Ukraine separatists strip Donetsk elite of power and property

Map of Ukraine, Including Crimea, and Neighbors, Including Russia

(Business New Europe – – Graham Stack in Donetsk – March 12, 2015)

A line of fresh flower-heaped graves marks the northern edge of Donetsk’s Scheglovskoe cemetery, where 33 coal miners killed in a pit blast on March 4 lie. Only 50 metres away stands a pithead of the massive Zasyadko mine, where the men met their deaths. The cemetery contains the graves of hundreds of miners killed in a string of disasters at the Zasyadko mine over the last 20 years. Local lore says a coal seam runs beneath the cemetery itself, and gravediggers sometimes turn over lumps of coal.

Divided by the perimeter wall from the graves, workers stacking timber for mine props onto carriages at the pithead are fatalistic rather than angry about the March 4 accident. “In 2007 there was a much bigger accident,” shrugs Kolya, a former miner now stacking timber, who declined to give a last name.

Instead, the workers express outrage about a danger from an entirely different direction: the cemetery and adjacent pithead are in north Donetsk near the Prokofiev airport, which was defended fiercely by Ukrainian government forces against the Russian-backed separatist forces operating in the Donbas region.

As a result, the district including the cemetery and pithead suffered extensive damage from Ukrainian outgoing shellfire. The shelling left behind a trail of shattered gravestones and splintered trees, cratered graves and embedded rocket shells “We had more than 200 direct strikes,” a cemetery administrator tells bne IntelliNews. “You work, and you never know when it will hit, the swine!”

While mine workers are quick to blame Kyiv for the shelling, they are less inclined to blame the mine’s management for the accident. But the self-proclaimed authorities of the separatist ‘Donetsk People’s Republic’ (DPR) that now control the city of Donetsk and its environs see things differently. In response to the accident, the DPR authorities on March 7 said they would ‘nationalise’ the mine that produces around 7% of Ukraine’s coking coal. On March 9, the DPR authorities announced they had arrested the mine’s general director since 2005, Pavel Filimonov.

The March 4 disaster at the Zasyadko mine was only the latest in a series of similar or worse catastrophes since Ukraine’s independence, mostly involving methane explosions. The worst of these, in November 2007, killed 101 miners, with a second explosion two weeks later killing another 57, including five rescue workers. Explosions in 1991, 2001, 2002 and 2006 had already killed in total 140 miners, many of whom lie buried in the Scheglovskoe cemetery, beside the mine that took their lives.

The mine is controlled by 82-year-old MP Yufim Zvyagilsky, who in October 2014 was elected to parliament for a record eighth successive time. Despite the series of terrible accidents, in the city and the workforce Zvyagilsky still enjoys wide respect. Workers point to the mine’s constant expansion under his leadership, workers’ perks including provision of housing, and regular salary payments.

Staff at mine headquarters, located at a different pithead 5 kilometres from the Scheglovskoe cemetery, expressed dismay at the reported removal of Zyvagilsky from running the mine. “Zvyagilsky is still directly involved in running the mine – the last time I saw him here was a week ago,” said a mine engineer and member of the accident investigation commission, who declined to give his name.

“But if there was human error involved in the accident, it would be on the part of managers, not the lessor,” the engineer said. “Yufim Leonidivich is a very authoritative personality and enjoys huge respect in the mine,” the engineer added, referring to Zvyagilsky by his first name and patronymic.

“The commission is still investigating, and we cannot comment,” a spokesman for the mine told bne IntelliNews.

“The main thing is that they pay our salaries on time,” says miner Kolya phlegmatically, “whoever the owner may be.”

Local hero

The Zasyadko mine has long been synonymous with the larger-than-life figure of Zvyagilsky, whose career illustrates the fusion of political and economic power in Donbas since independence.

Zvyagilsky is a Donbas institution – with a street named after him in his home town, and decorated as a ‘Hero of Ukraine’ in 2003.

Zvyagilsky has run the Zasyadko mine for 36 years, over half of the life of the mine, which was founded in 1958. Born into a poor Jewish family in 1933, Zvyagilsky worked his way up from engineer to manager, becoming director of the mine in 1979 at the age of 46, and remained in the job until 2005.

Zvyagilsky is widely regarded as controlling the mine through an “organisation of lessors,” formally comprising the 1992 workforce, which he heads down to the present day. He denies personally owning or controlling the mine.

The “organisation of lessors” leased the mine from the state until 2011. Then Zvyagilsky initiated the privatisation of an 86% stake in the mine to the “organisation of lessors” for around $220mn, funded by a state bank loan. No auction was held for the stake.

According to Mikhaylo Volinets, head of Ukraine’s independent miners union, it is Zvyagilsky’s de-facto authority in the workforce and his political weight that secured his control of the mine. “In fact, the mine de jure belongs to the labour collective, and 16% is still held by the state,” he says.

Zvyagilsky had plenty of political weight behind him: he became mayor of Donetsk in 1993, and was then appointed deputy prime minister. His political career peaked in 1994 when he became acting prime minister for a few months.

After power changed hands in Kyiv in 1995, criminal charges were opened against Zvyagilskii for alleged embezzlement of around $25mn, which he denied. After he became the first Ukraine MP to have parliamentary immunity removed, he fled for Israel, where he reportedly remained until 1997, when it became safe to return to Ukraine.

He continued to sit as MP for the Donbas-dominated Party of Regions, the party of ousted former president Viktor Yanukovych, lobbying the mine’s interests behind the scenes, but attending sessions rarely.

