ZOLOTE, Ukraine – War-zone smuggling helped trigger a blockade of railway lines connecting Ukrainian-government controlled areas of the Donbas with Kremlin-held ones.
Launched on Jan. 25 by volunteer battalions and other activists, the blockade has resulted in panic in government, the seizure of Ukrainian enterprises by Russian-backed separatists and coal shortages. On March 9, ArcelorMittal Kryvyi Rih said its steel production was at risk of shutdown due to the blockade.
The ongoing blockade, however, has done little to stop smuggling. And fighters of the volunteer Aidar Battalion participating in the trade disruption have been accused by critics of profiting from smuggling themselves.
History supports the critics. In May 2015, law enforcement in Luhansk Oblast’s Zolote seized 168 trucks with alcohol, cigarettes and food illegally on its way to separatist-controlled territory, according to then-Luhansk Oblast governor Hennadiy Moskal.
Aidar soldiers were serving in Zolote, a city of 14,500 residents some 700 kilometers southeast of Kyiv, at that time. They belonged to a unit headed by Valentyn Lykholit, one of Aidar’s commanders, who now leads the Donbas blockade, according to Olga Reshetylova, an activist who is investigating Aidar’s activities.
“Aidar soldiers were organizing corridors for smuggling, collecting Hr 2 per kilogram of cargo from cars crossing into the separatist-held area,” Reshetylova said, adding that Aidar fighters were later forcefully removed from Zolote by the army because of smuggling.
Lykholit denies involvement in any illegal activities.
When Kyiv Post journalists visited Zolote in December, they saw that minivans loaded with food products were crossing from there into the separatist-held area.
How it works
Smuggling became a problem in the war zone right after the front line was defined in the Minsk II peace agreement in February 2015.
Thousands of Donbas residents, who struggle to survive after nearly three years of war, are thought to be involved in the illegal trade. Those who have vehicles, courage and the right contacts try to smuggle food products to the separatist-controlled side, where prices for many goods are at least twice as high.
On the return trip, smugglers bring counterfeit cigarettes and alcohol, as well as drugs and gold.
They pay bribes to soldiers, border guards and other law enforcement officials at checkpoints for permission to cross the separation line with their goods. If they are caught, they are facing only a fine of up to $600.
Technically what they’re doing is not even smuggling, since separatist-held areas legally remain part of Ukraine.
“Officially it’s not a border but a separation line,” said George Tuka, deputy Ukrainian minister for the occupied territories and one of few officials who speaks openly about the smuggling problem.
Criminal groups on both sides of the lines battle for control of the routes.
Rodion Shovkoshytnyi, part of a group formed in 2015 to fight smuggling, said he knows of about a dozen Ukrainian soldiers killed for trying to combat smuggling. But officially, most of them were killed in fights, Shovkoshytnyi said.
Loopholes
When traveling to frontline villages, the Kyiv Post saw discrepancies between the actual and official front line. Several towns, including Zolote, Verkniotoretske, Novoluhanske, Mayorsk, Triokhizbeka and Toretsk, straddle the line of control, making them ideal smuggling conduits.
Soldiers from the Donbas battalion arrive at their base in Novoluhanske, Donetsk Oblast on Dec. 25. Donbas battalion commander claimed he decided to take the city to stop a rampant smuggling there. (Anastasia Vlasova)
In Zolote, located just eight kilometers from separatist-held Pervomaisk, there is a fully constructed but officially non-operating crossing point to the separatist area.
All the same, vehicles are crossing the lines here in both directions. The border guards say that they are carrying residents of the government-controlled Rodina Mine and village of Katerynivka home and back.
Rodina Mine is a residential area of 1,000 people, which is technically part of Zolote and has four streets separated from the rest of the village by a final military checkpoint, where only people who are registered locally are allowed to go. That part of the village has no border with the separatist zone.
In just 30 minutes, the Kyiv Post saw several minivans fully loaded with goods passing through the final checkpoint.
One woman from Katerynivka said it was still possible to cross into the separatist-held zone near Rodina Mine, where the person crossing has to bribe first the Ukrainian soldiers and then the Russian-backed forces on the other side.
Verkhniotoretske, a town in Donetsk Oblast, also has several streets cut off from the rest of the town by the front line. The only ones there are soldiers who check documents of people crossing the line.
Shovkoshytnyi said his group once captured a car in Verkhniotoretske loaded with drugs worth $75,000.
At the Mayorsk crossing point, the transport of goods across the separation line costs Hr 15 per kilogram of goods, a local businessman told the Kyiv Post. So a 10-ton truck will cost smugglers some $5,500 to get across the lines.
People rush to the bus stop at the border crossing point in Mayorsk, Donetsk Oblast on Dec. 27. (Anastasia Vlasova)
Radio Free Europe/Radio Liberty journalists recently uncovered a smuggling scheme in Mayorsk, at a logistics center set up to sell food to residents of the separatist-held areas.
In Luhansk Oblast, the smuggling channel lies across the narrows of the Siversky Donets River, in the area of the villages of Triokhizbenka, Lobachevo and Lopaskino. One local resident told the Kyiv Post his mother traveled across the lines here, paying $2 per trip for a seat on a boat.
Risky business
Two war veterans told the Kyiv Post that shootouts across the front line were often just a cover for the smuggling of goods. Violence also comes with the smuggling.
In September 2015, a car with officers from the anti-smuggling mobile group was set on fire near the town of Shchastia in Luhansk Oblast, killing a representative of the State Fiscal Service and a civilian volunteer, as well as wounding four soldiers.
