The Donbas is, historically, a culturally and economically distinct, industrial, “Sovietised” region
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbas
The term Donbas, short for Donets Basin, has historically been an economic as well as a geographic designator. It was coined in the nineteenth century by mining engineers for the Tsarist government to describe a coal-rich area straddling sections of modern-day eastern Ukraine and western Russia. Under the Soviet Union, Donbas was an industrial powerhouse, producing disproportionate shares of the Union’s coal and steel. Its population consisted largely of first- and second-generation migrants sent from other Soviet republics to staff its mines and factories. The region thus earned a reputation as one of the most “Sovietised” parts of the Union – a place where pre-existing identities, languages and patterns of life had been supplanted by a multicultural society held together by common pride in industry, with Russian as the lingua franca.
The post-independence collapse of Ukrainian industry savaged the national economy. It hit this area particularly hard. Luhansk and Donetsk oblasts, which together encompassed most of Ukrainian Donbas, lost 21.6 and 18.3 per cent of their populations, respectively, between 1993 and 2013. (While Ukraine’s population was falling elsewhere, the average drop was comparatively smaller countrywide – 12.5 per cent.) The share of working-age people (20-64) in the two oblasts shrank by 13.5 and 12.1 per cent, respectively, during this same time period, compared with 3.9 per cent nationwide. The region became known as a centre of organised crime as illegal mining took off and smuggling across the border with Russia flourished.
In late 2014, secession caused the Ukrainian government to require registration as an internally displaced person (IDP) in order to receive pensions
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbasBy October 2014, some 4,000 Ukrainians on both sides of the fight had been killed. Mariupol remained under government control. So did the lesser industrial centres of Kramatorsk, Sievierodonetsk and their respective surroundings. Otherwise, the region’s major industrial areas, including the bulk of Akhmetov’s empire as well as the assets of the steel giant Industrial Union of Donbas, were in rebel hands. The Russian-backed separatists were frank about both their need for marketable resources that would give them income and their interest in “nationalising” industrial enterprises. Their leaders put out the message that industrial workers had voluntarily joined their ranks in large numbers, a narrative that Akhmetov’s managers disputed.
Meanwhile, Kyiv moved to extricate its institutions, and some of its citizens, from rebel-held areas. It passed legislation granting the roughly 400,000 people who had fled these areas the right to register as internally displaced persons (IDPs) and receive cost-of-living subsidies. In November, Kyiv announced that it would withdraw all government services and funding from these territories the following month, in order to prevent funds from reaching the separatists. By December, the number of registered IDPs had doubled, largely because so many pensioners had signed up hoping to retain access to their benefits.
Pensioners in the Donbas receive ~$140 per month; the sum of all subsidies and pensions is less than $275 per month, and average monthly salaries are $340 - $430 a month
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbasAt the same time, much of the new economic activity has come at the expense of vulnerable segments of the population, including local pensioners and IDPs living on fixed incomes. Increased housing prices illustrate the problem. Property owners sought to capitalise on the 2014-2015 influx of new government workers, security personnel, foreign aid workers and IDPs, causing rental prices to spike. Rental costs in Sievierodonetsk’s barren downtown, for example, and in the quiet front-line town of Volnovakha, have risen to levels that rival some middle-class districts inside Kyiv’s city limits, with well-maintained two-bedroom apartments going for about $200-320 a month before utilities.
Those are steep prices given many locals’ means. The average non-IDP pensioner in government-controlled Donbas received roughly $140 per month as of May 2020. The average IDP pensioner, regardless of which side of the line he or she actually resides on, receives more, due to the historical prevalence of higher-paying industrial jobs in areas now held by separatists. An able-bodied IDP also benefits from non-pension government support of slightly under $20. Still, the sum of subsidies and pensions for an IDP generally does not exceed $275 per month per individual, and more often falls far below. IDPs who find work in government-controlled areas can generally afford rent – provided salaries are paid on time – with average monthly salaries for government-controlled Luhansk and Donetsk reaching roughly $340 and $430, respectively, in the first quarter of 2020.
The D/LPR is basically an economically depressed welfare-state dependent on Russian subsidies and Ukrainian pensions
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbas
Like their neighbours across the line, residents of separatist-held areas have partially adjusted to the new war economy, but their new normal is one of dire stagnation. Broken links with government-controlled areas have forced the statelets to orient what remains of their industries toward Russia, whose market is less interested in what they produce. The result is mass unemployment, with Russian subsidies and Ukrainian pensions filling the gaps.
Moscow and Kyiv prop up the de facto statelets’ residents’ generally poor living standards in an expensive, unhappy and uncoordinated collaboration. Excluding military expenditures, Russia spends roughly $1.5-2 billion a year, or about 0.1 per cent of its GDP, on the de facto republics, according to Ukrainian government sources and non-government experts. As of 2017, Ukrainian officials estimated that Moscow was covering about 50 per cent of the DPR’s budget and about 80 per cent of the LPR’s. Russia also has covered all the LPR’s energy needs since 2017, when Kyiv cut off the territory due to unpaid debts. Both statelets get their gas from Russia’s Gazprom, which keeps household energy costs low relative to those in government-controlled Ukraine. Kyiv’s contribution to the statelets’ economies takes the form of electricity it provides to the DPR, and the pensions that many so-called pension tourists currently cannot collect due to COVID-19 travel restrictions.
VNESHTORGSERVIS plays a key role in “laundering” coal revenue from the L/DPR
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbas
Prior to the 2017 trade cessation, Ukrainian-registered industrial entities were still the major employers in the statelets. As mentioned previously, Akhmetov’s enterprises alone employed 40,000 men and women. After the blockade, Russia and its proxies gained the opportunity – or, as the case may be, burden – of keeping these entities functioning and their workers employed and paid. Coal lay at the crux of the problem. De facto authorities now had over 60 mines to manage, although many had already stopped work and been left to flood when hostilities began. As for those still functioning, the statelets had lost access to the industries and heating plants across the front line that depended on their product. “We have neither the means nor the mechanisms of payment for coal shipment [to government-controlled areas]”, the de facto heads, Aleksandr Zakharchenko and Igor Plotnitsky, announced. “We will reorient all our production processes toward the Russian market and toward other countries”.
Moscow now had to navigate a competing set of interests. On one hand, it was keen for the statelets both to avoid economic collapse and to become more economically self-sufficient so that it could spend less of its own budget on their upkeep. To that end, it wanted to help them sell their products. A former Kremlin official said Putin had, following the blockade, “given orders” to his inner circle to find domestic markets for Donbas’s coal and steel, although this aide also conceded that the orders proved ineffective.
