Reconstruction of the Donbass — a Pilot Project for Russia

As Russian officials, including economist Sergey Glazyev, have pointed out in recent weeks, the western sanctions against Russia have produced limited immediate damage on the national economy, but they have also had an unintended boomerang effect. They have forced an acceleration of the transition from an economy based on raw materials for export revenues, to one giving priority to industrialization and infrastructure development. The cut-off from the dollar and the euro, the necessities of import substitution and a focus on funding economic projects (as opposed to the Central Bank’s previous monetary operations) have contributed to the needed re-thinking.

In some aspects, the new approach resembles the rapid industrial development which China has achieved over the past two to three decades. The construction of the bridge that connects the Taman region of Russia on the eastern shore of the Kerch Strait with Crimea to its west, can be seen as a prelude to the shift, as it was completed within only two years for road traffic and three years for rail.

The Donbass region is seen as an integral part of the project to industrialize the entire southwest of Russia. In the case of Mariupol, within less than three weeks of the takeover, the city’s port and the surrounding coastal areas were cleared of sea mines, enabling transports over the Black Sea via the Azov Sea. The first vessels docked at the port for loading from mid-June on.

Other projects are to be financed by a newly created special fund of 2 trillion rubles (currently about 35 billion dollars) operating as an extraordinary administration, outflanking the previous financial bureaucracy, which had slowed them down or even put them on ice. Under partnerships built between the 20 richest Russian regions and the regions of south-eastern Ukraine now under Russian control, projects carried out will be reimbursed by the special fund, and are exempted from the previous system of fiscal monitoring. That is meant to avoid the kind of bureaucratic obstacles that have stood in the way of realizing infrastructure and industrial projects in Russia before.

If western nations finally reject the current Iron Curtain policy, the Mariupol port could be turned into a new hub for the southern artery of the New Silk Road’s transport grid between Asia and Europe, as well as contribute to the North-South Corridor from Russia’s St.Petersburg to Iran’s Bandar Abbas.