Putin does not need the Donbas in Russia. Putin does not need the Donetsk and Luhansk "republics" either. In both cases, Putin would be forced to support the Donbas financially from the Russian budget. And Donbas, with its current outdated, unreformed economy, especially if subjected to possible sanctions, would become a much greater burden for Russia than Crimea, Abkhazia and Transnistria put together.
Putin, unlike many residents of the Donbas, understands perfectly well that the fiery speeches by representatives of the Party of Regions that "Donbas supports Ukraine" are a bluff. The Russian economy, which already is on the verge of stagnation, simply cannot survive such a burden. Furthermore, these options may bring about the third level of sanctions.
Putin needs for the Donbas to remain in Ukraine, so that the unprofitable mines and social programs continue to be supported by the Ukrainian -- not the Russian -- budget, but in a status where Russia would control the regions through its puppets among the local elite. Federalization is to become the mechanism to achieve this status. In short, the expenses would go to Ukraine; the bonuses to Russia. This is the Russian concept of a "federal" oblast, supported by Ukraine.
To implement this plan, Putin needs to ensure two mandatory conditions:
- Give the Russian language a special status that would offer additional opportunities to explain Russia's "special participation" in the affairs of the Donbas.
- Establish a constitutional mechanism that would make Kyiv's power over the Donbas purely symbolic.