On the other hand, Russia’s domestic markets already had coal surpluses, and its coal export market was crowded. Mines just over the border from the statelets in Rostov, in what is known as Russian Donbas, had long since been “optimised”, ie, mostly closed, leaving most Russian anthracite to be mined in southern Siberia’s Kuzbas region. There, together with metallurgy, coal is the economic mainstay of an otherwise depressed area. But the Kuzbas coal industry was already approaching crisis by 2017, with production surpluses and falling global demand. In short, Donbas coal was one of the last things that many Russian officials or consumers needed or wanted around.
On 14 March 2017, Zakharchenko announced the first shipments of 95 wagons of coal across the Russian border. He admitted to “problems with marketing and with certain types of documents” – in other words, trouble with exporting as an unrecognised political entity and with finding buyers. The first hurdle proved easier to clear than the second: in April, the DPR leadership issued a decree inaugurating a new company, Vneshtorgservis (VTS), that would manage coal and metallurgy assets, and the marketing and export of product. The company was registered in South Ossetia. Its purported heads included a former deputy governor of Russia’s Irkutsk region, now a deputy head of the DPR, and a young Ukrainian billionaire associate of ex-president Yanukovych who had settled in Moscow.
Investigative journalists and anti-corruption activists have explored the resulting schemes extensively in English-language, Ukrainian, Russian, Belarusian and Polish publications, and D-TEK staff corroborate the general picture, if not the details. The schemes are reported to work roughly as follows. Coal reaches Russia from the statelets by rail, through an arrangement with Russia’s state railroad. It then gets mixed with Russian coal, either from one of Rostov’s few remaining mines, or in Kuzbas, rendering it harder to identify as Donbas coal. It is then shipped abroad from two ports in Rostov oblast. Some reports also have it moving by rail farther west via Belarus, or through Abkhazia. Through such schemes, some coal originating in the statelets has almost certainly found its way to government-controlled Ukraine, which, following the 2017 blockade, increased imports of Russian anthracite – meaning that Ukraine has probably bought its own coal from Russia. Firms registered in Switzerland and other tax havens all reportedly play bit parts in these schemes.
VTS gradually consolidated control over most of the statelets’ coal and steel assets throughout 2017 and 2018. The August 2018 assassination of Aleksandr Zakharchenko may or may not have been an element of this consolidation. Many mines, however, remained in disuse: Ukraine’s minister of ecology and natural resources announced in 2018 that 36 flooded mines in the D/LPR were beyond repair and were now threatening to poison the surrounding water and soil.
Ultimately, neither consolidation nor the sophisticated smuggling schemes detailed above could turn Donbas coal into a hot commodity. The one country that had depended on it, Ukraine, still needed some but had partly moved its thermoelectric power stations to gas coal, which is dirtier but readily available in government-controlled territory. Moreover, VTS has aroused the ire of miners and local officials due to its alleged chronic non-payment of salaries, as well as running up large debts for the product itself. By the end of 2019, VTS allegedly owed about $390 million to its daughter entities, resulting in massive wage arrears and regular miners’ strikes. A project billed as a means of saving jobs and making the statelets self-sufficient appears instead to be viewed by many residents as something that left them even worse off.
Secession in the Donbas triggered a massive economic decline
Savelyeva, Natalia, “Eight Years of War before the War”, Rusa Luxemburg Siftung (blog), Mar 25, 2022, https://www.rosalux.de/en/news/id/46205/eight-years-of-war-before-the-war
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.
“Laundering” rubles through coal mining was one method by which Russia extracted wealth from the Donbas
Savelyeva, Natalia, “Eight Years of War before the War”, Rusa Luxemburg Siftung (blog), Mar 25, 2022, https://www.rosalux.de/en/news/id/46205/eight-years-of-war-before-the-war
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.
Pushilin and Pasechnik promised to raise pensions and civil servant salaries, likely in coordination with Russia
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbasAverage monthly salaries in the statelets also compare poorly with those across the line. While the exact figure for the LPR is unknown, it is likely similar to that for the DPR: about $185 as of April, as opposed to about $340 and $430 in government-controlled Donetsk and Luhansk in the same period. Leonid Pasechnik and Denis Pushilin, the de facto heads of the LPR and DPR, respectively, have both promised to raise pensions, as well as salaries for civil and public service workers, to equal those in Rostov oblast, where the average salary in the general work force is now around $480 and the average pension in the low $200s, by 2022. They did so in separate but nearly simultaneous and identical statements, suggesting coordination with the Kremlin.
The majority of pensions in the L/DPR, about $1.1 billion annually, are now paid by Russia; Ukraine pays about $750 million a year, but the pensioners are still below the poverty line
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbas
The official retirement age for men in Ukraine is 60. For women, it is 59.5. Thus, because at least one quarter of the statelets’ population is over 60, pension payments play a substantial role in the region’s economy. These are paid both by local authorities, courtesy of Moscow, and by Kyiv, in a microcosm of the warring sides’ grudging burden sharing.
While expert estimates for Russia’s non-military spending on the statelets hover around $2 billion annually, the de facto authorities spend roughly $1.1 billion annually on their 1.1 million pensioners. As of mid-2019, the average monthly pension in the DPR was 6,145 rubles, or roughly $97 using the exchange rate at the time, while the LPR equivalent was just under 5,000 rubles or about $79. Authorities acknowledge that these payments, officially known as financial assistance, not pensions, are below subsistence levels.
Kyiv, for its part, has paid out roughly $750 million annually between 2015 and 2018 in pension payments to registered IDPs, although records show this amount accounts for just half of those who were on the pension rolls before the war in areas now held by the separatists. For the 500-600,000 people who receive these payments, this income is crucial. Despite small incremental increases over the following year, in 2019 the International Organization for Migration found that 41 per cent of registered IDP pensioners in the statelets lived on less than $115, compared with 28 per cent of IDP pensioners across the line.
Ukraine has ~$3.5 billion in unpaid liability to pensioners in the L/DPR
International Crisis Group, “Peace in Ukraine (III): The Costs of War in Donbas”, crisisgroup.org (blog), Sep 3, 2020, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/261-peace-ukraine-iii-costs-war-donbas
This picture looks even grimmer, moreover, when one considers that Ukraine’s unpaid debt to pensioners in non-government-controlled areas totals $3.5 billion as of early 2020. In 2018, Ukraine’s Supreme Court, citing international precedent and human rights norms, ruled in essence that Kyiv’s moves to restrict pension access to citizens residing in areas under government control were illegal. It follows that Kyiv is legally obligated to repay these debts in full. Doing so inevitably would increase the deficit substantially, but the World Bank and other international financial institutions may be able to help, as described below.
