Averting Collapse in the Donbas: Why We Shouldn’t Wait for a Long-Term Political Resolution to Address the Region’s Socio-Economic Crisis

Brian Milakovsky May 2021

The negotiations within the format of the Minsk Accords have revealed how incompatible the positions of Moscow and Kyiv are: while Moscow is seeking to keep Ukraine within its “sphere of influence” by using the separatist “republics,” Ukraine strives for sovereignty and independence. Can practical solutions for people living in the occupied areas of the Donbas lead to a long-term political solution?

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Can repairs of key infrastructure bring lasting peace to Ukraine? Image Source: DonVoda, http://www.donvoda.com

About the Author

Brian Milakovsky

Economic Analyst

Independent analyst on economic aspects of the Donbas conflict. He has been living in eastern Ukraine since 2015, working in humanitarian and development sectors.READ MORE

Most of the oxygen in the Minsk negotiation process is devoted to questions of elections, special status for the Donbas and final political settlement that should return Ukrainian sovereignty over the region. This is understandable; the lives, property and political agency of several million people are at stake.

However, the process is profoundly stuck.

True, the Minsk platform has proven effective for negotiating prisoner exchanges and the ceasefires that periodically lower the bloodshed before always, inevitably, unravelling to be followed by new escalation.

But so much process is consumed by Ukraine and Russia orbiting around the basic incompatibility of their interpretations of the Minsk Accords. For Moscow, the Accords should facilitate the incorporation of the “People’s Republics” of Donetsk and Luhansk, unbowed and armed, into the Ukrainian state. For Kyiv, the Accords should facilitate the disarmament of the Russian-controlled enclaves, followed up by a package of economic, linguistic and political concessions to the local population to ease their reintegration.

If there is a mutually acceptable compromise between these positions, it would require an extraordinary alignment of the political planets on both sides. So far, they have not even come close to each other. The beginning of the Zelensky presidency was widely seen to be a moment pregnant with that possibility, but Russia did nothing to make it easier for Zelensky to navigate this incredibly difficult process with his Ukrainian constituencies; thus, deep retrenchment ensued.

In the meantime, critical economic and infrastructure issues that affect the lives of millions of Ukrainians in the Donbas fester on the sidelines of the Minsk-II agreement. At best, the platform has been able to tackle the symptoms of these issues, but always without addressing the root causes that prolong them: logistical and economic connections rent asunder by the war.

Is it possible to redirect energy from the seemingly dead-end political deliberations to burning socioeconomic issues? Could that in fact help create a path to an eventual political resolution?

Economy

For the first three years of the war the Donbas, its industrial economy remained surprisingly connected to Ukraine and to the global markets into which most of its steel production has traditionally been sold. Even during the most intense artillery duels, trains crisscrossed the frontline with iron ore, coking and anthracite coal, and even steel, cable and machine parts. Many Ukrainians saw in this trade a dark expression of a dirty deal (dohovorniak) at the highest levels in Kyiv and Moscow to ensure that the money kept flowing even as their forces were killing each other and civilians remained caught in the crossfire.

And yet this ethically ambiguous arrangement ensured a livelihood for several hundred thousand Donbas residents. It kept an industrial economy active that, if idled, might not be revivable (think flooded coal mines and blast furnaces gone cold). Not least of all, this arrangement contributed taxes to the Ukrainian state and brought in hard currency via exports. But to maintain operations in the “people’s republics” these industrial holdings almost certainly had to make some financial contributions to them, and this fact engendered the Ukrainian discourse of “trade in blood.”

At the end of 2016, a wildcat blockade of train tracks running into the ORDLO (Certain Districts of Donetsk and Luhansk Oblasts) was organized by the Ukrainian politicians Semen Semenchenko and Iehor Soboliev with the participation of ATO veterans and nationalist activists. Officially, their demands were linked to releasing Ukrainian prisoners of war, but some supporters also cited as goals opposing corrupt contraband schemes of high-ranking Ukrainian politicians and the financing of terrorism.

Initially, President Poroshenko and his political party condemned the blockade as destructive to Ukraine’s economic interests. But they did not demonstrate the political will to disburse the activists, and, as the wildcat blockade dragged on, the “republican” authorities escalated their rhetoric, bringing forward a threat that had long been circulating in their discourse: “nationalization” of coal mines, industrial enterprises, and energy plants there have thus far been managed by Ukrainian companies. The separatist authorities of Donetsk and Luhansk set a March 1, 2017 deadline to lift the blockade which Poroshenko refused to acknowledge, and they proceeded to place remaining Ukrainian-owned enterprises under “temporary state management.” In retaliation, Ukraine’s National Security Council legalized the economic blockade.

