Russian budget pays
From the very beginning of the aggression against Ukraine in 2014, the Kremlin was forced to take the "people's republics" in economic tow. Contrary to the popular mythology that the pre-war Donbas fed the whole of Ukraine, the region's economy was already in crisis and was subsidized. Only parts of the industrial assets owned by the oligarchs Rinat Akhmetov (metal plants in Mariupol and the most profitable coal holdings) and Dmitry Firtash (chemical plants in Severodonetsk and Gorlovka) brought income. The fighting in 2014-2015 exacerbated the situation. The enterprises that found themselves in the “gray zone” lost Ukrainian sales markets, and the Russian authorities began to build schemes to maintain their vital activity.
In 2017, the SBU published an investigation into the Russian Foundation for the Support of International Humanitarian Projects. The Ukrainian special services claimed that out of the 11 billion rubles of the “LPR” budget, only 2 billion were collected in the form of taxes on the spot. An international settlement bank registered in Tskhinvali on Stalin Street. Later, Pashkov showed up in the Donbas already as a "Deputy Prime Minister of the DPR."
Contrary to the popular mythology that the pre-war Donbas fed the whole of Ukraine, the region's economy was already in crisis and was subsidized
The Russian budget supported infrastructure and social payments in these territories. However, the payments remained much lower than those in any Russian region: the average pension in the LDNR is 7 thousand rubles, the salary is 12 thousand. Nevertheless, according to Bild estimates , by 2016 Russia spent up to a billion euro per year.
How the economy of Donbass is managed
Sergey Nazarov, Deputy Minister of Economic Development of Russia, became the informal curator of the Donbas economy in 2014. Before joining the Ministry of Economy, he was the first deputy governor of the Rostov region, bordering the Donbass, and was considered an expert on the region. In December 2014, Nazarov was appointed head of the interdepartmental commission for humanitarian aid to Donbass, and at the same time she was entrusted with the task of organizing the restoration of the region. Formally, Nazarov was responsible for organizing the supply of humanitarian supplies, but in fact, the commission was engaged in the complete organization of the life of the Russian protectorates in the Donbass. This included "humanitarian" supplies of energy sources – gas and electricity – after Ukraine stopped supplying the occupied territories.
It is with Sergei Nazarov that the scheme is associated with attracting to the Donbass the fugitive Ukrainian oligarch Sergei Kurchenko, who in the past became fabulously rich on the proximity to the family of President Yanukovych and controlled the offshore empire. In 2017, under Russian patronage, Kurchenko took control of the most profitable part of the Donbass industry, expropriated from Akhmetov, and organized a system of gray exports of products from coal and metallurgical enterprises through the company Vneshtorgservis (VTS), registered in South Ossetia. For example, Donbass coal was delivered all over the world through the companies-laying companies and ports of the south of Russia (including Ukraine, where it got through Belarus).
The Yenakievsky and Makeevsky Metallurgical Plants, the Yenakievsky Coke and Khartsyzsky Pipe Plant, the Rovenkianthracite, Sverdlovanthracite, Krasnodonugol coal enterprises, which belonged to Akhmetov’s structures, and the Alchevsk Iron and Steel Works (belonged to the Industrial Union of Donbass) came under Kurchenko’s control.
The MTC managers entered the governing bodies of the "republics" and became a kind of colonial officials (the policy of "Vneshtorgservis" was compared with the predatory methods of the East India Company).
However, Kurchenko was summed up by an excessive thirst for enrichment. Strikes began at Donbass enterprises due to delays in wages, since all profits were taken offshore. For a long time, the Kremlin was satisfied with this situation – the Ukrainian media periodically published publications about Russian officials and FSB generals who had a share in the Donbass schemes. But in 2021, when the situation began to threaten stability in the region, and it was not possible to hide the scale of the strikes, the Kremlin decided to replace the adventurer Kurchenko with a Russian businessman with a “clean” biography , Evgeny Yurchenko, a former top manager of Svyazinvest and the United Aircraft Corporation. He was supposed to cover up the infusion of Russian state money into the Donbass economy.
Strikes began at Donbas enterprises due to delays in wages, as all profits were transferred to offshore
The change of curators took place against the background of another political impasse with the Minsk agreements. The new Russian “investor” was supposed to personify the creation of a “showcase of the Russian world” in the Donbass, attractive to the part of the region that remained under the control of Kyiv. At the same time, Putin, by his decree, removed customs barriers for goods from the LDNR.
Some experts suggested that financing Donbass enterprises could become a "patriotic" burden for Russian private metallurgical companies. “They are given certain directions, in other words, they are confronted with the fact that, together with their company, they must develop some other enterprise in the uncontrolled territory of Donetsk and Luhansk regions,” said Ukrainian economist Oleksiy Kushch.
Putin's new aggression, which began in February 2022, ended the coexistence of the two Donbass – the Kremlin swung at the occupation of the entire region. Under the new conditions, the need for imitation statehood of the “LDNR” and complex schemes disappeared: the Russian presence in the Donbass became open. For example, instead of suspicious banks from South Ossetia, Russia’s Promsvyazbank, linked to the military-industrial complex, which is under Western sanctions and has already opened its branches in the annexed Crimea, is officially starting to operate in the “DPR”.