VTS is a kleptocratic “setup” likely intended to recoup losses from paying pensions in the Donbas
Milakovsky, Brian, “Trade or Blockade? Economic Relations with Uncontrolled Territories in Moldova and Ukraine”, Kennan Institute Kennan Cable, March 2020, https://www.wilsoncenter.org/publication/kennan-cable-no-48-trade-or-blockade-economic-relations-uncontrolled-territories
In the Donbas the situation is far more complicated. The “nationalized” mines and factories were stolen from Rinat Akhmetov and other leading Ukrainian oligarchs, who won control over them in the privatizations of the 1990s and 2000s. Returning industrial assets in the “republics” to the jurisdiction and customs space of Ukraine will be impossible until some arrangement is made with their influential legal owners. But any such move will be politically fraught for Moscow, Donetsk and Luhansk, where demonization of Ukrainian oligarchs is core aspect of state ideology.
Almost all heavy industry in the “republics” is currently under the management of Vneshtorgservis, a shadowy holding registered in the breakaway republic of South Ossetia in Georgia and nominally managed by Ukrainian oligarch-on-the-lam, Serhiy Kurchenko. It was likely set up by the Kremlin to recoup some of its losses from paying for pensions and other social payments in the Donbas territories it controls. But the holding has been colossally mismanaged, or, more likely, skillfully managed to maximize plunder. It racked up debts of eight billion rubles (around $126 million) to the “republican” coal mines whose product it until recently had exclusive rights to export to Russia.[9] This causes widespread wage arrears to miners who grumble loudly on social media but face intense pressure from the separatist security services not to strike.
Pensioners required to register as IDPs constituted a significant amount of traffic across the line of contact; as it stands, more than half of pensioners in the L/DPR do not receive pensions, part of a broader problem with paperwork in the L/DPR
De Waal, Thomas, “Uncertain Ground: Engaging With Europe’s De Facto States and Breakaway Territories”, Carnegie Endowment for International Peace: Washington, D.C., 2018 (https://carnegieendowment.org/files/deWaal_UncertainGround_final.pdf)
Many of those who cross the Line of Contact from the rebel-held territories do so to claim their entitlements as Ukrainian citizens. They come to acquire documents such as birth and death certificates, passports, and pensions, but they face difficult bureaucratic hurdles in doing so. Even some residents of government-controlled areas have had difficulties getting Ukrainian documents as their official records are in archives on the other side.
Pension rights are the biggest problem. In 2014, there were more than 1.2 million people of pension age registered in the non-government-controlled areas. The government in Kyiv then decreed that in order to receive a pension, a resident of the non-government-controlled territories must register as an internally displaced person (IDP). In practice, many older people registered as IDPs but stayed in their homes in rebel-controlled territory. These people comprise a large number of those who cross the line, often on foot and in hazardous conditions, to receive their pensions—which are meager by international standards.
As of May 2018, 650,000 residents of the non-government-controlled territories were not receiving Ukrainian pensions, or around half of those entitled to do so. Many of those who have remained at home have been stripped of their pension rights. Needless to say, many others are too sick, infirm, or scared to make the crossing. Different parts of the Ukrainian state view this situation differently. Some say that this policy saves the government money, by cutting down on fraud and on elderly people “double-dipping” by getting two pensions. Others, backed by Ukraine’s international partners, see this as a basic rights issue. Draft law 6692 was introduced in the Ukrainian parliament to simplify procedures and remove the requirement to register as an IDP. It follows the practice the Georgian government has adopted on pension rights for residents of Abkhazia. However, it has not been adopted.17
Humanitarian organizations working in the region report similar problems for those wishing to obtain Ukrainian birth and death certificates or foreign passports. Frequently, people are told they do not have sufficient proof of identity for themselves or their children, and are forced to go to court to try to receive the documents. In 2017, only 38 percent of children born in non-government-controlled Donbas received Ukrainian birth certificates (and only 10 percent of those born in Crimea), according to United Nations estimates.
There are 3 million people in the L/DPR and 38% are pensioners
Roth, Andrew, “What is the background to the separatist attack in east Ukraine?”, The Guardian, Feb 17, 2022, https://www.theguardian.com/world/2022/feb/17/what-is-the-background-to-the-separatists-attack-in-east-ukraine
Leaked documents suggest there are just under 3 million people remaining in the territories, 38% of whom are pensioners. That’s less than half of the pre-war population. Anecdotal evidence has shown that many of the people who remain are those who strongly opposed the 2014 revolution that toppled the former Ukrainian leader Viktor Yanukovych (his hometown is in the separatist-controlled regions) and those who are too poor or were unable to leave when fighting broke out. Public opposition in the territories is virtually non-existent.
L/DPR authorities report that pensions are still being paid despite the war
Staff, ““There are no days off in war”: OVA told how pensions are paid in the Lugansk region”, NewsReadOnline (blog), Apr 3, 2022, https://newsreadonline.com/there-are-no-days-off-in-war-ova-told-how-pensions-are-paid-in-the-lugansk-region/
In the Lugansk region, despite the active attacks of the invaders, people managed to pay pensions. In some places, people received payments for March and April at once.
It was important to give payments to people, because for many this is the only income. This was announced by the head of the Lugansk OVA Serhiy Gaidai on April 2, on the 38th day of the full-scale war that Russia launched against Ukraine.
Director of branches of Ukrposhta “In the Lugansk and Donetsk regions, Vadim Shestopalov said that their employees understand that for most people, pensions are the only source of income, so the main thing is that there should be any relative “quiet mode”.
There are no weekends in war. We use every opportunity to deliver pensions and essential goods to people whom the Russian Army has actually resettled in basements and bomb shelters,” Shestopalov explained.
In particular, another 495 people received pensions in the Lugansk region. In particular, it is known that:
two pensions – for March and April – in the amount of almost UAH 4.2 million were received by 334 residents of Lysichansk;
one pension – for March – 161 clients in Severodonetsk received UAH 780,000.
Separatist pensions are paid in rubles
Chernov, Mstyslav, “Rebels in eastern Ukraine pay pensions in Russian rubles”, Associated Press, Apr 1, 2015, https://apnews.com/article/c88ee14781f44c9889750eada2262cc9
Russia-backed rebel authorities in eastern Ukraine on Wednesday started paying pensions in Russian rubles.
