DONETSK — Komsomolets Donbas is one of the largest coal mines in the Donetsk region in eastern Ukraine. But for more than a year now, it's been out of operation due to serious damage suffered by the war. There are holes from falling explosives. The electricity has been interrupted. And the entrance is practically collapsed. Only a couple of the workers are still left, and they haven't been paid for several months.
At the Zacyadko mine, another major regional coal mine, work hasn't stopped, but production has dropped below 30% of its previous level. The facility has been fired on multiple times, and in March there was a methane explosion that killed 17 miners.
Many other miners have lost their jobs, though that doesn't mean they've stopped working. Most of turned to the black market, taking jobs in illegal coal mines.
Vacili P., 48, a miner who had worked his whole life at Komsomolets was initially reluctant at first to talk to a reporter, but wanted to share his security worries. "It's scary, of course," he said. "I'm from a mining family. I learned about safety equipment as a child. In the illegal mines there is no security. We are walking on the edge. But I have to feed my family."
Before the fighting broke out, Luhansk and Donetsk regions provided nearly 70% of Ukraine's coal production, and coal represented 21.8% of the country's GDP. Yet mining coal in the region is also difficult, since most mines are extremely deep. As a result, the Ukrainian government has historically subsidized the industry. In 2013, the government spent $2 billion, or 1% of GDP, on mining subsidies.
According to the regional statistic service, the amount of coal mined from the Donetsk region has fallen so far this year by a factor of 3.1 compared to the same time period in 2014. Yet the amount of illegal coal is growing: Every day the region is exporting dozens of tons of coal.
Only available option
The illegal mines in Donetsk have always been a headache for Kiev: The coal there is stolen, and people die. There is no electricity or ventilation in the mines, and the miners who risk their lives to work there are paid pennies.
Before the civil war, miners in Donbas were paid well — around twice as much as the national average in Ukraine. It wasn't easy to land a job at an official mine without good qualifications. But the "black" mines always took anyone who was capable of holding a shovel. As a result, it's a totally different business. Now you can buy a ton of coal for 480 hryvnia (about $23). Official coal companies sell their coal at more than three times that price.
Legal mines have often protested against the black market coal, but many suspect that the complaints are not entirely genuine. "Since it is so expensive to mine coal in Donbas, Kiev gave out subsidies and had tax benefits and special economic zones in Donbas," explains Sergei Shapoval, a journalist who has done several investigations in Donbas. "Mine directors would buy coal from illegal mines and then pass it off as legal coal to increase their profits."
Now, in many parts of Donetsk and Luhansk, illegal mines are the only option for coal miners. At the end of last year, the Donetsk and Luhansk Autonomous Republics legalized "small mines," which are now required to pay a fee to the government every month. Many were against legalization — it is more profitable to work completely illegally.
An Internet search for "buy cheap Donetsk coal" produces more than 50,000 results, most of them nameless companies that have only simple contact information and occasionally an address. The coal is often low-quality, mixed with rocks or coal dust. But people still buy it, especially large electricity plants. In theory, the government gives these plants subsidies to buy legal coal, but the payments are small and rare — not enough to pay for legal coal.
Dump-truck secrets
Officially, trade between the unrecognized republics and Ukraine is forbidden. Yet a look at coal purchases for the most recent heating season tells a different story. Approximately a third of Ukraine's coal came from domestic production. Experts say it's not possible that Ukraine produced that quantity of coal without using some from Donetsk and Luhansk.
Dmitri, a businessman from Luhansk, confirms that at least 30 trucks leave the autonomous republic filled with coal every day. At the beginning of April, Ukraine's energy minister confirmed that coal for electrical stations was coming from "occupied territories." The minister insisted that it was buying only coal coming from legal, taxpaying mines.
Ukrainian military and law enforcement have seen first-hand the coal deliveries from Donetsk. Fuel and scrap metal transport columns are regularly stopped on their way to Ukraine from the autonomous republics. At the beginning of the year, the largest bust yet was 18 trucks full of coal. According to one expert on illegal mining in the area, the oligarchs in Donetsk — whose businesses were not nationalized, unlike others in the autonomous republics — made agreements with the government to share the profits from the coal businesses.
Even though the heating season is behind us, Ukraine still suffers from a serious coal deficit. Electrical plants are eating away at the country's coal reserves, which were never very extensive to begin with. It's clear that Ukraine needs the coal from Donetsk and Luhansk.
But the high level of criminality in the coal industry in Luhansk and Donetsk, combined with the legal and political difficulties in Ukraine and the interests of everyone who has profited as middlemen in the illegal coal trade, makes regularizing the coal trade extremely complicated.
