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by John Helmer, Moscow 

There is no lack of confidence in Donetsk that the war will be won, but no conviction when exactly that will be.

A Ukrainian heavy artillery salvo hit the Kirovsky district market, on the western outskirts of  Donetsk city on Sunday,  killing at least 27 people, and wounding about as many. The New York Times reported falsely “it was not possible to independently confirm which side launched the strike.”  

The reaction in Donetsk, and also in Moscow, is that the incident triggers serious questioning of how the Russian military operations can be failing still to drive long-range Ukrainian artillery, rockets and missiles far enough westwards to protect the civilians of Donetsk region; and also  the three other accession regions of expanded Donbass; as well as the Russian border regions to the north of Belgorod, Bryansk, and Kursk.

The daily operations briefing and bulletin from the Ministry of Defense in Moscow are reporting exceptionally high casualty rates for the Ukrainian side – 860 last Thursday; 1,005 on Monday; 700 on Tuesday. The bulletin,  which is blocked on the internet in many of the NATO allied states, also reveals a rising toll on the US and NATO-supplied long-range guns, and a changing ratio for Russian army operations each day from defence to offence.

Still, sources in Donetsk and Moscow acknowledge that although the pace and impact of Russian  operations along the line of contact have been growing in recent days, the east-to-west depth of the demilitarized zone required for long-term security remains a hope and military ambition —  not yet the reality on the ground, or in the economy of Donetsk.

Donetsk business sources say they are actively planning for the reconstruction of the region’s mining and metals fabrication industries, and they are negotiating terms of financial assistance for both with the federal authorities, as well as the regional administration. The sources said this week they are sure that in the plans now being discussed there will be no return of the Ukrainian oligarchs who controlled Donetsk’s economy in the past, especially Rinat Akhmetov,  Igor Kolomoisky,   and Victor Pinchuk.  

The Donetsk sources said the most pressing problem at the moment is the lack of manpower to return from the fighting to work; the sources are considering importing North Koreans to fill the manpower gap.

For the longer term, the conviction in Donetsk is that there will also be no return of the criminal gangs who had dominated the local economy in parallel with, and accommodated by the oligarchs. “From the Russian side,” said a business figure in the steel industry, “I am sure the recovery and reconstruction will be done with a heavy hand. No mafia.”

In a lengthy interview just published in Moscow,    the Donetsk regional government’s plan for reviving the local economy has been presented in detail.  Vladislav Vasilivev, the deputy regional chief for the economy, does the talking. Donetsk business sources, who have read the interview, confirm the details.

Source: https://vz.ru/

January 24, 2024                                    

Interview with Vladislav Vasiliev, Deputy Chairman of DPR Government
By Gleb Prostakov

The Donetsk People’s Republic [DPR] has the greatest potential for industrial development among the new regions of Russia. At the same time, the destruction of enterprises, proximity to the demarcation line, constant shelling and the rupture of logistical ties turn the restoration of the region’s industry into a non-trivial task. Vladislav Vasiliev, Deputy Chairman of the Government of the republic, shared details of the industrial situation in the DPR with the newspaper Vzglyad.

At the end of December, during his Direct Line broadcast, President Vladimir Putin said that over 1 trillion roubles were provided in the federal budget for the development of the new regions. The money will be spent, among other things, on the industrial development of new regions of the country. Vladislav Vasiliev, Deputy Chairman of the Government of the DPR, in charge of industry and trade, also told Vzglyad . He explains exactly how they plan to restore and develop the industry of the Donbass, what state support measures will be involved, and what problems will have to be solved.

Question: The outcome of ten years of military operations in the region is not only destruction from shelling, but also a halt in development, lack of capital investments, physical and moral obsolescence. How would you assess the current state of the Donbass industry?

Vladislav Vasiliev (right): Let me answer with numbers. There are almost 360 enterprises in the republic. This is more than in any of the new regions of Russia. And this is taking into account the fact that so far we have liberated less than 60% of the DPR. The Slavyansk-Kramatorsk agglomeration, Gornyak, Ugledar, and Kurakhovo will add dozens more enterprises that need to be restored and developed. Of these 360
enterprises, about 250 are listed as working. Why are they listed? Because most of them have separate surviving equipment, which can produce a limited range of products.

More than 60 enterprises are located on the line of combat contact (LBS); even without being on the LBS, many industries are regularly shelled. Some enterprises have been de-energized [with electric power supply];  suitable railway tracks have been destroyed;  considerable debts have accumulated;  and there are questions about the effectiveness of the work of the individual  administrators who have been working there on temporary assignment.  All these issues are overlaid with the need to switch to Russian technical standards, which may differ greatly from those according to which these enterprises have worked so far.

Now about the good things. The DPR has a huge industrial potential with which it is possible and necessary to work! Already this year, we plan to launch 18 large enterprises – this is something that can be done relatively quickly. In parallel, we will devote the first half of the year to developing a Strategy for the development of the DPR industry.

The strategy will provide answers to key questions: what is the focus of the restoration? how will the DPR industry be integrated into the development programs of Russia’s industry as a whole?  what is the role of interregional cooperation, industrial clusters and technoparks?  Simply put, this document is a vision of what the industrial sector of the republic will be like in the new realities.

Question: Is there a vision for the prospects of recovery? What is worth resuscitating and developing, and what is easier to let “die” by focusing scarce resources on relatively more promising industries and enterprises?

