Donbass Is No Longer Ukraine September 13, 2016 Analysis Translated by Helga Green 18:14:49 13/09/2016 Svpressa Written by Dmitry Rodionov Two years have passed since the completion of the full-scale war. Who benefitted as a result? We can discuss endlessly, who benefitted from the Minsk Agreement, but one indisputable fact remains: the full-scale war stopped in September of 2014 and the present-day balance of forces was established, which since that time suffered only negligible changes. The Republics have finally acquired a possibility to fulfill themselves as the states with their own ideology, economy and prospects. This possibility allowed for the start of full-fledged state-building process in order for these states to provide peaceful existence to their citizens. Perhaps, at that time the population of the Republics saw their future in a bit different way. Many of them still believed that Russia would “pick them up”, that the DPR and LPR are temporary phenomena. Many hopes were not destined to fulfill. Ahead lay the years of economic blockade perpetrated by Ukraine and lengthy military conflict fraught with heavy casualties. In the fall of 2014 I sensed for the first time what the life in a besieged city felt like: with empty shelves in the stores, lack of the most basic medicines in the drug-stores, no chance of travelling from one city to another after 5 PM, because buses stopped running, commuting trains traffic stopped altogether, and taxi drives charge an arm and a leg – “bombing” (slang for taxi driving) at that time was almost the only source of income in Donbass— when at 10 PM every outlet closed and the city streets emptied, because curfew started at 11.00 (and that was only right about Donetsk, as in Gorlovka, living on the front line, the life stopped at 6 PM), when people forgot about hot water in their dwellings, and cold water in certain cities was running as a thing thread only from 8 till 10 AM, when blackouts in entire blocks was an every-day occurrence even on the New Year’s eve, when the cost of gas in Hryvnya was the same as its cost in Rubles in Moscow (and the exchange course was 1 to 3), and even then you had to look for it hard, and at the rare filling stations, where they sometimes sold gas, mile-long queues of cars could be seen. That was only the description of the economic state. Add to it incessant even for a day shelling, when even in downtown Donetsk it was scary to go out in order to buy some bread, and people had to hide in the basements several times a night. It was so, I underline, in the center of the city, let alone Kiyevskiy and Kuybyshevskiy districts of Donetsk, Gorlovka, Pervomaysk and other front-line cities. With time it became clear, that “the Crimean story” will not be repeated, and Russia is not going to incorporate Donbass, but there was no going back to Ukraine as well. At least some kind of management structure had to appear in the devastated by war and blockade territory with the undefined status, which would provide for the basic livelihood of the population. And such structure did appear, in defiance of Kiev’s attempts to strangle the young Republics. Ukrainian authorities thought that if they failed to conquer the dwellers of Donbass on the battle field, they would make them starve, and force them to crawl on their knees to ask forgiveness. The effect was quite contrary. If in the summer of 2014, in spite of the war, Donbass still in many senses remained a part of Ukraine (as Ukrainian state establishments and banks had still been working, Ukrainian pensions and salaries were paid, Ukrainian notaries and lawyers were still active, and mostly Ukrainian goods were sold in the stores), then, starting with the fall, Ukraine began withdrawing from Donbass. The authorities in Kiev hoped that having banned the delivery of humanitarian aid to Donbass they would provoke humanitarian catastrophe. Nevertheless the calamity was prevented by Russia, which daily saved thousands of lives not only through aid brought by the white KamAZ trucks, but also owing to the efforts of numerous volunteers, who at their own cost, by their own transport delivered to Donbass every kind of aid, from medicines to clothes and building materials, having cleared many thresholds at the border and custom office. I do not exaggerate — I know a great number of people, who abandoned everything – their jobs and careers – in order to become humanitarian aid providers. It is hard labour and a real heroic deed. It is partially thanks to them that Donbass endured. Thus, Ukraine with its own hands broke economic ties with Donbass, having in fact forcibly pushed it into Russian economic space. Besides shortage of goods, shortage of currency became another great problem. E-payment did not work, and cash flows from Ukraine practically ceased, because the turnout of goods stopped short. I must say that a human being easily gets use to everything, and enterprising people at once saw the way out. Already in summer of 2014, when most banks closed, almost each pole in the city carried announcements, offering cash-out services. Entrepreneurs via internet transferred from the client’s card the necessary sum, with interest, to their own cards, and paid the client in cash, after that they went to Ukraine and monetized the earned, and then repeated the operation. The owners of some stores tuned their terminals so that they officially situated in some place in Ukraine, and, while the customer actually bought the goods with his card in Lugansk, he officially made a purchase in Kharkov. At first the interest rates were very high — the people earned money the only possible way, but in time the situation stabilized, and the rates stopped to be extortionate, as the state started regulating this sphere. As a result Hryvnya, which was “washed out” in the natural way, was abandoned. In spring of 2015 the republican governments introduced multicurrency systems, and in autumn full transition to Russian Ruble took place. They are still perplexedly wondering there in Kiev: is it true