Ukraine is considered to be among the world’s most hazardous countries for coal miners, with regular multiple fatalities making it one of the most dangerous jobs in the region and second only to China in terms of world fatalities. On October 29, four miners were killed in an explosion in Lugansk, while during a single week in September 2006, 17 miners died in three separate accidents. The Ukrainian public has long since grown used to the melancholy news that another disaster has hit the domestic mining industry, with coverage of miners’ funerals and grieving relatives now an all too familiar scene on the evening news. Since independence in 1991, approximately 4,700 miners have perished in the line of duty, or an average of around 300 every year.
Soviet-era equipment blamed
Outdated ventilation equipment was said to be directly to blame for the methane explosion which ripped through the giant Donetsk mine on November 18, according to spokespersons from the Ministry for Emergency Situations. The problem of the Ukrainian coal mining industry’s ageing, often Soviet-era equipment is aggravated by the extreme depth at which Ukrainian miners are expected to operate. Coalbeds in the Donetsk region are generally twice as deep as most other European deposits, increasing the likelihood of deadly gas leaks and explosions.
Deputy Prime Minister for Energy Andriy Klyuev confirmed the increased likelihood of accidents due to the depth of the country’s mines. “Unfortunately, the deeper the mine, the more problems we encounter,” he explained.
Viktor Yanukovych, who hails from the Donetsk region, visited survivors in hospital as the scale of the tragedy became apparent early last week. After consoling grieving families, the Prime Minister vowed to conduct a thorough investigation into the accident and assured victims’ families and mining industry officials that safety conditions would improve in the coal industry.
President Viktor Yushchenko also visited the scene in the wake of the disaster and declared November 20 a national day of mourning. He called upon politicians to “learn proper lessons” from the tragedy and stressed the need to follow existing safety regulations.
Yulia Tymoshenko, who is busy hammering out a ruling government deal, offered her condolences to the victims’ families and called for the outgoing government to take measures to increase safety. “It is necessary to finally stop measuring every million tonnes of mined black gold in human lives,” stated a representative of Tymoshenko’s bloc.
Paid by the shovel
Ukrainian miners are paid by the volume of coal they produce rather than by the hour, a practice that remains in place both in officially operating mines and those involved in the grey economy, which produce an estimated additional 5 million tonnes of coal every year.
As a result, workers tend to exceed quotas – earning more money in the process but breaking safety regulations routinely in a bid to up their modest salaries. This tendency to overlook safety concerns has been blamed for many of the biggest mining disasters in the country’s history.
According to the US Energy Information Agency, Ukraine possesses reserves of 37.6 billion tonnes of high-grade anthracite and bituminous coal. This mineral wealth places the country among the major global producers of high-grade coal, which is used to fuel a surging steel industry and power a growing manufacturing sector. This year, the government ramped up quotas for coal production by one-third to 80 million tonnes, reflecting the importance of the industry in fuelling the economy.
Despite voluminous reserves, the Ukrainian coal mining industry faces seemingly insurmountable challenges. The latest tragedy at Zasyadko is a symptom of an industry afflicted by the woes of economic transition, corrupting local business interests and a pattern of repeated poor investment.
As a result the country cannot always meet domestic demand for coal despite its wealth of natural reserves. In 2006, Ukraine imported USD 760 million worth of coal – an increase of 6.5% from the previous year. Exports were also reduced in order to meet growing demand from steel mills and manufacturers.
The industry is also high politicised, with the majority of its literally tens of thousands of employees pledging loyalty to the Party of Regions in return for improved salaries and promises the mines will not be closed down or wages left unpaid, as was the case throughout the troubled 1990s.
Subsidies amount to an annual USD 1 billion, despite the fact that many mines are unprofitable. In 2004, Minister of Fuel and Energy Serhiy Yermilov was fired in part for proposing to eliminate these coal subsidies.
Meanwhile, no senior officials have been sacked due to mining-related deaths or failure to implement safety protocols despite the continuing fatalities.
Close the mines or invest?
