Economic integration of Russia and Donbass: reality and prospects

In the Soviet and post-Soviet periods until the political crisis in Ukraine (2014), the old industrial Donbass was economically closely linked to Russia, which made it possible for its industrial capacity to be successfully implemented. The permanent military actions resulting in the substantial loss of industrial capacity, the total economic blockade, the unsettled political status of the Lugansk and Donetsk People’s Republics led to the breakdown of traditional cooperative ties, the loss of traditional markets, personnel shortages, and a sharp aggravation of social problems. Compared with the pre-war period, the economy of Donbas has noticeably stagnated. In such a severe environment, Russia and Donbas are trying to restore their integration relations, although the supply of high-quality anthracite coal to Russia in exchange for the supply of electricity, gas, and food are so far the main items of trade relations. The share of Russia in the import of the republics exceeds 80% today. Technological processes of a number of Russian enterprises, in particular ones located in the south of Russia, are closely related to the enterprises of Donbass. Russia is interested in procuring dolomite, ferrous metals, anthracite, and salt from Donbass, and Donbass has an interest in supplying it with electricity and creating markets from which this macroregion is now virtually isolated. In the authors’ opinion, the future economy of the Lugansk and Donetsk People’s Republics depends on the prompt shift of trade flows focus from Ukraine to Russia and the global market.