Many ideologically committed locals working for the “republics” had high hopes for a Soviet-style nationalization of the “commanding heights” of the economy. They were horrified when instead the industrial assets wrested from Ukrainian oligarchs like Rynat Akhmetov and Serhii Taruta were simply farmed out to a different Ukrainian oligarch, Serhii Kurchenko, who took refuge in Moscow after the fall of Viktor Yanukovych’s government in 2014. Despite a near-monopoly on the “export” of coal and steel, Kurchenko’s holding has wracked up huge debts to its partners and to the coal miners and metalworkers who receive a fraction of their promised salaries.

Donbas’s loss of access to global markets was not compensated by the opening of the Russian market. So far, Moscow has shown little interest in flooding its economy with cheap Donbas products to the detriment of its own crowded coal and metal markets. Instead, Russia mainly launderscoal and steel from the “republics” onward to the global market and into Ukraine itself under the guise of Russian products. Needless to say, a big slice of the sale price of these raw materials remains in Russia.

The result of this “blockade/nationalization” regime is a massive decrease in industrial production, impoverishment of hundreds of thousands of workers in the Donbas, and industrial strikes with accompanying crackdown by separatist security services. And yet, this misery and degradation have had little tangible effect on the durability of Russian control in the Donbas. Even if the blockade is slowly forcing Moscow to moderate its negotiating position (a highly debatable position belied by Russia’s massive brinkmanship in April 2021), it appears that the economy could collapse and the territory become non-viable for economic life long before the fruits of these efforts can be harvested by Ukraine.

Water

In the course of the war, electricity infrastructure has been dramatically re-configured such that Ukraine now supplies little energy to the “people’s republics.” But this is not true of water. In the Donetsk Oblast, the Voda Donbasu (Water of the Donbas) canal system begins on the government-controlled side, supplying water from the Siverskyi Donets River to communities like Kramatorsk before crossing the frontline into Donetsk and its satellite cities, and then across the line again to supply Mariupol.

Even before the war, the aging Soviet pipelines and pumping stations were in urgent need of modernization, and seven years of artillery warfare have severely damaged the system. One vitally important function of the Minsk platform is to negotiate local ceasefires for Voda Donbasu repair crews to plug shrapnel holes in the pipelines.

There are indicators that a more substantial technical discussion of water supply issues is taking place in Minsk, and this may be the first test of the platform’s potential for addressing questions of the Donbas’s socio-economic survival. But so far, the results are far exceeded by the scale of the challenge itself and the consequences if it is not addressed. Without urgent and systemic attention, the Voda Donbasu system could pass a point of no return.

Having a utility that weaves between the government- and non-government controlled areas adds enormous complication, but also acts as a brake on total isolation of the “people’s republics.” Some Ukrainian policymakers would like to build a bypass canal so that water for Mariupol would not need to flow through Donetsk, after which Kyiv could stop supplying water to the non-government controlled areas. So far international donors and financial institutions have discouraged such a move, fearing it could become a new flashpoint.

Russia’s blatant escalation around the issue of water for Crimea, including massive troop buildup in April 2021, suggest that these fears might be justified. A Russian push to control water infrastructure in the Donbas could ignite the most dangerous stretch of the frontline.

Problems with water in the Donbas warzone extend beyond utilities to the very hydrologic system underlying the region. A brutal combination of climate change, war damages and industrial neglect is leading to declining and increasingly contaminated ground and surface water supplies in the so-called people’s republics, and even across the line in the government-controlled areas.

Much of the region is honeycombed with deep coal mine shafts, which require constant pumping to prevent their flooding with ground and surface water. This has imposed significant cost on the Ukrainian state budget for decades, but the “managers” of seized coal mines in the non-government controlled areas have found neither the will nor the funds to continue at the necessary scale. After the “optimization” of the coal sector in both “republics” (that is, large-scale mine closures), this problem has only intensified.

Many reservoirs and small rivers were dependent on mine water pumped to the surface to maintain their levels, and without this they are simply disappearing. The seeping of surface water into abandoned mines exacerbates the problem. As water levels rise in abandoned mines, toxins from mine tailings seep into aquifers, further undermining the water supply to cities in the dry Donets steppe. This issue receives extensive attention from the UN, OSCE and other international organizations, but has barely surfaced in the Minsk dialogue.

