Graham Stack in Schastye, Luhansk, for Business New Europe (
August 25, 2014

Ceremonial units paraded in Kyiv to mark Ukraine’s Independence Day on August 24. However, in the town of Schastye – translating as “happiness” – in the Luhansk region, troops fighting Russian-backed rebels expressed discontent at their commanders in the capital, and threatened to march on Kyiv once the fight in the east is over.

Ukraine celebrated the anniversary of its declaration of independence from the Soviet Union in 1991 by holding an impressive military parade in Kyiv. The celebration came as war is waged in the east in a bid to secure the country’s territorial integrity against Russian-backed rebels. Volunteer forces at the heart of the fighting found no place for themselves in the parade in Kyiv.

“We wanted to march in the [Independence Day] parade so that people in Kyiv would have the chance to honour our fallen comrades. But when we arrived, police cordoned us off and prevented us from joining the ceremony,” said Serhiy Melnichuk. He is the founder and commander of Ukraine’s “Aidar” volunteer battalion, which is at the forefront of the battle against Russian-backed rebels in the Luhansk region.

Aidar was formed in June, after rebels had seized control of the Luhansk and Donetsk regions, taking its name from a river that flows through the north of Luhansk. Those committed to fight for Ukrainian control of the region joined the irregular battalion, bringing their own kit and supplies. The government now supplies weaponry and fuel, and the unit is formally subordinate to the interior ministry, but major funds are drawn from public donations.

Aidar celebrated its first victory in its first month of operation in June, when it drove Russian-backed rebels out of Schastye, which sits around 30km to the north of Luhansk. “Happiness” is now its base for Aidar’s ongoing campaign to free the city of Luhansk itself.

The battalion lost six men in the week leading up to Independence Day, but that wasn’t enough to book them a spot in the capital. The parade, broadcast on national TV, instead featured immaculate ceremonial units marching with aplomb to salute President Petro Poroshenko, and a drive-by of state-of-the-art Ukrainian weaponry. The parade also featured prayers for those who had died for political change and national independence this year.

Trojan Horse

Melnichuk expresses particular bitterness that Kyiv had not moved to prevent the recent Russian convoy, comprising over 270 trucks of ostensibly humanitarian aid, from entering besieged Luhansk on August 22. “We now know that the convoy was carrying mortars, machine guns and ammunition and has completely replenished the terrorists’ supplies. Now we are expecting them to launch a counter attack,” he claims.

The International Red Cross had inspected the humanitarian convoy at the Russian-Ukrainian border and found it did not contain any weaponry, according to bne sources. However, Ukraine’s border guards did not clear the Russian column of trucks, causing security services to label its entry into the country a “direct Russian intrusion” into Ukraine. However, apparently under international pressure, Kyiv chose not to risk direct confrontation with Russia.

“This Trojan Horse [the convoy] means now that it will be extremely difficult to close down the terrorists before the weather deteriorates at the start of autumn,” Melnichuk tells bne. “And this is very bad for us, since autumn and winter will make it far more difficult for us to fight. It is vital that we liberate Luhansk before the weather deteriorates, i.e. as soon as possible, and the purpose of the convoy was to stop this. This is the message we tried to convey in Kyiv.”

Russia has said more convoys should be expected in the coming days and weeks. Despite the international controversy, and strong Ukrainian aversion, they may have a precedent in international law, says a bne diplomatic source. Similar such humanitarian convoys have recently entered rebel-held territory Syria, without the assent of Damascus.

Aidar fighters in Schastye, questioned by bne, said they would in future open fire on any convoy if they had the chance. “Politicians in Kyiv might give orders to let it pass, but if we come across it, that is the end of it,” said a fighter from Kharkiv, who declined to be named.

Unhappy in Schastye

Allowing the humanitarian convoy to pass is only one of the failings of Kyiv’s political and military leadership, according to irregular and regular Ukrainian forces in and around Schastye. A fighter with the nom-de-guerre Zola, commanding Aidar in Schastye in Melnichuk’s absence, criticised lack of support for Aidar’s operations on the ground from the regular army units.

“We are storm troopers, i.e. we move up into new territory to take up new positions, and in fact often find ourselves fighting against Russian special forces units. We get good support now from army artillery, this is working well. But what happens is that then the army units that reinforce us to dig in and hold the positions in fact surrender [them], often at the cost of lives, because the generals order them to retreat or they come under a little pressure from the terrorists.”

Professional career soldiers heading to the front through Schastye also criticised the Ukrainian army leadership. “We know that the generals who will be attending the parade [on Independence Day] are corrupt. The general staff is riddled with Russian spies thanks to Yanukovych,” said a sapper from Lviv. A career soldier who served in United Nations peacekeeping operations in Africa, he declined to give his name. Ukraine’s security service, the SBU, has also acknowledged Russian intelligence penetration of Ukraine’s general staff.

“We know this [the presence of traitors in the general staff] because often when we follow a route according to the orders we receive from above, we end up coming under artillery attack from the terrorists,” he continues. “Now we never follow the routes according to orders, and we get through fine, but we see that the route we are supposed to have travelled has been worked over by shells and rockets.

