Parallel reality, or What happens to the "LNR" industry

The state of industrial enterprises in certain districts of the Luhansk oblast seized by Russian agents resembles the plot of a science-fiction film. Sounding promises of the so-called "LNR" leaders to launch economy on the one hand and uttermost hopelessness when it comes to implementation of ambitious plans on the other. And there is not even a hint that these planes will once intersect at one point…

Alchevsk dead end

Industrial capacity of t

he Luhansk oblast is considerably inferior to the neighboring Donetsk. The largest enterprises on the territory of CDLO are located in Alchevsk - iron & steel works (AISW) and coke plant.

From the end of August 2014 to the beginning of June 2015, the iron & steel works was almost completely idle. But even after the end of active hostilities, it was not possible to resume its work at full capacity.

The output of rolled steel for the AISW in 2015 fell by 72.6% - to 624 thousand tons, steel - by 72.8%, to 680 thousand tons, cast iron - by 70.5%, to 691 thousand tons and agglomerate - by 64.3%, to 1.127 million tons.

That is, there was a more than 3-fold fall in production indicators compared with the pre-war period.

Then in 2016, the iron & steel works, officially owned by the Industrial Union of Donbass group of Serhiy Taruta and Russian Vnesheconombank, recovered itself a bit.

Thus, the output of rolled steel reached 1.232 million tons, steel – 1.397 million tons of steel and cast iron – 1.334 million tons. However, since the end of November, the AISW has again "limped", switching over to work with one blast furnace.

And at the beginning of 2017 because of the blockade of economic ties with CDDLO, problems with the supply of iron ore from Kryvbas appeared. The iron & steel works stopped its work again from February 13.

But officially, the IUD announced the loss of control over the AISW and Alchevsk Coke Plant only on November 29, 2017. The day before, on November 28, the "LNR" authorities transferred the plant to ZAO Vneshtorgservis, registered in South Ossetia.

However, earlier on November 14, then "head of the LNR" Igor Plotnitsky reported that the work on resumption of production at the AISW has been going on for more than 3 months.

That is, representatives of the mysterious South Ossetian firm appeared in Alchevsk at least at the end of the summer. It is often associated with runaway Kharkiv oligarch Serhiy Kurchenko, but Irkutsk ex-vice-governor Vladimir Pashkov, who is close to the leadership of Rostec and Rosneft Russian government-owned corporations, is considered to be the general director.

The launch of blast furnace No.5 at the AISW took place on December 19, 2017. The new "head of the LNR" Leonid Pasechnik, who was present at the event, called this "a momentous event for the republic".

To be true, all was not so rosy in fact. According to "Minister of Industry of the LNR" Dmitriy Bozhych, with two blast furnaces in operation at the AISW, it was received… as many as 16 thousand tons of cast iron for January-February. Considering that the average daily heat of metal at this enterprise in 2016 was 4-4. 5 thousand tons - it worked… 4 days in the space of 2 months.

Nevertheless, the authorities of the "LNR" continued to exude optimism. Already on April 10, "head of the Council of Ministers of the LNR" Sergey Kozlov announced plans to resume steelmaking at the AISW.

Acting chief engineer of the iron & steel works Maksim Mokritskiy at the same time assured that the equipment testing was successful. However, the "Napoleonic" plans were frustrated again.

There was a breakdown of the converter during the repair work. According to some reports, the reason was common disorder – "improper maintenance of converter aggregates".

This comes as no surprise – during the war years, the most skilled workers of the iron & steel works left CDLO and got a job in Ukraine, Russia, or far-abroad countries.

Now according to D.Bozhych, "the LNR Ministry of Industry" is working on how to speed up the repair work in the converter shop of the AISW.

While they only think about this issue in Luhansk, L.Pasechnik made a new fake on May 29, announcing plans to set up a pipe production at the Khartsyzsk Pipe Plant in CDDO using strip steel, which will be rolled at the AISW.

But it is not enough to resume steelmaking (although it is unknown when this will happen now due to an accident in the converter shop) in order to do this - it is also necessary to launch the rolling shop.