Yekaterina Matyushchenko, the finance minister in the Donetsk region’s separatist government, said pension payments to retirees in the rebel-controlled areas will total 1.9 billion rubles (over $30 million) in March.
Another rebel official, Oksana Taran, denied that Russia had provided the money, claiming that the funds came from taxes paid by local businesses.
The L/DPR has 45-70% of its prewar population; Russian citizenship gives L/DPR residents the right to claim Russian pensions
Savelyeva, Natalia, “Ukraine’s Donbas Already Another Country”, Center for European Policy Analysis (blog), Feb 21, 2022, https://cepa.org/ukraines-donbas-already-another-country/
According to various estimations, the occupied territories now have anything from 45-70% of their pre-2014 population, which was then above four million. In 2019, Vladimir Putin signed a decree granting residents a chance to get a Russian passport through a simplified procedure. By January, more than 720,000 had done so, and more are in the bureaucratic system. Now those people are officially designated as “Russian citizens residing in Donbas,” which has multiple consequences. Most importantly, it gives them the right to claim Russian social security and pension payments, and it makes easier for them to work in Russia.
Getting a Russian passport doesn’t guarantee pension eligibility
Burkhardt, Fabian, “Russia’s “Passportisation” of the Donbas: The Mass Naturalisation of Ukrainians Is More Than a Foreign Policy Tool”, SWP Comment 2020/C 41, German Institute for International and Security Affairs, Aug 3, 2020, https://www.swp-berlin.org/10.18449/2020C41/
Fourth, passportisation intensifies the gerrymandering caused by the war, i.e. the manipulation of borders and constituency composition. In everyday life, which is marked by death, forced migration and expulsion, passportisation creates incentives. It facilitates permanent settlement in Russia for Ukrainians who already have a residence permit there and will make it easier for Ukrainians living in the NGCAs to enter the Russian labour market. By contrast, for those who are socially vulnerable and less mobile, such as parents of several children or pensioners, their Russian passport has so far only had symbolic value. It does not provide automatic entitlement to a Russian pension or state benefits such as child benefit (“maternity capital” for two or more children), since these require proof of being registered in Russia or additional conditions – which the vast majority of people living in the Donbas do not meet even after naturalisation.
Starting “in the past four or five months” before March 2016, Russia started bankrolling the pension system in the DNR & LNR
International Crisis Group, “Russia and the Separatists in Eastern Ukraine”, Briefing no. 79/Europe & Central Asia, risisgroup.org (blog), Feb 5, 2016, https://www.crisisgroup.org/europe-central-asia/eastern-europe/ukraine/russia-and-separatists-eastern-ukraine
After showing little interest in building political institutions in the DNR and LNR or enthusiasm for funding social policies, Moscow has begun in the past four or five months to bankroll pensions, social benefits and salaries to local officials and the separatist military forces. If consistently maintained, this will cost it over $1 billion a year, a substantial sum for the Russian treasury in straitened economic times.
Russia is paying pensions in the L/DPR, there’s no other way for them to sustain the territory
The Moscow Times staff, “Separatist Leader Says Russia Paying Pensions in Eastern Ukraine”, The Moscow Times, Oct 6, 2016, https://www.themoscowtimes.com/2016/10/06/russia-funding-pensions-in-donestsk-and-luhansk-ex-official-claims-a55638
Russia is financing pensions and state salaries in the self-proclaimed Donetsk and Luhansk People's Republics, a separatist leader has claimed.
Alexander Khodakovsky, commander of "Vostok" batalion and former secretary of Donetsk Security Council, told the Reuters news agency that Russia covered both expenditures “as a priority.” He was removed from the Donetsk administration earlier this year after an internal dispute.
"Without outside help, it's impossible to sustain the territory,” he said, claiming that Russia's financial help was greater than the Donetsk Republic's internal revenue.
The Kremlin has denied all claims, Reuters reported.
The Finance Ministry in the Luhansk People's Republic could not be reached for comment, while the Donetsk authorities said that they could not discuss the sources of their budget for security reasons.
The Ukrainian government no longer pays pensions or public sector salaries to those registered as living in self-proclaimed republics, while fighting in the region has caused much of the area's industry to close.
In December of 2014, 160,000 pensioners in the L/DPR lost access to their pensions; legal changes in Ukraine resulted in another 400,000 as of 2017
UNHCR staff, “Thousands in eastern Ukraine lose access to pensions”, UNHCRG.org, Jun 14, 2017, https://www.unhcr.org/en-us/news/stories/2017/6/59396b6d5/thousands-eastern-ukraine-lose-access-pensions.html
For hundreds of thousands of elderly and disabled people in the conflict-torn Donbas region of eastern Ukraine, the state pension is their only means of support. However, some 160,000 retired people lost this income after the government limited access to state pensions for residents of the area outside its control in December 2014.
Further restrictive measures introduced last year led to an additional 400,000 people losing access to their pensions.
As of 2020, low contribution rates and low participation endanger Ukraine’s pension system
International Labor Organization staff, “The Ukrainian pension system at crossroads: Key policy messages from the recent ILO report”, ILO.org (blog), Jan 29, 2020, https://www.ilo.org/budapest/whats-new/WCMS_735541/lang--en/index.htm
Message 1: The pension level and minimum guarantees should be improved
The analysis shows that the current pension formula does not secure the benefit level required by Convention No. 102, which Ukraine ratified in 2016. The pension formula should be increased to secure at least a benefit rate of 40 percent after 30 years of contributions as required by Convention No. 102 for earnings-related contributory pensions.
For workers with low income, pensions under the current pension formula fail to attain national poverty benchmarks. To strengthen the minimum guarantees, the right to a full minimum pension guarantee should be given to persons with shorter contributory periods and the equal treatment of minimum pension protection should be ensured throughout the retirement period.
Message 2: It is crucial to extend the pension system coverage
Currently only 36 percent of the population aged 15–64 in Ukraine are contributing to the State pension system. The low coverage implies that in the long run more than 60 percent of elderly persons would not be entitled to pensions.
There is an urgent need to increase labour force participation and the rates of formal employment (in particular for youth and women), increase effective coverage of all types of employment contracts, and increase enforcement and compliance with reporting economic activities and paying contributions.
Message 3: Stakeholders should agree on the measures to improve the sustainability of the pension system
Since 2016, the revenue to the Pension Fund has decreased significantly due to the substantial reduction in the single social contribution rate. As a result, more than 40 percent of the total expenditure of the Pension Fund is financed by the State budget. In 2018, the transfer from the State budget to the State Pension Fund amounted to 4.2 percent of GDP, one third of which was spent to cover the deficit of the Fund.
