News | War / Peace - Eastern Europe - Ukraine Crisis Eight Years of War before the War

How eastern Ukraine’s breakaway provinces lost everything and gained nothing through integration with Russia

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Participants in the Solidarity Day rally in Donetsk, Ukraine, with flags of the Donetsk Peoples Republic on 20 December 2016. Photo: picture alliance / ZUMAPRESS.com | Celestino Arce Lavin

In February 2022, Russia recognized the Donetsk and Luhansk “People’s Republics” (DPR and LPR), two breakaway regions in eastern Ukraine, as independent states. While experts and the general public were left guessing what it would mean for their future as well as the future of Ukraine, the Russian Army invaded Ukrainian territory.

Natalia Savelyeva worked as an assistant professor at the School of Advanced Studies at the University of Tyumen, Russia from 2017–2019 and is currently a Future Russian Fellow at the Center for European Policy Analysis.

President Putin and Russian state officials justified their intervention by invoking eight years of misery and the “genocide” of the Donbas population. “To let Donbas people live peacefully” was one of the major slogans as well as a reason for many Russian citizens to support their country’s “special military operation” in Ukraine.

However, the reality of these unrecognized People’s Republics on the eve of Russian invasion was grim, and not only because of alleged “Ukrainian aggression”. After eight years of war, one of the most prosperous Ukrainian regions had become completely impoverished, de facto integrated with Russia, and de-Ukrainized. Although this situation was the result of many factors, including Ukrainian policies towards the rebel territories, it is the Russian state which should be blamed for the fact that, after years of continuous “support”, the two republics became deprived of any possible future except the one chosen by Russia.

From Prosperity to Economic Decline

At the beginning of 2014, when the anti-Maidan protests in the Donbas region started gaining more support among the local population, many observers claimed Donbas was a drain on the Ukrainian economy. At the same time, Donbas residents who did not support Euromaidan and developed pro-Russian views believed the opposite: “Donbas feeds Ukraine” was one of the most common arguments in support of more independence for the region.

In fact, neither was true: the region’s output per head was comparable to Ukraine’s average. While Donbas contributed a lot to the Ukrainian economy, its coalmines, steel mills, coking plants, chemical factories, and coal-fired power generators also enjoyed a significant amount of explicit and hidden subsidies in the form of generous state orders, output price controls, and paltry environmental pollution penalties. That said, although Donbas as a whole was neither a net contributor to national inter-budgetary transfers nor a net recipient of equalization subsidies from Kyiv, its pre-war economic structure would be a major contributor to the problems the Donetsk and Luhansk “People’s Republics” faced over the next seven years.

Prior to 2014, Donbas was a comparatively wealthy but economically declining region. Its economic importance has continued in the traditional spheres of mining and quarrying, but the service sector drives most economic growth. The overall significance of the Donbas economy for post-Soviet Ukraine has steadily declined, from 17.3 percent of Ukraine’s GDP in 1996 to 14.5 percent in 2013. In spite of that, salaries and wages were among the highest in the country. In terms of gross disposable income, Donetsk province remained Ukraine’s second-most-prosperous province throughout the 2000s after Kyiv (Luhansk province chronically lagged behind). Donbas’s income level was 6 percent higher than the national average, and the residents of Donetsk province were even 12 percent better off than the average Ukrainian.

During the first four years of the conflict, Donbas’s total GDP in constant local currency prices dropped to just 38.9 percent of the 2013 level. In non-government-controlled areas, wages dropped significantly: the average monthly wage in 2016 in the DPR was 38 percent of the pre-war level, in the LPR it was only 34 percent. It was almost half of the average wage in government-controlled territories of the same region. This drop in income was reflected in a dramatic decline in consumer demand: aggregate retail sales across the entire region in 2017 ranged between 38.6 percent and 44.8 percent of the 2013 level.

In 2017, all legal economic relations between rebel territories and government-controlled Ukraine territories were stopped: Ukraine announced an “economic blockade”, and the two republics responded with “nationalization” of Ukrainian enterprises. Due to the shortage of raw materials previously supplied from government-controlled territories, the newly expropriated steel works halted production immediately.

On 4 May 2017, Russian Prime Minister Dmitry Medvedev instructed the Federal Agency for State Reserves to provide 10 billion roubles from the National Reserve Fund for “replenishing raw materials necessary for the ferrous metals industry”. Assets confiscated through “nationalization” were assembled into ZAO VneshTorgServis, a company registered in South Ossetia — another Russian-backed breakaway territory in northern Georgia.