Vladislav Vasiliev:  The answer for the focus of recovery will be given by the future strategy. But it is necessary to revive production and create jobs here and now. We will have to establish systematic work with potential investors and unlock the full potential of the government support measures. And this includes preferential financing from the Industrial Development Fund, and a subsidy for the purchase of equipment from the Federal Ministry of Industry and Trade, plus  subsidies for R&D on modern technologies, and tax incentives provided for the Free Economic Zone participants, and much more.

There is also a lot of field work required.  I go to enterprises several times a week to fix problems. Someone needs to help establish the sale of products;  someone needs to find unique equipment and components;  others need to solve property registration issues, and so on.  We are solving all these problems together with the government of the republic and the federal authorities.

But the main thing is that we have to change the management and communication system, which was formed under Ukraine and has not yet completely outlived that regime under the DPR. For eight years, a local business has taken shape in the region, which has developed in difficult conditions and achieved a lot. Thanks to this, it has been possible to maintain the situation in the economy, prevent a shortage of key goods, and preserve, albeit with significant losses, the industrial potential. But this system has disadvantages which hinder further development.

Previously, local businesses negotiated with the authorities and survived. Now, as we are the new subjects of the Russian Federation, the priority is to solve problems of a national scale: the restoration of industry, saturation of the market with goods, price control. The federal and regional authorities must identify where the systemic problem exists and how to solve it. And only then can the business sector get involved in solving the priority tasks. Only when the pressing problems in the DPR are resolved, and the old practices replaced by institutional coordination in the Russian management system, will we be able to let go of the reins a little, following the well-known principle of the ‘lean state’.

Question: Azovstal is almost completely destroyed and is unlikely to be restored. What is the situation with other grandees of the Donbass industry – Mariupol’s Ilyich Metallurgical Combine (MM), Azovmash, the Stirol chemical plant at Gorlovka?

A Reuters photograph of the damaged entrance to the Ilyich Steel and Iron Works at Mariupol,  April 15, 2022.

Vladislav Vasiliev:   The  Ilyich MMK has a clear position, according to the head of the DPR Denis Pushilin and the federal authorities – the enterprise will be restored. This enterprise is a giant with a huge share in the industry of the republic and the potential to create thousands of jobs for local specialists. Separate workshops of the plant will start operating this year. We are currently working on a plan for its development, which will be integrated into the republic’s industrial strategy. The re-launch of Ilyich MMK  will give about a billion roubles in tax revenues per month. The company will be able to provide jobs for over 27,000 people, skilled workers, and taking into account related industries, this figure can be safely multiplied by three.

The mining and metallurgical industry has been and will remain the driver of the DPR economy in the coming years. But it is necessary to take a balanced approach to the issue of restoring metallurgical capacities, to maintain a balance of interests between  the subject of the DPR in the federation and the entire industry.

We are not going to be thoughtless about increasing crude steel smelting, for example. We plan to focus instead on higher crude to finished steel conversion rates, which will provide products for the Russian shipbuilding, mechanical engineering, the automotive industry and other industries in which import substitution is actively underway.

As for Stirol,  the company has suffered a lot. Gorlovka is still under intense shelling. We will fully restore the plant, and the terrorist attack on the Tolyatti–Gorlovka–Odessa ammonia pipeline will become an additional incentive for us to produce,  not raw materials for Western markets, but the final product – mineral fertilizers.

The reviving Stirol plant at Gorlovka; source: Donetsk News Agency

The huge Azovmash production site has become part of the Almaz regional company. Already, we see interest in the Azovmash site from the Rostec State Corporation and large private companies. Next is the issue of investments and debugging industrial cooperation.

Question: Industry is not only about machines, equipment and infrastructure, but also about personnel. The military conflict forced many people to leave the DPR. How can we help them return — how can we attract valuable personnel from other regions of Russia to work in what is not the safest subject of the Federation?

Vladislav Vasiliev:  You are absolutely right: We are experiencing a shortage of personnel in all sectors of the economy. There is a shortage of engineers in industry, freight forwarders and drivers in trade, and there is no one to harvest and process crops in agriculture. We need accountants, HR specialists, and handymen. The war will end and people will go home to the DPR. And we must create conditions for their return. This is not my area of responsibility, but I will tell you the following: the housing construction program implemented in the region takes into account people who will definitely return to live and work in the republic.

Question: The cost of living in a republic under martial law is comparable to the cost of living in Moscow, the wealthiest city in the country. Prices for many products and medicines, as well as rental housing,  are higher here than, for example, in the neighboring Rostov region. What causes such dissonance and how to deal with it?

Vladislav Vasiliev: There are many military and civilian specialists in the region who, let’s say, can cope with a price tag comparable to Moscow. But for eight years, ordinary people did not stay here in order to end up now paying for food and medicines at exorbitant prices following the accession to Russia.

Therefore, we are now working closely with local retailers, wholesalers and manufacturers on a group of socially significant goods. The price for them should not exceed the price in the Rostov region.

And if we have fewer questions about [price gouging in the] large chains, then we are seeing the smaller shops within walking distance of their customers, taking advantage of the shortage of outlets in the city are not hesitating to raise prices. We will either come to a compromise with them, or apply tougher response measures which are available to us within the framework of the law, starting with fines.

In addition, sooner rather than later, the large Russia-wide food and pharmacy chains, wholesalers and manufacturers will enter the region. And if local businesses want to compete successfully with them, they will need to implement the laws and public administration procedures adopted in the Russian Federation. We are all here to help  business grow. But between the interests of business and the interests of ordinary people, we will always choose people. 

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