Putin's 'Peacekeeping' Move Jeopardizes $4.5 Billion in Industrial Projects in Eastern Ukraine

Researched by Industrial Info Resources (Sugar Land, Texas)--Following months of diplomatic jousting, Russian President Vladimir Putin sent troops into two Moscow-backed breakaway enclaves of eastern Ukraine, which call themselves the Donetsk People's Republic (DPR) and Luhansk People's Republic (LPR). Putin says he is recognizing the "independence" of the two areas, which are parts of the larger Donetsk and Luhansk regions that otherwise remain under the control of Ukrainian forces. But Western officials believe this could be a pretext for Putin to launch a broader attack on Ukraine. Industrial Info is tracking roughly $4.5 billion worth of active industrial projects in Donetsk and Luhansk.

Putin's move, which he called a "peacekeeping" effort, effectively ends the 2014-15 Minsk Protocol, an agreement enacted following Russia's annexation of Ukraine's Crimean peninsula in 2014. Western leaders, including those in the European Union (EU) and the U.S., have responded with harsh condemnation and an array of sanctions. But Putin, as always, appears to be unswayed by any action rooted in diplomacy. If Putin does launch a broader attack against Ukraine, this will have been the easy part: Separatists have controlled the DPR and LPR areas of the Donetsk and Luhansk regions since 2014, and have been culturally divorced from the rest of Ukraine.

Any further incursion into Ukraine by Russia likely would begin with the broader Donetsk and Luhansk regions. But there's more to these two areas than their long, complicated political history: They are home to large coal reserves that are the basis for heavy mining and steel-producing capacities, and even have a few high-capacity renewable-energy projects under development.

While much of Europe has been aggressively pursuing renewable generation, Ukraine continues to rely heavily on fossil fuels. According to the U.S. Energy Information Administration (EIA), natural gas represents nearly one-third of Ukraine's primary energy consumption, followed by coal at 30% and nuclear at 21%. The Dnieper-Donetsk Basin, which covers a large swath of Ukraine's eastern border with Russia, accounts for 90% of Ukraine's natural gas production.

Click on the image at right for a map from the U.S. Geological Survey (USGS) of the Dnieper-Donetsk Basin, which is bordered to the north by Belarus' Pripyat Basin.

Nonetheless, coal accounts for more than 90% of Ukraine's fossil-fuel reserves, and the Donetsk Coal Basin in East Ukraine is a major source of both thermal and coking coal, according to the EIA. But the COVID-19 pandemic put a serious dent in Ukraine's industrial production and forced many of its largest coal mines to suspend operations in early 2020; since then, Ukraine has relied heavily on coal imports, about 70% of which came from Russia in 2020, according to the EIA.

At least one major power-generation facility already has fallen victim to the conflict. A transformer at a coal-fired power station near Schastia, Luhansk, caught fire February 22 due to shelling, Ukraine's State Emergency Service (SES) said. The SES said that "a projectile hit a transformer on the territory of a thermal power plant" and was "followed by a fire." The SES said the shelling came from "temporarily uncontrolled territory." Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can read a detailed plant profile, and plant profileclick here for a list of active projects at the plant.

DonbasEnergo, one of the major power-generation firms in the region, is planning two coal-fired unit additions at its power plant in Donetsk. The company plans to dismantle the inactive Unit 6 and replace it with units 6A and 6B, each of which is designed to generate 330 megawatts (MW). Subscribers to Industrial Info's Global Market Intelligence (GMI) Metals & Minerals Project Database can read detailed project reports on Unit 6A and Unit 6B.

But Donetsk's Ministry of Coal & Energy is not ignoring global efforts to reduce carbon emissions. The ministry is planning a degasification and modernization project at its Kholodna Balka Coal Mine, which is designed to recover methane and abate roughly 150,000 tons per year of CO2 at the 600,000-ton-per-year mine. Subscribers can learn more from Industrial Info's project report.

One of Ukraine's largest renewable-energy projects is located in one of the country's most sensitive areas. DTEK Renewables, the renewable-energy subsidiary of private DTEK Group (Kiev, Ukraine), is planning to build a four-phase windfarm in Mariupol, Donetsk, a Kiev-backed city that is the 10th-largest city in Ukraine. Mariupol sits on the northern coast of the Sea of Azov and borders the Moscow-backed DPR area; it is ethnically mixed, with many citizens of Ukrainian and Russian identity, and has been the site of sporadic attacks since Kiev claimed it following the 2014 conflict.

Click on the image at right for a map detailing the location of the proposed windfarm in Mariupol, Donetsk.

Each phase of the Mariupol windfarm is designed to generate 200 MW, with construction staggered from mid-2022 to late 2024. Subscribers can read detailed project reports on Phase I, Phase II, Phase III and Phase IV.

Mariupol also is home to Metinvest Holding LLC's addition of a cold-rolling facility at its Ilyich Iron & Steel Works complex, one of the highest-valued projects in the area. The company aims to produce 1.2 million tons per year of cold-rolled, galvanized and polymer-coated steel from the addition, and would consider a proposed second-phase addition if it is successful. Subscribers can learn more from Industrial Info's project reports on Phase I and Phase II.

Subscribers to Industrial Info's GMI Project Database can click here for a full list of active projects in Ukraine's Donetsk and Luhansk regions.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.