15 March – 4 April 2017: Summary
Industrial production in the “people’s republics” has widely ceased after local leaders took control of all Ukrainian-run plants in their territory, officially in response to the trade blockade on government-held territory. The separatists downplayed fears over the economic fallout and even launched a campaign to woo the people living in the government-controlled parts of Donetsk and Luhansk regions. In a positive move, a fresh ceasefire attempt began on April 1.
1. Effects of the blockade and “external administration”
Reports in both Ukrainian and separatist-controlled media suggest that much of the remaining industrial production in both the Donetsk and Luhansk “people’s republics” has ground to a halt after 1 March, when the separatists began to force local plants under their own control.
The move was meant to improve the separatist “republics’” finances because the plants continued to pay taxes in Ukraine, where their owners, first and foremost influential oligarch Rinat Akhmetov, are based. But it might turn out to be a Pyrrhic victory for the separatists, because they must find new markets in recession-hit Russia, capable management in their isolated and deprived regions and, first and foremost, cash to keep operations going.
To restart the huge plant with more than 5,300 workers would cost 584 million Russian rubles (about 10 million US dollars) per day, according to a report by the Donetsk “Ministry” for Industry and Trade that was published by the official DAN news site on March 25. After being widely quoted by Ukrainian media, the report vanished from DAN’s website but remains accessible via Google cache.
The reasons for the article’s removal is not hard to gauge – even locals will find it difficult to believe that the Donetsk “people’s republic” (”DNR”) can currently afford such costs, let alone those for the other 42 plants on its territory affected by the move. Both the “DNR’s” and the neighbouring Luhansk “people’s republic’s” (“LNR”) finances are thought to depend almost totally on Russia (see our Annual Report, p. 9) and it is unlikely that Moscow is ready to step up its already considerable subsidies in the near future.
In Luhansk, the separatists even decreed that executives’ salaries at “state” enterprises must not exceed 30,000 rubles (500 euro) per month.
Amid reports of wage arrears and non-payment of salaries in the areas controlled by them, the separatists are playing down fears of economic crisis. At a March 22 meeting with workers of the Yenakiieve Metallurgy Plant, trade union leader Maxim Parshin promised that the “DNR” will make first salary payments in April and that all jobs are secure, DAN reported.
On March 31, a city official told workers at the Donetsk Metallurgy Plant that they will get their salaries for March “soon”. The official, Oleg Belyayev, added that it was unclear when production at the plant could start again, because it lacks raw materials. The plant’s reopening has been postponed several times since the separatists took control of it back in June 2016.
Speaking in Donetsk the same day, Industry and Trade “Minister” Alexei Granovsky said that the process of bringing plants under control of the “DNR” was going smoothly. “All state enterprises have agreed, confirmed and installed (new) executives,” he was quoted as saying by DAN. It was unclear, however, what Granovsky meant with “state enterprises”. Officially, “outside administration” does not mean nationalization, i.e legal ownership does not change. Instead, the plants get a new management, must register in the “people’s republics” and re-orientate production (to Russia).
2. Minsk Contact Group talks clouded by blockade
Ukraine is calling the “outside administration” a forced nationalization. During the latest round of talks of the Trilateral Contact Group on March 29 in Minsk, Kiev said that “the seizure of state private and foreign enterprises” was a serious violation of the Minsk agreement and demanded an immediate return to Ukrainian law, according to Darya Olifer, the spokeswoman of Ukraine’s chief negotiator Leonid Kuchma.
Olifer explained that the nationalization and other recent violations like Russia’s recognition of separatist-issued passports had forced Ukraine to impose a trade embargo against the separatist territories. However, the embargo, announced on March 15, was widely seen as a result of Kiev’s three months-long struggle with nationalist activists, who had imposed their own blockade to prevent Ukraine trading with the separatists.
Both the “DNR” and “LNR” had cited the blockade as the reason for putting local industry under “outside administration”.
The Minsk meeting had been clouded by these developments. Kuchma himself said two days earlier that progress had become so difficult that another summit of the “Normandy Four” (Russia, Ukraine, Germany and France) was necessary to break the deadlock.