South Ossetia became a payment centre through which money went from Donbas to Russia and came back in form of goods. It worked like a relay around the barriers established by sanctions imposed by the European Union, the United States and others spelling out penalties for doing business directly with the separatist territories. However, “nationalization” resulted in further decline as well. VneshTorgServis has been dogged by wage arrears and soaring debt and bore the brunt of the pandemic-induced slump. The DNR’s Ministry of Revenues and Duties stated in January 2021 that the holding suffered a 45 percent reduction in exports in 2020, a major contribution to a 26.6 percent fall in overall exports from the DNR in the first eleven months of 2020.

In general, the war has resulted in the region’s rapid and severe deindustrialization, with a significant drop in industrial output and foreign trade. In 2020 most of the factories produced 15–20 percent of pre-war volume. Some factories were destroyed, others robbed — machines were either taken to Russian territory or sold for scrap. For many of those factories, it is impossible to restart. The biggest retail chain, Amstor, was closed in 2017 after Russian retailers set up shop in the region.

People’s Protests against the People’s Republics

For many cities of the occupied part of the Luhansk and Donetsk regions, the mines represented crucial enterprises upon which the entire economy depends. Before starting the military conflict in 2014, many coal enterprises were unprofitable, and the Ukrainian government subsidized them to curb social tension in the cities where they were located. At the beginning of 2015, mines and factories in the breakaway republics operated on the investments made in peacetime. After those investments were exhausted, it would have been time for the self-proclaimed “republican” government to subsidize them. But that did not happen. Declining production facilities, job security, salaries, and employment soon followed.

Since 2014, 22 coal mines in the non-government-controlled part of Luhansk region and 19 coal mines in the of Donetsk region were closed, eliminating over 60,000 jobs. Many settlements were left without enterprises to anchor their economic life.

Closed mines were flooded, which in turn created serious environmental threats. Donbas has become the third-most mine-contaminated stretch of land in the world, covering around 16,000 square kilometres. At the same time, small-scale, informal coal production has been de facto legalized. According to the East Human Rights Group, miners experienced a 10-fold decline in salaries compared to the pre-war period. Over 30,000 jobs were eliminated in 2020, when the LPR and the DPR started closing coalmines that were previously the part of the Ukrainian public sector. According to official documents, workers employed in unprofitable mines were dismissed without paying back wage debts for the period of 2014–2020.

Worker protests on the territories of the two republics started happening back in 2015. Non-payment of wages was the most common reason for uprisings. However, due to the fact that all independent trade unions were prohibited in 2014 and the “official” trade unions do not represent workers’ real interests, all protests in the occupied territories were carried out by self-organized groups and did not have a systemic character. Six out of 15 protests registered by the Eastern Human Rights Group between 2015–2020 were protests by miners. Other protests took place among public transportation and factory workers, and in 2016, entrepreneurs in Luhansk protested against tax hikes.

The most serious protests, however, took place in summer 2020. Miners at the Nikanor-Novaya mine in Luhansk region launched the first radical miners’ protest in the history of the military conflict. Provoked by the announcement that the Russian occupation planned to close the mine, which serves as the economic lifeblood of the town of Zorinsk, the protest lasted for six days and enjoyed widespread local support. Workers refused to leave the mine until receiving promises that the 2.87 million US dollars in back wages they were owed would be paid and that new jobs would be found for them in other mines.

A similar protest occurred at the Komsomolskaya mine later in June. In a way, both protests were successful — if nothing else, wage demands were fulfilled. Local police officers refused to follow orders to interrogate family members of the protesters, but the reaction of the authorities was more violent. On day four of the protest, mobile communications and high-speed internet were cut, and the entrance and exit to the city were closed. Thirty-eight people were arrested, three of whom went missing and have not been found. The authorities announced that the protests were organized by foreign “agents of influence” and “special services”.

It is possible that, despite sanctions, much of the coal from the “People’s Republics” was sold to outside markets via Russia, benefitting intermediaries involved in this process. An investigation found that most of the coal went to India, Belarus, and Ukraine — after being reclassified as Russian. The DPR economy resembled, in some ways, a huge money-laundering scheme: while Russian money filled state coffers, from which pay pensions and salaries for public-sector workers were paid, most income produced by local enterprises went to private individuals. “They use those mines, export coal paying nothing for it, pay petty salaries. That’s like a private enterprise, which using a colonial scheme extorting all Donbas resources”, is how journalist Denis Kazanskiy described the situation. The VneshTorgServis debt to the DPR state budget in October 2019 was 400 million US dollars. However, after all major factories in both republics were transferred to the control of Russian businessman Yevgeni Yurchenko’s company in 2021, the situation changed for the better, however slightly.

