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President of Russia Vladimir Putin: Mr Pasechnik, it is no secret that the situation in the Lugansk People’s Republic remains very complicated, with the key issue being keeping people safe.

Still, I suggest we begin with other issues today, namely, economic ones, with the economy, social sphere and healthcare.

I would like you to give me a retrospective on what has been going on in these crucial areas, and we will certainly discuss all other issues afterward.

Go ahead, please.

Acting Head of the Lugansk People’s Republic Leonid Pasechnik: Thank you, Mr President.

The foundation of our economy is obviously the coal industry. The Republic is home to the only fuel and coal enterprise, Vostokugol Republican Fuel Company.

This coal company was basically moving towards growth before the launch of the special military operation. In 2019 we reorganised the coal industry and shut down all coal mines operating at a loss.

Around 32,000 people were made redundant at the closed mines. However, 29,000 virtually on the same day went to work in other mines, which means they actually did not feel the layoffs. We offered early retirement to some of the personnel, some other workers were sent to different jobs, so there remained just 500 people that we were unable to provide jobs to.

In 2020–2021 we were steadily increasing coal production and the profitability of the enterprise. However, in 2022, due to the start of the special military operation, 58 percent of miners – the ones that were working in the mines, young guys – went to the front. By way of example, only three people are now working in one of the mines where there should be over 300 miners.

The enterprise has become unprofitable. We are unable to reach the level where it would be profitable. In fact, there is not enough money to pay wages. This is the biggest problem.

We asked for help from the special commission and spoke to Mr Khusnullin. Funding has been allocated to us – about 1 billion rubles – to pay the wage arrears. But the thing is that this situation cannot be tolerated. Therefore, I raised the question of how this problem can be settled.

As for what has been done, it was suggested to me that we privatise the enterprises, which looks like the simplest solution. Yes, we would no longer need to deal with this problem. We would be asked no questions. We would not request subsidies for paying wages. But I have two questions.

The first question has to do with the economy. It turns out that as long as the mines are state-owned they are unprofitable, but if they are privately owned, they quickly become profitable, start earning good money and paying good wages to professionals. The question is, are we doing something wrong? We must answer this question.

Vladimir Putin: Who is the current owner? The republic?

Leonid Pasechnik: Yes, the republic. It is a state unitary enterprise.

This is what we propose. There is also an illegal mining company operating in the republic.

Vladimir Putin: An unregistered company?

Leonid Pasechnik: Yes, exactly.

A company buys part of an officially registered coal producer and uses it to legalise the operation of its illegal facilities. Consequently, they are highly profitable because they do not pay full taxes, they do not work in accordance with the established rules and, of course, at some stage they become a serious rival of our state-owned enterprise.

For example, according to my information, a huge volume of coal has been delivered to Rostov from our small coal companies, the so-called coyote hole mines. I do not know how this coal is legalised, but it is, and after that it is sold to Ukraine, Europe and other places. In other words, a private company can export its coal whereas we cannot.

My first proposal is that our law enforcement agencies redouble their effort in this area so that the operation of these coyote hole mines is cut short and prohibited. I believe that this will increase the profitability of our enterprises. This is my first point.

The second, if we cut short and prohibit these coyote hole mines, their personnel will be released, and we will be able to offer them jobs at our enterprises. In other words, we will increase the number of coal producing personnel and also the profitability of the state-owned company.

To encourage people to work there, we must make coal mining a reserved occupation, so that miners will not be called up, at least for now, to the units of the Lugansk People’s Republic or the Armed Forces of Russia. I believe that this will help us improve the situation.

There is also a political aspect, which I regard as very important. We have become part of the Russian Federation, and it will look wrong if we shut down enterprises in this situation. In other words, our enterprises worked when we were an independent republic, but they will be shut down or turned over to private owners now.

Therefore, we would like to ask you to support us, to provide the necessary subsidies for paying wages and for development, at least for some time, possibly six months or a year, until the end of 2023, so that we can take the measures I have described to save face. Since there is also an economic aspect to this, I believe that we will be able to improve the situation and even make some enterprises profitable.

There is one more thing which I failed to mention. It is a request to add us to state coal supply programmes. Maybe some regions need our coal, the coal of Donbass. I understand that we will be competing, in a way, with Kuzbass, but maybe someone will want to buy our coal for logistical or quality reasons, because the quality of our coal is very high. Mr President, this is why we are asking you to support us.

Perhaps it would be easier to cede the enterprise to a private owner, but I would rather see Vostokugol retain its public status, so that we can continue working.

There is another aspect I have not mentioned. In any event, the miners who are currently fighting will come back and they will say to me, “Mr Pasechnik, we spilled our blood, but we have nowhere to work.” We will have to provide them with jobs, to decide their destinies because they are our people, and we must take care of them.

Vladimir Putin: Mr Pasechnik, there are almost no state-owned coal enterprises left in Russia. This does not necessarily mean that there can be no state-owned enterprises in the Lugansk People’s Republic.

However, their privatisation does not mean that they will be shut down. You said that the people will come back and there will be no employment for them. To be honest, people who work at enterprises care nothing about who owns their company. They want to get paid on time, and they want decent wages that reflect labour intensity levels, the risks involved, and so on.

