The figures do look positive. But let's try to understand how such growth is possible in the belligerent self-proclaimed "republic" and where this growing volume of steel goes to, considering the "economic blockade" (according to the separatist media) and the impossibility of access to foreign markets?
To do this, first you need to understand what a metallurgical complex of the “DPR” is.
A page of the report of the "Ministry of Industry and Trade of the DPR"
According to the "ministerial" report, the “DPR” has only one metallurgical state-owned enterprise - Yuzovsky metallurgical plant.
It was founded on the basis of the nationalized in June 2016 "Donetsk electrometallurgy plant", better known as ISTIL plant. It has not released any products yet, therefore, it could not get into the report on the growth in steel production of the "DPR".
LLC Domprom, PJSC CIE Metallist and LLC Profdonmet could not make a great contribution to the Donetsk "economic miracle" even if in the “report” they were referred to "the ones which resumed production activities".
First of all, because they all belong to the category "medium-sized businesses" and second of all, because Profdonmet, for example, has been established and put into operation only at the end of October 2016. According to the director, only four people work there.
"We have started the founding process in April 2017. We purchased the equipment, found specialists who set it, purchased coiled steel from Russia. Much was done on our own, without any help, – the director of Profdonmet Yuriy Stryukov told the reporters. – Our republic is now actively constructs and restores many things, and I hope that our products will be in demand...
Now only one production facility is launched with three lines for the production of sheeting for fencing and wall coverings, as well as for the roofing. Currently four people work in the company. According to Stryukov, for now these workers are quite enough for the service of lines, but it is possible that their number will expand in the future.
"Unfortunately, during the production we have to deal with various difficulties. For example, raw materials have to be delivered from Magnitogorsk (Chelyabinsk region of the Russian Federation – OstroV), – the deputy director of Donprommet Olexandr Kumurzhi said to reporters."
One of the separatist news agencies marked an "important" event in the economy of "the republic" with such a reportage.
Interestingly, the average number of workers employed in the metallurgical complex of the "DPR", according to the "Ministry of Industry and Trade" of the “republic” is 21.4 thousand people. Since the opening of the plant with four employees had a propagandist effect, rather than an economic one.
Metal grid producer Domprom from Zugres and pipe producer JSC CIE Metallist work on the Ukrainian market more than dozen years, according to their websites, but they are little known. As medium-sized businesses, they can not really influence the economy of the "republic", especially after the Khartsyzsk pipe plant stopped working.
That is, such enterprises are important for TV programs and news reports, but for the economy (moreover, in such small numbers) they are a drop in the ocean.
Where did the growth and millions of tons of steel, cast iron and metal-roll come from?
It turns out that the “report” included enterprises registered on the territory of Ukraine, but working and paying taxes to the "DPR".
In particular, the experts of OstroV have noted that the main metal-producer of the "DPR" is Yenakiyeve steel plant and its subsidiary in Makiivka (former MSP). They both produce the lion's share of production and sales of metallurgy of the pseudo-state. Despite working in occupation, the plant continues to operate and even increases the production. In November 2016, news appeared that the Yenakiyevo steel plant "started the production of angle iron of two new sizes".
A few months earlier, in July 2016, it was reported that "YSP began production of equal angle iron 110 mm wide and 7-8 mm thick".
"Also, at the beginning of this year, Makiivka subsidiary plant started to release angle with the size 50x50x4," – it was stated on their website.
It is interesting that back in 2015, the “DPR” leader Oleksandr Zakharchenko called YSP "the state plant of the DPR", although the plant is still owned by Rinat Akhmetov. And much of its production goes to the domestic market, that is to Ukraine...
The number of employees at the plant is about 7 thousand people - in fact, one-third of the total number of workers in the steel industry of the "republic". We noted it for you to understand who is the main employer and manufacturer of the "DPR".
Another major metallurgical enterprise, which more or less contributes to the "growth" of the "DPR", is Donetsk metallurgical plant, owned by Russian oligarch Viktor Nusenkis. The plant is also registered in Ukraine. Nowadays it specializes mainly in the production of cast iron, though it is low-performing. For example, according to the report for the 3rd quarter of 2016, the Donetsk metallurgical plant produced 635 103 tons of cast iron. This is 23% of the total production of cast iron in the "DPR" during the year. And this is just one, the most successful, quarter.
The data for 2016 on Yenakiyeve plant could not be found. But it produced 1 648 thousand tons of cast iron in not the most successful 2015.
As we can see, the numbers make it possible to say that it is Ukrainian enterprises DSP and YSP that make not even the basis, but almost the whole metallurgical industry of the "DPR", the success of which is a proud for the "authorities" of the "republic".
And now - attention - another figure from the report of "the Ministry of Economy of the DPR": metallurgical complex composes 46.4% of the republic's industry!
That is, it can be said just by the metallurgy, exclusive of the mines and machine-building enterprises, that it is UKRAINIAN enterprises that are the economic basis of the terrorist "DPR".
The same situation is in the "LPR", where the Alchevsk Iron and Steel Works is, registered in Ukraine.
The question about where the unrecognized "republics" sell the products produced in these enterprises disappears after that. Generally it is Ukraine.
And you cannot accuse of a lie the Deputy Prime Minister of the "DPR" with the nickname Tashkent, who states that his "country" trades with 15 countries besides Russia. Of course, it is enough just go to the site of YSP to see: "Products of the PJSC YSP are widely represented in the foreign markets of Bulgaria, Poland, Romania, Italy, Turkey, Moldova, Belarus, Russia, Lithuania, Slovakia and the United States"...
