Soviet-Era Survival Instincts Kick in for Ukrainians

(Bloomberg – bloomberg.com – Yulia Surkova – April 7, 2015)

Deep behind rebel lines in eastern Ukraine, cash machines on garbage-covered streets have long run out of bills and residents are turning to fixers to survive.

A pro-Russian insurgency that erupted a year ago has killed more than 6,000 people, with economic desperation permeating what was once Ukraine’s industrial heartland. Residents of the self-proclaimed Donetsk and Luhansk republics, which have become a geopolitical battleground, struggle with even mundane tasks.

Hemmed in by travel curbs, residents of one village near the separatist stronghold of Luhansk were left short of options when rebel handouts dried up. Lidiya, 61, now pays a local middleman to ferry her pension across the front line from a bank in government-controlled Kharkiv.

“People queued for days to get money from the rebels and some fought each other,” said Lidiya, who lives off food grown in her garden in the town of Petrovskoe, 63 kilometers (40 miles) from Ukrainian territory and declined to give her last name for fear of reprisal. “They had to fire shots into the air to make everyone leave once the cash ran out.”

Life inside Ukraine’s pro-Russian breakaway republics hinges on a shadow economy flourishing amid the cease-fires, embargoes and severed supply lines of a yearlong war. The shortages underscore the difficulties the Kremlin-backed rebels face to establish a semblance of normality and cement their rule. They also highlight the war’s mounting costs as the government in Kiev starts debt-restructuring talks.

In Limbo

“The conflict has wiped off relatively comfortable living standards achieved in the last two decades,” Lilit Gevorgyan, a senior analyst at the IHS Global Insight Inc. research company in London, said by e-mail. A persisting stalemate may trigger mass migration amid a “slow and painful” recovery, she said.

For now, Soviet-era survival instincts are kicking in as businesses sprout up to fetch cash, medicines and diapers from government-held areas. Couriers skirt roadblocks and burnt-out tanks to feed demand.

While a February truce helped reduce the thunder of artillery, Ukrainians in the areas run by insurgents face a battle to access money and food staples. The government in Kiev now requires people to carry travel passes to keep the separatists at arm’s length, which has left many citizens stranded and worsened an already acute humanitarian crisis.

‘Drastically Worsened’

The situation continues to deteriorate, according to the United Nations, with access to benefits and services cut off since December in rebel territory. “This has drastically worsened the plight of people living there, seriously affecting access to basic services and food,” the UN said March 13.

Ukraine is simplifying procedures for humanitarian-aid imports, Social Minister Pavlo Rozenko said Tuesday.

It takes about a month to get papers to enter territory controlled by the government. For those without a pass, the array of options is outlined on fliers pasted to wooden notice boards at bus stops and via social networks.

Some try bribes. The going rate is as much as 25,000 hryvnia ($1,100), according to Konstantin, who declined to give his last name to avoid prosecution. Cash doesn’t always work, though, as Konstantin said his truck filled with vodka, cigarettes and food got stuck at a checkpoint as the shooting of a secret-service officer sparked a crackdown.

“Everyone I ask to help says I can forget about the truck,” Konstantin said.

‘Really Hungry’

In Donetsk, the conflict zone’s biggest city, businessmen lean on contacts at border checkpoints to shuttle clients in minibuses 65 kilometers to Konstantynivka, on Ukrainian territory. There they can withdraw cash and visit local shops for products from antibiotics to baby food.

While markets and stores are open in Donetsk, other cities like Debaltseve, the site of a weeks-long siege, are afflicted by shortages. That means humanitarian aid is spread thin, according to Dmitry Filimonov, who said he recently collected $2,000 worth of donations from Moscow and Kiev. The breakdown of local services also makes it difficult to get supplies to those who need them the most, he said.

Aid is “distributed in the center and people living on the outskirts just don’t get to it in time because city transport isn’t working,” said Filimonov, 32. “We brought 130 packages of food to Debaltseve and a long line appeared near our bus in minutes. Those people were really hungry.”

Pension Tours

A special service geared toward the elderly is pension tours that whisk them off to Ukrainian banks to get monthly payments of 1,500 hryvnia, charging about 300 hryvnia.

The charges are high because of the cost, according to Oleh, who drives 36 hours from Petrovskoe to reach Ukrainian territory via Russia and re-register pensioners for 2,000 hryvnia each. Before the fighting started in the aftermath of President Vladimir Putin’s annexation of Crimea last March, the trip took 4 hours.

“I have to pay penalties for crossing the border illegally,” said Oleh, who declined to give his last name because of the nature of his business. “We’re looking now for the best routes.”

The new businesses sometimes run into opposition.

Mariupol, under government control, is a hot spot where couriers show up clutching stacks of bank cards to withdraw cash. Donetsk coal mines often select one employee to make the journey and collect wages for his colleagues. Some wind up clashing with frosty locals who don’t welcome the trips, according to 31-year-old Eduard Horlov.

Throwing Punches

“Once every two weeks, Mariupol steel workers get paid at the same time as buses arrive from Donetsk carrying people to take out cash,” said Horlov, a locksmith. “You see lines of 50 to 100 people at ATMs and there are can be scuffles.”

For those who’re able, the shadow economy is a lifeline. Far from being angry at the fees, there’s gratitude at not being completely cut off.

“It costs a lot for me, of course” said Petrovna from Petrovskoe, who paid 1,000 hryvnia to arrange for her pension to be re-registered in another town. “But I can’t do it myself. It’s good there are people who’re dealing with this.”

Article ©2015 Bloomberg L.P. All Rights Reserved. Article also appeared at bloomberg.com/news/articles/2015-04-06/soviet-era-survival-kicks-in-for-ukrainians-in-rebel-wasteland