To improve the long-term sustainability of the pension system, the stakeholders should discuss a wide range of policy alternatives and make rational decisions based on national tripartite dialogue.
As of 2021, there were 11 million pensioners in Ukraine total, of whom 65% received less than 3,000 hryvnia per month
Guz, Serhiy, “The slow-burn crisis inside Ukraine’s pension system”, openDemocracy.net (blog), Jul 8, 2021, https://www.opendemocracy.net/en/odr/ukraine-pension-system-crisis/
Approximately 80% of single pensioners in Ukraine live below the official poverty line, according to Ukrainian media Liga.
Today there are about 11 million pensioners in Ukraine, and 65% of them receive a pension below 3,000 hryvnia (£79) per month. Only 2.7% receive a pension above 10,000 hryvnia (£264) per month. As a rule, these are former ministers, parliamentary deputies, judges, prosecutors and other high-ranking officials of the state apparatus.
“Today, if you don’t work in the public sector, you can hardly count on a normal pension,” Kolishevskyi states. “Having provided themselves with pensions, state officials declare that there’s not enough money to pay normal pensions to everyone else. Yet lack of money is not a reason, but a consequence of policies pursued by government officials. This policy is not aimed at developing the national economy, creating new jobs, supporting small- and medium-sized businesses. As a result, almost all entrepreneurship is forced to work ‘in the shadows’.”
VNESHTORGSERVIS may pay funds to the L/DPR through two entities, Fund For The Support Of International Humanitarian Projects and the Center For International Settlements
UAWire staff, “Media: the Ukrainian factories seized in the Donbas are managed by the former governor of Russia’s Irkutsk region”, UAwire (news blog), May 7, 2017, https://www.uawire.org/news/media-reports-reveal-that-seized-factories-in-the-donbas-are-managed-by-the-former-governor-of-irkutsk
Ukrainian factories that have been seized by pro-Russian separatists are managed by Vneshtorgservis Company, headed by the former governor of the Irkutsk region, Vladimir Pashkov.
This was reported by the Russian magazine Kommersant. The publication notes that the leader of the so-called DPR, Alexander Zakharchenko signed a "decree" in which he appointed Vneshtorgservis as the "temporary administrator" of the seized Ukrainian enterprises.
The list of enterprises controlled by the Russian company includes Donetsksteel Iron and Steel Works, Yenakiieve and Makiivka Iron and Steel Works, Yenakiieve Coke and Chemicals Plant, Yasinovka Coke Plant, Makiivkoks, and Khartsyzsk Tube Works.
"None of the documents of the self-proclaimed republics indicate who is heading this company and to whom it belongs," the newspaper writes. However, on March 20, a message from the Krasnodonsk territorial organization of the trade union of workers of the coal industry of the local Krasnodonugol Company said that coal companies and metallurgical plants would join Vneshtorgservis.
"A proposal has been made to build a vertically integrated company that will operate in LPR (Luhansk People’s Republic) and DPR (Donetsk People’s Republic) territory. The General Director of the company is Vladimir Pashkov," the newspaper reports.
The s-called Minister of Industry and Trade of the Donetsk People's Republic, Alexey Granovsky confirmed to the Russian newspaper that Vneshtorgservis is being headed by Pashkov.
"Before that, he was an adviser to the head of the republic on economic issues. His true patron will not be disclosed in order to avoid harming our partners," Granovsky said.
Kommersant draws attention to the fact that in 2015, Pashkov also became president of the charitable fund that supports international humanitarian projects. In February, the SBU accused the former Russian official of using a fund to cover the financing of the so-called LPR.
"To hide the Russian financing of the pseudo-republic and to avoid additional economic sanctions against the Russian Federation, as one of the mechanisms for providing funds for the separatists budget, a charity was chosen: the Fund for the Support of International Humanitarian Projects whose President was a Russian citizen named Vladimir I. Pashkov," the SBU reported.
Employees of Ukrainian Special Services believe that the Russian Fund transfers money to pro-Russian separatists in Luhansk through the accounts of the Russian NGO “Center for International Accounting.”
SERHIY KURCHENKO owns VNESHTORGSERVIS, VNESHTORGSERVIS' General Director is VLADIMIR PASHKOV, prime minister of the DPR, PASHKOV is president of FUND FOR THE SUPPORT OF INTERNATIONAL HUMANITARIAN PROJECTS
Barabanov, Ilya, “"We have one partner - the Russian Federation” («Партнер у нас один — Российская Федерация»)”, Kommersant, May 6, 2017, https://www.kommersant.ru/doc/3283539
On April 4, the head of the self-proclaimed Donetsk People's Republic, Alexander Zakharchenko, signed a decree appointing Vneshtorgservis CJSC as the "temporary administrator" of Ukrainian factories located on the territory of the DPR and undergoing the procedure for introducing external management in early March. The resolution of the council of ministers of the self-proclaimed republic, published on the same day, listed the enterprises that would come under the temporary administration of Vneshtorgservis. The Donetskstal metallurgical plant, Yenakievsky and Makeevka metallurgical plants, Yenakievsky Coke and Chemical Industry, Yasinovsky Coke and Chemical Plant, Makeevkoks, Khartsyzsky Pipe Plant were included in the list.
Although this decree was signed only at the beginning of April, enterprises on the territory of the DPR and LPR began to come under the control of CJSC Vneshtorgservis in March.
Thus, one of the workers of the Komsomol Mining Administration in the Starobeshevsky district of the DPR sent documents to Vlast showing that this enterprise was re-registered as a branch N8 of ZAO Vneshtorgservis on March 28. Yenakiyevo Metallurgical Plant became the "N2 branch" of Vneshtorgservis, the re-registration of employees began there on April 1. From the same day, workers of the Donetsk Metallurgical Plant began to write applications for employment in the "branch N1" of "Vneshtorgservis". In the LPR, the process of transferring factories under a new manager began at the beginning of March.
