CONTENT PREVIEW
Country Risk

Donbass-Abkhazia coal export scheme, if implemented, to provide separatist entities in Ukraine and Georgia with additional revenues

19 February 2018

Key Points

  • Russia is interested in facilitating exports from its protectorates in eastern Ukraine to provide them with additional revenue streams and make them more financially self-sufficient.
  • Any coal exports from Donbass via Abkhazia are likely to be mislabelled as Russian-produced, thus elevating corruption risks in the Russian coal sector by increasing risks for prospective foreign buyers.
  • Georgia is unlikely to intercept trade vessels engaged in illicit trade between Abkhazia and Turkey in order not to jeopardise its own commercial interests in trading with Turkey.
  • If the coal export scheme succeeds, Russia will likely encourage the Donbass separatist entities to export other commodities, including metals, chemicals and grains, via Abkhazia.

Event

On 9 February 2018, the Ukrainian investigative online platform InformNapalm published a detailed report on the Russian government's alleged plans to start exporting coal from the separatist-controlled areas in eastern Ukraine via Russia and Georgia's breakaway region of Abkhazia to Turkey.A 28-year-old miner, uses a cast-iron bathtub to rise up from 'kopankas', a small illegal coal mine in Shakhtarsk, Donetsk region, on 22 September 2016. (ALEKSEY FILIPPOV/AFP/Getty Images #612167376)A 28-year-old miner, uses a cast-iron bathtub to rise up from 'kopankas', a small illegal coal mine in Shakhtarsk, Donetsk region, on 22 September 2016. (ALEKSEY FILIPPOV/AFP/Getty Images #612167376)

The report by InformNapalm on the proposed Donbass-Abkhazia coal export scheme cited an interview given by the self-described representative of breakaway Abkhazia in the self-proclaimed Luhansk People's Republic (LPR) in eastern Ukraine, Sergei Ladariya, on to the main TV channel in LPR on 29 January. Ladariya spoke about an unidentified "Turkish company" that expressed interest in buying coal from LPR in Donbass to be delivered to Turkey via Russia and the Ochamchira seaport in Abkhazia. He noted that the talks were at an advanced stage and were currently focused on forging an agreement on tariffs between the three sides.

Export mislabelling

Following the start of the armed conflict in eastern Ukraine in April 2014, the pro-Russian separatist militias established control over significant economic assets in Donetsk and Luhansk regions, including in mining. As of early 2015 the LPR and Donetsk People's Republic (DPR) controlled 60 out of 95 coal mines in the Ukrainian section of the Donets Coal Basin (Donbass), including all mines producing higher value anthracite.

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