The work of the huge industrial enterprises on the occupied territory is a mystery. Their leadership, as usual, does its best not to leak the information about the real situation out of the walls of the factory. But, society has the right to know, on what principles builds the cooperation of our state with the economic entities, located in the areas controlled by the fighters.

Business of Putin and interests of Taruta

Industrial enterprises, located on the occupied territories, are continuing now their struggle for survival. Alchevsk Iron & Steel Work is not the exception.

The limitation of raw materials supply and also harsh decreasing of the filing of the gas and power on the enterprise have brought to complete stop of the combine in 2014. And blast furnaces have been translated into the “hot-preservation.”

Immediate “timid” tries to supply raw on the combine began to be undertaken in the spring of 2015, but little came of it – Ukrainian militaries prevented the passing of cargo through the demarcation line.

However, combine started work at last in summer 2015. Today its production crosses the demarcation line and goes to Europe by Ukrainian railway roads to direct markets. The fact that this enterprise is under control of the Russian State “Vneshekonombank” adds piquancy to the situation. Also, combine is mostly called “the plant of Putin” by dwellers of Alchevsk. At the same time the partners of Russian investors in the steel business are Ukrainian businessmen Oleg Mktrchan and Sergei Taruta. According to the data of the Ukrainian Register of Legal Entities and Individuals for today they are the owners of the founder of PJSC Alchevsk Iron & Steel Works – the Metallurgical Holding “Industrial Union of Donbass” (IUD).

The Demarcation Line

Transporting of the goods (cargo) through the demarcation line is realized in accordance with the “Interim order of control over the movement of persons, vehicles and goods (cargo) through the line of collision within the Donetsk and Luhansk regions”. This document was approved by the Order of the first Deputy of the head of Anti-terrorist center at SSU Lieutenant-General I. Kolesnik #415 OG from 12.06.2015.

According to the point VIII of this document, the including enterprises and individuals in the lists of business entities, who have a right to transport goods on the uncontrolled territory or from it, is subjected in the conditions of payment of taxes, duties and other compulsory payments to the budget of Ukraine by them. The priority in the consideration of applications is given to those subjects, who are re-registered for the tax accounting on the controlled by Ukraine territory, socially oriented (the production process is directed on the creation of working places, payment of wages, material assistance, provision of social guarantees of the rights of labor collectives); have a single production cycle on the uncontrolled and controlled territory; export-oriented; realize calculations, using only the banking system of Ukraine.

Alchevsk Iron & Steel Work practically by all points had a priority right on the review of the submitted application. Also, the head of the Juridical Department “IUD” Sergei Tkachenko claimed on December that authority of the holding is considering to re-register the enterprise on the controlled by Ukraine territory. At the beginning of 2016 the legal address of PJSC “AISW” really was removed on the controlled territory – Severodonetsk.

Our source in “IUD” reported that this decision was dictated, first of all, by economic advisability and also agreements, achieved between top-management of “IUD” and leadership of Ukraine. The application to “Temporary order” contain the list of the enterprises, which officially realize import of goods on the uncontrolled territory and export from it. In a big number of cases the product names and their specific recipients also are pointed

War separately, money alone

As Informator wrote earlier, the raw supply for “AISW” were made, in general, from the territory of Ukraine, from Kryvyi Rig.

According to the application to the “Temporary order”, the main contractors, who supply “AISW” with iron ore are PJSC “Ingulets Mining and Processing Plant”, PJSC “Central Ore Mining and Processing Plant”, PJSC “Northern Ore Mining and Processing Plant” – three companies holding “Metinvest” Rinat Akhmetov; and PJSC “Southern Mining and Processing Plant”, connected with Russian financial-industrial group Evraz Group.

Among the other large entities, supply cargo to Alchevsk Iron & Steel Works, must be noticed Dnepropetrovsk PJSC “Dneprotyajmash” which provides combine with the special equipment and also Nikopol and Zaporozhye plants of the ferroalloys, connected with financial-industrial group “Privat” of Ihor Kolomoisky.

The enterprises of the Russian Metallurgical Holding such as  “Dneprodzerzhinsk Coke Plant” and JSC “EVRAZ Sukha Balka”also provide “AISW” with the different types of raw (concentrate, sinter ore, lump ore, pellets).

There are dozens of smaller suppliers as from the territory, controlled by Ukraine and located on the occupied area.

Raw supply on the occupied territory is carried out on the railway road through the Svetlanovo station, located in 10 kilometers from the front line between towns Zolotoe and Popasnaya.

At the end of December journalists of informator.lg.ua conversed with the support of the railway station and found out that after the stable truce 30 freight trains per day had been coming through this site of the railway road in both sides. The main receiver of the cargo – the raw for the metallurgic producing – was Alchevsk Iron & Steel Works. This enterprise also was the main sender of cargo, coming through Svetlanovo on the controlled by Ukraine territory.  

Where production is imported?

Very often Transcarpathian Chop features among the destination stations, where production of “AISW” sends. The cargo communication of Ukraine with European states is realized through this station.

Except this, the export of the production of “AISW” from Ukraine is realized through the ports. So, as an intermediate destination, who have a right to export goods from the uncontrolled territories, are appointed in the list of business entities Kherson, Mariupol and Ismail Sea Trade Ports. The export of the production of “AISW” to the clients from Singapore  («MEKATRADE ASIA PTE. LTD»), Latvia («MINERAL IMPEX»), supplies for “Duferco SA” are realized through this transportation hubs.

