Wizeus > Religious Affairs
| Video Links
| Book Reviews
BILD | 16Jan2016 | Von Julian Ropcke
How Russia finances the Ukrainian rebel territories
The roubles are rolling
in -- a 50 rouble note that a man from the large city of Luhansk has
received as part of his salary in December, 2015
Since 2014, two unique state entities have been established in eastern
Ukraine. They call themselves the "People's Republics" of Donetsk and
Luhansk. But both the pro-Russian propaganda in the "republics" and the
Russian President Vladimir Putin 
think that a different name is more appropriate for the Ukrainian
conflict region: "Novorossiya", in English: New Russia.
This conception -- based on ethnicity and culture and entirely against
international law -- also explains what we know so far of Russia's
support for the separatist territories.
studies have shown that, between the spring of 2014
and the summer of 2015, it was the Russian army who led the alleged
separatists to one military victory after another against Ukraine. But
hardly any information is available as to how the self-proclaimed
People's Republics with their 3.8 million inhabitants have been able to
cope economically and socially ever since.
Even before the conflict, industry in the region was mostly
dilapidated. Since then, it lies almost entirely in ruins. Ukraine has
cut the region off from almost all welfare benefits and the banking
system. Officially, Russia only delivers relief supplies approximately
twice a month in its now famous "humanitarian convoy" of several dozen
white trucks. Overall, this is not nearly enough to guarantee a more or
less intact life in an area the size of the German Bundesland Thuringia.
The airport of Donetsk
today -- the majority of the economic infrastructure of the regions in
the east of Ukraine that are supported by Russia is similarly derelict
This extensive BILD investigation shows why millions of people can
still lead a more or less bearable life in these areas.
Through numerous interviews with the concerned local population in the
cut-off territory of "New Russia", insights into documents of the
"People's Republic" and exclusive intelligence findings, a detailed
picture has emerged of the extraordinary involvement of Russia in the
affairs of its western neighbour.
The "People's Republics"
were never financially viable
Although separatists in the regions of Donetsk and Luhansk already
declared their independence from Ukraine in April 2014, the government
in Kiev maintained most state services until June and partly July of
the same year. The salaries for public servants continued to be paid;
citizens could still use their accounts with Ukrainian banks.
It was only in the summer, when it became obvious that the regions
could not be brought back under its control, that Ukraine adapted to
the situation and ended most payments -- except pensions and benefits.
At that time, Alina, a young teacher, was living in the large city of
Horlivka. She worked at the Elementary School No. 16. In July 2014, she
received her last teacher's salary of about 117 euros in her Ukrainian
bank account. After that, Ukraine stopped paying her salary. With the
beginning of the new school year, the new leadership promised to
continue paying all teachers -- but independently of their working age,
and only 78 euros.
The teacher Alina from
the city of Horlivka, interviewed by BILD in December 2015. She has, in
the meantime, fled to the city of Kramatorsk
The reality turned out to be different. Between September 2014 and
February 2015, only one salary was paid to Alina and her colleagues.
"That was at the beginning of the school year, to keep up the
impression of normality, and so that we would come to work at all,"
says Alina. After that, the funding of all social services in both
"People's Republics" broke down completely, because the ambitious aims
of the new rulers were totally unrealistic.
Three more of those concerned confirmed to BILD that virtually no
salaries and pensions were paid in the regions controlled by
separatists in the winter of 2014-15.
The next salary, plus back pay for November only, did not follow until
March 2015, both paid in Ukrainian hryvnia. It seemed, Alina says, that
the Ministry of Education of the "People's Republic of Donetsk" was
ordered to pay out as salaries the money reserves that had been held
back until then. "They didn't seem to need the Ukrainian money
anymore," the teacher remarks.
From April 2015 on, salaries began to be paid regularly again, and the
salary losses of the previous months were also paid back. Area-wide
(from June), they were paid in brand new Russian rouble notes and coins.
The old Ukrainian hryvnia salaries were converted 1 to 2 into new
rouble salaries and then frozen. The actual exchange rate is one
hryvnia to three roubles (in December 2015). This was a severe loss for
millions of people, especially given that the food prices were adapted
to the Russian standard and hence almost tripled.
