Ukraine Separatist Republics Won’t Survive On Their Own
The Donetsk and Luhansk People’s Republics are trying to legitimize themselves, but how they will support millions of inhabitants is unclear.
What You Need to Know:
✓ Separatist forces carried out local elections in violation of the Minsk peace deal on November 2;
✓ The elections are an attempt to legitimize the breakaway states;
✓The Donetsk People’s Republic and Luhansk People’s Republic are two separate entities with varying levels of internal cohesion;
✓Both republics have few obvious functional institutions to run a government;
Long after the dust settles from the faux elections in the Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR), Ukraine and Russia will be coping with its repercussions. The economic situation and institutions that will be created as a result will have serious implications, particularly this winter, which promises to be a harsh one.
That the elections went forward is not that surprising. Sure, they proceeded in violation of the terms of the Minsk Protocol signed back in September which had agreed to hold local elections on December 7th. Ukrainian President Poroshenko’s peace plan, which provided the region with limited autonomy for a period of 3 years, is now in shambles.
By holding the vote, the Russian-backed separatists will now have to go about trying to set up proper institutions to run their isolated regimes. Budgets will need to be financed, infrastructure repaired, and pensions paid.
The question is, are they up for the challenge?
The Donetsk People’s Republic: The Myth of Prosperity
The Donetsk oblast has long been known for its economic prowess, based on the strength of its coal and metallurgy industries. Heavily subsidized from the Ukrainian state budget, many of these mines and plants already suffered from the work stoppages due to the war, to say nothing of those which have were the subject of a direct assault.
According to a 2012 report by the donor-funded Laboratory of Legislative Initiatives project that looked at Ukraine’s state budget in 2010 and 2011, the Donetsk Oblast received 27% of all of the subsidies provided. This outstrips even the Kyiv Oblast, who received around 22%.
Ukraine’s centralized system of tax revenue collection and distribution is not based on a principle of “the more you pay in, the more you get back”. Rather, it is a game of who knows who and can influence decision makers in Kyiv to extract rents and subsidies.
Given the current state of the region and the financial situation in Kyiv, subsidies for much of the region will evaporate. While it remains to be seen if the Russian-backed separatists will be able to get Moscow to openly finance them, it is unlikely due to the fact that there is no real market for their coal and ore in Russia (though they may just gift it to Russia in return for support).
Any chance of the region directly tapping into the Ukrainian state budget disappeared with the elections as they left no means for formal cooperation between Kyiv and the DPR.
The Luhansk People’s Republic: Chaotic Mess
The lesser known of the two self-proclaimed separatist republics, its significance has not been entirely clear throughout the conflict. While the former Party of Regions clan did earlier rule the region with impunity, it has never held the almost mythologized political or economic significance that Donetsk has.
It is not for want of territorial size that its visibility remains so limited. It is as large or even larger than the region under the DPR’s control, as you can see from this map:
Unlike the DPR, the LPR is rumored to have little, if any, real command structure. Infighting between groups is more prominent and few of Russia’s ideologue imports have made their way to the region for more than a cursory visit.
Igor Plotnitsky, who also ‘won’ by a landslide in the LPR elections, is another virtual unknown. The only information available about him comes from Russian state-controlled media. He is allegedly a local and not much more is known about this shadowy figure.
Like the Donetsk oblast, the Luhansk oblast’s economy is primarily based on extractive and heavy industries. It also benefited from subsidies amounting to roughly 11% of all state budget supported subsidies, falling only behind the Kyiv and Donetsk provinces. Whatever industry it has will now be cut off from its primary market in Europe, with only a handful of declared ‘ministers’ (only one ministry is listed on their official website) and no one with any apparent experience at the top that can administer the thousands of bureaucrats on the ground.
Self-Sustainability: Mission Impossible
Insofar as it is clear that both separatist republics are seeking complete autonomy from Ukraine now and have finally received Moscow’s blessing, their real goals are far from clear. The region holds virtually no obvious economic or military significance for Russia.
As the economic and financial heart of the region, Donetsk and the surrounding regions under separatist control will continue to economically disintegrate. What few businesses that remain in the region and plan on sticking around will continue to make ransom payments for protection, but these revenues are not likely to find their way into the local budget to build and repair roads, maintain schools, or non-essential infrastructure.
With its industry and mines in shambles, and no one holding the slightest interest in either paying for their restoration, much less their modernization, the economic situation is indeed rather grim. It is not clear where the regions will get the money to rebuild: nor Russia, nor Ukraine have shown little interest in underwriting the contested area, as The New York Times’s Andrew Roth reports from Luhansk province:
The scale of destruction throughout the region is often breathtaking. Residential apartments bear craters from tank shells. Many places, especially smaller towns, lack basic utilities, like water and electricity. Power lines have been downed, mines flooded, substations incinerated and rail service halted.
In Novosvitlivka, no one expects electricity until around the new year, Ms. Svetlova said. The destroyed wing of the hospital will have to wait until spring, if not longer, for repairs. She said she had eaten nothing but buckwheat for days.
“If Russia has decided to come help us, then we should have Russian leaders to keep an eye on things,” she said. “Look around you. This is anarchy, boys.”
Should the situation calm down into a proto-Transnistria style frozen conflict zone, its economy will largely be confined to contraband and selling off whatever natural resources they can extract at discounted prices. VoxUkraine’s editorial board thinks it could lead the way for the region’s re-unification with Ukraine:
It could be tempting for the people of Ukraine to “teach a lesson” to the Donbas by promoting economic collapse and chaos there. Somewhat surprisingly, this could require a counterintuitive strategy of encouraging the separatists to create their own institutions. If the separatists take responsibility for establishing economic policy, enforcing law, and providing public goods, they are likely to fail. If they fail, their support among the local population will plummet
For these and other reasons neither the LPR or DPR are likely to be annexed into the Russian Federation. The frozen conflict scenario is, at present, the only foreseeable option, especially with winter already on their doorstep.
In the short-term, their ability to succeed as governing entities depends on their ability to build at least nominally functional institutions capable of carrying out the day-to-day business of government and maintain some sense of normalcy.
How they will create, run and finance these institutions is anyone’s guess, as it takes more than Russian ‘humanitarian aid’ convoys and influxes of cash to run a state, even a pseudo-state. The coming months will be akin to a probation period, both in terms of their ability to win the hearts and minds of the local population and, if possible, the outright support of the Kremlin.