ANALYSIS: Can trade unions protect Ukrainian miners' rights? (10/27/02)

ANALYSIS

Can trade unions protect Ukrainian miners' rights?

by Boris Dodonov
RFE/RL (Un) Civil Societies

Coal has been extracted in Ukraine for about 150 years. The tragically high number of coal miners' deaths in recent years means attention to peoples' lives has not improved since the 19th century. About 3,700 coal miners have been killed since Ukraine gained its independence in 1991; 190 have died so far this year. While mining accidents with large numbers of casualties have receded into history in the developed world, for Ukraine they are in today's news.

Not only do miners face abysmal safety conditions, they have less jobs. Since 1990 coal production has been cut by about 50 percent. On the one hand, there is a shrinking demand for metallurgy and fossil-fuel power plants, and on the other hand, Ukrainian coal is difficult to extract and of low quality. It makes Ukrainian coal noncompetitive, and it also makes it extremely inefficient due to the very high labor intensity needed for the production. According to the World Bank, in 1995 production costs of about 40 percent of all coking coal-producing and 35 percent of all steam coal-producing mines were higher than those of comparable imports.

A major factor working against improvement in the miners' lives is the price at which coal is sold in Ukraine. It does not cover the costs of extraction, and, therefore, the production is subsidized; the planned state budget subsidies are five and seven percent of the state budget's total expenditures in 2001 and 2002, respectively.

Are such subsidies in the miners' interests? In fact, it is a vicious circle. Generally, subsidies do not create any incentives to improve production efficiency, and in fact have ruined the finances of the better-performing mines. Production subsidies, in turn, result in very high labor intensity, and both coal miners and managers have found they have a common interest in blocking restructuring and cutting corners.

Before the break-up of the Soviet Union, coking coal and coke were delivered according to state purchasing orders. After 1991, the situation changed significantly. Today, a few firms acting as intermediaries control virtually 100 percent of the market. Intermediaries gave commodity credits in the form of equipment to the coal mines when the mines were cash-strapped due to non-payment for the coal supplied and non-payment of the government's planned subsidies from the budget. Now the coal mines must deliver coal to the intermediaries to pay for the credits.

There was no transparency in granting these credits, nor any open tenders in order to obtain the necessary equipment. Unions and parliamentary opposition were not strong enough to demand such conditions. As a result, the value of the credits could be substantially exaggerated. Widespread corruption within this system, and an exploitative relationship to the mines and the workers become the most urgent problems.

The State Oversight and Review Department has revealed that the state subsidies given to the coal industry are not spent for the stated purpose. The Audit Commission has accused the government of misappropriating World Bank loans for coal industry restructuring. The World Bank's loan of $300 million approved in 1996 was supposed to go towards implementing mine closures, and social and environmental mitigation. There was one key problem: lack of transparency, especially regarding the social funds, still being investigated.

Open books are not the only issue. The actual accounting procedures are questionable: investments in the coal mine's development are not included in the balance sheet before profit/loss estimation, and actual social costs are not shown against profits, but reported separately or under-reported.

Like other large industrial enterprises inherited from the Soviet era, coal mines finance wages and pensions, but also day care, hospitals, schooling, apartments, stadiums, health centers, and so on. The companies try to shift these costs to local government, but not always successfully; the life of the whole town depends on the mines.

Into this bleak and challenging landscape step the four main trade unions in the coal-mining industry now: the Trade Union of Coal Industry Workers which is a member of the Federation of Trade Unions of Ukraine (which inherited the Soviet trade unions); the Independent Union of Miners of Ukraine, a member of the Confederation of Independent Trade Unions of Ukraine; the Independent Union of Miners of Donbas; and the Trade Union of Technical Staff and Employees of the Coal Industry. Once powerful enough to force the dismissal of the president and the Parliament in 1994, these unions can no longer protect workers' interests for several reasons.

