Ports, mines, agriculture: what new regions can bring to the Russian economy

Former Ukrainian territories have great industrial and agricultural potential

On Monday, the Russian State Duma ratified the treaties of accession of the People’s Republics of Donetsk and Lugansk (DPR and LPR), as well as the regions of Kherson and Zaporozhye, to the Russian Federation. The territories voted overwhelmingly to join the country in referendums in September.

Economists say restoring conflict-torn territories will require huge investments, noting, however, that the returns could be even greater. RT examines the economic cost as well as the benefits of territorial integration in Russia.

  1. What are the new regions?
    The total area of ​​Donbass, Kherson and Zaporozhye is almost 109,000 square kilometers (42,085 sq mi), more than 15% of the total area of ​​Ukraine. More than eight million people live in the territories, which have more than 5.6 million hectares of arable land. Moscow has not yet determined the future borders of Kherson and Zaporozhye while parts of them are still controlled by Ukrainian troops.
  2. What are the driving forces of the Donbass economy?
    The Donbass, with its coal-based economy, was the industrial heartland of Ukraine. The Donetsk People’s Republic (DPR) accounted for 20% of the country’s industrial production until 2014. The mineral-rich region has the fourth largest coal deposit in Europe, with its extractable reserves estimated at more than 10 billion tons. In February, 115 coal mines were operating in the Donbass, producing about 70 million tons of raw materials per year. Eight power plants are also located on the territory of the Donetsk region.

    The Lugansk People’s Republic (LPR) is an important transport hub and is known for its metallurgy, machinery and agricultural industries. It also has chemical and pharmaceutical factories and several coal mines. A number of important through highways pass through the republic. LPR authorities claim that its agricultural potential is significant, with emphasis on the cultivation of cereals.

  3. Why is Zaporozhye important?
    The Zaporozhye region is the center of energy supply, with its three powerful energy producers – the Zaporozhye nuclear power plant, the largest nuclear facility in Europe, the Dnieper hydroelectric power station and the Botievo wind farm. In 2019-2020, Zaporozhye produced about 40 billion kWh of electricity per year, which is about 25-27% of the entire energy sector in Ukraine. The region has a number of large industrial and mechanical engineering facilities, including the Zaporozhye Automotive Plant (ZAZ) with an output of 150,000 vehicles per year. The Dnepr River, the Kakhovka Reservoir and the Sea of ​​Azov play an important role in the economy of Zaporozhye, which also has great potential for industrial fish farming.
  4. What is the meaning of Kherson?
    The Kherson region specializes in shipbuilding and is known for its resorts and agriculture. It has the largest territory of arable land at nearly 20,000 square meters. The region produces cereals, sunflowers and vegetables. The fertile land allows two or sometimes even three harvests per season. Other traditional industries are cattle breeding and winemaking. It is planned to develop a resort and tourist center on the territory, which has access to both the Azov and the Black Sea.
  5. What challenges does Russia face?
    Russia has obtained land with incredible agricultural and industrial potential, but with very degraded infrastructure. The main concern of the government is to integrate these territories and help them overcome the economic development gap and recover from the destruction inflicted by the conflict. Initially, Moscow will finance the budgets of the four regions. In the future, as integration deepens and the economy recovers, the volume of transfers from the federal budget will decrease, experts say.
  6. How could Donbass, Zaporozhye and Kherson contribute to the Russian economy?
    The territories have an extremely advantageous geographical location. They offer vast opportunities due to the presence of ports and sea routes with southern Russia. Access to the key port of Mariupol in the Sea of ​​Azov means a potential increase in coal and other supplies to Africa and South Asian countries. The regions can contribute both to ensuring the nation’s food sovereignty and to increasing the supply of exports to “friendly” states. Experts estimate that the potential contribution to the Russian economy could be worth trillions of rubles, or even more.

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