The slain volunteer was Andriy Halushchenko, an outspoken activist, who told journalists days before that he had uncovered a smuggling scheme leading from Russia to Ukraine involving top officials.
Military prosecutors found Halushchenko had been killed by the Ukrainian side. They arrested two soldiers from the 92nd Brigade on charges of murder. But later they were released from custody and the investigation has stalled.
Gold, vodka, cigarettes
Halushchenko was among those who in July 2015 seized five bags of golden crosses and chalices being transported by rail from the separatist-controlled part of Luhansk Oblast. The jewelry was produced by Agat, a jewelry factory in the city of Rovenky.
The factory still produces silver goblets with Ukraine’s national emblem, the Tryzub, on them, and its products can be purchased in shops in Kyiv.
Tuka, who was friends with Halushchenko, said the jewelry smuggling schemes were led by Armen Bagiryan (nickname Buggy), a separatist fighter, who was killed in October. Buggy controlled the city of Slovianoserbsk and a boat smuggling channel across the Siversky Donetsk River.
Tuka added that Volodymyr Kiyan, a soldier serving in Luhansk Oblast, told him he was going to investigate Halushchenko’s killing, but that he was killed the next day. Investigators claimed Kiyan died after stepping on a mine.
Meanwhile, the Khamadey tobacco factory in the separatist stronghold of Donetsk has become a leading producer of cheap counterfeit cigarettes.
They are shipped from the war zone across the country to Zakarpattia or Odesa oblasts, from where they are smuggled to Europe.
“When you hear the reports about cigarettes seized in Zakarpattia, do you think they bought them in a local supermarket?” Tuka said. “These cigarettes are usually produced by Khamadey. A pack of cigarettes here costs some 50 to 60 U.S. cents, when in Hungary the same pack would cost at least $2.”
Donetsk is also known for its counterfeit alcohol, produced at the city’s Olimp factory. Both Khamadey and Olimp were reportedly controlled by Mykhailo Lyashko, a Donetsk-based gangster, who was killed in Crimea in December 2015.
Railroad route
Those fighting the smuggling describe the rail-based smuggling route as an “elite club” because goods can be transported in higher volumes.
A special order by the Security Service of Ukraine, or SBU, issued in June 2015 included a list of hundreds of companies that are allowed to ship goods from separatist-held zones and back. They are mostly plants and mines located on the separatist area. But a closer look at the order shows that these firms are allowed to buy and sell a lot more than that.
The Yenakievo Metallurgical Plant, owned by Ukraine’s richest businessman Rinat Akhmetov, is allowed to ship tablet computers and cell phones, as well as sails for boats, and equipment for surfing and camping.
The Krasnodonvugillya coal company is allowed to ship men’s suits, coats, and ski jackets. Donetsk Metallurgical Plant is allowed to ship lawn mowers, parts for swimming pools and vitamins.
The Alchevsk-based company Granit Techno, which official trades in household goods and electronics, can also ship by rail equipment for video games, billiards, casino tables, and automatic equipment for bowling alleys.
Who is behind this?
Kyiv Post sources say that the smuggling is permitted by representatives from all government services, including the military, police and fiscal service.
Shovkoshytnyi said that in 90 percent of cases, the smugglers captured by his group didn’t face any criminal charges. “And the courts later released almost all people arrested by us,” he said.
Shovkoshytnyi remembers that his special mobile group to combat smuggling in late 2015 seized a jeep and a minivan at a checkpoint near Svitlodarsk, in which SBU officers were carrying furniture fittings, building materials and bathroom equipment.
But despite reporting the case to the military prosecution, the SBU officers were later released and kept their jobs.
Shovkoshytnyi added that activists were removed from the special anti-smuggling groups in May, so now little is known about their activity.
A view of the damaged market in Svitlodarsk, Donetsk Oblast on Dec. 24. (Anastasia Vlasova)
The separatists also complained about smuggling. A report found among leaked emails of Kremlin adviser Vladislav Surkov dated November 2014 reads: “The main directions of smuggling are the shipment of coal through Russia to Ukraine, the shipment of fuel from Russia with its subsequent resale in Ukraine, and flows of food products and food raw materials from the EU and Ukraine to Russia.”
A dozen separatist warlords have died suspiciously over the last two years. Some of these deaths could be related to fighting for control of the smuggling business.
After one of the separatist warlords of Luhansk, Oleksandr Bednov, nicknamed Batman, was killed in January 2015, his supporters claimed he had been killed because he was trying to block drug trafficking to Luhansk from Russia.
Later that month, fighters of the Odesa separatist unit were attacked in separatist-held Krasnodon. One of them claimed in a video posted on YouTube that they were attacked by a Russian private military unit led by a Russian colonel, Yevgeny Vagner. The separatists claimed Vagner’s unit was trying to kill them because they accidentally ended up on the way of drug trafficking, according to an RFE/RL investigation. Luhansk region is located on the heroin trafficking route from Central Asia to Western Europe.
Oleksiy Bobrovnikov, the journalist who was the last to interview Halushchenko, kept on investigating his killing. But early this year Bobrovnikov left Ukraine, saying his life was in danger.
In his story for Ukrainska Pravda, Bobrovnikov wrote that Halushchenko’s death was related to a mysterious group led by a Ukrainian military officer nicknamed Syrota. Bobrovnikov said the group was involved in drug trafficking and smuggling.