The author goes away from the assessment of the fact that Ukrainian enterprises make up the economy of the "DPR" and, therefore, work on the authorities of these "republics". But it is impossible not to notice that every medal always has its reverse and, accordingly, the owners of the economies of the "LDPR" can totally affect the social situation in them. Firstly, they provide workspaces, and secondly - pay taxes to the budgets of the pseudo-states, which was often said by all the same old "Tashkent".
Even Zakharchenko signed in the disability of economies of unrecognized republics in March last year, contrary to a victorious report of his "ministry": "The fall of rolled metal products and metal in general has one reason – we are the unrecognized republic and we cannot realize metal officially".
That is, it is hard without taxes from the working enterprises not only to Ukraine, but also to the "LDPR" – they cannot exist without Ukrainian registration of these enterprises and their taxes. But Kyiv practically does not use this leverage.
But this possibility of blackmailing Ukraine was already realized "there". For example, this is a recent dialogue of the broadcaster of the Luhansk "state" television and radio company with the representative of the "LPR" in Minsk and the "vice speaker of the People's Council of the LPR" Vladislav Danego:
- It is said that they want to follow suit with the electricity (...as with water, – to turn off. – auth.).
- Well, it is the purest declaration. Technically, they cannot do it without a serious damage to those economic entities of Ukrainian jurisdiction, which continue to work in our territory…. The owners of these enterprises are in the territory of Ukraine. And they have no problem to respond appropriately to the destruction of their property in this territory. Destruction by the hands of those who are going to turn off the switch.
In other words, Akhmetov is used there as a weapon against Ukraine, and how does Ukraine use our oligarchs to fight the separatists? – It allows them to increase production volumes in the occupied territory, that is, to increase the amount of tax revenues to the budgets of the "DPR-LPR"...
"We need to improve the economic component of our republic. This affects very much, - almost everything. The enterprises will work – the workplaces will be. The workplaces will be – the taxes will be paid, the taxes will be paid – the republic will be able to exist".
These are the words of the speaker of the "People's Council of the DPR" Denis Pushylin, said at the meeting with the core group in Torez.
The head of the so-called administration of the "LPR" in Alchevsk Natalya Pyatkova said his thought clearer during the interview.
- It is a huge blessing that our plant works today. There are only two furnaces, but this is a great progress for us. It is a smoke of hope, a smoke of our confidence that we have tomorrow. 14 thousand people work at the plant and all of them receive the salary...
People got wages – came to the store, social tension decreases, economy moves, taxes are paid...
I will repeat myself that the main thing for the citizens, - that today the plant works and people are paid. And the fact that today it is registered in the territory of Ukraine, - the situation is as follows: either the plant works as it works now, or the plant just stands...
The Security Service of Ukraine expressed the thought of Pushylin and Pyatkova even more eloquently despite the barren style. Interfax-Ukraine agency quoted the findings of the special service, introduced in the decision of Sievierodonetsk City Court regarding the coal supply to the terrorists by the state (Ukrainian) company PJSC Centrenergo.
"The Minister of Fuel, Energy and Coal Mining of the "LPR" pays around 47% of tax from the amount of exported coal from the pointed coal enterprises (public and private extractive enterprises) in the occupied territory to the budget of the so-called "LPR" from the received money (from the sale of anthracite). These funds are further directed at the payment of salaries to the members of terrorist groups of the "LPR" ... as well as for the purchase of ammunition, form, etc."...
However, for the sake of objectivity it has to be said that "its own" enterprises appear in the "republics". It appears from the December speech of Zakharchenko that about 38 enterprises are registered in the republic every week.
Let us discard the skepticism about the veracity of the words of the "Chief Gabber of All Russia". Some Ukrainian businessmen, mostly with similar production in Russia, actually announce the closure of their manufactures in the occupied territory, or the lease of their powers to Russians in order to avoid double taxation. Such sales and rentals are in fact fictitious as a rule. But they free from the Ukrainian taxes, as well as from the responsibility for the payment of taxes to the treasury of the "DPR-LPR", that is, their financial support.
It is interesting to quote a spring interview with the head of administration of the Leninsky district of Donetsk Oleg Belyaev: "Only one of the bread-baking plants of Donbasskhleb holding works almost at its full capacity. Other food industry enterprises work with varying success. This applies to Hercules, Vinter, milk plant No 2, Konti and AVK confectionery factories, now renamed to Thor and Lakond correspondingly. They have problems with raw material and sale. For example, Konti has produced 550 tons of sweet products per day before the war, and now it produces only 300-350 tons per month! Milk plant No 2 is provided with work on 16-20%.
Nord, now Intertekhnika, seemed alive in February, but have stopped again from April till the middle of May as a minimum. Only one blast furnace works at the Donetsk Metallurgical Plant. The work of Donetskgormash is about normal. It even exported a mine fan to Kazakhstan in winter. In general, most of the industrial enterprises work in unstable mode".
Speaking about other risks of "separatism" of the Ukrainian economy in the occupied territories, it is also necessary to lay emphasis on the fact that hryvnia imported there in cash because of the lack of Ukrainian banking system there. Accordingly, the "taxes" to the "republican authorities" are also in cash. And how is it spent knows only those who receive it... Except the income tax, of course, which is automatically calculated from the salaries of employees to the local separatist budgets.
Another risk factor is the quality of products made there and supplied to Ukraine. Commission from Kiev cannot come in Yenakiieve or Donetsk and trace the following of technological process. As a result, the NABU investigates the so-called "case of bolts and nuts" when Ukrzaliznytsia purchased the details for track bond in the occupied territory (even overpriced), and examination revealed then that it could easily lead to the mass accidents on the railway because of the metal quality...
But this is not related to the theme of "economic growth" in the "DPR". But on the other hand…
So now we know what the "economy of the DPR" is, why it grows, who provides this growth in Ukraine and where are the money from this economic, in the truest sense of the word, miracle...
Serhiy Harmash, OstroV