Over the past month, ZAO Vneshtorgservis has not acquired either an Internet site or an office. None of the documents of the self-proclaimed republics indicated who heads this company and who owns it. Former commander of the Vostok battalion, ex-head of the DPR Security Council and leader of the Patriotic Forces of Donbass movement Alexander Khodakovsky, commenting on Alexander Zakharchenko’s decree in his Livejournal, wrote that Vneshtorgservis was registered in South Ossetia. This partially recognized republic is the only one to recognize formations in eastern Ukraine, and therefore through it Russian companies can carry out transactions with Donetsk and Luhansk without fear of being sanctioned. "What is VTS - Vneshtorgservis" ? On what legal basis is the activity of this organization based? - Alexander Khodakovsky wrote. - Who will actually manage and own the assets of Ukrainian owners - Kurchenko (Ukrainian businessman and head of the UMH group Sergey Kurchenko, close to ex-president Viktor Yanukovych, moved from Kyiv to Moscow after the 2014 revolution.— "Power" )? During the introduction of external management, not a single document was adopted regulating the activities of an enterprise with a South Ossetian residence permit on our territory. An enterprise entrusted with carrying out all the processes of managing the industrial complex of Donbass."
The name of the possible head of Vneshtorgservis was mentioned only once on the websites of the self-proclaimed LPR.
The appeal of the Krasnodon territorial organization of the trade union of coal industry workers to the workers of the local enterprise Krasnodonugol stated that after the introduction of external management there from March 1, the former owner, the Metinvest company of the Ukrainian oligarch Rinat Akhmetov, stopped working at the enterprises from March 15. "Krasnodonugol has introduced an external management - CJSC Vneshtorgservis. Now the company is undergoing registration on the territory of the LPR," the trade union said in a statement published on March 20. "Coal enterprises, including Krasnodonugol, as well as metallurgical factories. It is proposed to build a vertically integrated company that will operate on the territory of the LPR and the DPR. The general director of the company is Vladimir Pashkov"
FUND FOR THE SUPPORT OF INTERNATIONAL HUMANITARIAN PROJECTS funds CENTER FOR INTERNATIONAL SETTLEMENTS which pays into THE STATE BANK OF THE LPR
Barabanov, Ilya, “"We have one partner - the Russian Federation” («Партнер у нас один — Российская Федерация»)”, Kommersant, May 6, 2017, https://www.kommersant.ru/doc/3283539
On February 25, the Security Service of Ukraine released a statement that few people in Russia noticed at that moment, in which she accused the Pashkov fund of being used to fill the budget of the self-proclaimed LPR. "According to the information of the secret service, the "budget of the LPR" for the first quarter of this year provides for the receipt of more than eleven billion rubles. The leaders of the terrorists are able to collect only two of them on their own," the SBU said in a statement. "The rest is planned in the form of financial assistance from the government of the Russian Federation To hide Russian funding for the pseudo-republic and to avoid additional economic sanctions against the Russian Federation, one of the mechanisms for filling the budget of terrorists was chosen as a pocket charitable Foundation for the Support of International Humanitarian Projects (the president is a Russian citizen Vladimir Igorevich Pashkov)."
Employees of the Security Council of Ukraine believe that the fund, through the accounts of the Russian non-profit organization "Center for International Settlements", sends funds directly to the so-called State Bank of the LPR.
In the same statement, the SBU said that the founder of the Fund for the Support of International Humanitarian Projects is the Russian International Settlement Bank. However, in fact, the founder of the fund was the bank of the same name from the same South Ossetia, registered in Tskhinvali on Joseph Stalin Street. Since 2015, the Ossetian International Settlement Bank has been cooperating with the authorities of the self-proclaimed LPR as a correspondent bank. In January, the head of the State Bank of the LPR, Dmitry Chaikin, announced his intention to create a processing center in the first half of 2017. “Technical equipment, ATMs are important, but there are more expensive points, such as software and the introduction of an electronic payment exchange system,” he said. “Work is underway to create a processing center, there are some agreements,
The former Minister of Trade of South Ossetia, who at that time introduced himself as the chairman of the International Settlement Bank of Donetsk and Luhansk banks in South Ossetia, Vadim Shadyan spoke in 2015 about the work of the bank: "The main goal is to break through the economic and financial blockade of the DPR and LPR and bring payments to the financial market Russia. We have already managed to introduce several programs that allow payments from the LPR and DPR to bypass international systems. This has allowed us to bring the economy of Donetsk and Luhansk out of the shadows." Now Vadim Shadyan holds the post of Deputy General Director of OAO Gazprom-South Ossetia. The chairman of the board of the Ossetian International Bank is now his relative Vasily Shadyan. In an interview with Vlast, he stated that the Ossetian MRB had nothing to do with the Russian bank of the same name, and confirmed that that the bank he manages works with the self-proclaimed republics in the east of Ukraine. When asked about the bank's connection with the Foundation for the Support of International Humanitarian Projects, Vladimir Pashkov and the Vneshtorgservice company, Shadyan replied: "I need to coordinate the answers to such questions in order to give you only verified information." A few days later, in response to another call from Vlast, he said: "Unfortunately, I cannot comment on these issues."
Pension system payments are mailed through the LPR postal system since March 21st and paid from the State Bank of the LPR since April
Makarenkov, Nikita & Khanarin, Pavel, “In the liberated Stanytsia Luhanska began the payment of social benefits (В освобожденной Станице Луганской началась выплата социальных пособий)”, Komsomolskaya Pravda (Комсомольская правда) (pro-Russian news site), Mar 25, 2022, https://www.kp.ru/daily/217165/4265546/
Since March 24, in accordance with the current legislation in the territory of the Lugansk People's Republic in the Stanichno-Lugansk region, social benefits (assistance) have been paid for 16 types, the report says.
Payments are made through the LPR Post, according to the Ministry of Labor of the Republic, it is planned to provide 644 recipients in March. Since April, the payment of social benefits will also be carried out through the State Bank of the Luhansk People's Republic.
For the appointment and payment of social benefits (assistance), please contact the following address: village Stanytsia Luhanska, Lenina street, 52.
The payment of pensions in the liberated Stanytsia Luhanska started on March 21.
Pension system payments are paid from the State Bank of the LPR according to the State Bank of the LPR
Lugansk-info staff, “The State Bank of the LPR has identified 15 branches that will work on Saturday, March 12 (Госбанк ЛНР определил 15 отделений, которые будут работать в субботу, 12 марта)”, lug-info.com (separatist news blog), Mar 11, 2022, https://lug-info.com/news/gosbank-lnr-opredelil-15-otdelenij-kotorye-budut-rabotat-v-subbotu-12-marta
Duty departments on Sunday will provide the following services and perform the following operations:
- payment of all types of pensions, social benefits and salaries from the accounts of individuals;
- acceptance of all types of utility payments. *k31*p
Pensions are managed by and accessed through the State Bank of the LPR
State Bank of the LPR, “SERVICES FOR INDIVIDUALS (УСЛУГИ ФИЗИЧЕСКИМ ЛИЦАМ)”, gosbank.su (official website), accessed Apr 27, 2022, https://gosbank.su/uslugi/fizicheskim-licam/ Getting pensions
Benefits of receiving a pension at a branch of the State Bank of the LPR:
to apply for a pension through the branches of the State Bank of the LPR, you must contact any branch, having a passport and an identification code with you;
an application from a pensioner to the Pension Fund of the State Bank of the LPR submits independently;
the pensioner is not tied to the place of residence. He can apply to any branch of the State Bank of the LPR throughout the Republic and present a passport and identification code, receive the accrued funds, as well as consult or pay for utilities;
you can always call the hotline and check the availability of a pension on the account, as well as clarify whether there is a queue in the branch to which the client is going to apply (in the case of a queue, the client is provided with information about more unloaded branches);
a pensioner opens a personal account. It is not necessary to apply day-to-day to the branch of the State Bank of the LPR and waste time in queues, you can apply on any convenient day;
the pensioner has the ability to track the movements in his account on the statement.
