Russia pledges £650m a year for region while businesses could invest £3bn more – but burden on Moscow may be far higher
Families strolled in the spring sunshine along Yalta's seafront day, but the serene scene belied the geopolitical shifts going on around them. Last week they lived in Ukraine, this week they live in a self-declared independent region, and next week there is a large chance they will be living in Russia, even if much of the world will not recognise the change, brought about by several weeks of Russian military occupation and a referendum on Sunday.
The signs of change on Monday were subtle. At an upmarket restaurant, the waiters found in the morning that their credit card terminals no longer worked. "The bank in Kiev has blocked everything since this morning," said one. "We can take euros or dollars. No roubles, though I guess soon that's what we will be using."
In Simferopol, visiting Russian MP Leonid Slutsky painted the political change as a victory for ordinary Crimeans. "People are happy ... they are protected, they will return to the country where they wanted to be for at least the last two generations," he told Ekho Moskvy radio.
Crimea is used to changes in the geopolitical wind, most recently in 1954 when Nikita Khrushchev handed it over to the Ukrainian republic within the Soviet Union. Near Yalta is the Livadia Palace, the summer retreat of the last tsar, Nicholas II, and the place where Franklin D Roosevelt, Winston Churchill and Joseph Stalin redrew the boundaries of Europe as the second world war came to a close.
Just six months ago, the palace hosted an annual conference of global politicians, hosted by a Ukrainian oligarch Viktor Pinchuk, opened by then-president Viktor Yanukovych and attended by Tony Blair and Bill Clinton among others. By the time gathering comes round this year, the palace and the rest of Crimea will almost certainly be part of Russia.
President Vladimir Putin is expected to announce officially on Tuesday that Russia will absorb Crimea, paving the way for a redrawing of Europe's borders, and thoughts are turning to economics. Crimea is a psychological prize for the Kremlin, but is it much of an economic one?
Some economists have warned that propping up Crimea could be a financial burden at a time when Russia's economy is struggling, with increased capital flight, a tumbling rouble and the threat of economic sanctions.
Crimea's deputy prime minister said that the region has set up a new central bank, which will later join Russia's central bank, and has been promised £20m in the coming days from Russia to help stabilise the situation.
In social benefits alone, Russia will have to foot a huge bill, with increased pensions and a massive amount of red tape to adjust the region to life within Russia. "There will be changes in tax laws, the issue of forming a customs service, an internal revenue service, and the registration of legal entities and individuals, inventories and rules to adapt to the Russian tax system," deputy finance minister Sergei Shatalov said.
Russian officials have said Russia will spend £650m a year on Crimea, while £3bn could be invested by Russian businesses. The real figure could be much higher, and a warning sign comes from the region of South Ossetia, where Russia spent huge sums after recognising it as independent in the aftermath of the 2008 war with Georgia, with little visible effect on the ground because of corruption.
There is also the headache of what to do with the remaining Ukrainian military bases on the peninsula. So far there has been no fighting, and many Ukrainian troops have deserted or defected, but there are still some holding strong, and although a ceasefire has been agreed until Friday, Crimean authorities have said all such bases on the territory are now illegal.
Crimea is dependent on Ukraine for 85% of electricity needs and 90% of water, and many small businesses rely on it for trade or supplies. In Belogorsk, locals said 100 people had been told they would lose their jobs at a construction materials factory, as the stone needed for production came from Ukraine.
Russia has promised huge investment to cover such losses. Yalta, like much of Crimea, depends heavily on tourism for revenue, and there are fears the Russian military presence, not to mention visa requirements for Europeans when Crimea joins Russia, could scare away tourists.
Sergei Aksyonov, Crimea's de facto prime minister, said over the weekend that there was nothing to worry about: Russia has already sent representatives of more than 180 regions and major state enterprises, who have promised to "send their tourists to us", ensuring the tourist season will go ahead as usual this year.
One of the first people to call Aksyonov on Sunday to congratulate him on the vote, was Chechnya's ruthless leader Ramzan Kadyrov, before the poll was even over. day, the Chechen businessman Ruslan Baisarov followed up on Kadyrov's offer of support, claiming he would build a £200m resort complex in Crimea including a luxury hotel, a yacht marina and a golf course.
The Kremlin's business ombudsman, Boris Titov, said on Monday that Crimea could be the ideal place to work "economic miracles" impossible in the rest of Russia, where businesses could take risks and an economic strategy could be "aimed at development, not at stability".
Crimea has a special place in the Russian historical memory, and Soviet Crimea during the 1960s and 1970s was relatively prosperous, functioning as a sort of idealised shop-window for what the Soviet Union could be. Far from the industrialisation and gulags of the icy Siberian tundra, Crimea was a sun-drenched land of wine production and resort life.
"We were used to good infrastructure, people who travelled a lot, and a relatively free intellectual life," said Sergei Kiselev, a pro-Russian professor at Taurida University in Simferopol. "That was why when it all collapsed, and we had the pain of perestroika, the bandit capitalism of the 1990s, and then the mess of the Ukrainian state, it was so painful."
