Written by Nikolaus von Twickel


Two years after Ukraine imposed a trade blockade and the separatists seized businesses in the “People’s Republics”, fresh reports suggest that the economy is sliding into deeper crisis. Meanwhile, political leaders and official media were campaigning for a law on self-government, a precondition for holding local elections. And Donetsk leader Pushilin decreed that the “DNR” should aim to join the UN.

Signs of worsening economic situation in the “DNR”

Media reports said in March that work at two plants in Donetsk is stopping because they cannot sell their products and/or receive no raw materials. The Donetsk Metallurgy Plant, one of the city’s biggest, is at the verge of closure, workers have been told to stay at home while receiving about two thirds of their pay, the Novosti Donbassa news site reported on March 10, citing an unnamed worker. Staff at the plant have written a complaint to their management, which they blamed for the “catastrophic situation”, the report said.

The plant, known by its Russian acronym as DMZ, is thought to employ some 4,500 workers, almost half of the 8,000-strong workforce of 2014. In November, separatist leader Denis Pushilin promised that the DMZ would work “under maximum steam” through winter.

DMZ has been owned by Ukrainian businessman Vyktor Nusenkis and continued to operate under Ukrainian law after 2014. In March 2017 it was put under the control of Vneshtorgservis, the secretive holding believed to be based in South Ossetia in order to enable Russia to manage industrial assets in the “People’s Republics” without attracting more sanctions.

Also apparently in severe trouble is the Donetsk Electrotechnical Plant (DEZ). The plant has stood idle since February and workers’ pay arrears have grown to 6 million roubles (82,000 euros), former Industry ”Minister” Alexei Granovsky wrote on Facebook on March 15. According to him, the plant was hit by the decision to stop production of a tramway line launched under separatist leader Alexander Zakharchenko.

The “Ya Donetsky” tram was launched with fanfare on August 21, when Zakharchenko and his then “minister” Granovsky claimed that it was the first major industrial product manufactured in the “DNR” – while it was really a rebuilt Russian model based on an old Czechoslovak tram (see Newsletter 39). Granovsky, who was sacked in the purges following Zakharchenko’s August 31 assassination, said that the programme has been stopped and that the only tram built was mothballed. According to the anonymous Telegram channel Donetsky Aborigen, the programme was stopped in November. “Donetsky Aborigen” also claimed that the DEZ was doing illegal business without documentation.

Low wages create labour shortages

In another sign that deepening economic hardship is affecting all spheres of life, Donetsk separatist-appointed mayor Alexei Kulemzin admitted on March 11 that the city was losing communal workers because their wages were too low. “People are looking for better paid work,” he said according to the “DNR” official website.

Another sector suffering acute labour shortages is health. The “DNR” alone needs more than 5,000 extra doctors and another 7.500 medical staff, health “minister” Olga Dolgoshapko said in February, adding that the situation was worst in rural areas. Her Luhansk colleague Natalya Pashchenko said in March that the “LNR” currently has 4,107 doctors but needed twice that number.

Wages in both “People’s Republics” are extremely low, even compared with the rest of Ukraine and the neighbouring Russian region of Rostov-on-Don. In February, a junior doctor in the “DNR” on average earned some 4,500 roubles – just 60 euros – per month, according to the Donetsk Health “Ministry”.

The “People’s Republics” are believed to be greatly dependent on Russian subsidies. Moscow indirectly admitted its sponsor role last autumn when state media reported that senior Kremlin aide Vladislav Surkov had promised Pushilin to raise wages in the “DNR” (see Newsletter 46).

“DNR” claims rising tax revenues

During his annual account to parliament, Revenue “Minister” Yevgeny Lavrenov claimed on March 1 that tax income for the “DNR” had risen 30 per cent in 2018 compared to 2017. He did not mention any figures, stressing that the “People’s Republic’s” budget was secret. Lavrenov suggested that much of the rising revenue came from Vneshtorgservis, whose tax payments had risen more than threefold between September and December. “It is no secret that practically 70 per cent of our economy depends on this organization,” he was quoted as saying by Novosti Donbassa, a sentence that was conspicuously absent from the official transcript.

After the seizures of 2017, Vneshtorgservis took control of nine enterprises in the “DNR and another four in the “LNR”. Much of the remaining industry was handed to the “republics” and is managed by its “ministries”, who, in Donetsk, report to powerful Prime Minister Alexander Ananchenko, himself a former senior Vneshtorgservis official.

No Russian aid convoys

However, the Russian government has not sent a single aid convoy to Donetsk and Luhansk this year. Kremlin spokesman Dmitry Peskov explained this in March by saying that a needs assessment was ongoing. Russia sent 84 convoys to non-government-controlled Donbass between August 2014 and December 2018, amid Ukrainian suspicion that the Russian lorries contain military goods.

Since the separatists expelled most international aid organizations, the International Committee of the Red Cross (ICRC) and the United Nations are the only ones who deliver aid from Ukraine to the “People’s Republics”. On March 6, however, the “DNR” refused entry to three of four ICRC vehicles who were bringing aid, according to Ukrainian border guards. An ICRC convoy carrying 180 tons of aid was let through on March 14. One day later, an UNICEF convoy carrying 108 tons of aid was also allowed to pass.

Separatists plan local elections

Politically, both People’s Republics began another project in tandem, suggesting that it originated outside, most likely in Moscow. The ruling “Public Movements”, Donetsk Republic and Peace for Luhansk, campaigned for a bill about local self-government. Such a law could sanction local elections held not under Ukrainian law. Earlier plans by the separatists to hold local elections were cancelled, presumably due to Russian pressure.

Holding local elections under Ukrainian law is a central element in the Minsk agreement. Faced with strong criticism from Ukraine and the West, Moscow has argued in the past that the leadership and parliamentary elections held in the “republics” in November did not fall under this because they were held on a national rather than local level.

In January and February, separatist-controlled media in both Donetsk and Luhansk began campaigning to set up a Public Chamber and a Youth Parliament (see Newsletter 52).

Pushilin wants “DNR” to join the UN

Meanwhile, Donetsk separatist leader Denis Pushilin, who unlike his predecessor Zakharchenko is thought to have little say over the economy, published a “Foreign Policy Conception” for the “DNR”. The nine page-long decree, published on March 1, says that the “People’s Republic” should strive to become a UN member and join the Collective Security Treaty, the Russian-led alliance often described as Moscow’s answer to NATO.

While Pushilin regularly stresses that a future with Russia is the only way forward for his “People’s Republic”, he rarely explains why progress is so slow and Moscow has not even recognized them as independent. In a March 18 interview on the fifth anniversary of Russia’s annexation of Crimea, he simply said that for Donetsk “the way home to Russia” will be more winding and longer.