Crimea - withering on the vine or Russia’s blossoming new stronghold?

By bne IntelliNews March 18, 2015

Anna Kravchenko in Moscow and Nick Allen in Berlin -


A year on from its whirlwind absorption by Russia, Crimea’s change of flag was on March 18 celebrated with a ‘rebranding’ and a splash of festivities across the world’s largest country.

“I’d like to congratulate people in Crimea and all Russian citizens once again on this occasion and to say thank you to those who live in Crimea, in Sevastopol, for the courage they showed a year ago,” President Vladimir Putin said during a Kremlin meeting with Crimean officials.

While most of the international community condemns Crimea’s effective annexation by Russia after a hasty local referendum last March, Moscow regards the matter as done and dusted, a long-overdue restoration of historical justice.

The pen Putin used to ink the document that returned the peninsular to Russian control is now in a Moscow museum. And amid speeches and Russian flag-waving parades, March 18 saw the launch of a new Crimea logo that will adorn local signs and wine labels. Designed by a top Russian art studio, authorities wanted the logo to “symbolize an original tourist product of high quality".

But although the peninsular can still count on its fine wine, sunny weather and hefty injections of money from Moscow for its military facilities, plans to turn Crimea into what its Moscow-appointed prime minister, Sergei Aksyonov, calls the “best region in Russia” are spiralling over budget.

Think of a number

Riding a wave of jubilation at its bloodless land grab, Russia last May approved a RUB680bn (around $20bn) Crimean development programme that will run to 2020. Although Economic Development Minister Alexei Ulyukaev said Crimea would be spared government budget cuts as Western sanctions began to bite, it wasn’t to be. And amid reported claims of mass illegal property theft by the new authorities, the general number crunching became increasingly nebulous in recent months.

The main infrastructure project launched since March 2014 was the bridge across the 5-kilometre Kerch Strait from mainland Russia. In the past year, the cost of the project more than quadrupled from RUB50bn to RUB228.3bn, making it Russia’s most expensive bridge when – if – it is completed in 2019.

On March 16, Russian Minister of Crimean Affairs Oleg Savelyev also warned of delays in building new infrastructure targeted for 2020 due to budget limitations. “We will commission the major highways a bit later than was planned," Savelyev told RBC news agency.

But if better roads can wait, the need for power can’t after Ukraine cut electricity  supplies. Parallel to the bridge project, installation of a power line across the Kerch Strait will now start this year rather than 2017, it was announced.

Regardless of the difficulties, many Western companies are ready to invest in Crimea, Savelyev claimed. “The entire world is interested in Crimea. But many, including Europeans, cannot enter [the market] due to the existing sanctions. Nevertheless, many businessmen and companies from various countries come to the peninsula – from Turkey, Israel, the Netherlands, Finland and Italy.”

Prior to the one-year anniversary of the referendum, PM Aksyonov said Crimea had signed the first $30mn contracts with investors in the energy sector. There were also 200 pending investment requests, he added.


Crimea’s story has some parallels, especially seen in the context of the ongoing armed conflict in eastern Ukraine.  Russia has previously used breakaway regions to strengthen its positions in the former Soviet space. In 2008, it recognized the self-proclaimed republics of South Ossetia and Abkhazia. But after the fanfare, pledged funds failed to materialize or were “diverted”.

The signs are that Crimea’s new authorities are as partial to the windfalls of office as are Moscow’s proxies in South Ossetia, or those running the 2014 Olympic Games in Sochi, which are said to have seen huge amounts of funding go astray. It’s not idle ‘Russia bashing’ either. The rampant nature of corruption in Russia has been a stock feature of Putin’s state of the nation address since he came to power in late 1999 – at least until last year, when it was not mentioned by name.

In February, Aksyonov pledged an end to the wave of "nationalizations" of valuable assets in recent months, from mobile operators to banks, shipyards and energy concerns. By the end of 2014, some 4,000 enterprises, organizations and agencies had been affected, according to Ukraine's Justice Ministry. "The new authorities are taking property and giving it to businessmen who are close to them," Sergei Mitrokhin, leader of Russia's liberal Yabloko Party, told The Moscow Times.

Prices are also marching upwards. But whatever the disappointments for the population at present, Crimea’s strategic importance will always up the ante – and the cash flow – to maintain it. So intent was Russia not to back down last year, that “we were ready” to put Russia’s nuclear forces on alert during the Crimean operation, Putin said in the documentary “Crimea: The Way Home”, aired on state television on March 15.