The 2015 list of Pension Fund of the LPR personnel is different
Ostro.org, “The full composition of the power structure in the LPR. by name“, ostro.org (blog), Jul 14, 2015, https://www.ostro.org/lugansk/politics/articles/475312/
PENSION FUND OF THE LUGANSK PEOPLE'S REPUBLIC
Chairman
VASILIEVA Tatyana Mikhailovna
Reception
SHABRATSKAYA Anna Viktorovna
First Deputy
MOSINA Anna Mikhailovna
Deputy
ELNIKOVA Natalya Gennadievna
Department of Citizens' Appeal and Office Work
KEKALO Elena Yakovlevna
Surova Violetta Nikolaevna
The State Bank of the LPR buys Ford vans and parts as well as American office equipment like Cisco VoIP phones, HP, Canon, and Epson printers
State Bank of the so-called Luhansk People’s Republic, “Procurement plan (План закупок)”, gosbank.su (official website), accessed Apr 27, 2022, https://gosbank.su/wp-content/uploads/2021/01/%D0%9F%D0%BB%D0%B0%D0%BD-%D0%B3%D1%80%D0%B0%D1%84%D0%B8%D0%BA-%D0%B7%D0%B0%D0%BA%D1%83%D0%BF%D0%BE%D0%BA.pdf
The State Bank of the LPR buys Wincor Nixdorf (Germany) ATM parts
State Bank of the so-called Luhansk People’s Republic, “Procurement plan (План закупок)”, gosbank.su (official website), accessed Apr 27, 2022, https://gosbank.su/wp-content/uploads/2021/01/%D0%9F%D0%BB%D0%B0%D0%BD-%D0%B3%D1%80%D0%B0%D1%84%D0%B8%D0%BA-%D0%B7%D0%B0%D0%BA%D1%83%D0%BF%D0%BE%D0%BA.pdf
An entity named “Branch NO. 2 of the Commercial Bank International Settlement Bank (Limited Liability Company)” (Филиал № 2 Коммерческого банка «Международный расчетный банк» (Общество с ограниченной ответственностью))” is listed as as a “credit organization” (Кредитные организации) at the State Bank of the LPR. So is Renaissance Capital (Общество с ограниченной ответственностью «НЕБАНКОВСКАЯ КРЕДИТНАЯ ОРГАНИЗАЦИЯ «РЕНЕССАНС-КАПИТАЛ»). So is AKHMETOV.
State Bank of the so-called Luhansk People’s Republic, “Credit organizations (Кредитные организации)”, gosbank.su (official website), accessed Apr 27, 2022, https://gosbank.su/kreditnye-organizacii/
SDN candidate: CHAIKIN DMITRY SERGEEVICH, State Bank of the Lugansk People's Republic Chairman of the Board, money laundering and kleptocrat asset disbursement scheme management
State Bank of the so-called Luhansk People’s Republic, “Chaikin Dmitry Sergeevich (Чайкин Дмитрий Сергеевич)”, gosbank.su (official website), accessed Apr 27, 2022, https://gosbank.su/chajkin-dmitrij-sergeevich/
Date of Birth
September 30, 1979
Place of Birth
Lugansk
Education
2001, Ukraine, Lugansk, Eastern Ukrainian National University, Faculty of Economics, specialty "Finance", specialist;
2009, Ukraine, Kharkiv, Kharkiv Regional Institute of Public Administration of the National Academy of Public Administration under the President of Ukraine, Faculty of Public Administration, Master;
2016, Lugansk People's Republic, Lugansk, Vladimir Dahl Lugansk State University, Faculty of Finance, direction "Banking", Master;
2016, Russian Federation, Belgorod, Belgorod State Technological University. V. G. Shukhova, Faculty of Finance and Credit, Master;
2019, State Educational Institution of Higher Professional Education of the LPR "Lugansk National University. V. Dahl, Faculty of Law, Specialist.
2019, Luhansk People's Republic, Lugansk, awarded the Honorary title "Honored Economist of the Luhansk People's Republic".
2020, Luhansk People's Republic, Luhansk, defended his dissertation for the degree of candidate of economic sciences in the specialty "Economics and management of the national economy".
Labor activity:
Total work experience in the financial and banking system for more than 20 years
Held senior positions (including top manager):
OJSC Raiffeisen Bank Aval; LLC "BTA-express"; PJSC CB LF "PrivatBank"; PJSC VB Bank.
During the period of hostilities from 2014 to the present State Bank of the Lugansk People's Republic Chairman of the Board
The GuR is not a fan of Chaikin
GuR (Ukrainian intelligence), “Chaikin Dmitry Sergeevich / Chaikin Dmitry Sergeevich / CHajkin Dmitrij Sergeevich (Чайкин Дмитрий Сергеевич / Чайкін Дмитро Сергійович / CHajkin Dmitrij Sergeevich)”, myrotvorets.center (GuR blog), accessed Apr 27, 2022, https://myrotvorets.center/criminal/chajkin-dmitrij-sergeevich/
Wanted under Article 3-258 Part 1 of the Criminal Code of Ukraine
Department of Internal Affairs: SBU LUHANSKIY REGION
Category: PERSON, YAKA TRANSFER TO THE AUTHORITY OF THE PRE-COURT INVESTIGATION
Surname: Chaikin First
name: Dmitry
Middle name: Sergeevich
Date of birth: 09/30/1979
Gender: M
Article of accusation: ST.3-258 Ch
. place of disappearance: LUGANSKAYA
, LUGANSK
Date of disappearance: 08/28/2015
Contact information: (06452) 4-41-47, 095-418-23-53
The South Ossetian International Settlement Fund disburses funds for VNESHTORGSERVIS
von Twickel, Nikolaus, “South Ossetia: A “Little Switzerland” for Donbas?”, EurasiaNet, May 31, 2017, https://eurasianet.org/south-ossetia-a-little-switzerland-for-donbas
In April, the de facto authorities in the Donetsk People’s Republic announced that they were putting the bulk of the territory’s massive industrial enterprises under a little-known holding company reportedly based in South Ossetia. And for the last two years Tskhinvali has hosted a bank that manages payments between Moscow and the two eastern Ukrainian breakaway republics, Luhansk and Donetsk.
