Pro-Russian Ukrainian separatist pension systems as a sanctions target
It makes more sense than you might think
I didn't really understand how pensions in the pro-Russian separatist regions worked, but I think I get it a little bit better now.
Start with the basic stats.
Before the war, the separatist territories had "2.9 million people, about 38 percent of them pensioners, according to the documents, whose authenticity could not be independently verified", according to Radio Free Europe/Radio Liberty on Sep 27. 2021.
That means 1,102,000 pensioners in the separatist territories give or take. This is almost certainly a precise number that Ukraine itself has.
Average pension amount is 3,000 Hrynia, or $102.04(!) per month, according to Lana Gehring, "An increase in pensions is not enough to fight the poverty crisis among the Ukrainian elderly", in The Breaker, May 30, 2021,
Pensions dispensed by the Ukrainian state are a matter of substantial political dispute going back to '14 of course.
Somewhat ironically, it looks like Russian pensions end up being the arbiters of whether or not people get money in a lot of cases. In response separatists set up their own pension funds.
In order to cover standing obligations to existing pensioners the separatist pension fund has to be on the order of 1,102,000 people * 36,000 hrynia per year = 39.672 billion hryvnia or $1.349 billion a year. That is, coincidentally, the amount of money that RFE/RL thinks is being spent on the separatist territories.
So far, so ordinary. The entire economy of the separatist territories resembles a giant money-laundering concern.
This gets interesting on March 29, 2022.
On March 29, 2022, the City of Gorlovka posted their version of the pension, Decree No. 107 of March 29, 2022 "On the approval of the Order for the Implementation of the Monthly Monetary Payment to the Heroes of the Donetsk People's Republic.". It provides details for the Pension Fund of the Donetsk People's Republic (Donetsk, Universitetskaya st., 91; contact phone 0713035706).
The Heroes of Donetsk pension appears to be a new, private pension - not a solidarity pension as the original Ukrainian and Russian pensions were - and it is a new pension that appears to be specific to the new war.
Interestingly, it is paid in rubles.
The announcement on the separatist website states that "The heroes of the Donetsk People's Republic, upon their application, receive a monthly cash payment in the amount of 36,410.00 (thirty-six thousand four hundred and ten) Russian rubles 00 kopecks."
That works out to about $440.67 a month, four times an average Ukrainian pension. It is almost certainly not a coincidence that the pension is being paid in rubles, and not hryvnia.
There are on the order of 35,000 (CNN) to 42,500 (UKR gov't) separatist fighters in Ukraine (per reporting in early February 2022 in Al Jazeera). That means 1,274,350,000 - 1,547,425,000 rubles per month outstanding liability assuming everyone eligible applies, or 15.292 billion - 18.569 billion rubles per year ($185 million - $224.7 million per year).
In reality, the number of Heroes of the Donetsk People’s Republic awardees appears to be very small, but composed of people who have definitely killed Ukrainians.
What I didn't understand was, why would anyone in their right minds make a big deal about $440.67 per month, much less $102.04 per month?
What's more, why are older people receiving pensions MORE likely to be pro-separatist than younger people - at least in 2018, when Carnegie Endowment reported on it?
So, it goes back to two things: first, the notion of a solidarity pension in a true social-welfare state with a subsidized economy, and second, the idea of a pension to begin with.
Start with the basic economic situation: when we're talking about pensioners, we're talking about people who remember the Soviet era. Much of the history in terms of how people lived is well-documented, if somewhat controversial and misrepresented occasionally.
For the majority of people in the Soviet era, even a relatively small amount of money dispensed by the state as, essentially, a living stipend, went a long ways in terms of providing food and necessities. A straightforwardly redistributive economy took money from younger people and paid it to older people; this basic system, called a "solidarity pension", exists today in several European countries. Other pension programs, like employment pensions, or even private pension funds paid into by pensioners or outside entities, also arose, although private pension funds are a minority in Europe as compared to America.
The entire economy was heavily controlled, including basic commodity prices, so relatively modest pensions for the vast majority of people from whom wealth was extracted were essentially sufficient.
Since private enterprise was at least putatively illegal, that meant that only the privileged few had money; this was something like the 'nomenklatura' class, a class of privileged people in an authoritarian steady-state.
At the same time as the heavily-controlled economy provided goods for the majority of the populace, a black market alongside the economy provided goods that the regular economy couldn't. And as the regular economy worsened, the black market economy burgeoned.
What all that means is that for people of this era, the solidarity pension that they receive is a critical aspect of the social contract from their perspective. Moreover, pensions don't conflict with the black market; they are part of the same organic system to a person from this era.
Secondly, the very notion of a pension, in this context, becomes especially politically charged - indeed, nationalist.
Pensions reflect not only payment into an employer or a private fund, as they do in America, they are also seen as a kind of allowance from the state. Pensions are an essential part of the social contract. People feel entitled to their pensions not just because they paid money into a fund; they feel entitled to rewards from paying loyalty into a bifurcated welfare-state/kleptocratic black-market society.
This is why pensioners are more likely to be pro-Russian separatists in the Carnegie Endowment poll, I think. It's not just that they feel entitled to someone, anyone paying them - even if it's in nearly worthless rubles. It's also that they want the recognition and validation that comes from years of loyalty to the system; and the last most meaningful manifestation of that system was the Union of Soviet Socialist Republics.
This ends up answering, I think, the proportionality question for me - specifically, the principle of necessity. That principle dictates that I cannot designate for economic sanctions any target that is not of military necessity.
Theoretically, given the range of sanctions on entire regions - for instance, Crimea - everything down to a Girl Scout troop that happens to be organized and attempting to participate in the economy out there is sanctionable. In practice, this is not only a hard sell to the people who actually implement sanctions, this is also not really doing anything except discrediting the sanctions regime and making Crimean Girl Scouts sad.
This is fine, but what if, say, a sanctioned entity like VNESHTORGSERVIS, a sanctioned coal-mining concern operating in the separatist territories, happens to be laundering money through the Girl Scouts? Then the necessity question starts to look like a scalar quantity, not an on-off question.
That is, I care a lot more about $750 million a year worth of Crimean Girl Scout cookies that are paid for by Russia, than I do about, say, $224.7 million a year worth.