Anthracite FAQ. What’s the Deal with the Donbas Coal?

We were the first to describe in the ‘Dziennik Gazeta Prawna’ daily the practice of importing anthracite to Poland from Russian-occupied Donbas. We have published several articles about it since October 4th, 2017. On the grounds that the issue is complicated, we have prepared a compendium of the most important information about the subject, basing on the frequently asked questions.

Why is the Donbas anthracite trade reprehensible?

After the outbreak of the war in the Donets Basin in 2014, all Ukrainian anthracite mines – both state and private – could be found in the area controlled by the self-proclaimed Donetsk and Luhansk People’s Republics, controlled by the Russians. And, when Ukraine after some time forbade trade with the separatists, they illegally took over all the mines in retaliation. In the first years, the DPR and the LPR officials dealt with the shipment of coal to Russia, but it is the oligarch Serhii Kurchenko who has recently monopolized it. The Donbas mines are exploited in a predatory manner. Coal first goes to Russia, where – with the consent of the government in Moscow – it receives false documents, confirming its allegedly Russian origin. Then, it is sent by sea or land to other countries, including Poland. Trading profits go to the pocket of Kurchenko and separatists. The names of many of them can be found on the USA and the European Union sanctions lists.

What is anthracite and what is it for?

Anthracite is the most energetic hard coal. With the highest calorific value, it contains the most of ‘coal in coal’. In Ukraine, anthracite was burned in power plants. Polish power plants do not use this type of coal, because they burn mainly culm. Poland has not produced anthracite since 1990s, when the Wałbrzych Basin district was closed. In contrast to Ukraine, which has to import anthracite from other sources and gradually switch power plants to gas, anthracite is not a strategic raw material from Polish point of view. In Poland, anthracite can be used in chemical processes of water treatment and wastewater treatment. It is also used to produce electrodes. It is a component for the production of materials for metallurgy, such as carburizers and slag foaming agents. Part of the raw material is re-exported to other EU countries by the Polish importers.

What is the scale of the problem?

According to our information, from March 2017 to September 2018, a total of 304,000 tonnes of anthracite from Donbas were sent to Poland. This year, mainly by rail through Małaszewicze, it has come much less anthracite than before, and the loss of income in this respect in comparison to the previous year reaches several dozen million dollars. It is worth noting that anthracite is bought by private companies, so the statement that the country of Poland imports coal from the separatists is unfair. However, it is true that the state turns a blind eye to this practice. The Ministry of Energy is right when they talk about the negligible impact of this import on the Polish energy balance. But the problem with anthracite from Donbas does not depend on its influence on the Polish market, but on the fact that, contrary to the Polish raison d’état and the EU policy, it supports pro-Russian separatists.

Is it possible to buy Ukrainian anthracite?

It is not possible to buy anthracite from Ukraine because the mines of this raw material are only on the side occupied by the separatists. Ukraine, in early 2017, introduced an embargo on trade with the occupied territories. If the Ministry of Energy gives in this context data on import from Ukraine, which has decreased to zero, it misleads the public opinion. The anthracite from the Donets Basin, thanks to false certificates of origin, is accounted for as an import from Russia.

Who buys anthracite in Poland?

According to our findings, only private companies have done it or continue to do it. Most of them have purely Polish capital. In waybills that we possess are, among others, Szar from Częstochowa or K-Investments from Zielona Góra, which even boasted on its website that it is a shareholder of two mines in Donetsk. When we asked about it last year, the owners explained that it was just a “marketing gimmick” and a mistake. Nevertheless, the information about the mines was available on their website until July 2018. Some companies registered in Poland have traces of the capital directly related to separatists. Among the owners of the dynamically operating company TD Anthracite from Sławków until 2017, there was Ihor Lyzov, holding managerial positions in the party ruling the DPR. On the other hand, the majority shareholder and, until recently, the president of the Doncoaltrade company from Katowice, which seems to be extinguished, is Oleksandr Melnychuk, the former deputy minister of fuels, energy and mining in the LPR.

What have the Polish authorities done about the import of anthracite from Donbas since October 2017?

