Both sides have a plan for the country’s coal resource; Kiev’s privatization plan creates unrest among organized labor, while the rebels embrace coal relying on Russian connections
By Vladislav Vorotnikov
The armed conflict in eastern Ukraine has broken the country’s coal industry into two parts: one is under control of the authorities in Kiev, and another one is under the control of pro-Russian rebels. By the end of November 2014, a large number of mines in the country had been closed. Many of them have been completely destroyed: they lie in the region ravaged by the war between Ukraine’s troops and separatist rebels.
After the cease-fire at the beginning of 2015, the authorities in Kiev and the leaders of the self-proclaimed republics announced the implementation of the strategies for the development of their respective parts of the country’s coal chain. The power plants and steel mills that consume coal are located mostly in distant metropolitan areas controlled by Kiev or Russia. Export facilities in the Crimea are now controlled by Russia. The prospects for the mines and the transportation infrastructure remain unclear. A large investment will be required to restore the mines. Before that can become a consideration, the geopolitical situation must be resolved.
Until recently, Ukraine was the third largest coal producer in Europe. It will probably never return to that level of production — 85 million metric tons (mt) in 2013. In general, the prospects of overcoming this crisis for coal producers remain as obscure as the prospects of ending the Ukraine conflict, as even the most ambitious plans for both sides can quickly unravel as hostilities resume.
Ukraine Will Cut Coal Industry by Half
In early March 2015, the problems of the Ukraine coal industry, in addition to the economics, gained social attention as 20,000 miners from the five coal-producing regions of the country walked off the job. The chairman of the Independent Trade Union of Miners of Ukraine Mikhail Volynets warned the authorities that if the industry’s problems were not resolved, another 10,000 miners would march on Kiev to protest, which would tarnish the image of the new Ukrainian government. And, they did.
Protest actions with several thousand miners took place April 21-24, 2015 at Independence Square, in front of the President’s residence. Unrest among miners has not stopped; regional protests are occurring weekly. As this edition of Coal Age was going to press, Lvyv Coal Company had blocked the Lviv-Rava-Russkay highway, demanding the payment of salary.
Most of the people employed by the Ukrainian coal industry have not received compensation since October 2014. The miners, however, are asking for more than salaries; they want Vladimir Demchishin, the Minister of Energy and Coal Industry of Ukraine, to resign. He announced plans to close half of mines and dismiss 27,000 miners by 2018; moreover, Demchishin has been criticized recently by political opponents and coal operators, who see him as incompetent.
Demchishin’s stark vision for the future of Ukraine’s coal industry consists of three steps. The first — and probably the most important — is the abandoning of any state support for coal producers. Last year, state support for the coal industry amounted to UAH 11 billion ($600 million). It’s estimated that 70%-80% of mines in the country are producing coal at a loss. The conditions of the agree