that they have with their own hands made Donbass a part of Russia? Measures of solving energy crisis had also been taken, and again Ukraine had shot itself in the foot by severing the ties with Donbass. As a result, several cities receive electric power directly from Russia; however, in some cases exchanges take place, when the Republics supply electric power to territories under Kiev control whereas other areas receive it from Ukraine. These are practically the relations between two independent states, although Kiev still shirks from acknowledging the fact. We should note that the blockade was not strictly observed, and some Ukrainian producers kept on delivering their goods to the Republics. This business was profitable not only for them, but also for Ukrainian military and police (according to some sources, the guards at block-posts demanded sums from 100 to 150 thousand Hryvnya per truck). This provoked manifold growth of prices of food and sanitary products in the Republics in the course of several months, as the sellers had to compensate their losses at the expense of the customers. One more factor of overcoming the gap became the severe economic crisis and inflation (45 per cent since the spring of 2014) in Ukraine, where prices grew even more rapidly than in the Republics. If you compare Donetsk to Kiev, the latter will not benefit from this comparison in most aspects. They say that people from Ukraine-controlled territories come to the DPR to buy food, that is, the situation has changed to quite contrary in a year’s time. And, certainly, the dynamics of prices was greatly affected by the fact that in the circumstances of blockade the market started to quickly fill by the imported goods: from Russia, Belarus, Kazakhstan, Uzbekistan, Abkhazia, Georgia, Transnistria. Local producers also promptly got used to supplies of imported raw materials and managed to their niche at the forming new market. By the fall of 2015 the share of Ukrainian goods was no more than 20% and then mainly in the sphere of small trade. Today Ukrainian beer, cigarettes, dairy products, sausages and canned food have been almost totally squeezed out from the Republics by Russian and Belorussian products. This has also facilitated jump-start of Republican small business. In the first none months of 2015 five hundred stores and 400 cafes and restaurants opened in Donetsk, and altogether there are 7,000 and 1,500 of them respectively in the Republic. The number of food-producing enterprises grew from 90 to 200. Many businesses and companies open in fact under new brand names. Probably, many of you heard about “Mac”, opened on the premises of former McDonald’s in Lugansk. Now let us dwell upon housing services and utilities. Utility rates are three, five, and in some cases nine times higher in Kiev than in Donetsk. For instance, the cost of central heating (for meter-less households) per square meter in Hryvnya is 5 in Donetsk, 15 in Kiev, 21 in Sumy. At that, if we follow the dynamics of the rate change, we will see that at the time, when they rapidly grew in Ukraine, having doubled or even tripled, they even lowered in the DPR. Similar situation can be observed with the cost of electricity. In the DPR they pay 0.22 UAH per 1 kWh, in Ukraine — 1.29 UAH (since September; in March of the next year the cost will rise to 1.68 UAH). Utility expenses of an average-sized family in Ukrainian city of Zaporizhzhia (cost of heating, electricity, gas, water) equal 1890 Hryvnya with the average income of 6500 Hryvnya (they comprise 29 per cent of the income). The same expenses of a family in Donetsk equal 504 Hryvnya with the income of 4500 UAH (11 per cent — almost as at the time of Yanukovich’s presidency). It must be mentioned that the next rise of utility rates is expected in Ukraine in March of the next year. Certainly, the Republics also have to elevate their utility rates, but this rise cannot in the least be compared to what is taking place in Ukraine. Since April 1st of 2015 electricity and gas supply cost rose by 50 per cent in the LPR. At that water, maintenance and heating bills remained on the pre-war levels. Since January 15 of 2016 for the first time the cost of urban transport rose from 6 RUR to 10 RUR. In the DPR the utility rates, cost of transport and electricity did not rise. As far as the transport fares in Ukraine are concerned, they rise regularly. The social sphere is a matter of pride in the Republics. Of course, it is a far cry from the global standards, and living conditions in Donbass are still far worse than, say, the average ones in Russia. Nevertheless, it is a great achievement for self-styled states, subjected to military aggression and economic blockade. And this was achieved in two years’ time, certainly, with Russia’s assistance. The Republics border on Russia, which makes their plight much easier than, say, that of Transnistria. They have their own productive facilities and sufficient for an industrial region population, contrary to, for instance, Abkhazia. And what is taking place in Ukraine? A crisis of non-payments is developing there, and the authorities started to evict families spectacularly for non-payment of utility bills. It is true that there is a gap between the incomes of different social layers, but it is gradually shortening. Kiev banned the access to the database of pensioners in the territories it ceased to control, and it had to be designed from scratch, and already in March of the last year the Republic started to pay its own pensions. According to the official report of the DPR Pension Fund, since April 1 of 2015 till April 1 of 2016 27.3 bln RUR was paid, and the average pension amounts to 3500 — 4000 RUR. The average salary in the DPR in Rubles is 7500, in the Ternopil Region — 8669, in the Chernivtsi Region — 8772, in Volyn Region — 9220, in the Kherson Region — 9493, in the Zaporizhzhia Region — 12295. As we see, the gap is not too big and, I repeat, it shows the tendency to shortening. There still remains the unemployment problem: according to different