For years, Ukrainian politicians and policymakers have wavered between closing down dangerous mines and expanding coal production.
Earlier this month, President Yushchenko stated in an interview with a leading Kyiv weekly newspaper: “We should give new meaning to the energy potential of Ukraine, starting with the coal industry.”
Government demands to increase coal production serve as a temporary solution to the greater problem of Ukraine’s energy security concerns, namely of the country’s dependence on Russian oil and natural gas. However, this comes at a price and prevents the improvement of safety measures and purchase of new equipment which could help prevent disasters like the recent deadly explosion.
An unprofitable industry
According to Minister of Coal Industry Serhiy Tulub, total losses in the coal industry last year stood at USD 477 million. This comes at a time when the ministry estimates that around USD 3.9 billion in investments is needed to meet government plans to build seven new coal mines. This figure does not include the huge sums also thought necessary to improve the country’s existing mines and modernise the industry to meet minimum international safety standards.
Although the World Bank has funnelled more than USD 300 million to help restructure the country’s coal industry, around 80% of mines are unprofitable. Inefficiency and a dismal safety record have scared away prospective foreign investors.
Strategic bankruptcies
Rampant corruption throughout the sector has stalled privatisation and put investors capable of introducing modern techniques off the idea of entering the market. In 2001, the privatisation process was launched but halted two years later when mines were reorganised into state companies. This year, the Ministry of Coal proposed the privatisation of 18 assets totalling USD 122 million, with hundreds of mines remaining in state hands.
Many mines have been closed by the government, only to be bought at discount prices by private companies connected to local business interests. Speaking in Lugansk this August, Tymoshenko charged that the bankruptcy of holding company Rovenkyantratsyt was an artificial measure taken to liquidate and sell it for a minimal price to an inside bidder. “This enterprise is being destroyed in order to buy it out afterwards for nothing,” she claimed, adding, “As a result of such economic terror, budget debts are being accumulated.”
Compared to other coal-producing nations, the share of the Ukrainian labour force involved in the mining industry is relatively high, with around 500,000 people depending on the mines for their livelihood. Any government would be criticised if steps were taken to close the mines, which are a major socio-economic anchor in the eastern regions.
Mines and coal enterprises are also tightly controlled by eastern Ukrainian business interests, which are connected to the Party of Regions, whose electoral base is located in eastern Ukraine.
In the meantime, President Yushchenko has sought to push forward a law to regulate coal production in dangerous mines such as Zasyadko as part of an effort to “correct national coal industry policy.”
In 2005, President Yushchenko revived the Ministry of Coal, which then allocated USD 29.7 million for equipment upgrades and safety systems. Despite these gradual steps toward reform, the powerful lobby of the coal and steel industries will ultimately prevent far-reaching reforms that would close dangerous mines.
Politically sensitive industry
In 2002, former president Leonid Kuchma vowed to close all unsafe mines after 20 people were killed at Zasyadko. This week’s tragedy indicates that the previous and current presidential administrations have achieved very little in protecting mine workers.
As Ukraine reels from yet another tragedy in the coal mining industry, the stage may be set to re-evaluate the government’s priorities for the industry.
Ramping up coal production would likely distract the government from implementing conservation and alternative energy programmes. Attempts at reforming the coal mining industry are sure to evoke heated attacks from the Party of Regions, who will seek to use it to bolster the image they have created as protectors of the common man in the Donbass industrial belt. As a result, the next government may be forced to choose between two unsavoury options.
Calls for action
Given the scale of this most recent tragedy, there is every chance that long-standing calls for mining sector reform may now be heeded by the incoming government and also gain the support of the wider electorate. While the bloc of Yulia Tymoshenko and Our Ukraine looks set to demand action to reform the industry, the Party of Regions will likely continue to offer the usual consoling rhetoric but will not risk damaging relations with its eastern constituency by closing down dangerous mines or imposing measures that would reduce miners’ earning power. This latest tragedy will also prompt multilateral lenders to voice concerns over mine safety.
