While the Kemerovo Central Court is hearing a criminal case over extortion of the controlling interest in Inskoy mine, Kemerovo mines have already accumulated new large wage arrears; this development has already resulted in strikes and there is a risk of a massive social crisis. RAPSI analyzes potential prospects of the precedent of the high-profile case and effects it will have on the mutual relations between the authorities and the industry. 

As wages had not be paid for two months, on November 11, 2019, 53 employees of the Oktyabrskaya mine refused to go to work. Sergey Tsivilev, the Kemerovo Region governor, did not support the strike noting that in such a situation it was required to work, not to stage boycotts.  

In 2016, Aman Tuleyev, his predecessor, acted differently: after a strike at Inskoy mine he ordered law enforcement agencies to deal with the situation and arrest the management. At the same time, the former head of the region could find means to expedite the payment via a charity replenished by local businesses.  

Although at that time there were many more strikers, whereas the amount of arrears was higher, now the situation looks to be much more dangerous. Among other factors, the estimates of energy grade coal prices dynamics are discouraging; although in 2016 the management acted on assumptions of gradual growth. Now it remains to be hoped that strikes will not begin at other industry’s enterprises. 

The decision of the present governor could be affected by the results of Tuleyev’s rescue effort: instead of getting decorations and merit citations the persons participating in it – two ex-governor deputies, the head of the regional Investigative Committee Directorate, a billionaire, as well as a number of civil servants and law enforcement officers – became defendants in the case over extortion of the controlling interest.

The court has not yet adjudicated in the case; however, being in detention and under house arrest for three years is already a preliminary punishment. Can this precedent set a vector in relationships between the coal industry and the regional authorities in the situation of falling demand for coal and growing social tensions at enterprises? 

The aftereffects of this lawsuit will definitely affect the decisions of the current Kuzbass authorities. 

Recently published records of telephone conversations may help to clarify the potential of this high-profile case. The materials contain discussions and remarks on coordination of actions aimed at the resolution of the crisis at Inskoy mine of the persons, who are now defendants and witnesses involved. 

The readout of the telephone calls published by mass media outlets confirms the course of events as described earlier. In particular, it follows from the publications that Tuleyev was informed about the situation on the day the strike broke out. Law enforcement officers, among them those from the Investigative Committee and the Prosecutor’s Office, employees of the region’s Department of Internal Policies, were sent to Inskoy mine. It was established that lawyer Anton Tsygankov, the principal stockholder, who owned 51% of the shares, was in Novokuznetsk, and it was planned to arrest him. 

The conversations also show that the administration controlled all the processes underway at that time; the head of the Coal Industry Department was sent to the mine in order to facilitate the process of coal mining so it could be sold as soon as possible. There are remarks on initiating a criminal case under Articles 145.1 of Russia’s Criminal Code (failure to pay wages, pensions, studentships, allowances and other types of payments) and Article 201 of the Code (abuse of power). The main thing is that it becomes clear that only personal participation of top officials (first of all, the governor) could permit to persuade businessman Alexander Shchukin to help in relaunching Inskoy operations and to pay wage arrears due to miners. 

Justification of aims and means 

Proceeding from the court materials, everybody knew about the distressful situation and enormous debts of Inskoy. The main problem was to maintain social stability first, and the attraction of large investments to at least settle the debts of the enterprise was of only a secondary aim. The administration believed the region needed the mine and acted accordingly. 

The authorities worked on solving purely social problems: to repay some wage arrears as soon as possible and to find ways to save jobs. However, it had been known since long across the region – Inskoy was a problem-ridden object. Due to an error on the part of the management the mining encountered a geological anomaly causing the production of coal to be stopped for 18 months. The enterprise accumulated debts; employees stored up grievances. 

It was attempted to solve the problem using administrative resources of the authorities and financial resources of businesses. The records reveal the nature of relationships between the private and state sectors under Tuleyev. Entrepreneurs contributed certain money to a charity, which some associated with the governor, in return for support on the part of the administration, or termination of pressure from regulating agencies (meaning stricter control when businesses failed to comply with the requests of the administration). 

In this situation the “socially responsible business” was represented by Alexander Shchukin, a billionaire on the Forbes list and a famous industrialist. It follows from the readout that Shchukin refused to contribute in the charity in July 2016, as in March 2016 he transferred to the foundation 100 million rubles (about $1.5 million at the present exchange rate) for social needs. However, he had to deliver 50 million rubles more in order to stop unscheduled inspections of Russia’s environment and nuclear supervision agency Rostekhnadzor, which had suspended operations of two of his mines.  

When it became necessary to increase the sum of the charitable donation aimed at the payment of wage arrears to workers of Inskoy and to send experts to the mine, Tuleyev turned to Shchukin, and Shchukin had immediately agreed to help as it was plainly and in detail illustrated by yet another readout of the conversations published by mass media outlets. Only in the summer of 2016, the businessman transferred 100 million rubles to the charity with the aim to pay wages.

Is Inskoy to be a lesson?  

Although there has been no sentence yet, the Inskoy precedent may well pose as a demotivating factor for the intervention of the authorities in order to settle crises at enterprises. Three years under house arrest or in detention is an ample counterargument to providing help to workers deprived of wages. And this concerns not only the coal industry or the Kemerovo Region. 

Dmitry Kravchenko, Chair of the Executive Committee of the Moscow office of the Association of Russian Lawyers, where the Working Group on Anti-Crisis Regulation of Socially Important Businesses was created, believes that current legislation does not present instruments suitable for prompt settlement of social problems to the authorities:   

“Russia’s regulation lacks an efficient mechanism to prompt intervention of the authorities in crises at private enterprises, even if the effect of such a crisis spills over the company. This problem is now being discussed both in the parliament, and we have created a special working group in the Moscow office of the Association of Russian Lawyers. In cases, where the authorities decide to intervene in the operations of enterprises, they act “as situations demand.” At that, in the process of decision making, the authorities had to take into account the unfolding law enforcement practices. And whereas active intervention results in criminal responsibility, this circumstance influences such decisions.”  

The sentence in the Inskoy case may have a political effect and present a very interesting precedent, taking into account the current economic and social situation. 

If it is recognized that the defendants have been motivated by the solution of social problems and not a wish to “transfer the assets to their retinue” under pressure, it will be a signal for administrations of the constituent entities of the Russian Federation to more actively participate in the affairs of private companies experiencing hard times, and not necessarily by power politics. 

There is a small chance that the public attention to the case will result in a broad discussion on the instruments suitable to be used to protect the interests of employees of private enterprises; it is well in keeping with the current social policy pursued in Russia. 

Otherwise, the authorities may stir clear of the conflicts between workers and owners of enterprises, and instead apply strong arm tactics directly against strikers.