Defying blockade, warlords seize industry in eastern Ukraine

Protesters against smuggling and ‘trade in blood’ block rail tracks crossing the front line

Alexander Zakharchenko: The head of the self-proclaimed Donetsk People’s Republic   visits a metallurgical plant in Donetsk, Ukraine. Photograph: Alexander Ermochenko/Reuters

Alexander Zakharchenko: The head of the self-proclaimed Donetsk People’s Republic visits a metallurgical plant in Donetsk, Ukraine. Photograph: Alexander Ermochenko/Reuters

 

Russian-backed warlords in eastern Ukraine have begun seizing mines and factories on territory that they control, in a move the Kremlin called a justified response to a blockade of the region by protesters.

Separatist leaders vowed to impose “external control” on enterprises in militia-held parts of Donetsk and Luhansk regions that were still paying taxes to Kiev, unless trade was allowed to resume across the front line by March 1st.

“Everything is going according to plan,” Alexander Zakharchenko, head of the so-called Donetsk People’s Republic, said on Wednesday. “About 40 enterprises are under external control,” he added, without naming the firms concerned.

The permanent seizure of large coal mines and metal works would not only deal a heavy blow to Ukrainian “oligarchs” such as Rinat Akhmetov, the billionaire industrialist who owns Shakhtar Donetsk football club, but could trigger an energy crisis and further weaken the country’s fragile economy.

Three years

About 10,000 people have been killed and 1.5 million displaced in nearly three years of war between Kiev’s forces and militias armed and funded by Moscow.

Industry has continued to operate across the front line, however, because government-held territory needs the coal extracted in militia-controlled areas, while the separatists need big firms to keep functioning and paying local wages.

The kingpin in this shadowy trade is Mr Akhmetov. The Donetsk native’s dominance over heavy industry in eastern Ukraine made him the country’s richest man, allowing him to invest in Shakhtar Donetsk and property such as the London penthouse he bought for £136 million (€159 million) in 2011.

Mr Akhmetov’s vast wealth and ability to keep making money on both sides of the front line are widely resented in Ukraine, especially by soldiers who risk their lives in battle while their government continues to do business with separatist-held areas.

For several weeks, military veterans, parliamentary deputies and activists have blocked rail lines in eastern Ukraine in a bid to end what they call a “trade in blood” – both the movement of coal, iron ore and other bulk items across the front line, and smuggling allegedly run by corrupt members of the security services.

Coal disruption

The disruption to coal supply is particularly worrying for Ukraine. The European Union and United States have joined the country’s leaders in warning of possible power cuts, damage to industry and major job losses.

The escalating crisis could also feed political and social tension, pitting those who insist Ukraine must retain trade and other links with militia-held areas against those who favour cutting ties and forcing Russia to foot the bill for depressed regions where it fomented and continues to fuel a separatist uprising.

According to Kremlin spokesman Dmitry Peskov, the separatists were taking over enterprises because “regions rejected by their own state are falling into even greater hardship due to a total blockade by extremist elements.

“To some extent, one can understand their actions,” he added. “We are talking about the lives of several million people and, of course, people have to survive.”