“When this is all over we will march on Kyiv and sort things out there,” he adds.

Some conscripted soldiers serving in Donbass also criticise the army leadership for failure to give leave after serving three months in the field. “We feel we have been abandoned, three months out here under constant shell fire,” said a conscript from central Ukrainian Chernigov serving in the army’s 13th battalion, currently holding the town of Stannitsa Luhanska to the east of Schastye.

“The reason is they are afraid that if we do go back home on leave we will never return,” he said. Many conscripts are de facto volunteers, since the universal mobilisation ordered in May was not enforced, meaning only those who readily agreed to serve were called up. But with those ready to serve already in the field, the army may be unable to replace them without enforcing conscription, which it is reluctant to do for political reasons.

Discontent in Donetsk

Volunteer battalions engaged in heavy fighting in Donetsk region also express fears of betrayal by the country’s political leadership, to whom they may represent a future political threat. The “Donbass” paramilitary battalion under the leadership of Semen Semenchenko appeared to have courageously seized the rebel-held town of Ilovaisk in the Donetsk region on August 18. Ten Donbass fighters have been reported as subsequently killed defending their positions in the town, as army units and other volunteer battalions failed to move up in support.

“What has long been rumoured as [being] in planning is now happening before our eyes:  the volunteer battalions are being put through the meat grinder,” photographer Maks Levin, based with the Donbass battalion, wrote in his Facebook feed on August 22. Ukraine’s “Anti-Terrorist Operation” headquarters for its part said that it ordered other volunteer battalions to move up in support of Donbass, but they failed to do so.

Twelve members of another paramilitary group active in Donetsk, Right Sector, were reported killed on August 13 when their minibus was raked by fire from rebels. Three days later, the leader of the ultra-nationalist Right Sector, Dmitro Yarosh, threatened publicly to pull his men out of fighting in Donbass and to march on Kyiv if criminal cases opened against members of his movement relating to their alleged extremist political activity were not closed. Yarosh later withdrew the threat saying that the criminal investigations had been closed and other demands met.


Ukrainian army “could take Luhansk by Independence Day”

Graham Stack in Stannitsa Luhanska
August 22, 2014
The city of Luhansk, a centre of the Russian-backed insurgency in east Ukraine, could fall to Ukrainian government forces in the next few days, the commander of an army battalion moving up on the strategic north-eastern flank of the city tells bne.

The commanding officer of a frontline battalion said Ukrainian government forces could break resistance in the city in the next 4-5 days. “Perhaps we could take the town by Independence Day [August 24] in time to parade, but of course this is not my decision,” said the leader of the Ukrainian army’s 13th Battalion, Oleksandr, who preferred not to give his last name for security reasons.

Ukraine’s Independence Day is celebrated on August 24. It marks the failure of the putsch in Moscow in 1991, which led to the collapse of the Soviet Union and the birth of independent Ukraine later the same year.

The fall of Luhansk would be the most important government victory since the start of the government’s “anti-terrorist” campaign against the Donbass insurgency launched in June. Luhansk, a city of over 400,000, is the second largest population centre held by Russian-backed rebels, and since May the seat of the so-called Luhansk People’s Republic, a self-proclaimed breakaway state. According to opinion polls, Luhansk, nestling on the border to Russia, is Ukraine’s most pro-Russian region outside of the Crimean Peninsula, which was annexed by Russia in March.

The capture of Stannitsa Luhanska, less than 10km from the outskirts of Luhansk, now tightens Kyiv’s stranglehold on the city. Crucial road and rail connections between Luhansk and Russia pass through the town, and were used by the rebels’ Russian backers to move supplies from the border to Luhansk. Spokesman for Ukraine’s armed forces, Oleksandr Lysenko stated on August 20 that Ukrainian army units now also control a police station within Luhansk city boundaries.

“So this now cuts off their oxygen supply,” says Oleksandr. However, he points out that there is still much work to be done to secure Stannitsa Luhanska itself, with the rebels holding high ground overlooking the town and still using it to shell Ukrainian forces. bne saw special force units out combing the surrounding area for rebel hideouts.

Russian guns

The battalion commader adds however that a major threat to his positions now is shelling out of Russian territory. “We man a post right next to the border and hear their artillery working, and can see the muzzle flashes,” he says.

The Russian border is only around 15km away. “Russian drones fly overhead regularly,” Oleksandr adds. The battalion’s base camp was hit by a volley of Grad missiles five days before bne visited, and some tents were ripped by shrapnel but were still standing and in use by the soldiers. Ukrainian forces elsewhere in Luhansk report seizing armed personnel carriers on August 21 that was carrying Russian documentation, suggesting they had been supplied from across the border, although this could not be independently confirmed.

Oleksandr insists many of the remaining rebels appear to be from Russia, including from the North Caucasus, fighting as mercenaries. In contrast, except for Oleksandr and two other career army officers, the men of the 13th battalion are all recruited from Chernigov, a Central Ukrainian region, and owe their fighting spirit to their regional identity, the commander claims. While formally all the men in the battalion were called up to serve in the army, there is no enforcement of Ukraine’s universal mobilisation announced in May, meaning those who did show up for army service are essentially patriotically-minded volunteers.

