Blood coal: oligarchs, terrorists and POW labor in Russo-Ukrainian war

coal Ukraine


Half of Ukraine’s power plants use antracite, which is mined in the occupied territories. Photo: zn.ua 

Analysis & Opinion, Featured, War in the Donbas

Article by: Olena Makarenko

Ukraine’s Security Services (SBU) revealed one of numerous schemes by which the so-called republic’s leaders receive money from Ukraine, part of which is used to finance armed forces of the “republic” which is waging war against the Ukrainian army.

This particular scheme involves the Ukrainian state energy enterprise Tsentrenergo and companies Luhanskuvuhillia and Antacit, which are located in the occupied Luhansk Oblast.

According to the SBU investigation, the “LNR’s” so-called Minister of Fuel, Energy and Mines created the scheme to finance the illegitimate republic. The coal extracted in the “LNR” was sold to the Ukrainian enterprise Tsentrenergo through Luhanskuvuhillia and Antracit.

“To achieve their criminal purposes, and for personal benefit at the expense of sales of coal, he [the so-called “LNR” minister] forced the Acting General Director of Luhanskuvuhillia and the acting Director General of Antracit to sign contract #111/20 with Tsenterenergo to supply the latter with coal of the anthracite group, amounting to UAH 1.584 bn ($ 60 mn) at the rate of UAH 1320 ($ 50), VAT included), per 1 ton of coal,” the corresponding court order stated.

The document also states that the Acting General Director of Antracit was paying a commission of 60 UAH ($ 2) for every ton sold to Luhanskvuhillia, and paid taxes to the so-called “LNR.”

The General Director of Luhanskuvuhillia organized and supervised the illegal transfer of sales to cash by signing agreements and primary accounting documents. He also provided financial support to several commercial businesses which, according to the court, are most likely illegal.

The court order shows that, in January and February 2015, the so-called officials of the fake republic transferred UAH12 mn ($456,700) from Luhanskvuhillia’s account to the companies Sodeystvie and Treyd. The transferred money was then moved to Ukrainian bank accounts in smaller amounts, and cashed out.

Law enforcement also found that, in the Ukrainian bank Sofiyskiy (which is currently under the process of liquidation), there was a person who approved the illegal transactions and informed Luhanskvuhillia of the court’s orders to block the money transfers . Thanks to this illicit collaboration, the money could have been quickly transferred from an account under investigation to a safe one

The so-called minister used 47% of the money received from this trade to pay taxes to the so-called “LNR.”

“These funds are further used for paying the wages of members of “LNR” terrorist groups, who are engaged in terrorist-sabotage activities in the interest of the “LNR.” These activities include armed attacks on law enforcements and the Armed Forces of Ukraine, infringement of life and health of local government representatives and individuals who hold a pro-Ukrainian position, etc., as well as for purchase of ammunition, uniforms and so on,” the order states.

The Deputy Minister of the Anti Terrorist Operation, Volodymyr Kistion, has stated that Ukraine buys almost 9 million tons of coal from the occupied Donbas each year. According to him, it is mined by enterprises registered in Ukraine, so they pay taxes to Ukraine.

Why Ukraine can’t give up coal trade with the occupied territories

This is what a kopanka (private mine) used to look like in the 90’s. Two decades later, there are still such kopankas in the Donbas. Photo: tyzhden.ua

Tsentrenergo is a public company which consists of three power plants: Vuglehirska, Zmiivska, and Tripilska. The total capacity of the plants is 7665 MW, equal to about 14% of the total capacity of Ukraine’s power plants. These are thermal electric power stations which Ukraine has as a Soviet legacy.

Half of Ukraine’s electric power stations require anthracite due to their technical characteristics. When the stations were built, under the Soviet Union, they relied on using this kind of coal. Anthracite is rarely used in other parts of the world, and is mined only in the occupied territories. Before the war, Ukraine was a major exporter of anthracite. In 2015, there was a suspension placed on this export, which was then lifted in February of 2016. However, according to other media sources, even when the moratorium was in action Ukraine continued to export tons of anthracite to Russia.

As the demand for coal is high, mining became even more important in the occupied territories. Every month, Ukraine receives 600 thousand tons of coal from the occupied territories. 42% of it comes from DTEK mines which are registered in Ukraine. DTEK belongs to Ukraine’s most powerful oligarch, Rinat Akhmetov.

The rest of the coal goes through the intermediate-companies and it’s a secret who owns it. The approximate amount is 300-350 tons each month. And the lion’s share falls on private kopankas, small private illegal mines run by ordinary people. According to the Ministry of Energy, [as of April 2016] about 8.5 million tons of coal were transferred from the Anti Terrorist Operation Zone, equal to UAH 11 bn ($ 419 mn). Almost 60% of this amount went to the intermediaries who sell the raw materials which were illegally extracted in the republics. And they, in turn, payed the illegal republic’s miners, Novoe Vremya describes.

