Ukraine imported $2.7 billion worth of coal in the January-November period, an 11 percent increase compared to the same period of last year, according to Ukraine’s fiscal services.
And incredibly, 62 percent of those imports – $1.7 billion worth – came from Russia, a country that is waging war against Ukraine.
At the same time Ukraine’s largest mining company DTEK, owned by the country’s richest oligarch, Rinat Akhmetov, has accused Russia of extracting roughly 500,000 tons of coal a month from Ukraine’s Russian-occupied Donbas region, and then even more incredibly, selling it in the European Union.
Ukraine spends between $200 million and $1 billion a year because coal domestic shortages force it to import coal from the United States and South Africa, according to DTEK. And while Ukraine’s coal production has dropping by an average of 15 percent annually since 2013 according to The European Association for Coal and Lignite, Russia is ramping up production in the Donbas.
CEO of DTEK Maxim Timchenko stated back in November during an interview with Polish media outlet Rzeczpospolita that more than 2 million tons of coal is shipped from occupied parts of the Donbas to the EU through Russia.
Timchenko’s statement is backed by multiple sources, including Russian officials who openly acknowledge the fact that they extract coal from the Donbas. The problem is that it is very difficult to ban Russia from illegally extracting resources from Ukraine and then reselling them in the EU, as it is very difficult to track the original source of the coal.
But it is easy to trace how Ukraine’s coal production has decreased since Russia launched its war against Ukraine in 2014.
Bad figures
Ukraine produced 34 million tons of coal in 2017, which is around 60 percent less than in 2013, and in 2018 the figures are expected to be even lower. The situation was aggravated by the fact that Ukraine lost control of 100 percent of its deposits of anthracite, the highest quality coal, used by power plants to produce heat for residential buildings.
Additionally, in March 2017, the Kremlin’s occupation authorities in the Donbas took over 11 more mines controlled by DTEK in the occupied zone. In 2016, these mines produced over 9 million tons of coal, including energy-dense anthracite.
As a result, Ukraine’s coal extraction was cut by two thirds.
Back in 2017, Timchenko stated in a comment to Interfax-Ukraine that there was no market for the coal from the occupied zone outside of Ukraine, and that mines controlled by the Kremlin-led forces would be shutdown eventually. But a year later the Donbas coal is now being sold to Turkey, Poland, Austria, Italy and potentially other countries as well, he said.
Kurchenko’s monopoly
According to Dmytro Tymchuk, a member of parliament from the 81-member People’s Front party, before 2017 Donbas coal was extracted in small amounts and was either used for domestic purposes or was sold to Russia by the occupation authorities in the Donbas for a fraction of its cost.
In March, 2017, after all mines situated in the occupied region were transferred to Russian controlled forces, the Russians started to ramp up coal exctraction, raising the amount shipped to Russia from 1.5 million tons in 2017 to an estimated 3 million tons in 2018, Tymchuk said on his Facebook page.
The recently established company VneshTorgService, registered in South Ossetia (a Russian-occupied part of Georgia) has today monopolized the energy sector in the Donbas. The company is owned by Vladimir Pashkov, the former governor of Russia’s Irkutsk Oblast, who is closely associated with Sergey Kurchenko, a Ukrainian businessman accused of corruption who was part of the inner circle of ousted former President of Ukraine Viktor Yanukovych.
The extracted coal is illegally shipped to Russia through the Russian controlled border, where it is transferred to Russian-based company Gas-Alliance, owned by Kurchenko, according to multiple news sources. In late 2017, Gas-Alliance became the sole importer of coal from the Russian-occupied part of the Donbas, while other Russian companies where banned from conducting business activity in the Russian-occupied region.
Both companies, VneshTorgService and Gas-Alliance, are on the U.S. sanctions list, yet are absent from Ukraine’s sanction list, according to Radio Svoboda.
Denys Didenko, the head of DTEK’s anti-crisis committee, said in an interview with Radio Svoboda on Nov. 18 that around 500,000 tons of coal is shipped to Russia each month. These numbers are taken from open sources since Russia categorizes these transactions as part of its imports from Ukraine, Didenko said.
Russia produces enough coal to cover its domestic needs, so the coal from Donbas is allegedly shipped abroad. In November 2017 the Polish news agency Gazeta Prawna was among the first European media outlets to discover the scheme behind the shipment of Donbas coal into the EU.
Polish-based companies Doncoaltrade and TD Anthracite, as well as Austrian-registered Carbones have been selling Ukrainian anthracite to Poland, Austria, Italy and possibly other countries. Doncoaltrade has been included in the U.S. sanction list since January, while all of the companies listed above are owned by Russian citizens associated with the Donbas.
Polish Minister of Energy Krzystof Tchorzewski in a comment to a Polish channel TVP1 on Oct. 4, 2017 acknowledged the fact that Poland is buying coal mined in Ukrainian territory occupied by Russia. He said that Poland is aware of the issue, yet the coal amounts to only a small fraction of Polish stocks and doesn’t pose a threat to Polish energy security.
Legislative loopholes
Donbas coal has been appearing on European markets for more than a year, yet there is little progress in banning Russian activity in the region.
First, it is hard to identify which coal is specifically from the Donbas. Back in 2017, both DTEK and Ukrainian government officials stated they would perform a chemical analysis to identify where the imported coal was originally from.
But it turns out that it’s almost impossible to find out the original source of the coal.
Coal from Russia’s Kuzbass region – where most of Russian coal is produced – has less than one percent of sulfur in it, while coal from the Donbas has a much higher percentage. With a proper chemical analysis, it is possible to separate Ukrainian coal from that of Russia’s Kuzbass coal. However, coal from Russia’s Rostov region has similar chemical characteristics to those of the Donbas coal, making it hard for Ukraine to prove the theft.
Ukraine’s Minister of Foreign Affairs Pavlo Klimkin also told the UNIAN news agency on Oct. 26 that Russia is mixing Ukrainian coal from the Donbas with its own and selling it to Poland and Turkey, making it even more difficult to trace.
After Klimkin’s comment, Turkey became the first country after Ukraine to initiate an official investigation, according to Gazeta Prawna.
However, under current EU legislation, those selling Donbas coal to the EU without Ukrainian consent will be able to continue to do so.
Independent Ukrainian lawmaker Ostap Yednak, the secretary of parliament’s natural resource committee, told the Kyiv Post that there is little that Ukraine can do: All official documents received by the EU confirm that the Donbas coal is Russian, and until this can be proved otherwise, coal mined in the Donbas, shipped to Russia, and then sold to the EU will continue to be considered to be Russian.