Economic decline together with illegal practices that drain the region’s industrial facilities and budget made the People’s Republics completely dependent on Russia. After Ukraine stopped all transfers of goods and electricity to the territories in 2017, Russia became the only economic partner of the unrecognized territories, the “state budgets” of which are heavily dependent on Russian money as well. Already in 2016–2017, 90 percent of funds came from Russia — a tendency that persisted until 2022.

Like Russia, But Worse

After Viktor Yanukovich left Ukraine in February 2014, Ukrainian state structures basically collapsed. While local administrations in Donetsk and Luhansk regions were occupied, the unrecognized people’s republics experienced a brief period of turbulence. During that time many bottom-up initiatives aimed at representing the local population were created. They ended by autumn 2014, however, when they were pushed out and replaced with de facto state structures acting in accordance with the decisions of local proxies backed by Moscow.

In general, the political system reproduced in the “people’s republics” was very similar to the Russian one: all parties, trade unions, and organizations were fully integrated into the state apparatus, which did not accept any unplanned political interventions. This state of affairs cemented quite quickly due to their complete dependence on Russia — both in military and economic terms. As a result, a significant part of the people who participated in the uprising in 2014 were soon removed from decision-making structures. Local initiatives were disbanded. Warlords and non-state armed groups who effectively controlled particular territories during the first months of the war lost their power. It is not surprising that the most persistent critics of the political regimes in the people’s republics were those who actively participated in the uprising in 2014. They were either killed, forced to flee, or to accept a new political order imposed by the Kremlin.

Numerous human rights violations were registered during the eight years of the two self-proclaimed states’ existence. Some Ukrainian prisons became part of newly created state structures. Back in 2016, human rights activists reported that 5,000 prisoners were held in solitary confinement, beaten, starved, or tortured if they refuse to carry out unpaid work. From the very beginning, the practice of illegal detentions, torture, and killings became part of life in the people’s republics. Those practices were employed by armed groups and warlords as well as the newly created militia and special security services.

People who publicly expressed pro-Ukrainian political views were detained. The most well-known example is Stanislav Aseyev, who was detained in Izolyatsiya prison in Donetsk for more than two-and-a-half years for publishing his observations and commentaries about life in the DPR with Ukrainian media outlets. In November 2019, an entrepreneur from Luhansk was detained for expressing pro-Ukrainian views and sentenced to 13.5 years for “high treason”. Some Telegram channels were banned in summer 2020 for covering the miners’ protests.

In June 2020, a new article was included in the DPR criminal code on “financing extremist activities”. It states that “supporting the activities of an extremist community or an extremist organization” will be punished with up to eight years in prison. In April 2021, a provision was added to the criminal code prescribing “criminal punishment” for slander committed publicly and on social networks. The amendments also introduced penalties such as corrective labour and imprisonment of up to two years. Similar changes were implemented in LPR laws. Many human rights activists had to leave the people’s republics after 2014, and those who stayed had to continue their activities under the threat of being abused by local militia and special services.

Both “People’s Republics” abolished Ukrainian as a state language in 2020. Since then, local schools do not teach the Ukrainian language or Ukrainian history. Prior to 2020 those subjects were still taught, albeit at a reduced level. The Ukrainian language disappeared from the public sphere. As a result, young people who were born shortly before or during the conflict are not “Ukrainians” anymore — they do not speak Ukrainian, they do not know Ukrainian history, and they do not regard themselves as Ukrainians. They do not know or do not remember what is it like to live in Ukraine. At the same time, the OHCHR reported cases in which people were detained not only for voicing pro-Ukrainian views, but doing so in Ukrainian. On 10 April 2020, the DPR secret police arrested a man who reportedly wrote and sang songs in Ukrainian, expressed support for Ukraine, and criticized the armed groups on social media.