“Some of them had never held a weapon in their hands before May and all they received before start of operations was 15 days training,” a staff officer of the 13th Battalion who preferred not to be named, told bne. Casualties have nevertheless been surprisingly low, with only 2 dead and 10 wounded out of around 500, the staff officer said, a fact he attributes to his commander’s skill.

“How are we supposed to live?”

However, others in the area are feeling less positive. Suggesting that post-conflict reconciliation between Kyiv and Donbass will be an uphill struggle, the mostly elderly residents venturing onto the streets in Stannitsa Luhanska were less than delighted about the Ukrainian army’s presence, after four days of armed confrontation in the town.

“How are we supposed to live now?” asks Tatiana Nikolaevna, a 58-year-old pensioner, trying in vain to sell her garden produce on the street. “For two months pensions haven’t been paid, and now nothing is being delivered to the shops, except bread. And we can’t get to Luhansk anymore to sell out fruit and vegetables. Everything was peaceful here before the army came, the rebels were hardly present,” she continues. “All we want is to live out our lives in peace.”

Tatiana and other residents accuse the Ukrainian forces of having shelled the town before its capture, causing dozens of casualties and fatalities, although there are no official statistics. “Three were buried yesterday [August 20] alone,” she says.

Extensive damage to buildings in the town showed that shells had fallen in built-up areas, but 13th battalion soldiers deny they shelled the town. “We do not use artillery against areas where civilians dwell,” Oleksandr insists. “This was the work of the separatists and Russian forces.”

“However much you say that [the rebels and Russians are responsible for the shelling] to the locals, they don’t believe you,” complained Volodymr, a soldier patrolling the streets of Stannitsa Luhanska. Meanwhile, locals living outside the town claim to have seen Ukrainian forces firing mortars towards it as the attack on the separatists started.

At the local hospital, staff are also angry at government soldiers residing in the building. “They are spreading dirt and litter, even in the surgical department,” says staff nurse Larissa Suvorova. A colleague with the same first name claims government forces were firing mortars from within the hospital environs at the rebel positions, but this was flatly denied by soldiers at the hospital.

Hospital staff spoke of around 20 in-patients, all civilians, being treated for wounds received during the fighting, some of them in a severe condition. “We have no electricity, no medicines, no bandages, no water,” Suvorova complains. “But in fact we have had no medicines for twenty years, ever since the Soviet Union collapsed, and this is why Donbass has risen up.”

Last train from Luhansk

Graham Stack in Luhansk
July 23, 2014

Luhansk falls quiet as its citizens flee the city. The train station is the town’s last populated place as residents queue for any ride out of town – and not by coincidence it is also one of the rebels’ favourite artillery locations.

With cars and taxis banned completely from Luhansk streets as rebels clamp down in anticipation of a Ukrainian offensive, the people of Luhansk alight at the station from local buses, or come on foot burdened down with baggage, despite the sweltering heat. There are no official figures on how many inhabitants have already left, but estimates range from half to two-thirds of the city. Luhansk has become a ghost town: the only shops working now in the city are some grocery stores, and they are set to close after selling down stock. The rest of the once bustling town is closed up. Government agencies are down to skeleton staff.

But before escaping the city, people have one last trial to endure: the Russian-backed rebels are firing mortars, howitzers and rockets directly from the environs of the railway station. Passengers sweat out hour-long queues to the accompaniment of heavy guns blasting away at the Ukrainian positions – and dreading the impact of Ukrainian response fire. Periodically air raid sirens howl, indicating a Ukrainian jet has been spotted: some passengers quit the queue for more sheltered corners of the station’s halls; others stick it out, set on getting the ticket away from here as fast as possible.

The station, a massive modernist structure from the 1970s on two levels that stands at the northern entrance to the city, is likely to be make a defensive redoubt for rebels as government troops press forward from the village of Metallist, five kilometres to the north. But currently it has another significant strategic asset: the very townsfolk flocking to get out of the city, creating a human shield protecting the rebels’ artillery.

Rebel artillery pounds Ukrainian positions from the station’s environs, but response fire from the Ukrainian side could create another human tragedy if it struck the station – and a propaganda coup for the rebels. Ukrainian forces are showing commendable restraint, but the pockmarks of mortar shell craters on the approach roads to the station suggest their patience may be wearing thin.

Outside the station, rebels patrol, eyeing for rumoured Ukrainian spies providing information on artillery positions. Rebels also seize at gunpoint any private vehicles arriving in violation of the prohibition on using cars. Now and again the heavily armed rebels burst into the station hall. “Our weapon is our strength,” one calls out in accented Russian that suggests he may hail from the North Caucasus.

Talk of the town

In the hour-long queues for tickets, the talk is of the shellings that have terrified the city over the last ten days. According to official statistics from the local interior ministry, over 60 townsfolk have died since Ukrainian forces took up positions around the city ten days ago after advances. Observers from the Organisation for Security and Cooperation in Europe (OSCE) confirmed 28 dead alone on July 18-19.