Working conditions which violate human rights

An example of a kopanka. Photo: argumentua.com

Pavlo Lysianskyi, Head of the Eastern Human Rights Group, noticed the recent bust in coal mining activity because of the frequent accidents among miners and the increase in private orders for timber from the terrorist republics. Timber is used for making strong mine roofs. Ex-deputy of the Donetsk Oblast Council, Vitaliy Kropachev, noticed that, during the last two years, the amount of kopankas on the occupied territories increased from a few hundred to 1500.

Before the occupation, kopankas were illegal. One of the reasons for this was that the owners of these private mines neglected all safety measures. Nevertheless, it still used to be widespread in Donbas, where coal is the main source of revenue. The business was overlooked by law enforcement, because they also benefited from the profit. Nowadays, these dangerous businesses are used to benefit the pro-Russian terrorists fighting against Ukraine.

Read also: The Donbas protests you haven’t heard of

Moreover, human rights activists say that the criminal republic uses prisoners and captive Ukrainian soldiers as slaves at these kopankas:

“Prisoners of war are soldiers who were captured while taking part in the war. Prisoners are those who had been sentenced for crimes committed before 2014. After the “DNR” and “LNR” came to control, the prisoners started to serve their sentences under the laws of the unrecognized “republics” and their work is used for free. Prisoners of war are in the same situation. They work in kopankas, produce something, and somebody becomes rich off of their labor. In fact, in the 21st century, we have a mini slave state, which profits from the people,” Lysianskyi said.

How Akhmetov’s DTEK sponsors terrorism

Akhmetov’s DETEK is a monopolist on the energy market in Ukraine. This company also profits from working in the occupied territories. Photo: vlada.io

Returning to Antracit, it is noteworthy to mention that, at the end of 2016, Ukrainian media revealed that Serhiy Kurchenko, the young runaway oligarch from the time of the tyrannical president Viktor Yanukovych, became its new owner.

Moreover, Yevropeiska Pravda wrote that the oligarch became the favorite ally of the criminals of the so-called republics. The media says that the young oligarch’s companies are aimed at taking resources from even Akmetov’s DTEK enterprise.

DTEK holds a monopoly on Ukraine’s energy market. Its owner, Rinat Akhmetov, has occasionally been accused of collaborating with the terrorists from the so-called republics. Journalist Denis Kazanskiy recently published an investigation giving proof of this collaboration and explaining how it happens.

Kazanskiy revealed a document which confirms the connection between Akhmetov’s business and the criminals of the so-called “Donetsk People’s Republic.” This document contains text from the contract with the Akhmetov’s enterprise DTEK Donetskoblenergo, and was created by the pro-Russian militants lead by Aleksandr Zakharchenko, Energoservice Vikold.

The agreement foresaw that, according to the commission of the DTEK Donetskoblenergo, the company Vikold will reach agreements for electricity provision with the consumers on the territory controlled by the so-called “DPR” forces. Vikold collects money from the consumers and gives it to Akhmetov’s company, functioning as the mediator between the oligarch’s company and the authorities of the occupied territory.

One of the the agreement’s clauses states that the company Vikold will receive payments from Akhmetov. The amount is determined by the expenditures of the company and by a Coordination Center. This center also defines the tariffs for electricity for the so-called republic’s population.

“This means that Akhmetov’s company agrees to electricity prices for ORDLO’s [occupied areas in Donetsk and Luhansk oblasts- Ed.] citizens with the illegal armed groups which seized a part of the Oblast,” wrote the journalist.

Denis Kazanskiy explains that, after the so-called republics expelled Ukrainian banks and started to use Russian currency, it became complicated for DTEK Donetskoblenergo to take money from the occupied territories’ populations. Registered in Ukraine, Akhmetov’s company could not have an account in a bank which works in the “DNR”. The local population pays for the electricity in Russian rubles. Therefore the Vikold company became an intermediary between the Akhmetov’s company and consumers. The money which the company of pro-Russian criminals receive for this mediation is also paid from the pockets of ordinary consumers.

Lysianskyi is afraid that the money illegally earned from business with the so-called republics in the end could lead to promoting criminal politicians in Ukraine.

This seems even more plausible, taking into consideration the intensified discussions on conducting elections in the occupied territories. These discussions often resonate with the pro-Kremlin plan for Ukraine.

Read also: Victor Pinchuk wants Ukraine to capitulate to Russia

Experts say that one of the ways to regulate the situation might be re-equipment of power stations for other kinds of coal. This might take three to five years. The main question, however, is who has more influence in Ukraine – those who benefit from collaboration with criminals, or those who are interested in moving Ukraine forward in its independent future.

Read also: Holding elections now will destabilize Donbas

Edited by: Isabella Popa, Alya Shandra

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