On 18 April 2017, Ukraine's Prosecutor General Yuriy Lutsenko claimed that the law enforcement agencies "had dealt a decisive blow" to the "Amber mafia" but further effort was required to stop illegal amber mining in northwestern Ukraine.
Outlook and implications
Regulatory burden; Corruption; Protests and riots; Death and injury; Cargo/Ground
Sectors or assets
Lutsenko reported that in the past 12 months, the law enforcement agencies had held 183 raids linked to the illegal amber mining in Rivne region alone, and prosecuted 31 individuals, leading to 25 prison sentences.
"Amber Belt" in northwestern Ukraine
The illegal amber mining by small local gangs in northwestern Ukraine increased significantly within the last three years as a result of growing demand for semiprecious gemstones in China (see Ukraine: 28 March 2016: Illegal amber mining in northwestern Ukraine likely to increase organised crime and violent protests in one-year outlook). The amber prices have grown by 400% and now often reach USD10,000 per kg, depending on the size and quality of amber stones.
Ukraine's amber deposits are concentrated in the northwest, stretching through three regions: Zhytomyr, Rivne and Volyn, close to the Belarus-Ukraine border. About 380,000 hectares in this mostly rural and heavily forested region are estimated to have amber deposits. In this "Amber Belt", numerous small gangs, typically of 20-50 people, dig shafts and flood them with water from nearby rivers to extract the gemstones. This practice causes significant environmental damage, destroying the forests and polluting rivers, and in some instances damaging infrastructure, including railways and roads. Due to the ongoing weak economic conditions in Ukraine and very scarce employment opportunities in the rural areas of the "Amber Belt", an estimated thousands of local residents switched to illegal amber mining and trade. Ukrainian media reported wide use of child labour, including instances of employing children as young as seven.
Ukraine contributes up to 30-40% to the global amber output, mostly mined illegally and then sold at the black market. There are nine Ukrainian companies holding legal permits for amber exploration and mining, extracting four tonnes of amber annually. According to estimates in the Ukrainian media, illegal mining produces up to 300 tonnes per year worth up to USD300 million.
Although China is the primary market for the black market exports of the gemstone, illegally mined Ukrainian amber is also sold to the Middle East. Trafficking routes mostly go through three Ukrainian cities: Odessa (a major Black Sea port), Lviv and Kiev. Gemstones are also smuggled into the EU, mostly via the Ukraine-Poland border. According to data from Poland's finance ministry, the country's border service seized nearly 20 tonnes of amber, smuggled from Ukraine, in 2015 alone. Amber trafficking caused the formation of organised crime networks in northwestern Ukraine. While Ukrainian law enforcement agencies often seize gemstones aimed for illegal exports, trafficking amber is not a criminal offence in Ukraine: the perpetrators are punished by ineffective administrative fines.
As the illegal amber miners often claim that they are unable to receive official permits for gemstone extraction due to red tape and widespread corruption, the practice is a source of bribes at all levels in northwestern Ukraine. The mining gangs oppose law enforcement agencies attempts to seize their equipment or gemstones, they often initiate confrontations with the police and security services during the law enforcement raids. Rival gangs, whose members are often armed with small firearms and in some case have recent combat experience, also engage in confrontations over control over amber mining sites.
On 1 April 2017, near Bilska Volya, Volyn region, 200 illegal amber miners destroyed a wooden bridge used by the police to inspect a mining zone and forcibly blocked police from entering. On 17 March near Olevsk, Zhytomyr region, about 100 men blocked the Kiev-Warsaw highway for several hours demanding that the police not interfere with amber mining. On 15 January 2017 also in Olevsk, a group of men armed with machine guns and grenades attacked another group at a coffee shop, killing two and seriously wounding a dozen others. After the 15 January incident, the National Guard of Ukraine had to be deployed in Olevsk to provide security.
Similar armed confrontations are frequent and widespread across the "Amber Belt" in northwestern Ukraine. In March 2016, near Klesiv, Rivne region, local police clashed with illegal miners during the raid to seize the miners' equipment. Almost a thousand people wearing camouflage and balaclavas and armed with guns and stones blocked the road preventing police to reach the illegal mines; ten policemen were wounded in the incident . In 2016 the National Guard has been deployed in the three affected regions on a number of occasions.
Despite an increase in illegal amber mining, the Ukrainian government has failed to adopt a law regulating amber mining. The latest attempt to introduce legislation on amber extraction and establishment of an official market failed on 7 February 2017 as only 221 MPs in the parliament voted in favour, below the necessary threshold of 226 votes. The law intended to simplify a procedure for obtaining special permits for subsoil use. The miners were supposed to pay government annuity, fees for land rehabilitation and a 20% tax on the value of the sold amber. The amber amendment also suggested increasing criminal liability for illegal extraction and environmental damage. Credible Ukrainian media claimed that the "Amber mafia" used its influence and bribes to derail the passing of the legislation.
On 6 April 2017 the memorandum agreed between Ukraine and the International Monetary Fund (IMF) included provisions on introducing regulating amber mining. Ukraine is now obliged to introduce such a law before mid-2018. The IMF said that legalisation of amber mining would provide an additional revenue stream to the government and would decrease the share of the "grey economy".
Outlook and implications
As corruption at all levels remains a significant factor in illegal amber mining, it is unlikely that any significant legislation changes will be implemented in the one-year outlook. As a result, illegal amber extraction in northwestern Ukraine is likely to continue on a significant scale.
The practice is likely to cause a number of armed confrontations between the mining gangs and the law enforcement agencies. Illegal amber miners are also likely to encroach on sites of the authorised mining firms. The law enforcement agencies' attempts to raid illegal production sites and to seize equipment and mined gemstones will likely lead to violent protests in the "Amber Belt" in the one-year outlook.
During such protests there will be elevated risks of death and injury as the demonstrators are likely to be armed with small firearms. The protesters are also likely to block key roads and railway lines causing ground cargo disruption for periods of up to 12 hours. Major motorways linking Kiev with western Ukraine and with the Ukraine-Poland border are likely to be affected. This will disrupt key cargo routes used by hauliers for international trade between the EU and Ukraine.