The holding company, Vneshtorgservis, now controls the nine biggest plants in Donetsk and the three biggest in Luhansk. The firm is reportedly run by Vladimir Pashkov, a Russian citizen and former deputy governor of the Irkutsk region in Siberia, according to comments by the de facto Donetsk Minister for Trade and Industry, Alexei Granovsky, published in Russia’s Kommersant-Vlast weekly in early May.
De facto officials in Donetsk did not return a request for comment from EurasiaNet.org about the company’s place of registration. The press office of Luhansk separatist leader Igor Plotnitsky also refused to comment.
But a former senior official in the Donetsk de facto republic, Alexander Khodakovsky, wrote on his blog that the company was registered in South Ossetia, and complained that the arrangement was not in the interests of the people of Donbas: “As long as we don’t have a legal basis for these holding companies, we will always have grounds to suspect the [de facto Donbas] government of double-dealing and hypocrisy, of a willingness to return everything to the old oligarchs, or to sell them to people … for whom the interests of our Republic are not even a passing concern.”
Officials in South Ossetia also did not respond to written questions submitted via email from EurasiaNet.org. However, local leaders have officially confirmed the banking link. In early April, outgoing de facto President Leonid Tibilov told a visiting delegation from Donetsk that the newly formed “young republics” should support each other: “What we managed to do for you is to open an international bank,” Tibilov said, according to the official news agency RES.
Tibilov did not name the bank, but it has been identified on multiple occasions by separatist officials from Ukraine as the “International Clearance Bank” (Mezhdunarodny Rashchyotny Bank / MRB). The website of South Ossetia’s Central Bank lists its address as Stalin Street 20. In turn, the central banks of both the Donetsk and Luhansk “people’s republics” have identified South Ossetia’s MRB as their official international correspondence bank.
This bank is believed to have operated for two years now, and observers believe it exists primarily to funnel cash from Russia to the separatist republics, which are largely dependent on outside financial support. And its role is likely to have grown considerably since March 1, when the separatists in Donetsk and Luhansk brought all Ukrainian-held industrial plants under their control.
The move, partly an answer to a trade blockade imposed by Ukrainian activists, was meant to improve the revenues of the breakaway republics by forcing the plants to pay their taxes locally. However, an unintended consequence was a cut off in the supply of raw materials from Ukraine. That, in turn, led to the departure of much of the industries’ management, either fired by the new separatist authorities or withdrawn by the Ukrainian owners. As a result, production at the plants has ground to a halt.
South Ossetia is the world’s only territory that has formally recognized the two “people’s republics.” South Ossetia itself was recognized by Russia in 2008, after Moscow crushed an attempt by Georgia to recapture the territory. All but Russia, along with a handful of states, consider South Ossetia to still be a part of Georgia.
In a video interview published in April, Donetsk’s parliamentary speaker and chief international envoy Denis Pushilin explained that “all processes” regarding payments, raw materials and their documentation for the relevant plants “go through the country that has recognized us – that is South Ossetia.”
Vasily Shadyan is a “top official” at the South Ossetian International Settlement Bank who works on transit of funds to/from the LNR as of 2018
Meduza.io staff, “The independent republic where everything depends on Moscow: How a Kremlin lifeline aided by separatist Ukraine is developing South Ossetia”, Meduza.io (news site), Oct 9, 2018, https://meduza.io/en/feature/2018/10/10/the-independent-republic-where-everything-depends-on-moscow
According to Timur Tskhubrati, all large financial transactions with Ukraine’s self-declared separatist republics eventually need to be discussed with officials in Russia. For example, he says he recently found a buyer in the LNR for plastics and construction materials, but the South Ossetian International Settlement Bank blocked the 21-million-ruble ($316,900) funds transfer. “They started harassing us, demanding that we open an account in Rostov, and then another in Moscow,” he recalls. “We were talking to Vasily Shadyan [a top official at the South Ossetian International Settlement Bank] about why our money was being held up. Then they started asking for a transaction passport.”
Confirmation: FUND FOR THE SUPPORT OF INTERNATIONAL HUMANITARIAN PROJECTS (Фонда поддержки международных гуманитарных проектов) employs PASHKOV, is located at 5 Pyzhevsky, building 1, Moscow, and “deleted record” as of 12/15/2021
https://excheck.pro/company/7706431844 business info site
https://ukrrudprom.com/news/Rossiya_videlit_okkupirovannomu_Donbassu_bolee_12_mlrd_dollarov.html low-quality blog
https://www.ostro.org/donetsk/society/news/621961/ pro-UKR news site
Alt address for Trishin: ADDRESS : GOMS , DUBNINSKAYA UL , D 2, CORPINE, https://www.list-org.com/man/1348277
One of FUND FOR THE SUPPORT OF INTERNATIONAL HUMANITARIAN PROJECTS’s stated business purposes is “Provision of social services without housing for the elderly and disabled” (per Interfax):
SHADYAN
This is him from 2018:
Bank of Ossetia’s “Information about Commercial Banks of RSO (ИНФОРМАЦИЯ О КОММЕРЧЕСКИХ БАНКАХ РЮО)” page lists Commercial Bank "International Settlement Bank" (Limited Liability Company) CB MRB (LLC), confirming Barabanov 2017’s findings
National Bank of the Republic of South Ossetia, ““Information about Commercial Banks of RSO (ИНФОРМАЦИЯ О КОММЕРЧЕСКИХ БАНКАХ РЮО)”, bank-ossetia.org (official website), accessed May 7, 2022, https://www.bank-ossetia.org/bank_system/sberbank_ruo.php
Heroes of the Donetsk People’s Republic stipend full text
Government of the so-called Donetsk People’s Republic, “Decree On Approval of the Procedure of Making Monthly Cash Payments to the Heroes of the Donetsk People’s Republic”, DNROnline.su (“official” website), March 29, 2022, http://doc.dnronline.su/wp-content/uploads/2022/03/Ukaz_N107_29032022.pdf