Meanwhile, supporters of the annexation turned out at around 140 celebratory events across in Russia, according to the interior ministry. In the Siberian city of Omsk, a TASS photo showed one participant in a parade bearing a sign saying "Je suis Crimea". "For Crimea it is a long-anticipated holiday of homecoming," Aksyonov said in a message of greetings to compatriots. "Russia has defended our legitimate right to self-determination, to unity with our historic Motherland."

The gift that stopped giving

Crimea was a part of Russia from 1784 until 1954, when Soviet leader Nikita Khrushchev transferred it to the USSR republic of Ukraine as a gift. After the 1991 Soviet collapse, Crimea remained part of independent Ukraine until the disputed referendum held in Crimea on March 16, 2014. While Moscow cites the wish of more than 90% of those who voted to rejoin Russia as justification for its actions, critics note than many thousands boycotted the rush vote. “90% is a complete and utter lie. Most of our friends didn’t participate in that ‘referendum’,” says Irina, 52, an entrepreneur from Crimea’s southern coast.

And despite Putin’s insistence that Crimea is Russia’s "historical territory”, the international community will not let it lie. Speaking after March 16 talks in Berlin with Ukrainian President Petro Poroshenko, German Chancellor Angela Merkel said the annexation of the peninsula was a violation of international law that "called the peaceful order in Europe into question". It was essential to “not rest until the full sovereignty and territorial integrity of Ukraine is restored, and of course this includes Crimea," she said.

Punch those nostalgia buttons

Among the new education and cultural projects, there was solid funding for Artek, a famous Soviet-era summer camp on the peninsula. Such projects play the nostalgia card very successfully, as generations of Russians holidayed in Crimea every summer and know every pebble there. “[Crimea] is for people who like hiking, wild beaches, meditation in the forest – so for those who don’t ask for much service-wise,” says Natalia Latkina, 30, a journalist from Moscow.

But whether yesteryear memories and the breezy new logo will work their magic, the next few seasons will show. For many, holidays across the Black Sea in Bulgaria or Turkey are more enticing in terms of service and price. “I would go if Crimean holidays cost significantly less than holidays abroad,” says Dmitry Vasilyev, 37, an IT manager in Moscow.

“There is definitely a drop [in trade], prices grew several times while pensions were raised only one and a half to two times… Only people from Crimea and some Russians come [as tourists] from time to time. Last year’s high season failed,” says Stanislav, 54, a pensioner from the resort of Yalta.

Others disagree. “Wages in the public sector grew at least twice, pensions grew as well. There is improvement in healthcare,” Sergei Meshkovoi, 36, told in Simferopol. He also praised anti-corruption measures, especially in law enforcement. “When we were in Ukraine, it [corruption] just was ignored,” Meshkovoi said.

There is no disputing that a significant part of the Crimean population (the Kremlin claims the vast majority), is happy to be part of Russia, especially in such traditional Russian bastions as the naval port of Sevastopol. But many Crimeans have had to take a rigid stand against what they cannot agree with.

“I am half Ukrainian, half Russian, and now I feel more Ukrainian than ever,” says Andrei, a 42-year-old international company sales manager also from Yalta but now living in Kyiv. “There is no legal, human or common sense reason for one country to annex a huge territory of another, and then even start war in another territory of the latter country, bringing heavy weapons and armed regular army forces to kill ‘good former neighbours’.”

Come fly with me

With its Black Sea trade routes and proximity to markets, Crimea has clear economic potential. But its physical distance from the Russian ‘mainland’ and political isolation currently offset many of those advantages.

Until the bridge is built, there are no road or rail links to mainland Russia and Crimea that does not pass through Ukraine, so an extremely overburdened ferry from Krasnodar to the peninsular is the most popular mode of transportation. "Up to 2,000 cars queue for the Kerch ferry, with a two-day wait, and that's in good seafaring weather," says one 53-year-old resident of the peninsular who did not want to be identified.

Expanded air connections to Crimea took off last June, only to nosedive six weeks later.  In 2014, Russian airlines said they would introduce cheap flights to Crimea from 30 Russian cities, tripling the number of flights over 2013.

In a government-pushed bid to woo holidaymakers and business travellers, Aeroflot promised a cut-price link from Moscow to the Crimean capital Simferopol from June through its budget subsidiary Dobrolet (“Goodflight”). But the airline was grounded by EU sanctions in August. Aeroflot’s new low cost airline Pobeda then said in February that it wouldn’t fly to Crimea.

For some Crimeans now living across the new border in Ukraine, home now seems a world away. “I now have to seriously think twice to decide upon travelling to Crimea to see my homeland and the graves of my parents,” says the sales manager Andrei. “There are occasional cases of Ukrainian citizens being arrested or taken into custody in Crimea for no obvious reasons. I feel as though a piece of my heart was torn away.”

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