Political opponents accuse Zvyagilsky of jeapordising mine safety in the search for profit, and of hyprocrisy in posing as a Donbas patriot and supporter of the common man. According to an investigation by journalist-turned-MP Serhiy Leshenko, Zvyagilsky’s granddaughter, the daughter of former Party of Regions MP Vladimir Vecherko, lives as a citizen of Switzerland in a villa on the banks of Lake Geneva.

Forbes Ukraine in 2013 rated Zvyagilsky’s wealth at $172mn. According to his official income declaration as MP, in 2013 Zvyagilsky earned UAH12.3mn (at the time around $1.5mn) in dividends.

“Where does such talk about me come from?” Zvyagilsky asked in a rare press interview with internet portal in November 2014. “The answer is simple: envy… Some people enjoy such a ‘rotten’ feeling, unfortunately. I usually look down on such people and answer: the dogs may bark, but the caravan moves on.”

Gilded elite

The ‘nationalisation’ of the Zasyadko mine by the Russian-backed DPR leadership symbolises the demise of the gilded Donbas elite, who achieved riches and power in the framework of independent Ukraine.

The wealth generated by the country’s numerous mines and smelters, largely accumulating in private pockets, lent a veneer of cosmopolitan flair and consumerism to what had been a hard-bitten industrial conurbation grouped around mines and metal works. The city sprouted malls, parks, multiplex cinemas, eateries and hotels to neighbour the slag heaps, pitheads and smelters.

Much of the profit was transferred abroad, but some wealth trickled down: On paper, average income in the Donetsk region was three times higher than that in West Ukraine, according to Ukraine’s state statistics commitee. But miners’ salaries, lacking strong trade unions, stayed low by international comparison.

The zenith came less than three years ago when Donetsk was a venue for the Euro 2012 football championships, attracting international crowds and cameras to the city. Concurrently the Donetsk elite held power in Kyiv via the administration of local boy President Yanukovych and a parliamentary majority for his Donetsk-rooted Party of Regions.

“Ukraine was a great country, Donetsk its best city, and those were good times,” says 26-year-old Dmytro Novyk, a self-confessed member of the Donbas golden youth – a manager in his father’s business supplying materials and equipment to, and trading coal, from the state-owned mines of Makeevka, a mining town adjacent to Donetsk. “Why did they [pro-European forces] have to ruin it all in Kyiv, and then come and ruin it here?”

Novyk browses his smartphone, reliving the past. Videos show Lamborghinis accelerating to 240 km/h on Donetsk streets at nght, birthday celebrations in Singapore casinos, and vacations in Dominica. “My dream was to own property in different places across the world,” he recalls.

“The truth is that Donbas was the heart of Ukraine’s economy, and those idiots [pro-EU forces] think Ukraine can live without its heart. We were the ones who held Ukraine together,” he claims. “We have our own way of life here, we have our industry, coal and steel, we work closely with the Russian market. We never needed the EU.”

While the Donbas clan had its own strong regional identity, and close links to Russia, it was Ukrainian statehood that had handed them control over the region’s industry. As a result, Donbas magnates like Zvyagilsky or steelmaker Rinat Akhmetov have stayed anchored to Ukraine and its territorial integrity: Zvyagilsky’s shaftheads are painted in Ukrainian colours, and after Donetsk fell into separatist hands, he re-registered the company to the nearby Donetsk town of Avdeevka, still under Ukrainian control.

Burst bubble

In February 2014, the Donetsk elite were abruptly ejected from political power after the ousting of Yanukovych by the Maidan street protests in Kyiv.

The collapse of Yanukovych’s Party of Regions and the flight abroad of leading figures created a power vacuum in Donbas, which the Kremlin filled with a separatist movement engineered from local workers and police, as well as Russians, mostly without the participation of the propertied class.

The Donbas bubble had burst. Novyk was badly injured when a shell struck his lakeside schashlik party in the summer of 2014, killing two. He underwent emergency surgery in a German clinic to save his leg.

Zvyagilsky is also no longer safe in Donbas. In a November 2014 interview, he described how security rapidly deteriorated in his former stronghold of Donetsk, forcing him initially to use an old car to move around in, and then to leave hurriedly after three aides had been detained by rebels. In November he was reported to have again been detained by rebels. The loss of the Zasyadko mine seals his loss of power.

Many of the former Donbas elite have likewise retreated to Kyiv or elsewhere in the EU, except for Yanukovych and his closest associates who fled to Russia for fear of arrest.

What awaits the Donbas miners under the new separatist authorities is unclear. Many mines have shut due to infrastructural damage during the conflict, forcing miners to look for work in Ukraine or Russia.

Given Donetsk’s antagonism towards Kyiv after shells struck the city, growing unemployment may also provide the separatist forces with more local recruits.

Outside the Zasyadko mine headquarters, an unemployed man seeking work is turned away. Asked by bne IntelliNews if he would join the rebels, the former security guard laughed as he hurried on his way. “I am more a civilian sort of guy,” he said.

But a rebel fighter, codenamed Hunter, guarding the Zasyadko mine headquarters shows how unemployment combined with anger at Kyiv prompts enlistment. ‘Hunter’ tells how in his former job as builder he had worked on the now destroyed Prokofiev airport in 2012. Four weeks ago he returned there with his unit, after Ukrainian forces pulled out. “Three years ago I worked there for months with trowel and mortar board – do you think I ever imagined I would stand in its ruins with a gun?”