Following the example of the USSR: patronage, international duty and construction teams
Even on the eve of the invasion of Ukraine, Senator Ryabukhin, the first deputy chairman of the budget committee of the Federation Council, said that the restoration of the infrastructure of Donbass would require about 1.5 trillion rubles. Now, taking into account the total destruction of Mariupol, the issue price for the Russian budget could rise to several trillion, this was also confirmed by Kiriyenko (or the lyrical hero of the publication attributed to Kiriyenko). Senator Ryabukhin also argued that Russia has money for the Donbass, both through the state budget and through public-private partnerships. The main thing, he said, is to protect the Donbass from the threat of an attack by Ukraine.
Several trillion rubles may be spent on the restoration of Donbass
After three months of the war, Russian governors and mayors began vying to offer patronage over the Donbass cities. So, the mayor of Moscow, Sergei Sobyanin, set out to take Lugansk under his wing, and the head of the government of St. Petersburg, Alexander Beglov, took Mariupol . Governor of the Khabarovsk Territory Mikhail Degtyarev announced his "patronage" of Debaltseve in the Donetsk region, the governor of the Khanty-Mansi Autonomous Okrug Natalya Komarova signed an agreement on cooperation between Yugra and Makeevka, and Chuvashia plans to help restore Donetsk factories.
Within the framework of the St. Petersburg Economic Forum, a cooperation agreement was signed between the "DPR" and the Tula region, which was reported by Denis Pushilin, the guest of honor of the event. In total, the Donbas burden was imposed on 20 regions. The process is supervised by First Deputy Presidential Administration Sergei Kiriyenko, who is behind the scenes called the "vice-king of Donbass."
Infrastructure projects will be coordinated by the government headquarters headed by Deputy Prime Minister Marat Khusnullin, a major construction industry lobbyist. The corresponding agreement was signed by the Ministry of Construction of Russia and the “government” of the “LDNR”. Sources of Kommersant note that the Unified State Customer in the field of state construction, created in 2021, which is subordinate to the Ministry of Construction, can become the general contractor for construction work in the Donbass. This structure is engaged in the construction of facilities in the Russian regions financed from the federal targeted investment program (which includes 938.7 billion rubles for 2021–2023).
The fact that the diversion of funds from regional budgets will lead to problems on the ground is already evidenced by the reduction in spending in the subjects of Russia – for example, on road construction. In May 2022, the tender for the reconstruction of the R-504 Kolyma (5.3 billion rubles) was canceled, in June the repair of the Baikal highway (6.6 billion rubles) was frozen . There are not enough funds to extinguish fires in Siberia. It can be easily assumed that as the budgets of the regions shrink, generous assistance to Donbass will turn into an analogue of the “international debt” of the late Soviet era, when the authorities maintained friendly socialist regimes against the backdrop of a deteriorating economic situation within the country.
A separate area is personnel and labor resources. Since 2014, the demographic situation in Donbas has been rapidly deteriorating . The population halved – from 6.5 million to 3.6 million: the economically active population and young people left the military conflict zone. Some people moved to Ukrainian territory, some to Russia. As a result of these processes, Luhansk and Donetsk became cities of pensioners : in the population of the republics, people of retirement age accounted for about half. After the current stage of the war, the population has decreased even more due to refugees and military losses (general mobilization has been announced in the LDNR, and a significant part of the men ended up at the front, where the “allied units” suffer heavy losses). The same can be said about the territories of Donbass captured by Russia during the “special operation”.
As the budgets of the regions shrink, generous aid to Donbass may turn into an analogue of the “international debt” of the late Soviet era
Replenishment of human resources will take place, among other things, at the expense of shift workers and immigrants from Russia. The Russian authorities are already actively recruiting officials, doctors and teachers from the regions, attracting them with double salaries and benefits (for example, interest-free mortgages). The pro-government telegram channel Nezygar proposes to use the “Israeli experience”, that is, to encourage the resettlement of several million Russians to the occupied territories.
Another option is to redirect labor migrants from Central Asia to Donbass. The head of the Center for Analytical and Practical Research on Migration Processes, Vyacheslav Postavnin, in an interview with Rossiyskaya Gazeta, pointed out the prospects of such a plan – in conditions when the inhabitants of the Russian provinces "begin to lose their labor skills", and for migrants with their high working capacity in the Donbass "the field of activity is huge" .
Some Russian enthusiasts of the "denazification" of Ukraine propose to use forced labor of Ukrainian prisoners of war in the Donbas, following the example of the post-war restoration of the USSR. The Ministry of Justice of the DPR also came up with similar initiatives. The United Russia party does not forget about another Soviet practice – student construction teams, which they plan to use to restore the Donbass infrastructure. “Such work should be counted as educational, familiarization and industrial practice,” the official website of the EP reports .
Such plans indicate that the Kremlin is already considering the Donbass as part of Russia, the next object for annexation. And the Russian bureaucracy perceives the region as a place where one can easily make a "patriotic" career – and, given the corrupt traditions, quickly enrich themselves through generous programs and subsidies allocated from the budget "to Donbass."