Ensuring Socio-Economic Survival

Many Ukrainian observers[1] angrily dismiss the idea of negotiations with Russia over economic access or utilities. They are more confident imagining a highly improbable scenario of the West finally exerting sufficiently high pressure on Russia — in the form of sanctions and military assistance — to lead to Russia’s eventual withdrawal from the Donbas. But with Western governments still avoiding the level of confrontation that might force a Russian withdrawal (or possibly a much larger and bloodier war), and with a conclusive negotiated settlement so agonizingly far out of reach, a moral imperative arises to use the Minsk negotiating platform to ensure tolerable living standards in the Donbas in the interim.

What might this mean in practice? On the economic front, it might mean negotiating the “de-nationalization” of industrial enterprises in the non-government controlled areas in exchange for lifting the blockade that keeps their goods out of global markets. Moldova came to such an arrangement with Transnistria, whose steel, textiles and alcohol are exported with a Moldovan customs stamp. Kyiv would not be able to accept a regime as liberal as the one developed by Chisinau, not the least because the “nationalized” enterprises in the Donbas belonged to powerful Ukrainian business interests before the war. Letting these enterprises back into the global market while they are still in the hands of their predatory Russian-backed “temporary managers” would be politically unacceptable. But certain elements of Moldova’s system could be adopted to ensure that the Donbas industrial economy does not collapse before Ukraine has time to successfully reintegrate it.  

In the case of the Voda Donbasu utility, it might mean negotiating a recognized joint management system that would build on the current de facto model in which the utility is officially based in the government-controlled Donbas but maintains operations on the other side as well. There are precedents, including joint Georgian-Abkhazian management of the Enguri Dam, which provides the latter with the vast majority of its energy. The purpose of formalizing joint management of Voda Donbasu should be to facilitate the start of large-scale repairs, upgrades and “right-sizing” of the system to the current water needs of the region.

An international commission could be developed through the Minsk platform to finance and administer mine pumping, water testing and other measures to address the steady degradation of water resources. While responsibility for this situation rests largely on the government administering the “republics” (Russia), its current track record suggests that, if left alone, it will not address this threat in a way commensurate to its scale.

Conclusions

The time has passed when we could leave the resolution of economic and infrastructure issues to be naturally resolved when the elusive comprehensive political settlement is negotiated in Minsk, or any other platform. Russia’s external aggression does not absolve Ukraine of the moral obligation to maximize welfare of its citizens in the actual conditions that exist. In crafting policy towards the ORDLO Ukraine should consider not just the tactical benefit of instruments like blockade against its enemies in the Russian and “republican” armed forces, but also the impact on the millions of Ukrainians in the territories they control. Especially as the conflict stretches into its seventh year.

This does not mean that Ukraine automatically must yield its fundamental political positions in the Minsk process. On the contrary, negotiations on economic access and water could be initiated precisely because Ukraine recognizes that no acceptable political settlement is in sight. The country could demonstrate its commitment to make life livable for its citizens in the “people’s republics” until political conditions change.

Maybe an attempt to hammer out a compromise on these bread-and-butter issues could even serve as a useful practice and trust-building mechanism for the trickier political negotiations to follow. It might be the case that the final political resolution can be built on a framework of more pragmatic agreements on coal export and drinking water.

Even if that larger goal is not achieved very soon, millions of Ukrainian citizens will benefit from the attempt in the meantime.


Footnotes

  1. ^ See, for example, Pavel Kalashnikov “Poroshenko criticized the intention to lift the economic blockade of Donbas: he believes that Ukraine is kneeling,” Hromadske, June 6, 2019; Iryna Bila “Alexander Kramar: The lifting of the ORDILO blockade is a game in favor of the Kremlin (media overview),” Radiosvoboda,June 17, 2019; “Surrender or impasse. How social networks react to the idea of ​​lifting the blockade from ORDLO,” BBC News Ukraine, June 6, 2019 

2 comments

  • Brilliant analysis, but a weak conclusion. The putinazis must be forced to pay in full for the mass murder, savagery, economic and ecological devastation that they alone inflicted.

    Liked by 3 people

    • It is the responsibilty of the fake republics and the Russian occupiers to see to the needs of those whose territory they occupy. There will not be any sort of political solution for the foreseeable future. There is no sense in pretending there will be (I’m looking at you Germany).

      Like

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