It was noted earlier that one of the main obstacles is the lack of electricity. And on June 4, L.Pasechnik reported on the restoration of a power bridge in CDLO from 2 power transmission lines, 500 and 200 kW.

"Their restoration will raise the power of incoming electricity to the Alchevsk Iron & Steel Works what, in turn, will allow full operation of the two furnaces and steel-rolling production", - he stated.

At the same time, the "LNR" leader, being a veteran manipulator, told the truth, but not all.

After all, the same I.Plotnitsky had earlier acknowledged that a fairly large electricity generation is needed to resume full-fledged work of the AISW.

That is, the main problem is not to resume the electric power supply – but where to get it.

As you know, CDLO receive electricity from the Luhansk CHP located on the territory controlled by the official Ukrainian authorities. The Luhansk separatists do not have their own generation.

I.Plotnitsky also stressed that electricity redirection to the AISW should not leave the residential sector without light.

"We have an understanding of how we will close the lack of electricity so that it does not affect our residents", - he stated, in particular, on November 14, 2017. Well, maybe, there is an understanding. But there is no electricity itself.

And regular announcements of light outages in cities and villages in the territory of CDLO lead to the conclusion that even uninterrupted power supply to the population remains too difficult for the self-proclaimed authorities of the "LNR".

However, the problems of resumption of production at the AISW are not limited to the lack of the necessary capacity of electric power and skilled workers and engineers.

The same I.Plotnitsky admitted in the interview with Russian media that under the conditions of transport blockade of CDLO, it is impossible to ensure the full supply of iron ore to the iron & steel works.

To be true, unlike the situation with electricity, here everything is just the opposite. Technically, Russian Vneshtorgservis can arrange supply of Russian ore.

But… those railway routes that are in possession of the separatists do not have the necessary capacity.

"If the AISW reaches the capacity of at least 80%... it will stop all the rest – we do not have enough road capacity (both "LNR" and "DNR") for export, so there is an additionally question about transport and transportation", - the then "head of the LNR" explained.

Because of this, attempts to resume the work of the Alchevskkoks association are doomed to failure. "Minister of the LNR Industry" D.Bozhych reported on February 28 this year that a coke-oven battery No.9 had been put into production there.

Again, technically, raw materials for Alchevskkoks work are products of the Krasnodonvugillya association. Previously, it was shipped for the Avdiivka Coke and Chemical Plant of the Metinvest group. But the transport problem for the coke and chemical plant in Alchevsk is just as relevant as for the local iron & steel works.

By the way, iron & steel works in Mariupol faced similar difficulties after the blockade of CDDLO. Now they are almost solved due to the modernization of the alternative Kamysh-Zorya-Volnovakha section. But even if the Ukrzaliznytsia state-owned company with its resource took 4 years to restore full-scale production logistics for the Mariupol iron & steel works, how much time would it take for the "LNR"?

That is why the statement of intent to launch the pipe production in Khartsyzsk in cooperation with the AISW is part of the same story with O.Bender's promise to turn Vasiuki into the world's capital.

Another curious detail: contrary to the statements of the "LNR" leadership about the resumption of work of the AISW and Alchevskkoks and expansion of the staff schedule at the enterprises in this connection, there is no recruiting in fact.

The city employment service and official website of the mayor's office of Alchevsk point that it is only possible to employ those who wish to work in the housing and utilities sector – that is, being yard-keepers, plumbers and electricians. That is all.

Stakhanov's "bottom"

The second most important industrial center of CDLO is Stakhanov (renamed Kadiyivka in 2014 by the decision of the Verkhovna Rada) with ferroalloy plant and railway car building works. The SFP also stopped its operation in the summer of 2014.

The first attempt to bring it into operation dates back to March 2016, when the "LNR" authorities appointed a provisional administration there.

Then in July 2017, then "Minister of the LNR Industry" Igor Gorbatenkov reported on the launch of electric arc furnaces No.4 and No.7 at the SFP.

