The blockade of three railway branches between so-called "Luhansk People's Republic" "Donetsk People's Republic" and Ukraine could lead to delivery problems of coal from mines located in the occupied Donbass territory. Ukraine’s Cabinet of Ministers has already warned of likely power and heating outages in seven regions.
This is not the only consequence of the blockade. It has become a threat for big enterprises on both Ukrainian and separatist territories.
One of the branches, which has been blocked since 25 January 2017, is used to supply the Alchevsk Steel Mill – now on "LPR" territory – with ore and other minerals. 100% of the raw materials for the mill are imported from Ukraine and 100% of its production returns to Ukraine before being exported to Europe. These figures have been confirmed by Serhiy Taruta, former head of the Board of Directors of the Donbass Industrial Union and owner of the Alchevsk Steel Mill and Alchevsk Coke Plant. As of 26 January 2017, traffic from both sides has ceased.
"We are closing for a month. We have two days to prepare the company for a long conservation", the management of the Alchevsk Steel Mill told Hromadske. "11,612 workers will only work the day shift; for now we won't put them on unpaid leave. You shouldn't call here, everyone is listening”, and with these words the conversation ended.
The Alchevsk Steel Mill and Coke Plant are the two city-forming enterprises. They accounted for ⅔ of the city budget. The jobs of 30 000 "Alchevites" are connected in some way to these enterprises.
Both Alchevsk enterprises are registered in territory controlled by Ukraine – in Severodonetsk. According to the State Fiscal Service, they are the number one enterprises in terms of the highest taxes paid in the Luhansk region.
“Because of the importance of the Alchevsk enterprises, their shutdown stands to affect many other plants in Eastern Ukraine. 20 000 people living in Alchevsk would lose their jobs. A further 20 000 could lose theirs, if the dependent plant in Dneprodzerzhinsk has to shut down as a consequence. The same applies to the plant in Mariupol, where a shutdown would affect 300 000 - 400 000 people, almost the whole city,” explains Serhiy Taruta.
Volodymyr Guts - Deputy Chairman of the Luhansk civil-military administration told Hromadske: "The blockade is a blow to the Luhansk region, and to Ukraine's economy in general."
The civil-military administration couldn’t provide specific figures such as taxes or the volume of goods transported by Luhansk Railways.
How the steel was stopped
In 2015 Aleksey Mozgovoy,commander of the "LPR"-Batallion "Prizrak" ("Ghost"), tried to seize control of the two enterprises and the city of Alchevsk as a whole. On 23 May 2015 his car was blown up and shot at with automatic rifles on the road from Alchevsk to Luhansk. As a result, Mozgovoy, his press secretary, guards and three local residents who were passing by, wound up dead.
On 16 June 2015 soldiers of the Ukrainian "Tornado" company halted a train which was carrying cast iron at Svetlanov station in the Luhansk region en route from Alchevsk to Kamensky. The soldiers claimed that 20 wagons carrying iron and coke had false documents issued in 2011 to a fictitious company. After this delay, the then head of Luhansk region Gennady Moskal initiated an internal investigation. Subsequently "Tornado" was disbanded. Twelve of its soldiers are now awaiting a verdict. They are accused of rape, looting, seizure of property and abuse of power.
The "Tornado" deputy commander Nicholai Tsukur told Hromadske that they were detained because they stopped smuggling at the contact line: "This train was carrying about 18 million UAH and they had fake documents. But there was no investigation, we were the only ones that suffered."
In turn, Gennady Moskal insisted that all documents were in order then, and SBU (Ukrainian Security Service) had authorised the passage of goods across the line.
All taxes for the "republic"
In occupied Luhansk there were talks for a long time about the biggest enterprise in the "republic" and its contributions to the “LPR” budget. The current head of the self-proclaimed "LPR" Igor Plotnitsky has repeatedly tried to block the transportation of products to and from the plant. The last attempt was in early 2016. Those attempts have not been successful yet. Officially, and repeatedly reaffirmed by Serhiy Taruta, the Alchevsk Steel Mill doesn't contribute to the "LPR" budget.
"The so-called "leadership" understands that if they demand something and the plant shuts down, it will induce riots in the city. It is to our advantage, that people who work at the plant are paid in UAH and are not fighting in illegal armed formations," said the enterprise's former co-owner.
However on the 10 February 2017 members of the so-called "LPR"-parliament adopted a "draft", under which non-resident corporations and individuals have until 31 March 2017 to register in the "LPR" tax system and start paying taxes. Otherwise the companies may be nationalized.
Among these non-resident companies named, are those belonging to Rinat Akhmetov, including "Rovenkiantratsit" and "Sverdlovantratsit"; as well as the Alchevsk Steel Mill and Coke Plant. The "Head of the Republic" Igor Plotnitsky welcomed this legislative initiative.