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17 April, 2020  ▪  Denys Kazanskyi

A thriving ruin

Despite many official pronouncements, industry in the liberated Donbas is in its death throes

The team of Ukraine’s current president, who largely won thanks to promises to bring an end to the war in the Donbas, is finally indicating that it intends to carry out these promises. Government officials regularly make pronouncements on the need to build bridges, establish dialog with the residents of ORDiLO – meaning, roughly “occupied rayons (counties) of Donetsk and Luhansk Oblasts” – and talk about plans for the future reintegration of the occupied territories. At the same time, no specific timeframes for taking control over these territories are ever mentioned, and all the discussions about its future sound like so much manly talk about how to divvy up the pelt of a bear that still hasn’t been killed.

A recent example was the first briefing with President Zelenskiy’s new Chief-of-Staff Andriy Yermak, who repeated, yet again, the line about how the government planned to transform occupied Donbas: “We should turn this place, which everyone in the world associates with war, into a truly thriving land with a developing economy. That’s the dream.”

Needless to say, Yermak provided no concrete timeframes for making this dream come true. Given the latest news from the front, it’s not going to happen any time soon. So far, no progress in resolving the conflict is evident and the war keeps piling up victims. The paradox is that, while making all these promises to turn occupied Donbas into a “thriving land” and develop its economy, the Ukrainian government is somehow completely ignoring the difficult economic state of those parts of the Donbas that are under its control. Nothing stands in the way of restoring all those places that were liberated back in 2014 from the illegal military formations and helping them grow. And yet, not only are they not thriving, but their state of decline and depression keeps getting worse.

Take long-suffering Lysychansk. In the past, the city was a prominent industrial center in Luhansk Oblast. Today, one of the last remaining factories, the huge Proletariat glass plant, is being cut up for scrap. And despite the fact that the plant is government-owned and the Ministry of Economic Development is responsible for it, no one seems in a hurry to stop the destruction.

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The Proletariat has a long and difficult history. Originally, this was a major manufacturing plant with thousands of employees. The factory survived the hyperiniflationary nineties but was unable to make it through the “stability” of the Yanukovych years. In 2013, it closed.

For a number of years, the property of the Proletariat had been leased to business entities belonging to one-time Lysychansk mayor Serhiy Dunayev, now an MP from the Opposition Bloc-Za Zhyttia and closely associated with Yuriy Boyko. The company was called PAT Proletariat and initially ran the factory relatively successfully. But over 2011-2013, it managed to run up debts for natural gas and power, and also took out loans at various banks that it then refused to pay back. The factory slowly became hostage to its tenant and fell into a black hole of debt.

Eventually, production was paralyzed. Dunayev’s companies began to break up the plant for scrap. Since it was actually still government-owned, the tenant was supposed to get permission from the State Property Fund in order to write off assets. By early 2014, the country was in the throes of a revolution and the interim government refused to grant permission. But Dunayev found a way around the situation by going through the Luhansk Oblast Commercial Court, which ruled in his favor on May 7, 2014. At that point, the regional government was effectively no longer under Kyiv and permission was in fact granted by the LNR military leadership. Yet the court’s decision was never overturned and the destruction of Proletariat began.

For a number of years, the plant was involved in lawsuits as creditors tried to collect. In the end, PAT Proletariat was declared bankrupt by the courts in 2017 and all its assets reverted to state control. It would seem that, after this, nothing stood in the way of the government putting an end to the factory’s trials and tribulations, and get it up and running again. Instead, the green light was given to its complete destruction.

In March 2019, then-Minister for Economic Development Stepan Kubiv wrote a letter to deputies at the Lysychansk City Council explaining that the state would not restore the company because it was too close to the frontline: “The current conditions, with the manufacturing facility located less than 150 km from the line of conflict, the cost and duration of restoration work, and the uncompetitive nature of the final product, make it impossible to continue to use the entire facility of the Proletariat glass plant for its designated purpose.”

Then, in summer 2019, the government changed. The Groisman Cabinet and Kubiv resigned. The new team announced its intentions to transform the Donbas into a “thriving land.” It seemed after this that there might be some positive move for the better at the Proletariat plant, especially with the new administration promising to restore the region’s economic potential. But the promises never turned into deeds and the stripping of the plant continued.

In February, photographs began circulating that showed very clearly the state of the various workshops at Proletariat. In some places, the equipment had been completely removed: cutting machines, assembly lines, metal structures – basically everything could possibly be moved was being cut with welding equipment and sold off for scrap. It won’t be long before all that’s left of this manufacturing giant is the empty premises of the denuded shops. Nor can this free-for-all simply be blamed on the previous administration, the way Ukrainian politicians like to do.

It’s highly ironic that the final disposal of this major plant is taking place while the government makes charming promises to restore the Donbas. With this depressing example before their eyes, it’s hard to believe that they really mean any of it.

As it happens, it wouldn’t be that difficult to renew the production of glass products at Proletariat, nor would it cost all that much. According to estimates included by that same Stepan Kubiv in his letter to the Lysychansk City Council, the cost of preparing the plant to relaunch operations was in the neighborhood of UAH 30-40 million. Investing a few hundred million would make it possible to buy new equipment, an amount that Ukraine’s government is completely capable of covering.

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Of course, the company is unlikely to be able to produce the volume of output it once did, but even if operations were only partly restored, with several dozen jobs created, it would be a major breakthrough for the city. Impoverished and robbed Lysychansk would be a clear demonstration that the new government really does plan to do something to restore the region. All of the Donbas would get the message, loud and clear, that the era of industrial collapse was finally over and a new trend to revive the region was on its way.

After so many years of standing idle, without any doubt, news about the revival of Proletariat would quickly reach the occupied territories as well. For the Ukrainians living in ORDiLO, this would be a clear and unambiguous argument in favor of Ukraine. But the money to revive Proletariat was not found. And this means that all those promises about the transformation of the Donbas are empty words that no one will believe. Such noble intentions need to be backed by deeds. So far, the Government is having problems doing this.

 

Translated by Lidia Wolanskyj

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