The government learned its lessons, too, from the strike era of 1993 and 1996-1997 and is striking back itself. First, state-controlled prosecutors launched criminal cases against the strike leaders of 1996, pronounced some guilty and conditionally sentenced them to several years of jail. Second, the government has also resorted to intimidating workers' leaders before strikes, and some of their protest actions were stopped through police force and violence, leading to several miners' hospitalizations. And third, the state has used the well-tested principle of "divide and conquer." The government will give financial support to a trade union to prevent it from joining another's strikes. For example, the government transferred funds to the Trade Union of Coal Industry Workers for buying gifts for the coal miners killed, and the Ministry of Fuel and Energy issued an order calling for the transfer of part of the revenue from the sale of coal to the union to finance coal miners' vacations in sanatoria. As a result, the union is negotiating with the government about wage arrears and providing political support, in exchange for some benefits.

The Independent Union of Miners of Ukraine is the most active defender of coal miners' rights among the trade unions. Its leader, Mykhailo Volynets, constantly accuses government authorities and the managers of coal mines of neglecting safety standards in pursuit of profit. Although he does attract a certain amount of attention to the deplorable state of the coal industry, the ability of the union to actually affect change in the industry is rather dubious.

First, such union leaders have little opportunity to inform the public at large about the troubles in the coal industry because the major mass media, owned or controlled by state or business groups, are silent about these issues.

Second, the mines' managers are appointed by the Ministry of Fuel and Energy. Their mission is to exploit the mines, and they do not feel responsible to their employees, simply ignoring union requirements about safety conditions, payment of arrears, wage increases, and so on. It is very difficult for coal miners to find other jobs in the depressed Donbas region in case of layoffs and they are forced to work under these poor conditions.

The independent union was the first trade union that started linking political to economic demands, and Mr. Volynets has long defended coal-miners' rights. Currently, he is a member of the parliamentary faction of Ms. Tymoshenko, who is in strong opposition to President Leonid Kuchma and his government. Tymoshenko was the deputy prime minister responsible for the energy sector in the Yushchenko government for a year and had some success in cleaning up the energy industries but was unable to get at the coal industry, which she called the most corrupt sector. Ultimately, she faced prosecution herself, which she battled and now faced again in August as the government tries to suppress her political challenge.

Another union leader, Yurii Pivovarov, leader of the Solidarnost trade union, was accused of stealing money and found guilty. His lawyer said the charges are based on unlawfully obtained evidence, because his arrest came within days of his leading a demonstration of 10,000 people urging the resignation of the head of the Donetsk state administration.

In sum, the depressed economy, the misappropriation of funds, and the absence of public oversight - all issues which trade unions alone cannot battle - lead to poor safety conditions, which in turn lead to accidents and large numbers of deaths among miners. The situation in the coal industry reflects the economy as a whole, as other sectors are declining as well. Without deep political reform and an end to repression, it is extremely difficult for trade unions to protect the labor and human rights of the coal miners. State and mine managers do not feel any responsibility for the miners, and safety rules are neglected in pursuit of profits.

The newly created trade unions represent workers' interests in better fashion than the old Soviet unions, but they constantly struggle against various state agencies and employers, on the one hand, and against the Confederation of Trade Unions on the other. The confederation inherited all the property of the old Soviet unions, and they treat the new unions as competitors, although the Constitution of Ukraine does establish equal rights for all trade unions. The legislative framework needs to be improved, however, to enable them to more effectively protect workers' rights.

The subsidies to coal industry should be transparent and follow a schedule as well as be a subject to public control. Trade unions can play a role, and an end to government harassment of them and the political forces they rely on in Parliament is crucial. Credits from international financial organizations like World Bank can mitigate the social consequences of industry restructuring and closing coal mines. However, as Ukrainian experience has shown, a portion of them might be spent on other purposes or simply stolen. Therefore, their distribution must also be subject to government and public oversight.

Boris Dodonov is a research associate in the Institute for Economic Research and Policy Consulting Department of Structural Reforms in Kyiv.

| Home Page |