Supporters of the people’s republics who are critical toward its policies and social conditions cannot avoid repression, either. In December 2020, the high-profile separatist blogger Roman Manekin was arrested on suspicion of being a “Ukrainian spy” for his criticism of DNR armed thugs. In January 2020, a local blogger and member of the Public Chamber (a body advising the “head” of the DPR on social and humanitarian issues) was arrested in Donetsk after he criticized a local administrative body for corruption and armed groups for detaining people who did not own DPR passports and license plates. He was sentenced to nine months in prison.

The political scene in the DPR and LPR is completely controlled by and loyal to Russia. Not only is freedom of speech repressed, but any and all political competition was annihilated. None of the separatist officials in Donbas were freely elected, and their de facto governments operate with extreme opacity, making it difficult to discern how much autonomy they have in practice vis-à-vis the Russian government.

During the last elections in 2018, Moscow-approved leaders — Denis Pushilin in the DNR and Leonid Pasechnik in the LNR — won virtually uncontested elections, while only ruling and spoiler parties were allowed to participate. Party lists were composed from locals loyal to the republics’ people, while locally registered Communist parties weren’t even allowed to take part in the elections. The only real opposition to the republics’ current leadership comes from influential separatist veterans, but the authorities thwart their political aspirations: the Donbas Republican Party created by one of the DPR’s founding fathers and former head of the legislature, Andrei Purgin, was denied registration. In 2021, the leaders of both republics publicly joined United Russia, the largest and the more powerful political party in Russia.

According to various estimates, the DPR and LPR territories currently have only 45–70 percent of their initial population, which was above four millions in 2014. In 2019, Vladimir Putin signed a decree granting residents of the DPR and LPR the chance to get Russian passports through a simplified procedure. By January 2022, more than 720,000 Donbas residents already had Russian passports. Now these people are considered “Russian citizens residing in Donbas”, which has multiple consequences. Among other things, they were granted the right to vote in Russian elections. Additional voting stations were opened in Rostov region in Russia to allow freshly minted Russian citizens — presumably all loyal to president Vladimir Putin — to vote in the last Russian State Duma elections in 2021. The DPR and LPR governments provided 825 buses and 12 railway trains to bring all those who wanted to vote to Rostov. Some of the voters received their Russian passports right in front of voting stations.

What’s Next?

Both “people’s republics” were de facto integrated into the Russian Federation at the moment when Russian government recognized their independence and Putin started the war against Ukraine. They had already become completely dependent on Russia economically and totally loyal politically.

In fact, the political system of the breakaway republics became a bitter reflection of the Russian political system, with no competition nor democratic institutions, repressed activists, and new laws which made any criticism towards the existing political order potentially dangerous.

The economies of the DPR and LPR are almost completely destroyed: most of the mines and factories are closed, and some of them cannot be reopened, as their infrastructure was either heavily damaged, destroyed, or stolen. This dependence on Russia only grew during last two years, when, due to COVID restrictions, travelling to Ukrainian-controlled territories was limited and the number of “contact line” crossings dramatically reduced. Eight years of conflict deprived non-government controlled regions of Donbas of both chances for reintegration with Ukraine as well as independent existence outside of any pre-existing political entity.

What kind of future awaits the so-called “People’s Republics” in Donetsk and Luhansk? Before Russia recognized their independence on 21 February 2022, their envisioned fate was to become leverage for Russia to exercise control over Ukraine. However, that prospect was possible only in a scenario in which the breakaway territories would be reintegrated into Ukraine in accordance with the Minsk agreements, granting them wide-ranging autonomy and influence over Ukrainian domestic and foreign policy. That did not happen.

The whole trajectory of economic, political, and cultural development of the two republics in recent years greatly increased their alienation from Ukraine. Russian recognition of their independence, followed shortly thereafter by the invasion of Ukraine, completed the process of their separation. At the same time, Russia has never voiced any intention to annex the territories. Most of the people who still resides in the LPR and DPR would probably support such a move, but it is unclear why it would be advantageous for Russia to absorb such an economically devastated region rather than continuing to use it for own purposes, such as money laundering and resource extraction.

Yet, regardless of whether or not their “independence” is recognized by the international community, neither the LPR nor the DPR would be able to survive on their own. This likely leaves only one option on the table: namely, that the Donetsk and Luhansk People’s Republics become quasi-states like South Ossetia or Transnistria, unrecognized by the international community but nevertheless eking out an existence under the Russian umbrella. In the case of the Donbas, however, the last eight years of Russian integration mean they will probably be even more heavily dependent on Russia than the latter.