Total Monopolization as a National Strategy: Why Does Russia Destroy the Industrial Donbas

Despite Russia’s claims of wanting to "protect the residents of Donbas," the experience shows that Russia is actually interested in suppressing the industrial potential of the region to enhance the monopolistic position of its own enterprises.

In 2013, Ukraine signed agreements with world-renowned companies Shell and Chevron for gas extraction. Thanks to these agreements, Ukraine was set to completely eliminate its dependence on Russian gas by 2020 without losing its potential. However, Russia soon occupied territories in eastern Ukraine where gas extraction was planned.

These fields had not been developed over more than 10 years of occupation, while Russia turned the once-prospering industrial Donbas into its resource appendage, with resources being taken away for pennies, as the once-great industrial potential dwindles year by year under occupation.

Instead of public companies with established corporate governance, resources in the Donbas have been managed since the beginning of the occupation by the fugitive Ukrainian oligarch Sergey Kurchenko, who made his fortune during Yanukovych's presidency through corrupt gas schemes in Ukraine, and after fleeing to Russia, quickly found common ground with the Russian authorities.

The destruction of Ukraine's industrial potential by Russia began long before the hot phase of the war. To monopolize its own production, Russia has always used various methods. For example, the former largest aluminum production facility in Ukraine, the "Zaporizhzhia Aluminum Plant," was destroyed by oligarch Oleg Deripaska, close to Putin, to strengthen the positions of the Russian aluminum holding "Rusal" on the world stage.

The destruction of the "Zaporizhzhia Aluminum Plant" began in 2006 when Deripaska's structures acquired a controlling stake in the plant, and an organized group of representatives and managers from the Russian "Rusal" was then formed at the enterprise. By 2009, the managers organized the shutdown of the ore-thermal furnaces and production sections of electrolytic production, which was supposed to lead to the complete destruction of the equipment.

Since the privatization conditions were not fulfilled, Ukraine initiated the process of reclaiming the nearly bankrupt plant into state ownership. However, representatives of "Rusal" decommissioned and liquidated the plant's equipment, leading to the destruction of the production cycle for the final product. Valuable equipment from the plant was dismantled and exported, while liquidated equipment was handed over to a company controlled by Russian business structures.

By 2013, Russia controlled about 30 percent of Ukraine's banking system and aimed to expand its monopoly further. The main players in the banking sector of Russia were banks controlled by the Russian government. They financed several state industrial companies in Ukraine, often ignoring their financial results and market competition. Some representatives of Russian banks openly stated in interviews that their primary goal was economic expansion.

However, Russia's economic expansion has never been accompanied by the introduction of modern technologies into the industry. The main aim of this expansion was to monopolize natural resources and exert political pressure using the prices of these same resources, the production of which Russia seeks to monopolize. In the case of some countries, such as Belarus, the use of preferential gas prices effectively absorbed the country.

Today, continuing its creeping occupation of Ukrainian territories, Russia captures resource-rich lands but obviously has no intention of developing them. Therefore, it is not surprising that the current temporary occupying power in Mariupol has already stated that no one in Russia is interested in restoring the "Azovstal" plant, which played a key role in Mariupol's economy before the invasion and accounted for about 40 percent of all Ukrainian steel production, totaling over 20 million tons.

Fifteen years ago, Russia declared its intentions to diversify its production and develop modern technologies. Most of these initiatives turned out to be PR stunts accompanied by the embezzlement of funds, and Russia chose the path of a resource country with a dictatorship, where conversations are already taking place about merging state giants "Gazprom" and "Rosneft" with the private "Lukoil" into a state monopolist through which Russia can exert more influence on both the global economic situation and on neighboring post-Soviet countries.

People, and in particular the population of Donbas, have also become a resource for Russia, which, in Putin's view, can be expended to strengthen the positions of its own autocracy, ignoring their real interests and without asking for their opinions.