Everyone it seems knows someone who lives on a street that has been hit or whose acquaintance or relative has been injured. The Ukrainian government has claimed the shelling is the work of the rebels themselves, or “terrorists” as they are referred to in official discourse. But this claim has little purchase in the population, who hold the Ukrainian forces responsible.

“The Ukrainian plan for Luhansk is to more or less flatten it, this is already clear from the way that the infrastructure is being bombed,” says Nikolai, an amiable, middle-aged, bespectacled lecturer at the local police academy, who studied law in Russia in Soviet times and passively supports the rebels, as do many in the city. “They are obviously not intending any reconstruction later – instead the region will be completely cleansed to make way for shale gas drilling by transnational companies.”

Nikolai’s views, surprising though they may seem, are mainstream in Ukraine’s easternmost region of 2.5m, perched on the Russian border, where there is intense suspicious of the West as a whole, and of Kyiv and West Ukraine in particular. In the run-up to the Euromaidan demonstrations that started in November in Kyiv, which were in favour of Ukraine’s European integration, in Luhansk 67% of people favoured Ukraine joining the Russian-led Customs Union, according to opinion polls at the time.

But for all that, Nikolai is waiting for his train to Dnipropetrovsk, where his wife already is. “There’s not going to be much left of the town when they’ve finished with it,” he sighs.

With Nikolai is Dmitry Bilous, a young detective from the criminal police. “Two of my colleagues have died fighting for the militias,” he said, adding that he was going to stay in town. “I’m not afraid of them. But my parents are traveling to relatives in Moscow.”

27-year-old accountant Svetlana, who declined to give her last name, said: “All our ties here are to Russia. They warned us of the Banderovtsy [West Ukrainian extremists], and now they have come. But where is Russia now? Putin has betrayed us.” Svetlana, her husband and their cat were looking for a ticket out of town in any direction – and overjoyed to unexpectedly get two places on the night train to Kharkiv. Ukrainian Railways announced they would be laying on extra trains to Kyiv to get people out of Luhansk. The announcement was welcomed but also gave rise to suspicions. “Anyone who stays here will be taken for a separatist and cleansed,” said Svetlana.

A later encounter at a kiosk with a young Armenian merchant, who requested not to be named for personal safety reasons, and speaking in a hushed voice, brings some counterbalance. “Donbass is made up of two groups of people,” he explains. “The poor, which is the majority, and the better-off and rich. It is the poor people here who support the Luhansk People’s Republic [LNR, the rebels’ self-proclaimed breakaway republic]. But they are very badly informed. They believe it is LNR that pays their pensions. They believe we are going to join Russia. They say that the militias are needed to protect us against the Ukrainian forces, but forget that if it wasn’t for the militias, the Ukrainians wouldn’t be here.”

He said he kept his foreign-made cars locked away, fearing they would be stolen by the rebels, and that two friends had had to buy themselves free after militia men had press-ganged them for trench-digging duty. “A lot of people here are now against the militias,” he said.

Egor, a taxi driver and former helicopter crewman in the Soviet air force, is setting off with wife and parents-in-law to central Ukraine, from where he comes. He said he had toyed with the idea of joining the rebels, the core of whom he said were “former paratroopers”. “I took one oath and that was to the Soviet Union. I don’t have anything personal against the Ukrainian army, but just look what they are doing here.”

Others in the station said they are travelling to Crimea as planned for “enforced holidays,” and joke that the Donbass uprising has been a shot in the arm for Crimea’s tourist industry, struggling in the wake of Russia’s annexation of the Black Sea peninsula.

In contrast to the others desperate to get out of Luhansk, Lena Stavychenko, a nurse, was waiting for her husband and children to return from Kyiv, to where they had fled. “Money has the habit of running out, and that is what has happened,” she said. She said they would sit out the next days in the cellar of their house.

International observers evacuated from Luhansk as Ukraine forces step up operations

Graham Stack in Luhansk for Business New Europe (
July 22, 2014

The shelling of Luhansk continued July 21 as international observers and Russian media were evacuated from the city. Shelling of Donetsk, the largest city in southeast Ukraine, has also started, described by the regional governor as the work of the rebels.

Luhansk came under renewed shellfire on July 21, with heavy explosions rocking the city centre in the morning, near the headquarters of Russian-backed rebel militias who have controlled the city since late April. Shellfire also hit residential areas further out.

In an interview with bne, the Organization for Security and Co‑operation in Europe’s (OSCE) monitoring officer for Luhansk, Kai Vittrup, and members of his team expressed alarm about the shelling of the city, and scepticism about Kyiv’s past claims that it is the separatists themselves who are secretly shelling the city of just under 500,000 in order to consolidate support. “We can’t say out of hand that this has never happened, but they [Kyiv] have presented no real evidence to support this,” Vittrup told bne. He also detailed that OSCE representatives had directly witnessed Ukraine army units firing artillery rounds from positions near to Luhansk that then struck the city. Many shells had fallen in built-up areas of no strategic significance, causing casualties, he said.

A spokesperson for Ukraine’s defence ministry earlier told bne that the armed forces “have never, do not and never will” fire on the civilian population.”

