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Viridian Note 00435: Ukrainian Coal Mayhem
by Bruce Sterling
Key Concepts:
Orange Revolution, coal, organized crime, fossil fuel racketeering, stolen coal mines, coal swindling, coal mining fatalities, beheaded journalists, dioxin poisoning, child labor, steel dumping, trade infringement
Attention Conservation Notice:
Involves a whole lot of Ukrainians.

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(((I know that the terms "Ukrainian Coal Industry" have got to sound like the dullest topic in the world, but how about "Organized Crime and Terrorism"? Those terms have a little more brio, eh?)))

Source: RFE/RL, Roman Kupchinsky

RFE/RL Organized Crime and Terrorism Watch Vol. 4, No. 23, 10 February 2005

Reporting on Crime, Corruption, and Terrorism in the former USSR, Eastern Europe, and the Middle East

DID KYIV SELL CRUISE MISSILES TO IRAN? (((in a word, yes))) CORRUPTION IN UKRAINE'S COAL INDUSTRY RUNS DEEP (((so deep that it's corruption all the way down)))


By Roman Kupchinsky

"Reforming Ukraine's coal industry is one of the major problems facing President Viktor Yushchenko and the government of newly appointed Prime Minister Yuliya Tymoshenko.

Link: "The Orange Princess" is quite a looker, but then, so was Viktor Yushchenko before they poisoned him with dioxin.

"Tymoshenko knows the power of coal from personal experience. She tried to reform the industry while she was deputy prime minister from 1999 to 2001. She was abruptly removed from office in January 2001 by former President Leonid Kuchma, charged with fraud and money laundering, and jailed for several weeks. The charges against her were eventually dismissed. (((On the other hand, if you're merely a journalist instead of deputy prime minister, the natural gas industry might have your head removed.)))
Link: The Gongadze case

"A Long-Neglected Industry

"Ukraine has huge coal reserves, estimated at some 37 billion tons. The industry employs 450,000 people and produced 90 million tons of coal in 2004.

"According to the World Bank, approximately two-thirds of Ukraine's 193 existing mines are unprofitable and should be closed. Ukraine's coal industry has been in a critical state of health for decades and survives mainly due to subsidies from Kyiv, which amounted to some $2 billion in 2003 and 2004. (((Maybe the Ukrainians should turn to nuclear – oh wait, sorry, Chernobylians.)))

"Such subsidies are not nearly enough, however, to maintain proper safety standards. In its August 2000 country brief on Ukraine, the U.S. Energy Information Administration found that 'outdated equipment, a lack of spare parts, and poor safety procedures have resulted in safety problems and lost production, exacerbating the industry's inefficiency." (((Imagine the mayhem they'd wreak if they were efficient. And imagine how lame you have to be to depend on the "American Energy Information Administration.")))

"The industry's lack of productivity has also been calculated by the World Bank: 'While a coal miner in Ukraine produced on average about 100 tons of (washed) coal in 1995, the comparable figures were 200 tons in Russia, 400 tons in Poland, 2,000 tons in the United Kingdom, and 4,000 tons in North America.' ((("Ukrainian coal miners: only one fortieth as harmful as American ones.")))

"Most mines belong to state-owned coal enterprises run by managers appointed by the Ministry of Fuel and Energy, into which the Coal Ministry was incorporated in 2000. During the two Kuchma administrations, these two ministries were headed by people close to the so-called Donetsk clan, an informal grouping of business and political leaders in that region.

"The Ukrainian Coal Ministry was described in a December 1998 World Bank report, 'Restructuring the Coal Industry in Ukraine,' as follows: 'Arranging barter trades and bombarding the Finance Ministry and cabinet with requests for additional investment funds and production subsidies became the main occupation of the Coal Ministry." (((At least they don't whine about drilling in the Arctic.)))

"The Human Cost Of Coal Mining

"The high rate of fatal accidents in the Ukrainian coal industry is mainly due to criminal negligence, industry officials in Kyiv say. Four miners in Ukraine are killed for every 1 million tons of coal extracted. Ukraine's coal industry is considered the world's second deadliest, after China. ((("After China, We're Number Two!")))

"More than 4,000 coal miners have died in accidents in Ukraine since 1991.

"Timber, needed to construct mine shafts, is in short supply in Ukraine and is often reused until it rots, creating dangerous conditions."

Link: That's funny, it took me all of 30 seconds to find all the Ukrainian timber one could need.

"Most mine fatalities in Ukraine are related to methane gas explosions, (((a Greenhouse two-for-one))) and most of these accidents take place in mines that produce coking coal used in the steel industry. These are also some of the most profitable mines in the industry.