Next time, the enterprise was recalled in March this year, when "mayor" of Stakhanov Sergey Zhevlakov announced the intention of the self-proclaimed authorities to resume the work of the SFP until the end of June.

At the same time, Russian media earlier noted that previous attempts to launch the enterprise failed due to a shortage of electricity. That is, this situation is one and the same with that in Alchevsk.

But the "mayor" did not mention another quite important moment as well: where he is going to take raw materials for the SFP, which belonged to the Privat group of Ihor Kolomoyskyi before the war.

As it is known, even under Leonid Kuchma’s presidency, Privat managed to steamroll the entire ferroalloy industry of Ukraine.

In addition to the Stakhanov, Nikopol and Zaporizhia ferroalloy plants, the group of Ihor Kolomoyskyi acquired Marhanets and Ordzhonikidze ore mining and processing plants, which produce manganese ore in the Dnipropetrovsk oblast.

In addition, Privat bought foreign assets in the 2000s. The group, in particular, became the owner of mining companies in Australia and Ghana, where the largest deposits of manganese ore are located.

And the ore to Stakhanov often came from Ghana - if for some reason for Kolomoyskyi it became unprofitable to develop its extraction and enrichment in Marhanets and Ordzhonikidze (in 2016 it was renamed to Pokrov).

It is clear that now SFP has been cut off from the old sources of raw materials. And then what? Russia has manganese ore, but the deposits are concentrated in the Urals and the Kuzbass.

It is possible to deliver it to Stakhanov only by rail. At such a transportation distance, manganese ore from the Urals will cost like gold.

Not to mention the fact that the Urals manganese ores require serious enrichment.

In a word, the constant promises of the separatists to launch the SFP will remain just promises.

An even more interesting situation is with the Stakhanov Wagon Works (SWW). It does not require large amounts of power and supplies by railroad.

And if you believe L.Pasechnik, launching SWW is easy. "With the use of those leftovers from Ukraine in the amount of 60 or 100 wagons that can be sold and funds for the start of the enterprise Stakhanov Wagon Works can be obtained", - he said on air of one of the Russian television channels on December 20, 2017.

However, in reality the problem is different. As early as September 2013, the Russian Certification Register for Federal Railway Transport stopped the validity of certificates for wagons and components of all Ukrainian manufacturers.

As a result, before the war not only the SWW was on the verge of a complete stop, but also the Mariupol Azovmash, Dniprovagonmash, Kryukivsky WW (Poltava oblast).

And even now Azovmash seems to be irretrievably destroyed as a producer, while Dniprovagonmash and KWW work with a 5-20% load from pre-crisis volumes only due to local orders.

For example, Dniprovagonmash received contracts for 600 freight gondola cars from ArcelorMittal Kryvyi Rih metallurgical plant this spring. KWW won tenders for the delivery of freight cars for PJSC Ukrzaliznytsia and modernization of cars for the Kyiv subway.

SWW cannot count on such orders, and the Russians, who manage the project "LNR", are not in a hurry to open their market for Stakhanov wagons.

Back in August 2016, an open letter of the SWW employees, addressed to V.Putin, was spread in the media. It mentions the plight of the enterprise and the inactivity of local authorities in this regard.

It was noted that the plant accepts any random orders - the production of small batches of bolts or even cemetery fences.

As a result, only 2 thousand of 5000 employees remained, while 400-500 people were actually working (2 times a week).

At the same time, the authors of the letter stressed that SWW cannot earn due to the lack of certificates of the Russian Certification Register for Federal Railway Transport and asked V.Putin to help resolve this issue.

But, judging by the report, dated December 2017, about the manufacture of 30 dumpsters at the plant, the appeal was never heard. The full-fledged work is unlikely to be resumed.

Yes, the SWW can follow the example of ZAO Luhanskcentrokuz named after Monyatovsky and get an "unidentified certificate" from Kazakhstan, for example. In this case, it can count on small orders from small industrial enterprises in Russia and/or Kazakhstan, which are ready to turn a blind eye to "fake" certification. But large customers, including Russian Railways, will not want to have problems because of the purchase of products from an illegal (from the point of view of Russian legislation) manufacturer due to possible huge fines.