Vittrup said Ukrainian units were now using “pretty well everything,” and that there was clear evidence of land-land rocket systems, such as Soviet-built Grad mobile multiple rocket launchers, being used against Luhansk, confirmingbne’s own observations.  Russian-backed militias continue to pound Ukrainian positions from out of Luhansk, using rockets and artillery, arguably exposing the civilian population to response fire.

Given that both sides – Ukrainian forces and Russian-backed rebel militias – are showing an increasingly no-holds-barred approach to combat, other members of the OSCE team in Luhansk spoke of the possibility of a “second Chechnya.” OSCE’s update on the situation in Ukraine on July 21 quoted the head of the city morgue as saying that 28 civilians in the city had died from shelling July 18-19, with latest figures not yet available. The report also detailed an OSCE visit to an impact site apparently of a rocket attack July 19 beside a bus shelter, resulting in casualties.

Minutes after bne talked to the OSCE representatives, they received evacuation orders to Kyiv. With pro-Ukrainian forces have long since fled the territory of the self-declared “People’s Republic of Luhansk,” this leaves the city largely without external observers. At the same time, Russian TV crews – many of whom are on Ukrainian soil illegally, and are detested by pro-Kyiv forces as Kremlin propagandists – were queuing up for evacuation from Luhansk to the Russian border, as Ukrainian units moved closer around the city. As bne reported, the Russian TV crews were targeted by what was apparently Ukrainian shellfire in the evening of July 20 while attempting a transfer between hotels.

Ukrainian troops are now believed to be closing in on the city from the east and west flanks, having dug themselves in the village of Metallist on the north edge of Luhansk, and holding the airport and taking the village of Georgievka to the south. Apparent air strikes were heard from the south in the daytime and in the early evening, rocket fire was heard and plumes of smoke seen rising from the from the immediate west of the city, after reports that Ukrainian forces had taken the nearby village of Yubilenoe.

Donetsk shelled

Ukrainian forces also stepped up efforts to take the city of Donetsk on July 21, with rocket fire hitting the outskirts of the city, causing civilian casualties, and tanks and armoured vehicles were also sighted, according to Interfax. West Donetsk took the brunt of the shelling. Media reported heavy fighting in Donetsk around the airport on July 21 and that Ukrainian forces captured the village of Pisky on the edge of Donetsk.

According to the site of Donetsk city hall, two people died after a rocket hit a house, with casualties from numerous other reported shell and rocket impacts are not known.

A spokesman for Ukraine’s “anti-terrorist operation” denied that the deaths in Donetsk were the result of any weaponry used by the Ukrainian forces. Kyiv-appointed governor of Donetsk, Serhiy Taruta, in a statement late July 21 likewise claimed that Donetsk had been “gripped by panic” and the conviction that “the Ukrainian army is attacking our city.”

“This is a lie,” Taruta said. “Understanding that they do not have mass support from the locals, terrorists have taken our town hostage and are killing it, by carrying out strikes against residential areas. He suggested locals “should not be afraid to leave the city,” and that the “nightmare would soon be over.”

The escalation of military action around Donetsk apparently follows the pattern of Luhansk since last week, indicating that Ukrainian strategy may have shifted to a simultaneous seizure of both the major populations centres in the Donbass basin region, using the window of opportunity provided by the international furore over the shooting down of Malaysian Airlines flight MH17 on July 17.

Across the regions of Donetsk and Luhansk, Kyiv claimed to have captured a number of small towns with strategic significance, especially Derzhinsk and Rubezhnoe, thus impairing rebels’ supply routes from Russia, although this could not be independently confirmed. There was fighting reported ongoing in the towns of Severodonetsk, Lissichansk and Avdeevka, according to the Centre of Political-Military Research. In the morning of July 21 a spokesman for the Ukrainian National Security and Defence Council said that two Ukrainian servicemen had died over the last 24 hours.

More blame game in Ukraine as dozens die in Luhansk shelling

Graham Stack in Luhansk, Ukraine for Business New Europe (
July 21, 2014


While the world has been transfixed by the crash site of Malaysian Airlines flight MH17, just an hour and half away dozens died from shelling in Luhansk on July 18. And while the guilt of Russian-backed rebels seems close to certain for downing the MH17 flight, there is also growing suspicion it is the rebels themselves who are behind the shelling of the population that they claim to protect.

On a street crossing in east Luhansk near midday on July 18 – close by the large “Eastern” outdoor market where cheap food, clothes and household wares are sold from stands; opposite a swanky supermarket where the better off shop – a mother and daughter was waiting to cross the road and a young woman fresh out of school was selling dairy products at a kiosk when a mortar shell landed among them.

“There was no warning, no whistle,” recalls Olga Kuznetsova, a shopkeeper, who standing on the opposite street side was herself struck by flying asphalt. “It just came and people literally dissolved into air.”

CCTV footage recorded at a clothes shop close by the attack shows a young man in shorts and sandals, earplugs and rucksack strolling by the shop, then smashed to the ground by the explosion and covered by a cloud of smoke. As the smoke clears, he slowly drags himself further away with his arms. Ten long minutes pass before ambulances come to aid the wounded.