I repeat, no federal agency will impose any decisions linked with privatisation or any other property-related decisions on you. You must do what you think is necessary. The republic is the owner, and you should make the decision.

Regarding assistance needed today, of course, we will provide it. First of all, this concerns wage subsidies and funding for implementing other measures needed to keep the enterprises going. We will also do this as soon as possible. We need to have an understanding of the specific volumes required. This is the second point.

Thirdly, we need to analyse the current economic status of these enterprises.

You mentioned small unregistered coal enterprises that you call coyote hole mines. Shutting them down seems to be the easiest option. You can do this if the authorities insist. We will provide the required support. However, this will create the problems you mentioned. People will be unable to find jobs. We need to assess the wage levels they have.

You see, it is now possible to analyse everything from scratch, from centre-field, as football players say, and to make well-thought-out decisions that would be coordinated with the people. Here is another question: will you shut these enterprises tomorrow? You also say that people will go to work for your public enterprise; and what if they do not?

This also concerns wage levels: they earn money, and, as you said, the produce are delivered to Rostov and to other Russian regions. We should see why this cannot be done with state-owned enterprises as well. You are absolutely right. All we have to do is meticulously analyse the situation and make decisions on that basis.

Leonid Pasechnik: Yes, we discussed this. There was a meeting attended by Prime Minister of the Lugansk People's Republic Sergei Kozlov.

Vladimir Putin: Well, now that you told me about it and informed me, I will definitely talk to my colleagues and ask them to come back, look at it again and then report on what they propose and why.

The main criterion, of course, is always the interests of the people, the employees, the interests of those who work at these enterprises. We have to provide them with jobs and the appropriate level of wages, which must be paid regularly, without any disruptions. This is what is important.

By and large, to be honest, the form of ownership does not even matter. It is important that the state simply keep track of the rules that are laid down for all the people who work in this field. Whether one is the owner or a manager, or an ordinary worker – everyone has to comply with certain rules, prescribed by the state, eventually in the interest of those who work at these enterprises.

Do you have any documents on this subject with you?

Leonid Pasechnik: I have the documents with me, Mr President. They state in general terms what we ask you to consider and do. But maybe we could take another look, ask the Government to review this.

Vladimir Putin: Yes, let us do that now.

Leonid Pasechnik: I think this will probably be the right decision. We may be wrong.

Vladimir Putin: No, look, I would like to say it again: no one will impose these decisions on you. If you need a subsidy for some time to support these companies, we will do it. This is not the money Russia will stand for. No, this is not an issue at all. The question is economic efficiency.

Of course, we must analyse this matter. You are right when you said we must analyse what prevents state-owned enterprises from being efficient. Let us have a look at it. Maybe one could take these decisions and then retain them in the republic’s ownership. It can be done that way too. We will see.

Anything else?

Leonid Pasechnik: My second question is about medicine. At present, our healthcare system is working quite steadily and everything is great.

Vladimir Putin: I doubt it is that great. You have had such a difficult eight years, and yet everything is great?

Leonid Pasechnik: You know, these eight years were fairly challenging. In 2019, when I toured the hospitals, I visited a veterans' hospital. Truth be told, I was unpleasantly surprised. Nothing high-end there in terms of renovation, but the premises were up to standard. The equipment and the medications, though, left much to be desired …

Vladimir Putin: Obsolete.

Leonid Pasechnik: Frankly, it was from the 1980s. So, when we started receiving high-quality medical equipment in fairly large quantities in the last couple of years, and the quality of medical help improved drastically, everyone, including the minister, appreciated it.

Vladimir Putin: The situation was changing.

Leonid Pasechnik: Frankly, we had never seen such equipment. One could only dream of having it. So, everything is working fine now, but there are issues.

We have arrangements with the Russian regions concerning the evacuation of civilians from the Lugansk People's Republic and providing them with help as planned. We are working on transport arrangements, and the regions are helping us a lot, but we are very concerned that this help may still not be enough for us.

Vladimir Putin: No, no. The Ministry of Healthcare was instructed accordingly, and I will have a word with the Minister and Ms Golikova. Planned help to the people of the republic should be provided exactly as scheduled, without failure. Should any issues arise, they must be addressed and resolved. We will definitely work on this.

Leonid Pasechnik: I drafted a letter on this matter.

Vladimir Putin: Fine, let me have it.

Leonid Pasechnik: There is a heating problem there. We would like to have some subsidies to bring in firewood and coal at our expense, because we do not have enough of it to stoke a fire in wood-burning stoves.

Vladimir Putin: We can do it easily. What is the second issue?

Leonid Pasechnik: It concerns communications, the same thing here. We will not be able to do it on time for purely technical reasons. We do not have enough specialists to install wireless communications, the internet, and so on. We just do not have time to build these towers. According to our standards, 10 towers are enough to provide high-quality wireless communications in a given area.

Vladimir Putin: I see.

Leonid Pasechnik: It works well in central districts, but we are short-staffed and are unable to cover all areas.

Vladimir Putin: What needs to be done?

Leonid Pasechnik: We need workers and specialists to go there and help us do that.

Vladimir Putin: Fine.

Leonid Pasechnik: We will send them to safe areas, so that they start working from there…

Vladimir Putin: To create a communication system, so to say.

Leonid Pasechnik: Yes, to create a communication system. Absolutely correct.

Vladimir Putin: Good.

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