The Ministry of Foreign Affairs and the Ministry of Energy transfer responsibility to one another. The Ministry of Foreign Affairs is not able to answer the question whether it has used its powers to apply for sanctions on the EU forum to recognize the heroes of our articles as persons who finance activities of the DPR and the LPR. The Ministry of Energy understates the matter, not willing to understand that this matter it is not about disrupting the coal balance. The former deputy head of the Ministry of Foreign Affairs, Jan Dziedziczak, in response to the interpellation of the deputies of Nowoczesna, however, suggested that the services should be interested in journalists writing on the subject and determine whether their motivation is not… spoiling the Polish-Ukrainian relations. The Minister of Energy demanded from his subordinate companies a declaration that they do not buy the anthracite from Donbas. We unofficially know that the Prime Minister Mateusz Morawiecki demanded explanations in this matter. On the other hand, the infrastructure department, as unofficially claimed by the railwaymen, expects operators to monitor coal transports.

What have the authorities of other countries done about the import of anthracite from Donbas since October 2017?

The greatest success was imposing sanctions by the US on some of the heroes of our articles and their companies. It happened in January and February 2018, four months after publicizing the case by the ‘Dziennik Gazeta Prawna’. Among them was Oleksandr Melnychuk and his Doncoaltrade, which thus became the first Polish company to be under restrictions associated with the Donbas war. The sanctions mean introducing a ban for these people on entering the US, freezing their American assets, and banning trade with them. The European Commission has done nothing, and if we do not count the general assurances of respecting the territorial integrity of Ukraine, they even have not answered our questions on this matter. The European Parliament Member of the PO, Jarosław Wałęsa, asked the Commission his own questions. Ms. Federica Mogherini, the deputy head of the European Commission, was answering them, but the questions were short and did not contribute much to the matter. Ms. Mogherini emphasized, among others, that the EU countries are responsible for respecting the sanctions. Moreover, Ukraine initiated a number of investigations into terrorist financing and ordered customs officers to examine samples of each transport of anthracite at the border, to exclude the possibility of importing the raw material from the DPR / the LPR on its territory. Also Turkey, the largest recipient of Donbas coal besides Russia, conducts its own investigation.

Why does the anthracite business continue to revolve?

There is a zero-duty tariff for anthracite in the EU, because the EU countries do not produce enough of it to protect the market. This means that customs controls only come down to checking the papers of the transported goods.

Is anthracite trade illegal?

From the point of view of the Polish law, buying a raw material from separatists is not illegal, because the European Union did not impose a trade embargo on the DPR and the LPR, as opposed to the Crimea annexed by Russia. The same argument is used by the European Commission, although in this case the sanctions can be interpreted as an order to sanction the anthracite traffickers as financing the activities of self-proclaimed republics, which are banned from financing. From the point of view of Ukraine, the practice breaks many provisions. The raw material leaves the internationally recognized territory of Ukraine without its customs and border controls, at the same time breaking the ban on trade with the occupied territories. Companies producing the anthracite do not pay taxes to Kiev, and instead, they settle with the authorities of the DPR and the LPR, thereby breaking the rules of the prohibition of financing terrorism. The Polish Embassy in Kyiv called on the entrepreneurs to act in accordance with Ukrainian regulations in the context of possible trade with Donbas. On the other hand, the nationalization of private mines by the separatists can be interpreted as a violation of martial law, specifically the Geneva Conventions of 1949, which stipulate that the misappropriation of assets, unjustifiable by military necessities, and unlawfully carried out on a large scale, is a war crime.

Where does anthracite from Donbas go beyond Poland?

According to our information, the largest amount of raw material from the Donets Basin goes, besides Russia, to Turkey. From March 2017 to September 2018, over 2.5 million tonnes of raw material were sent there, while, at the same time, only slightly over 2 million tonnes were sent to the entire EU. In the EU, the largest recipients are Romania, Belgium and Poland, but that does not mean that the raw material stays there. A part of it actually stays in these countries where it is used in industry, but the rest goes to the re-export. In the EU, the Donbas anthracite can also be found in Bulgaria, Italy or Greece; and outside the EU in Egypt, Georgia, India, Belarus or even South Korea. Separatists make use of three major transfer routes: a railway route through Belarus and Małaszewicze in Poland, and two sea routes through the Black Sea port in Rostov-on-Don and the Baltic port in Ust-Luga.

Translated into English by Paulina Baca