A total of ten people died in the attack, a number confirmed by photos taken of the bodies strewn across the street in the aftermath. But this was only the worst attack in shelling that started a week ago and turned Luhansk, previously a bustling city of nearly half a million, into a ghost town. Streets are empty of pedestrians and cars, shops are boarded up, air raid sirens wail regularly and there are constant power outages. The crash of artillery strikes ceases only after midnight.

The total dead from the shelling in Luhansk, according to the pro-rebel Luhansk city council, totals over 60 civilians, with 16 more dead on Saturday. A source in the city’s criminal police confirmed the figure.

As with many facts in this conflict, the question of who is responsible for the shellings is highly controversial

The Russian-backed rebels – who include fighters directly from Russia – together with Russian media blame the besieging Ukrainian forces. The brunt of the Ukrainian advance is from the north and as bne has reported the northern most district of Kamenobrodskii has seen a good deal of the shelling. A bne reporter saw an unexploded Grad rocket in the ‘Old Town’ part of Luhansk, which protruded from asphalt at an angle indicating it had been fired from Ukrainian positions.

But the majority of the shell impact sites show small craters and low structural damage indicating mortar fire. Given mortar ranges of 3-7km, while Ukrainian mortars might be in range of the very north of the town, most of the shelling appears to be from within rebel-held territory. The impact line of the shell that killed ten people on July 18 and two other shells fired in the same burst, point to the location of the mortar as being near the banks of the Luhansk, at the city perimeter, well within rebel territory.

Luhansk rebel authorities claim mobile groups of Ukrainian “saboteurs” have entered the city to carry out the attacks. Self-styled deputy prime minister Vassily Nikitin confirmed this, but declined to comment further. “We can give no information that alerts them to our moves,” he said.

bne witnessed frantic attempts by rebel forces apparently to find the Ukrainian mortar fire units and their accomplices on July 20. As mortar shells rained down on the very centre of Luhansk in the afternoon, apparently aiming at the rebels’ headquarters, militia men raced to search cellars of nearby buildings and stopped vehicles. Self-styled governor of Luhansk Valery Bolotov announced all traffic in and out of the city would be halted as of July 20.

The Ukrainian side has a very different view. “The shelling is carried out by rebel fighters and terrorists using weaponry supplied by Russia, and deliberately executed chaotically as if done by Ukrainian forces. This is being done for the convenience of Russian media to turn the population against us,” a Ukrainian defence ministry spokesman said.

Local pro-Ukraine activists – who have mostly fled the region – support this view. “The terrorists have again slaughtered peaceful citizens to prove how much they are needed as protectors,” blogger Sergei Ivanov tweeted.

Russian state-controlled media have indeed unquestioningly attributed the Luhansk shelling to the Ukrainian forces, and highlighted the soaring death toll, thus blackening the Kyiv government. The majority of city dwellers are also convinced that the shelling is coming from the Ukrainian side. “Please let the world know of our plight and what the Ukrainian army is doing to us,” Oksana Nekrasova, the owner of a small boutique beside Friday’s shelling scene, implored.

There is no doubt that Russian media have cosy relations with the rebels, and that the latter insist it is the Ukrainians doing the shelling. “What monsters could do that [shelling the civilian population]? And as a result every single person living here now hates their guts, don’t forget,” a rebel fighter told Russian journalists, his neighbours in a hotel, during a lengthy discourse on returning from the battlefield July 17. The same journalists later themselves came under heavy shell fire, apparently from Ukrainian mortars.

It is also clear that the rebels are firing mortars from the city centre. At the same time, the rebels have stationed artillery and rockets launchers downtown in Luhansk, and use them to pound the advancing Ukrainian forces. Ukraine’s ministry of defence says this makes a human shield of the city’s inhabitants. “Ukrainian forces will never use artillery against civil population,” the defence ministry tells bne. Locals however point out that the defence ministry does not answer for all forces in Kyiv’s “Anti-terror campaign,” which also includes battalions of volunteers believed to be more gung-ho and less professional.

Both arguments have their own logic: locals believe one goal of the Ukrainian mortar shelling is to prompt people to flee the city in the run-up to a storm. Kyiv claims that it is all part of Russia’s anti-Ukraine PR war. The truth might be a mixture of both.

While the blame game goes on, the people of Luhansk are despairing. “It won’t be long before there are as many corpses here as at Grabova [crash sight of the MH17 flight],” Nekrasova said.

Lugansk shelled as eastern Ukraine battle shifts to border region

Graham Stack in Lugansk for Business New Europe (
July 17, 2014

Ukraine’s struggle against Russian-backed rebels in East Ukraine has shifted to the border region with Russia, to cut off the flow of supplies and men to the rebels. Shellfire rained on the outer districts of the large border town of Lugansk on July 14-16 as rebels dug in.

“This is a genocide against the people of east and south Ukraine,” Anatoly Voevidko, a 63-year-old pensioner, standing in a lane of ruined cottages in north Lugansk, tells bne. Shelling struck the three houses on Kuibyshev street in the night of July 15 and again in the daytime of July 16. Because this district is one of garden allotments with low population density, only two people were injured in the attacks, with both out of danger, according to the city’s police department.