"A former deputy director of a coal enterprise in the city of Krasny Luch in Luhansk Oblast told RFE/RL that some fatal mine accidents in coking-coal pits are connected to management directives to extract up to three times the daily norm of coal, for which miners would receive double their monthly wages. The average monthly wage of a Ukrainian coal miner in January 2005 was 1,400 hryvnyas ($255). (((Luxury!)))

"However, existing ventilator systems that pump out the deadly methane gas that is a byproduct of mining are capable of removing only the amount of methane released during normal levels of coal extraction. The increased production results in an excess of methane gas that, when mixed with extra coal dust, often leads to fatal explosions.

To date, no mine director or enterprise manager in Ukraine has been punished for allowing workers to mine coal in unsafe conditions. Only lower-level managers have so far been disciplined. (((Given that coal magnates behave this way to their own employees, imagine how they feel about you.)))

"Inefficiency And Corruption

"Moreover, specialists in the Ukrainian coal industry told RFE/RL that some profitable mines are declared bankrupt and closed, then flooded to prevent their collapse. The closures are used as proof that the Fuel and Energy Ministry is attempting to reform the industry. After some time, however, these mines are bought by private companies at far below their real value; the new owners drain the water and resume profitable mining. (((Imagine if this kind of ingenuity were devoted to reforming our planet's industrial base.)))

"On 7 February, Mykhaylo Volynets, the head of the Ukrainian Confederation of Trade Unions and a member of the parliamentary Energy Committee, told Ukrainian television that there are presently 6,000 illegal coal mines operating in Ukraine that produce some 5 million tons of coal annually. He said these unregistered mines employ women and children, who work in unsafe conditions and receive no social benefits. Volynets added that local authorities and law enforcement agencies in the Donbas Basin are aware of the existence of these mines but are bribed to remain silent. ((("Ukrainian Children: World's Least Efficient Coal Miners.")))

"Coking Coal And Accusations Of Steel Dumping

"For the past decade, successive Ukrainian governments have provided massive subsidies to the coking-coal industry. This policy has been, in fact, a subsidy to the metallurgical industry by providing it with low-cost coke. These subsidies, in turn, led to accusations of Ukrainian manufacturers dumping steel onto world markets.

"On her website, U.S. Senator Debbie Stabenow says that 'from 1997 through 2000, carbon steel slab imports [into the United States] from key producers have risen dramatically: Brazil up 25 percent; Mexico up 13 percent; Russia up 106 percent, and Ukraine up 542 percent.' (((Lends a whole new meaning to the term "high-carbon steel.")))

"The corruption-prone cycle is illustrated by the 2004 tender terms for the privatization of the giant Kryvorizhstal mining and smelting enterprise, which the Yushchenko government is reviewing, saying that it serves as an example of corruption under Kuchma's regime.

"The terms announced for the tender limited the sale to only two bidders: the Investment-Metallurgical Union (IMU) consortium and the Industrial Union of the Donbas. The IMU is co-owned by Viktor Pinchuk, the son-in-law of former President Kuchma, and Rinat Akhmetov, the widely acknowledged leader of the Donetsk clan and one of Ukraine's richest citizens. The IMU won the tender, paying almost $800 million for the enterprise, while others offering up to $3 billion were disqualified.

"The Politics Of Coal

"The troubles in Ukraine's coal industry far surpass those of other energy sectors. (((Why am I not surprised?)))
-- Restructuring the coal industry would mean the loss of hundreds of thousands of jobs in a politically sensitive region. ((("Ukrainian Coal Miners: We Can Out-Die Even the Chinese"))) -- Retraining programs for coal miners are not in place; the prospects for miners performing other jobs are bleak. (((Maybe they can be replaced with their own children.))) -- Entire municipalities in the Donbas Basin rely on the coal industry to pay for medical care, schools, public transportation, and other vital infrastructure. (((Iron lungs, for instance.)))

"How the new Ukrainian government intends to handle this problem is hard to forecast. Any coal reforms are sure to provoke angry reactions from vested interests in the Donbas Basin and from members of parliament involved in the metallurgical and energy-generation sectors of the economy.

"The Donbas has shown itself willing to raise the specter of territorial separatism in order to maintain existing coal subsidy policies and schemes. ((("Welcome to the Ukrainian Coalistan."))) The country's eastern regions had also threatened to secede as a possible response to the Orange Revolution demonstrations in Kyiv.

"How real the threat of separatism is remains questionable, but few have any doubts that the owners and managers of the coking coal-coke- metallurgical industries in Ukraine will lobby to prevent the implementation of far-reaching reforms and will continue to use coal as a political weapon."

(Compiled by Roman Kupchinsky)

Copyright (c) 2005. RFE/RL, Inc. All rights reserved.

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