The last company – Italiano-Switzerland partner of “IUD” on the sale and one of the biggest metal trading companies in the world. European enterprises of the holding “IUD”, in particular, Hungarian Dunaferr plant, where long products delivered from Alchevsk, are also present in the list.

The companies from Poland, Czech Republic, Slovakia also could be found in the list of recipients. A part of them is affiliated with holding “IUD”, others don’t have a direct relation to it.

A big number of Ukrainian companies, also purchasing rolling, steel and cast iron from “AISW”, featured in the list too. But, according to the data of our source, the main number of the production is exported in Europe.

Slow fading of the Ukrainian metallurgy

Beginning from the World economic crisis of 2008-2009, iron and steel is going through hard times all over the world. Demand for the products of steel mills in recent years is limited, and the prices are low.

To provide renewed its work “AISW” with booking, the authority  of “IUD” had to stop one of the blast furnaces on the above-mentioned combine Dunaferr in Hungary.

“The fact that enterprise works and produces now is the result of the long and detailed negotiations on the most high level, – sured our source in Alchevsk Iron & Steel Works, wished to stay anonymous. – In this case the interests of Ukrainian authorities, owners and investors of the enterprise and even top of “LPR” almost completely coincided. The work of the combine is the pledge of surviving of Alchevsk city, where all without exception economic activity almostly connected with this enterprise. Occupation authorities understand it very well. The interest of leadership of the combine is to minimize losses from idle production and preserve the remnants of the team. If furnace at the plant are completely blown out and don’t remove in the mode “hot conservation”, as it was in 2014, it will be easier to build new combine, than to restore the old. Furthermore, changings in the free trade with the EU, which entered into force from January 1,2016, are opening for Ukrainian metallurgy new perspectives and in current economic situation in the country, it will be folly not to use them”.

For today Ukrainian iron and steel together with agriculture production consist the base of the domestic export in EU. After entering into force of the agreement about deep and comprehensive free trade zone between Ukraine and the European Union, market conditions could become more pleasant for domestic metallurgists. Native experts are noticing that it’s not so easy for Ukrainian metallurgy to bring ecology standards of the production to the norms of EU, but worth it. There are not a little number of the potential sale market, for which relatively cheap Ukrainian metal is able to compete, but it’s very important not to lose the moment.

It should be noted in fairness, that Brussels has left the quotes on the number of goods of Ukrainian export, also including metal. So, it’s hardly become possible to increase the volumes of export quickly and extremely.

Through the Looking Glass

The cargo connection between controlled and uncontrolled territories is out of competence of Luhansk Regional Military-Civilian Administration. Coordination Center at HQ of ATO controls it. The inclusion of subjects in the list of a host of activities is subject to the payment of taxes, duties and other compulsory payments to the budget of Ukraine and also with complete information on the transparency of the process and if the subject was not involved in terrorist activities ( financing of the terrorism).

Does “AISW” really still work only in the legal field of Ukraine? How enterprise cooperate with insurgents? On these questions we had answers from the informed source of the enterprise.

“The combine gravitates to the legal field of Ukraine and the cooperation with the “power” of LPR is minimized. If enterprise pays some funds to “tax depts” of our proud “republic” it not documented anywhere. The authority of the combine cherishes got opportunity to transfer production through Ukraine and takes care that any collaboration with the occupation authorities mustn’t be documented. An indirect confirmation of this fact could be such a fact, that administration of “AISW” during a lot of months has been refusing to provide statistical information in so-called “State Statistics Committee of LPR”.

At the same time our source in the enterprise claims that authority of combine still have to share funds, like “cash for calm”, with the leadership of the “young republic”. We still don’t have an opportunity to discuss current  situation with the representatives of holding or personally with Sergei Taruta , maybe because of catastrophic busyness. Nevertheless, we guarantee the possibility to them to speak out on the pages of our edition in case if they wish to do it.

It won’t be as previously…

It can take a lot of time to think about moral and ethic aspects of work of “AISW” on the occupied territory. There are thousands of lives of Ukrainian citizens, who came to protect their country from occupants and laid down their heads in the steppes of Donbass on one side of the scale, on the other is the dozens of thousand lives of the citizens of Ukraine in the occupied Alchevsk, whose destiny directly depends from work of this metallurgical enterprise. The interweaving of interests of the Russian and Ukrainian big business, the actual control of the enterprise and the entire holding “IUD” by political establishment of the state-aggressor, the struggle for control over assets of “IUD” inside of the holding and new realities of market conditions, dictated by coming into force the “Agreement on free trade zone with the European Union” make the situation more ambiguous.

But, while we are thinking about moral side of happening, the immediate participants have reached all necessary agreements and fixed problems, which obstructed the work of “AISW”, supply it with raw materials and export products.

Ukrainian side has logical position in this question, but in a case if authorities have the strategic understanding of such a fact, that already after a few years uncontrolled territories will come back under the jurisdiction of Ukraine. At this case the keeping of the production, jobs, technological chains is more than justified.

But, let’s remember that domestic media are actively cultivating the idea about total economic blockade of the occupied territories and mobile teams to combat illicit movement of goods are active from Ukrainian side along the demarcation line. While their representatives are looking for passenger cars and light vehicles, which are transporting goods on the uncontrolled territory, dozens and hundreds of tons of different cargo move on the railway road every day in the both sides.

Without any wish to impede the work of Alchevsk Iron & Steel Work or other enterprises on occupied territory, we are sure that this problem should not remain silent, but on the contrary it requires thorough public discussion  

Prepared with financial support of Czech NGO “People in Need” in the program Transitions of the Ministry of Foreign Affairs of Czech Republic.

Mark Korablev