Others may not have been so lucky. bne counted at least five other shell hits in the early evening, with the crash of explosion followed by plumes of smoke. Shells also hit buildings and streets in southern districts of the town of Lugansk on July 15-16. Eerily silent ambulances and fire engines raced to the impact scenes without sirens, due to the near-complete absence of traffic on the roads, with most of the population having left the city or hiding at home. According to the Lugansk police department, at least seven individuals died as a result of shelling on July 15. There were as yet no official figures for July 16.

Who is doing the shelling? “It is bad people, the Ukrainian forces,” said Sergei, a member of the separatist’s self-styled State Security Committee (KGB), who declined to give his last name.

The pensioner Voevidko also had no doubt that the Ukrainian army, encamped just kilometres outside Lugansk to the north, is responsible for the shelling. “It is open war against civilians. There is no possible strategic significance to this area,” he protested.

However, bne also saw and heard in the dusk what appeared to be the firing of a volley of rockets out of north Lugansk, apparently by one of the feared Soviet-built “Grad” truck-borne multiple rocket launchers that are in rebel hands. Pro-Kyiv activists and analysts widely claim that rebels have placed their weaponry in built-up areas to use civilians as a “human shield” against Ukrainian counter-fire. Some also claim that the rebels are themselves firing mortars on parts of the city, to whip up local hatred of Kyiv and increase international pressure on Kyiv to halt operations, although bne could not confirm this.

Border warfare

As the Ukrainian forces advance into the Donbass basin – an area covering three administrative provinces (oblasts) in the east of Ukraine – and towards the major cities of Donetsk and Lugansk, they are faced with the prospect of street-to-street fighting against the rebels, if they try to take back the towns. Given the restrictive terms of engagement laid down by Ukraine’s “anti-terrorist operation,” this would lead to high losses among the military, as well as inevitable civilian casualties.

This makes it crucial for Kyiv to first cut the rebels off from the Russian-Ukraine border in Lugansk region, across which is coming increasingly heavy weaponry – such as tanks and “Grad” units – and men capable of handling them, according to Kyiv. “The most intense fighting now is along the border… [Russian President Vladimir] Putin knows that if the rebels’ land connection to Russia breaks, this will be the end of the conflict in Donbass,” says Dmitry Timchuk, at Centre of Military-Political Research. “He will do anything to stop this.”

Ukrainian forces on the Russian border in Lugansk are, however, coming under fire from the rebels in and around Lugansk, which is less than 30km from the nearest part of the border. Moreover, a video clip uploaded to a Russian social network profile on July 16 appears to show “Grad” rockets also being fired out of Russia across the border towards Ukrainian forces. The clip was later removed from the profile.

Attacks from the Russian side as well could yet turn the border region into a “canyon of death” for Ukraine’s still raw and under-equipped troops: over 30 Ukrainian soldiers and border guards died July 11 under rebel “Grad” fire, in Zelenopillya, on the Russian border south of Lugansk.

Another focus of fighting in Lugansk is the city’s airport, which is held by Ukrainian army units but came under intense shelling on July 16. If the rebels were to seize the airport, it could provide a crucial bridgehead for Russia to step up its support for the fighters, in addition to the land border. “And that would be an entirely different level of war,” says Serhiy Garmash, editor at and expert for the Donbass region.

Massive corruption at Ukraine’s Naftogaz funnelled through western banks

Graham Stack in Istanbul
April 2, 2014

Italian banking giant UniCredit ignored money-laundering allegations to deal in funds connected to a controversial $400m deal between Ukraine’s corrupt state energy company Naftogaz and Latvia’s Riga Shipyards, according to documents obtained by bne.

As bne has previously reported, the  Norwegian financial company Ferncliff revealed that its subsidiary Standard Drilling directly sold an offshore drilling platform to Ukraine’s national gas company Naftogaz in 2011 for $220m, contradicting claims by the Ukrainian state-owned oil and gas company that it acquired the rig for $400m from Latvia’s Riga Shipyard via an open tender.

This wasn’t the first time that Naftogaz was involved in a deal involving such a huge discrepancy in the price it paid and the price quoted by the makers of the drilling platform. A previous, nearly identical acquisition of a similar drilling platform by Naftogaz in 2011 had raised widespread accusations of corruption and sparked investigations in Ukraine. But whereas the first deal in early 2011 involved shell companies and a controversial Latvian-owned bank Trasta Komercbanka, the second looked superficially cleaner: using an intermediary supplier of the drilling platform that was a bone fide ship-builder, Riga Shipyard, albeit one with no connection to drilling rigs; and instead of using the Latvian-owned bank, bnecan reveal the second deal was executed via the Latvian subsidiary of CEE banking giant UniCredit.

To complete the deal, bne has obtained documents that show Riga Shipyard used a newly registered UK subsidiary Northsale Logistics Ltd with an account at UniCredit Latvia, and set up another account for itself also at UniCredit Latvia – parallel to the shipyard’s main account at the Latvian branch of Finland’s Nordea Bank. The shipyard at the time disclosed an “agency and freightage” agreement with Northsale for implementing the rig deal. Northsale enjoyed small company status in the UK, exempting it from independent audit.