Speaking after the Minsk talks, Martin Sajdik, the chief negotiator for the Organization of Security and Co-operation in Europe (OSCE), said that “recent events intensify tensions between the sides and have an unambiguously negative effect on the process of mutual rapprochement.”
However, the parties in Minsk did achieve a minor success in brokering yet another ceasefire commitment for the upcoming Easter holidays. Whether that agreement, which came into force on April 1, will be successful, remains to be seen. The OSCE Monitoring Mission’s report of April 4 speaks of mixed results – fewer ceasefire violations in the Luhansk region, but a marked increase in the Donetsk region.
3. Separatists campaign to “Reunite the People of Donbas”
Despite facing the biggest economic challenge since their inception, both “people’s republics” launched a campaign to win over Ukrainians living in the government-controlled parts of the Donetsk and Luhansk regions by offering seemingly better social services.
The “Humanitarian Programme for the Reunion of the People of Donbas” is heavily promoted by official media outlets in Donetsk and Luhansk and includes offers to move to the “people’s republics” for work, education or medical treatment or even for a Russian-language quiz known as Totalny Diktant.
Especially the programme’s healthcare part has been criticized as being a mere propaganda tool. “DNR” leader Alexander Zakharchenko said during a call-in show on March 23 that Donetsk clinics are offering priority treatment for patients from government-controlled parts of Donbas. However, Zakharchenko admitted in the same show that his “republic” is in a difficult financial situation, but added that fellow Slavs should always help each other. “We are a family,” he said.
Ukrainian journalist Serhiy Harmash pointed out in his video blog that Zakharchenko is calling sick people to come to the “DNR” for treatment that he cannot even provide to his own population.
Also part of the program is the opening of “service centers” at crossing points along the “contact line” with government-held areas. Their staff is supposed to help people to sign up for social payments from the “people’s republics,” although the blue containers primarily function as post offices, selling stamps and offering to forward mail into separatist-held areas, as explained by “DNR Communications Minister” Viktor Yatsenko during the opening of one centre at the Olenivka crossing point.
During the March 23 call-in show, Zakharchenko made it once again clear that for him those areas are a part of his “people’s republic” under “temporary Ukrainian occupation.”
When a caller from the government-controlled town of Volnovakha pointed out that Ukrainian authorities are likely to retaliate harshly against anybody cooperating with the separatists by using those centres, Zakharchenko told him to stand up and fight for his homeland: “I have no problem when they arrest you, because you live in Volnovakha (and) Volnovakha is a city of the Donetsk People’s Republic … each of us needs to be at his battlefield position, including those in Volnovakha. The war continues.”
The program is the biggest attempt yet to extend the “people’s republic’s” reach into government-controlled areas. Previous examples include claims that a cell of the “DNR” ruling party, Donetsk Republic, has started work in government-controlled Sloviansk (see Newsletter Nr. 14).
4. Separatists deny involvement in Ukrainian intelligence officer’s death
Meanwhile, the wave of assassinations in Donbas continued. However, for the first time in many months, the victim was not a separatist commander but a senior Ukrainian officer. Oleksandr Kharaberyush, the deputy head of the SBU’s counterintelligence operations in the Donetsk region, was killed when a bomb ripped through his SUV on March 31 in Mariupol. Ukrainian police quickly pointed fingers to the separatists, who denied any involvement.
The Donetsk “Security Ministry”, known under its Russian acronym MGB, said in a statement that it does “not employ terrorist methods unlike the Ukrainian special services,” adding that the “DNR” will “sooner or later” restore its territorial integrity – i.e. conquer all of Donetsk region.
The MGB was referring to captured Ukrainian soldiers who were shown on videos by the Luhansk Security Ministry last month, where they confessed in carrying out the assassination of “LNR” military commander Oleg Anashchenko (see Newsletter Nr. 19). Anashchenko was killed by a car bomb on February 4. Four days later, prominent Donetsk field commander Mikhail Tolstykh was killed in his office by yet unidentified attackers. The separatists blame Ukrainian special forces for both killings.