Vladimir Ilyushenkov and 15 other men were working a half-mile beneath this decaying mining town one day last month, blasting away rock in a thick seam of the Gaegova coal mine, when they heard the low roar of exploding gas. There was no time to flee.

In the next instant, 600 tons of coal, powered by a gusher of methane gas, swept over the miners, carrying them down the black corridor like they were twigs in a raging river. Seven men perished, suffocated by gas fumes and coal.

Ilyushenkov escaped with methane poisoning, a spinal injury and memories of terror. "We were suffocating, we couldn't move our arms or legs," he said in an interview in a doctor's office in a rundown Donetsk clinic.

Only one thing scares him more, he said. It is that doctors would judge him unfit to go back into the earth, to his $154-a-month job as a shift boss in Ukraine's perilous and rapidly shriveling coal-mining industry. "The money means everything to us," he said, nervously rubbing the calluses on his palms. "I can't go down in my salary. I have to provide for my family."

Ilyushenkov's desperation mirrors that of Ukraine's coal industry as a whole. Once the pride of Soviet industrial planners, the mines are now economic deadweight, an outmoded, state-controlled burden that many economists say Ukraine must shed if it is ever to remake itself as a capitalist economy.

The industry is sinking under more than $2 billion of debt, more than it could pay off with an entire year's worth of coal production. The government pays about $500 million a year in subsidies to keep the mines working, according to the World Bank. The Fuel Ministry says that only seven of 176 mines operate without subsidies.

Those subsidies present the government with unpleasant choices. If it ends them, mass unemployment would likely result in southeastern Ukraine, which is already rocked by labor unrest. If it continues to pay them, the mines would just barely stay alive, blunting the urgency for restructuring, and scaring off investors who might buy and modernize some of the mines were it not for competition from other mines subsidized by the state. More than 10 years after Ukraine began privatizing its industries, only two coal mines are in private hands, according to the minister of fuel and energy, Vitaly Hayduk.

Many economists here say the mines illustrate a disturbing trend for this Texas-sized nation of 49 million people. After a burst of economic restructuring in 2000 and early 2001, the government appears to have put on the brakes. Overhauls of the tax and civil codes are on hold. The government appears to be substituting secrecy for openness. In the past three months, it has adopted 22 secret laws, according to the Center for Policy Studies, a nonprofit research group in Kiev, the capital.

President Leonid Kuchma, political analysts here say, is intent on preserving the status quo while he battles allegations that he ordered the kidnapping of a journalist, approved an illegal sale of a weapon system to Iraq and employed a squadron of state agents to intimidate his political opponents.

The scandals and wavering economic policies are taking their toll on growth, said Tetiana Sytnyk , chief economist for the Center for Policy Studies . She predicted that Ukraine's expansion rate last year of 9 percent will be cut in half this year.

The government's will to streamline the hugely inefficient coal industry has visibly slackened. Over the past six years, Ukraine used a $300 million World Bank loan to help shutter 90 mines, roughly a third of the industry, sometimes enraging local communities. It was part of a strategy to close down noncompetitive industries and turn resources toward businesses in which Ukraine has an edge.

But with the government's appetite for more closures waning, the World Bank has canceled a plan to lend Ukraine another $100 million to shut down 40 or 50 mines by 2005. The government now says it plans to close only 30 mines over the next nine years.

Aides to Kuchma say that with 450,000 people still employed in mining, the government must support the mines as long as possible. But some economists see a darker motive: Although the state continues to own nearly all the mines, it has ceded day-to-day control of many of them to politically connected business leaders who have helped keep Kuchma in power.

In a process that picked up speed before this spring's parliamentary elections, industry experts said, the state allowed these investors to provide new equipment to many mines that were on the brink of closure. When the mines defaulted on payments, courts declared the mines bankrupt. The businessmen, as creditors, then became the de facto owners -- and heirs to a supply of cheap, state-subsidized coal for the steel mills and metallurgical factories they own.

As the mines' owner, at least on paper, the state continues to pour money into operations it no longer runs -- and the taxpayer swallows the cost. "The state has no ability to impose losses on these powerful business groups that have control of the coal mines," said Sytnyk, the policy center economist.

Ukraine's coal mines are deadly and in financial trouble for the same reasons that mines in England, Belgium and France were closed years ago: The exploitable coal seams are too far underground to mine profitably or safely.

Some seams are as deep as 4,500 feet, where methane is more plentiful and under far higher pressure. Unless it is detected and safely vented, the gas can shoot out in a poisonous cloud or explode in a fireball.

No one knows that better than the miners in the Donbass, the southeastern region that produces 60 percent of the country's coal. Since July, a mining accident has occurred here an average of every five days.

During the communist era , this region produced most of the Soviet Union's coal, and reaped the high wages and prestige that came with it. Statues of miners were erected in squares; villages were named after famous engineers.

The tide began to turn in the last 20 years of Soviet rule, when the flow of funds from Moscow dried up. After communism's fall, the mines were exposed as the money-losers they are, at the same time that economic pressures devastated their customers. In a decade, the demand for Ukrainian coal dropped 45 percent.

Now Donbass is clinging to the two-thirds of its industry that remains. Viktor Yanukovich, the regional governor, said in an interview last month that another 30 of the region's 89 mines would eventually have to close. But he said he needed at least five years to accomplish that and needed an average of $18 million per mine to provide the miners benefits, retrain them and safely close the pits. "I am not against closing down the mines," he said. "But not as it was done before."

Talk of closure is anathema to Anatoli Goncharov, the director of Gaegova mine, which is located in a bleak village outside Donetsk. His mine produces 360,000 tons of coal per year, less than half what it did in the mid-1980s. Because of the steep angle of the seam, half of coal must be extracted by hand, with hammers.

It costs the mine nearly $30 to produce a ton of coal -- $11.50 more than the coal is selling for. Even with $2.7 million in state subsidies last year, the mine failed to break even. The Ministry of Fuel and Energy has put it on a list of pits that cannot be saved, the mine director acknowledged.

But Goncharov, 51, is campaigning to keep it open, saying its deposits are big enough to keep 2,500 people working for another 15 years -- with state support.

With 7,500 miners, the Zasyadko mine in the center of Donetsk is three times as big and vastly more efficient. Valentin Ilushenko, the director's assistant, said the mine made $18 million a year in profit, one of the handful that survive without state funds.

Union representatives say the mine is forced to produce twice as much coal as its rated capacity, and air shafts are insufficient. Ilushenko disputed charges that safety rules are not followed. The real problem, he said, is the mine's great depth and the fact that no one can predict how methane gas will behave 4,450 feet underground.

He does not need to point out that Ukraine's miners accept the risk. Outside the personnel department, a sign is posted.

"No openings," it says.

Miners take a smoke break outside one of eastern Ukraine's notoriously dangerous coal mines. Since 1991, 3,724 Ukrainians have died in mine accidents, according to statistics.