And without the orders from Russian Railways and other major players, SWW is doomed to produce dumpsters. The same fate awaits Luhansk too.

The Luhansk sentence

Russian Transmashholding bought the association Luhanskteplovoz in 2010 and by the time of the beginning of the Donbass war remained its owner.

This is the only enterprise in Ukraine producing diesel locomotives, but Russia has several such manufacturers.

Nevertheless, in June 2016, co-owner of Transmashholding Andrei Bokarev claimed that Luhanskteplovoz continues to fulfill orders for Russian Railways.

"Now there are no problems, the plant builds locomotives, produces spare parts", - he said.

But back in March 2016, the administration of Luhanskteplovoz reported serious difficulties with the supply of materials and components from Russia.

Then in 2016, it became known that the owner of Luhanskteplovoz does not intend to use it to fulfill a large contract providing for the supply of 100 locomotives for Russian Railways.

Almost the entire order was placed at Bryansk Machine-Building Plant, also part of Transmashholding.

Perhaps, this is the most vivid example illustrating the true attitude of "fraternal" Russia to the Donbass: its leaders are willing to help to continue the war in the region by sending weapons and mercenaries, but are not ready to give up even a fraction of their own economic interests to restore the destroyed (with their direct participation) local industry.

Although, why do this, if the goal of the "Russian Spring" project is the physical destruction of the competitor itself?

Well, Luhanskteplovoz completely stopped in 2016, and the "Minister of Industry of the LNR" D. Bozhych, assured that the enterprise would resume its work in 2017.

Nevertheless, the only news for 2017 on the official website of the plant is congratulation on the Victory Day. On May 22, 2018, the director general of Ukrzaliznytsia Yevhen Kravtsov reported that, according to his information, this plant was completely destroyed and dismantled.

It remains to add that the Luhansk Pipe Plant also could not resume its work, despite the presence of Russian shareholders.

The Krasnyi Luch machine-building plant does not work either. In the pre-war period it was a large producer of mining equipment.

In general, there are only several "LNR" businesses that show weak signs of life. Sverdlovsk Machine-Building Plant is among them. In March, it reported the receipt of orders for $3.2 million.

Nowadays the plant turned into a large mechanical workshop. This follows not only from the volume of its annual orders, but also from the current number of the employees - "as much" as 104 people.

Only a machine-assembly shop works there, the average salary is $110 (a quarter less than the minimum wage in Ukraine).

In all fairness, it must be said that even in the last pre-war years, the situation at this enterprise was not great: in 2013, the sales revenue was only $1.56 million.

But, of course, even under the former "criminal regime", the staff was not as poor as it is now in the "republic".

In addition, Luhansk factories Santekhdetal and Marshal (manufacturers of pipe products) are among the survived enterprises. They still recruit personnel.

The leadership of the "LNR" is trying to find orders for them from Russia and the Crimea. So far, unsuccessfully.

Sverdlovsk garment factory managed to operate all 2017 due to orders for tailoring school uniforms and children's overalls for a customer from Russia.

Though the factory itself, in fact, .has turned into a large sewing workshop: 58 people currently work there. Santekhdetal and Marshal factories are in approximately same situation

Workers are recruited there only when orders are received. For example, in the summer of 2017, Santekhdetal received an order for the production of pipes for the Luhanskvoda enterprise, which allowed to employ about 60 people.

Before the war, this plant produced 1.2-1.5 thousand tons of pipes per month, the staff was about 160 people. Thus, now the company operates at best 40% of its former capacity.

But the “LNR” has a ton of ads about working in Russia. Residents of the "republic" are offered to work as masons in Belgorod, farmers in the Krasnodar Krai, freight handlers in the Moscow region.

The promised payment range is $200-320. The Russians themselves do not want to work for such money. But it sounds like sort of a good option for the "republican residents", who can earn only $100 at home...

Vitaliy Krymov, OstroV