Rouble notes and the
fragment of a "grad" missile, by Alina from Horlivka
Since the banks were no longer operating from summer 2014, the school
director had to pick up the salaries each month at the "Republic's"
Ministry of Education and then hand them out to the schools' teachers
in cash. Alina does not know where the 4,000 roubles -- approximately
51 euros -- per month for the public servants came from.
Alina also shows us
rouble coins. They were mostly minted in 2014 and were handed out in
the occupied territories since April 2015
"The banks that paid out pensions and the money transporters were
heavily guarded by soldiers with guns." Today, armoured tracked
vehicles still follow the columns of Russian army trucks that arrive in
Horlivka and other cities once a month with millions of roubles, a
witness said to BILD.
everything, even job-creation measures
Much has happened in the self-proclaimed "independent (!) states" since
April 2015. The majority of the economy has been nationalized. Salaries
in the private and public sector, pensions and benefits for single and
disabled persons etc. are paid more or less regularly in roubles.
In September 2015, the "People's Republic of Luhansk" officially
declared the rouble to be, by law, the state currency.
Similar proclamations came from Donetsk in October.
Even job-creation measures were then undertaken with Russian money in
the occupied territories. Maria lives in the city of Antratsyt in the
Luhansk region, close to the Russian border. After troops loyal to
Russia took over power, she lost her job, because she did not agree
with the new rulers on several issues.
Maria T. is 23 and lives
in the city of Antratsyt in the self-proclaimed People's Republic of
Luhansk. BILD talked to her via Skype
Since September 2015, she is part of a job-creation measure that the
government in Luhansk has initiated for tens of thousands of newly
unemployed persons. For cleaning class rooms and sweeping the streets
she is now earning 2,436 roubles, which is about 30 euros, per month
Maria is holding 50
rouble notes up to the camera: her mother's pension, of about 30 euros,
has to suffice for Maria and her son for the month
"I can buy five chickens from that, that's all." At the time of the
interview, at the end of December 2015, she had also not yet received
her salary for November. In the local job centre, a few days earlier,
she was told: "We are sorry, but the money comes from Moscow, it's
probably cancelled or will come later."
It looks like a lot, but
is not even 30 euros. Maria's food money for herself and her son
Ukrainian-Russian double pensions are essential for survival
Maria and her one-year-old son can only survive, because the young
mother has her mother's Russian "republic pension" that her mother
gives to Maria in cash. Like many other pensioners, Maria's parents
drive to the Ukrainian part of the regions of Luhansk and Donetsk once
per month to receive their regular pensions in hryvnia. This is only
possible in the free part of the region and requires a journey of
several days, taking the travelers over the frontline.
Maria's mother's rent
for November 2015. The batch has a red "December" 2015 stamp in
Ukrainian and a blue label by the "Bank of the People's Republic of
Luhansk" in Russian
BILD is in contact with more pensioners from the territories occupied
by Russia. Every month they face the risks and exertion of crossing the
frontline. In the city of Luhansk, one of these persons -- who wishes
to remain anonymous -- receives a pension of 1,243 hryvnia (50 euros)
and 2,248 roubles (28 euros) per month. That is hardly enough for the
most essential needs.
In the Donetsk region alone, 25,000 people cross the contact line
between Ukraine and the occupied territories each day, Pawlo
Zhebriwskyi, Governor of the region, tells BILD. Of the 638,000
registered refugees in the region, 250,000 in fact mostly still live in
It is safe to assume that many of them are pensioners and benefit
claimants who use their status as refugees in order to cope financially
with their everyday lives.
Governor of the city of Kramatorsk, talking to BILD
However, Zhebriwskyi points out that Ukraine does not intend to
prohibit this. "Double pensions are surely a problem," he says. But,
the politician explains, it is not in the interest of Ukraine to punish
its citizens in the occupied territories. The raids at the border
checkpoints are merely directed at smugglers who want to profit from
people's misfortunes or "support the terrorists with money".
A high-level security official also justifies Ukraine's policy of not
taking action against the double pension recipients, even though, in
theory, they could: "Who wants to blame these people?" They live under
rough conditions in the occupied territories, and their Russian
"republic pensions" are "not particularly high. It is very hard to
survive there, even if you receive both pensions."
The tweet shows smuggled goods, as well as money and credit cards,
seized by Ukrainian border police.