sources, its level can reach 25 per cent in the Republics, whereas it is about 10 per cent in Ukraine. However, the situation is improving in this respect as well gradually. In the course of 2015 more than 13 thousand companies resumed functioning in the DPR, and more than 3 thousand opened new jobs. Additionally, a program providing temporary employment is in action since May of the last year, in accordance with which the locals are offered such jobs as repair and maintenance of urban infrastructure and planting trees and shrubs, аs well as nursing the wounded. The demographic situation is improving, too. The number of population in Lugansk was 424 113 as of January 1, 2014. As of January 1, 2015 according to some estimates 417 990 live in the city. According to the State Committee of Statistics of the LPR the number of population of the Republic as of January 1, 2016 amounts to 1.509.000 people. In the entire pre-war Lugansk Region lived 2.239.000, but the territory concerned was three times as big as the present-day territory of the LPR. In February of 2015 only 1.7 mln out of pre-war 3 mln remained in the DPR, however, by November of 2015 according to the data of the Main Board of Statistics, the number of republican citizens exceeded 2.3 mln people. According to official Ukrainian data, 120 thousand people de-registered as resettled inner refugees in the period of January – October of 2015. I was an eyewitness of the return of refugee masses with all their belongings in spring of 2015. Nevertheless we should take into account the fact that many settlers, having returned home, intentionally avoid de-registering, as it allows them to keep on receiving 900 UAH subsidies. According to the Mayor of Donetsk Igor Martynov, the population grew from 550 thousand to 850 thousand in the course of the last year with the pre-war number of 950 thousand people. Thus, the population of the DPR amounts to 75% of the pre-war number, and the population of Donetsk – to 90%. Those schools, hospitals and kindergartens that were to a lesser extent devastated by hostilities, keep on working, as they did before the war. Only those were closed, which had been totally destroyed. At that, many establishment premises had been thoroughly or partially remodeled. The Republics are fighting crime. However, according to the police statistics, number of homicide crimes was 300 in 2015 versus 200 in 2012, that is, the crime grew one and a half time. At that the number of murders in the capital of Ukraine exhibited more significant growth: 470 in 2013 versus 1250 in 2015. Here it should be noted that war is going on, and martial law, curfew and migration of criminal elements to Ukrainian territory curb crime rates. Finally, we should remind the reader one more time that Donbass, even downsized as it is now to the DPR and LPR has great industrial potential. Thus, according to the last year report of the LPR Industrial Ministry, more than 40% of industrial enterprises resumed functioning in the Republic; 226 enterprises functioned in the LPR in 2015 and 39 were ready to start working in 2016. Almost 3.5 thousand enterprises in the DPR resumed work in 2015. Food industry is also gradually recovering, which enables the Republics not only to be independent in regard to certain categories of goods, but even export them to Russia. Enterprises of dairy, baking, oil, confectionary, meat and fish processing, vegetables and fruit, tobacco, beverages producing and other industries are functioning. Chemical industry, predominantly oriented at mass consumer of household chemicals, is functioning, too. The Republic has its own pharmaceutical industry, mainly producing medicines and goods for medical use. Altogether 8 pharmaceutical enterprises function in the DPR territory, 11 distributor companies and about 600 drugstores. Utilization of capacity amounts to no less than 30%. 33 light industry enterprises out of pre-war 62 are working. The Republic produces textiles, clothes, footwear, fur and leather goods. Both Republics have developed building materials production, inasmuch as they possess deposits of field stone, sand, lime, granite. Also glass, isolating materials and concrete constructions are produced here. All the enterprises of the branch are also gradually reviving. The main bounty of Donbass – its mining industry – deserves separate mention. Sale of coal both to Ukraine and Europe goes on by way of various opaque deals. Unfortunately, owing to the undefined legal status, coal production remains the most non-transparent and corrupt brunch of industry. Nevertheless, mines still are the mains source of pumping up the republican budgets. Metallurgy is no less important. In summer of 2015 after long-term conservation the Donetsk and Yenakiyevo steel producing works and the Alchevsk metallurgic plant had been restarted. However, coking works of the Republic are functioning only to 30% of their capacities at the moment. Machine-building, tubes, carriage and locomotive production also have great potential in Donbass. These branches are “coming to their senses”, too. Thus, in early April of this year locomotive-producing works in Lugansk received a manufacturing order for 50 names of spare parts for Russian Transmashholding. Today many radical backers of Donbass claim that Russia has betrayed Donbass and is forcing it back to Ukraine. However, life itself creates such a reality, in which Donbass has practically become a part of Russia — it uses Russian money, consumes Russian goods, its legislation is tuned in with the Russian one, and only a few rudiments like the state border, etc., still remain. It is true that the Republics of Donbass still have no definite legal status. Nevertheless they have got will and determination to pull through. They are populated by the people, who created a unique industrial environment, a huge production estate, having proven in labour and in battle that no one is capable of bringing Donbass to its knees, and that means that Donbass has a future. Copyright © 2016. All Rights Reserved.