% between 2014 and 2017, going from 34 million t in 2014 to 15mn in 2017. These numbers won’t be found in the propagandist mouthpieces of the two “republics,” although the pathetic state of the sector is written about quite openly in scientific journals. 

An analysis of the development of economic potential in the Donbas coal industry under contemporary management conditions came out in the fourth issue of the Bulletin of the Institute of Economic Studies in 2018. It states that of Ukraine’s 270 mines, 157 are under DNR/LNR control, meaning more than half. However, where the 113 in the rest of Ukraine extracted 35mn t of coal in 2017, the 157 mines in ORDiLO managed to dig only 15mn t.

The reason for this kind of dreadful inefficiency is because only 70 of the mines in ORDiLO are actually operating today, and only 37 of those are any making money. Obviously, some of the 87 stopped operations because of the armed conflict, but this affected only a few companies. For the most part, the mines were simply looted, shut down and flooded by the militants, especially all the mines in Horlivka and Yenakievo.

The decline in output and economic woes in ORDiLO is typically explained away by the occupying administration as Ukraine’s fault. Supposedly the main reasons for all their problems are the conflict and the blockade. However, the illustrations in the scientific publication demonstrate clearly that this is not the case (see The big gap). The criminals who took over the mines turned out to be incapable of running them properly. Nor were they able to organize sales of their product to Russia. It turned out that the “brotherly nation” simply had no need for coal in such quantities, whereas Ukraine, from which the Russians provoked the locals into separating, was interested in expanding the mines. Unfortunately, those who supported DNR/LNR didn’t seem to have enough sense to realize this.

Yet another serious body blow to ORDiLO’s coal industry was the end of subsidies from the state budget. The popular myth was that the Donbas “fed all of Ukraine,” but it appears that, in fact, the industrial heartland was getting billions of hryvnia in subsidies, based on the older exchange rate. What these billions did was allowed a lot of mines to stay afloat and support locals in smaller mining towns. But in 2015, thanks to the efforts of the so-called “fighters against Ukrainian fascism,” the flow from this cash cow stopped.

“Up until 2014, these companies were subsidized by the budget, plus there was a moratorium on declaring coal mining companies bankrupt,” says the Bulletin article. “This issue took into account not only economic but also political and social components of the situation, as in many towns the coal industry was the main employer and local mines were the main source of revenue for the local budget. Starting in 2015, the subsidies were dropped and capital investment slowed down considerably, and there was no longer any alternative to shutting down the mines.”

Because of the capital shortfall, Donbas mines are forced to keep working on worn-out equipment. This equipment will work for some time yet, but no one knows what to do beyond this point. Why? Because there’s no investor willing to put money into stolen assets located in a ghetto that no one recognizes.

“At most coalmines, industrial and processing assets have depreciated by 60-80%, only 66% of standing equipment still works, having outlived its lifespan by some amount,” write the authors of the article. “It all needs to be replaced ASAP and could cause an accident at any moment. More than half the companies in the coal sector have been operating for over 50 years. Moreover, the equipment for the cleaning and preparatory shafts is not up to contemporary technical standards.” 

Dozens of mines were closed and extraction numbers collapsed. What’s more, this trend will only grow stronger. The same Institute article warns that in the not-so-distant future, the “government of LNR” will be forced to close dozens of mines and lay off nearly 30,000 miners! “In connection with the planned liquidation (shutdown) of coal extraction enterprises, 28,400 workers are slated to be laid off: 20,800 in DNR and 7,600 in LNR,” the report states.

Obviously, all these thousands of laid off people will not be able to find other work in ORDiLO, as the occupied territories are showing almost no growth in jobs in the grey zone between the conflicting sides. This means that the most realistic outcome for most miners will be to emigrate from ORDiLO, either to Russia or to the rest of Ukraine. The “people’s republics” that are free of “banderite oppression” have no use for them.

Meanwhile, in addition to inept management and open looting at ORDiLO mines, this year has brought yet another pestilence that is not dependent on the situation on the ground: global prices for coal have fallen. Europe has been gradually turning away from this kind of extracted fuel. Coal is being squeezed by both by natural gas, a much cleaner-burning fuel, and by renewable sources of energy, which are burgeoning lately. The steep fall in prices have caused even Russia’s Krivbas coal region to feel the pressure. So there’s not much to be said for the wretched mines in DNR and LNR that are already operating on the verge of bankruptcy.

RELATED ARTICLE: Donbas: The new repertoire

The official press in the two “republics” doesn’t write at all about the problem with coal sales, but the sites of coal company mines publish some very depressing numbers. For instance, the mines in the MakiyivVuhillia union managed to extract only 84% of their target in July 2019, even though this volume was already far lower than what was the case before the war. The total output of MakiyivVuhillia for June 2019 testifies that the mines only reached 56% of their target production.

The decline in demand for coal is obviously a long-term trend. This kind of extracted fuel is too dirty and will largely be squeezed out by renewable sources of energy. For the economy of ORDiLO and the Donbas over all, this kind of development harbors nothing good. But where mining towns in the rest of Ukraine still have a chance to attract new investors and establish an alternative to this dying sector, in ORDiLO there are basically no options other than extracting raw materials. Declining demand will only put the last nail in the coffin of the coal industry in the grey zone and lead to an even greater outflow of people from the occupied territories.

Translated by Lidia Wolanskyj

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