Border Guards detained a man heading occ territory w/bank cards, blank
UA passports, ~90000UAH
1:59 AM - 19 Dec 2015
In contrast to the pensions, Ukrainian social benefits are, as of
December 2015, tied to residency in the area controlled by Ukraine.
More than 300,000 families from the now occupied territories received
those benefits until the end of 2014, Vitaly Muzychenko from the
Ukrainian Ministry for Social Affairs explains to BILD. Since then, the
payments for the regions of Donetsk and Luhansk have fallen by about 70
Director in the Department for Social Benefits of the Ministry for
Social Affairs in Kyiv
At the same time, payments in other parts of Ukraine have risen by
exactly the same number, which means that the affected persons of the
1.5 million registered domestic refugees mostly still claim these
benefits, according to the Director.
He also thinks it is possible that tens thousands of these persons have
merely registered as refugees, but still live in the "People's
Republics". In practice, however, it is almost impossible to verify
this or even to prevent it.
Apparently, hundreds of thousands of Ukrainians in the self-proclaimed
states in the east of Ukraine, supported by Russia, still claim
Ukrainian social benefits and pensions to somehow make ends meet for
themselves and their families. This is how ruinous the welfare system
is in the occupied regions - despite the financial support by Russia.
The source of the money
for eastern Ukraine
The question remains, of where the many millions of euros for salaries
come from each month, and how they arrive in the "People's Republics".
The Ukrainian intelligence service is also interested in this question.
It is particularly keen on interrupting the stream of cash to 30,000 or
more fighters, of which around 17,000 are paid Russian mercenaries.
BILD met with a high-ranking representative of the intelligence service
in Kiev and gained exclusive insight into the service's knowledge about
It is alleged that virtually the entire civil state budget of the
separatist territories is organized via funds for "humanitarian aid"
from Russia. The Russian government coordinates these money sources.
2,000 roubles in 100-
and 500-rouble notes. The photograph was sent to BILD by an interviewee
from the separatist city of Luhansk.
According to BILD's investigations, there is indeed in Russia an
"Inter-ministerial Commission for the Humanitarian Support of the
Affected Areas in the Southeast of Donetsk and Luhansk"
that was founded on December 14, 2014.
The Commission, which is attached to the "Ministry of Economic
Development of the Russian Federation" has held its meetings secretly,
in contrast to other Commissions such as the also newly established
-- Three and a half months after the establishment of the Commission,
the area-wide supply of salaries in roubles for the "affected areas"
Funding of the
anti-Ukrainian forces in Donbass
According to intelligence service information, the money for the
"terrorists" -- as Ukraine calls them -- or the "United Forces of New
Russia", respectively -- as they are called in the occupied territories
-- mainly comes from two sources:
 From "Non-Government Funds" of the Russian Federation that, upon
close inspection, turn out to be very close to the government in Moscow.
 From former Ukrainian politicians and oligarchs who fled to Russia
after the downfall of the pro-Russian President Viktor Yanukovych, and
who are now working to destabilize Ukraine.
"Individual persons or organizations pay for their preferred units".
These funds are coordinated and topped up by the Kremlin or the local
Russian intelligence in the, effectively, controlled east of Ukraine.
The new rulers in the concerned territories do not deny Russia's
overwhelming influence on their state budgets. The influential "Donetsk
People's Republic Member of Parliament" Alexander Khodakovsky said in
an interview with a Russian
newspaper that 70 percent of the
"Republic's" budget stems from Russia's "financial aid".
The real numbers could be even more revealing. BILD talked to an
employee of the city council of Stakhanov, a city in the occupied
region of Luhansk with 77,000 inhabitants.
She revealed that merely 5 to 7 percent of the city budget stems from
taxes and the "Republic's" means. More than 90 percent of the roubles
available in December 2015 were "imported from outside". The civil
servant can only explain this by assuming that Russian money was paid
to the city.
This is how the money
gets to the Donbass
For moving money to the Ukrainian Donbass, the Kremlin primarily used
banks in the Georgian region of Abkhazia, which has been occupied by
Russia since 2008. The banking system developed there, says the
Ukrainian intelligence service, provides the structures that are needed
to divert billions of roubles from the state budget and other sources
and to redesignate them.