According to bne sources close to Riga Shipyard, these parallel bank accounts at UniCredit Latvia obscured the details of the deal and made proper oversight by the independent board members more difficult. Naftogaz paid the total contract value of $400m to Riga Shipyard’s main bank account at Nordea Bank. The funds were then transferred to the shipyard’s new account at UniCredit Latvia, and moved from there to the Northsale account, also at UniCredit Latvia. Northsale then made payments for the rig acquisition and to other suppliers. For instance, accounts seen by bne dating October 2012-March 2013 show around $50m in payments made to the Northsale UniCredit accounts from Riga Shipyard’s UniCredit account.

Riga Shipyard disputes any wrongdoing and says that details of the deal including payments are confidential. In a statement issued March 25, the Latvian company complained of a media campaign organised against it by Latvian creditors trying to have the company declared bankrupt. “Unfair information and statements are being distributed in the community, which fundamentally slur Riga Shipyard,” reads the statement.

Istanbul connection


Between October 2012 and March 2013, Northsale transferred a total of $46.5m from its UniCredit Latvia account to the Turkish account of the tiny Istanbul ship repair company Emarine, operated by a Turkish citizen called Murat Bayrak.

The money was ostensibly transferred for work performed on the B319 rig. But there are good reasons to doubt this because bne enquiries revealed that Emarine and Bayrak performed no significant work connected to the rig. “Emarine was not part of the B319 project,” Salih Fidan, B319 installation site manager in Turkey, tells bne.

In an interview, Bayrak declined to say what his role in the operation had been, citing confidentiality clauses in the contract. Emarine has share capital of only around €30,000, a glaring mismatch between the size of the funds transferred and the size of the company. Moreover, bne sources in the industry estimate the total cost of the work performed – reassembly of the rig legs – at not more than $5m.

Riga Shipyard sold Northsale in the last days of 2012, which the shipyard claimed absolved it from consolidating the subsidiary on its accounts for 2012. Most of the payments to Northsale that were wired on to Emarine took place in 2013 after sale of the subsidiary. Between January 2013 and February 2013, Riga Shipyard transferred $39.5m in multiple instalments to Northsale, which forwarded the same amount to Emarine.

Latvian police in late 2012 announced a money-laundering investigation into the UK shell company Highway Investment Processing, which was involved in Naftogaz’s equally controversial rig acquisition in early 2011. Highway Investment Processing had implemented the deal via a bank account at a controversial local Latvian-Ukrainian bank called Trasta Komercbanka. Trasta Komercbanka has denied any wrongdoing.

In May 2013, UniCredit declared it was pulling out of Latvia and winding up its bank there. As late as January 2013, the bank had said it planned to centralise its Baltic operations in Latvia. “In the Baltics we had only a tiny presence and decided to gradually downsize and close activities,” UniCredit in Vienna tells bne. The decision concerning the Baltics was taken in 2013 and had “nothing at all” to with money-laundering concerns regarding the Riga Shipyard or any other transactions, the bank explains.

The new administration in Ukraine has moved quickly to probe the corrupt dealings during the four years of ousted president Viktor Yanukovych. Naftogaz, long a nest of murky deals, has been at the centre of the investigations, with Ukrainian police arresting the former head Evhen Bakulin on March 21. Acting Interior Minister Arsen Avakov alleged that losses to the company under Bakulin’s watch “on just three counts” exceed $4bn.

Rum Company

Another angle to UniCredit’s involvement with the controversial Naftogaz deal relates to UniCredit’s former long-serving head of Ukraine operations, Boris Timonkhin. Timonkhin in July 2013 unexpectedly quit UniCredit’s Ukrainian unit Ukrsotsbank, to head banking operations for controversial 28-year-old Ukrainian businessman Serhiy Kurchenko.

There was surprise at the hitherto respected Timonkhin’s choice of new employer, who on March 20 was placed on Ukraine’s wanted list by the Prosecutor General on charges of embezzlement of around $120m of Naftogaz funds, offences described in detail in media since 2012. Timonkhin joined the supervisory board of Kurchenko’s newly acquired Brokbiznesbank and in this capacity, as bne has reported, he apparently signed off on an over $70m loan to a sham firm linked to Kurchenko, which had also received millions of dollars in procurement orders from Naftogaz.

Kurchenko has since fled Ukraine. Ukraine’s security service SBU detained Brokbiznesbank supervisory board chairman, Denis Bugai, on March 21 on charges of fraud and forming a criminal organisation. Interior Minister Avakov has accused Kurchenko and his gang of defrauding Naftogaz of around $200m.

Timonkhin himself is currently in France, but denies he is on the run. In an interview published inUkrainskaya Pravda on March 24, the former UniCredit banker denied belonging to what the SBU calls “Serhiy Kurchenko’s criminal group.” Timonkhin also criticised the arrest of Bugai, the Brokbiznesbank chairman, saying that Bugai was “clean.”

UniCredit declined to comment on whether Timonkhin had influenced UniCredit’s decision to take on the Naftogaz-Riga Shipyard business. Timonkhin could not be reached for comment by bne.