A firm facilitating illicit coal exports from separatist-controlled eastern Ukraine has been supplying one of the largest electricity generation companies in Russia, OGK-2 PAO, a subsidiary of energy giant Gazprom.

Kompaniya Gaz-Alyans OOO, which was sanctioned by the U.S. in January 2018 for its role in the coal trade, supplied 17 percent of OGK-2’s total coal supply in 2017, according to the electricity company’s annual report for that year.

Coal accounts for 29.9 percent of the raw materials used by OGK-2 for its electricity generation, according to OGK-2’s website. The company is majority owned through a number of intermediary companies by Gazprom, which is subject to U.S. sectoral sanctions.

Squeezed by Western sanctions and Ukraine’s economic blockade, the self-declared republics of Donetsk and Luhansk have turned to coal exports from the region for revenue.  

Separatists are exporting nearly 1 million tons of coal a month to Russia, helping raise funds, Russian Deputy Economy Minister Sergei Nazarov said in September 2017, months after the Donetsk and Luhansk governments expropriated Ukrainian enterprises on their territory, including coal mines.

Following this separatist takeover of the enterprises, the U.S. Department of the Treasury imposed sanctions in January 2018 on seven individuals and companies for supporting the illicit coal trade from eastern Ukraine. The seized Ukrainian enterprises were put under the control of one of the sanctioned companies, ZAO Vneshtorgservis, located in the breakaway territory of South Ossetia in Georgia, the U.S. said at the time.

ZAO Vneshtorgservis worked with Kompaniya Gaz-Alyans OOO to export coal from eastern Ukraine to Europe, the U.S. said. Kompaniya Gaz-Alyans is controlled by Sergey Kurchenko, a businessman once-dubbed the gas king of Ukraine before he fled to Russia in 2014. Local media reported that Kurchenko visited Donetsk in December 2018.