Nevertheless, in addition to online payment methods, the money
transported into occupied eastern Ukraine almost exclusively took place
in cash. The closed-down banks in the regions of Donetsk and Luhansk
have hardly been reactivated by Russia at all.
The "Bank of the
People's Republic of Donetsk" branch in Donetsk advertises the Russian
online payment system "WebMoney" from the computer game "World of
Tanks". Regular banking business is not possible
Approximately seven million 50-, 100-, and 500-rouble notes are
required each month in order to pay the salaries that Russia took over.
The intelligence service mostly knows how this money is travelling. The
five tons of bank notes are not delivered by the "humanitarian aid
convoy" that arrives every few weeks. The latter mostly serves as
propaganda. Also, Ukrainian customs is now allowed to examine the
contents of the convoy.
Instead, heavily guarded trains bring tons of bank notes and coins into
Ukraine -- illegally, of course -- once a month. On board these trains
are not only the salaries for civil and military work, but also tons of
ammunition and other war material.
According to Ukraine, the money is transported by heavily guarded
military convoys from the three big train stations into the cities and
villages of the occupied Donbass. There it is paid out to the people in
banks or state offices -- or nationalized offices.
There is evidence that these trains of the Kremlin-controlled Russian
Train Line actually exist and that they have, at least, ammunition on
board. Pro-Russian rebels posted a picture in April 2015 that showed
them at the train station of Sukhodilsk. Clearly visible in the
background: carriages of the Russian train company, containing crates
Rebels at the train
station of Sukhodilsk in eastern Ukraine. Behind them is a train of the
Russian public train company, fully loaded with ammunition.
Salaries in Ukraine cost
Russia one billion euros per year
According to BILD's calculations, Russia has to spend approximately 79
million euros per month in order to pay the public service salaries and
the pensions in the controlled territories.
BILD refers to official documents of the two "People's Republics" and
individual statements about salaries in various areas.
For the pensions of 653,000 people in the occupied region of Donetsk
and 425,791 pensioners in the region of Luhansk alone, Russia pays
2,418,378,168 roubles per month -- that corresponds to just over 30
The 30,000 Russian and Ukrainian fighters, who are still working for
the "People's Republics" or their donors, are particularly expensive.
Whereas a teacher earns around 50 euros per month in the "Republics", a
soldier -- depending on his rank -- earns between 90 and 465 euros,
which is up to nine times as much.
Even if Russia's expenses were limited to the salaries in the public,
mostly nationalized , sector and individual social services such as
pensions, these costs of approximately one billion euros per year are
comparable to the state budgets of countries like Armenia or the
Republic of Moldova.
This corresponds to 0.6 % of yearly
expenses in the Russian state budget.
However, these expenses are probably only one part of Russia's overall
expenses for the supported regions in the east of Ukraine. Subsidized
gas, fuel, oil, and food, humanitarian payments in kind and also the
ammunition for continuing the war against Ukraine should also amount to
several hundred millions euros per year.
Deception of the
The details of Russia's funding of the "separatist regions" in eastern
Ukraine that BILD has researched reveal the true intentions in Putin's
government -- in two respects:
 First, they are proof
of a continuous and obvious violation of the territorial sovereignty of
Ukraine, and they expose the tight links between the self-proclaimed
"People's Republics" and the Russian Federation. These links consist in
nothing less than the east-Ukrainian conflict zone's total financial
dependence on Moscow.
 It can, second, be
seen that Putin's Russia is not in the least interested in implementing
the signed Minsk Agreement from September 2014. The agreement intends
for the medium-term reintegration of the corresponding regions under
Ukrainian control. Instead, Russia's policy can rather be considered as
the long-term stabilization of the internationally unacknowledged
construct of the "People's Republics" of Donetsk and Luhansk and the
stabilization of their status quo.
Putin rules the biggest
country on earth. Nonetheless, Russia has annexed several additional
territories since 2008, partly by use of force
To sum up, it was apparently more than "foresight" by Vladimir Putin
when he called the concerned areas "New Russia" in 2014. Taking a
closer look at the welfare situation in the "rebel areas", they are
best described as a colony of Russia that was established and is kept
alive by Moscow.
We would like to thank the Ukrainian blogger "English Lugansk",
who supported BILD with its research in Donbass.