It also explains why so many people, especially among the older generation, are nostalgic for the Soviet years, and see annexation by Russia as a small step back to an imagined life of plenty. In recent days there has been an outpouring of nationalist bravado about Russia as a great power and a financial saviour for the region, but there have also been more sober evaluations of what Russia may offer. For a large part, Russia feels attractive to many because of the depressed economic situation and wanton corruption of successive Ukrainian governments, including Russia's favourite, Yanukovych.
"The problem with these Ukrainians is that they don't know how to steal properly. They want the whole 100% for themselves and leave nothing for us," said 62-year-old Vasily, a Simferopol resident. "Putin is corrupt of course, but he steals in a cultured way. He says: 'I will take 50%, and give 50% to the people. We will get something at least.'" Reported by guardian.co.uk 7 hours ago.
Families strolled in the spring sunshine along Yalta's seafront day, but the serene scene belied the geopolitical shifts going on around them. Last week they lived in Ukraine, this week they live in a self-declared independent region, and next week there is a large chance they will be living in Russia, even if much of the world will not recognise the change, brought about by several weeks of Russian military occupation and a referendum on Sunday.
The signs of change on Monday were subtle. At an upmarket restaurant, the waiters found in the morning that their credit card terminals no longer worked. "The bank in Kiev has blocked everything since this morning," said one. "We can take euros or dollars. No roubles, though I guess soon that's what we will be using."
In Simferopol, visiting Russian MP Leonid Slutsky painted the political change as a victory for ordinary Crimeans. "People are happy ... they are protected, they will return to the country where they wanted to be for at least the last two generations," he told Ekho Moskvy radio.
Crimea is used to changes in the geopolitical wind, most recently in 1954 when Nikita Khrushchev handed it over to the Ukrainian republic within the Soviet Union. Near Yalta is the Livadia Palace, the summer retreat of the last tsar, Nicholas II, and the place where Franklin D Roosevelt, Winston Churchill and Joseph Stalin redrew the boundaries of Europe as the second world war came to a close.
Just six months ago, the palace hosted an annual conference of global politicians, hosted by a Ukrainian oligarch Viktor Pinchuk, opened by then-president Viktor Yanukovych and attended by Tony Blair and Bill Clinton among others. By the time gathering comes round this year, the palace and the rest of Crimea will almost certainly be part of Russia.
President Vladimir Putin is expected to announce officially on Tuesday that Russia will absorb Crimea, paving the way for a redrawing of Europe's borders, and thoughts are turning to economics. Crimea is a psychological prize for the Kremlin, but is it much of an economic one?
Some economists have warned that propping up Crimea could be a financial burden at a time when Russia's economy is struggling, with increased capital flight, a tumbling rouble and the threat of economic sanctions.
Crimea's deputy prime minister said that the region has set up a new central bank, which will later join Russia's central bank, and has been promised £20m in the coming days from Russia to help stabilise the situation.
In social benefits alone, Russia will have to foot a huge bill, with increased pensions and a massive amount of red tape to adjust the region to life within Russia. "There will be changes in tax laws, the issue of forming a customs service, an internal revenue service, and the registration of legal entities and individuals, inventories and rules to adapt to the Russian tax system," deputy finance minister Sergei Shatalov said.
Russian officials have said Russia will spend £650m a year on Crimea, while £3bn could be invested by Russian businesses. The real figure could be much higher, and a warning sign comes from the region of South Ossetia, where Russia spent huge sums after recognising it as independent in the aftermath of the 2008 war with Georgia, with little visible effect on the ground because of corruption.
There is also the headache of what to do with the remaining Ukrainian military bases on the peninsula. So far there has been no fighting, and many Ukrainian troops have deserted or defected, but there are still some holding strong, and although a ceasefire has been agreed until Friday, Crimean authorities have said all such bases on the territory are now illegal.
Crimea is dependent on Ukraine for 85% of electricity needs and 90% of water, and many small businesses rely on it for trade or supplies. In Belogorsk, locals said 100 people had been told they would lose their jobs at a construction materials factory, as the stone needed for production came from Ukraine.
Russia has promised huge investment to cover such losses. Yalta, like much of Crimea, depends heavily on tourism for revenue, and there are fears the Russian military presence, not to mention visa requirements for Europeans when Crimea joins Russia, could scare away tourists.
Sergei Aksyonov, Crimea's de facto prime minister, said over the weekend that there was nothing to worry about: Russia has already sent representatives of more than 180 regions and major state enterprises, who have promised to "send their tourists to us", ensuring the tourist season will go ahead as usual this year.
One of the first people to call Aksyonov on Sunday to congratulate him on the vote, was Chechnya's ruthless leader Ramzan Kadyrov, before the poll was even over. day, the Chechen businessman Ruslan Baisarov followed up on Kadyrov's offer of support, claiming he would build a £200m resort complex in Crimea including a luxury hotel, a yacht marina and a golf course.
The Kremlin's business ombudsman, Boris Titov, said on Monday that Crimea could be the ideal place to work "economic miracles" impossible in the rest of Russia, where businesses could take risks and an economic strategy could be "aimed at development, not at stability".
Crimea has a special place in the Russian historical memory, and Soviet Crimea during the 1960s and 1970s was relatively prosperous, functioning as a sort of idealised shop-window for what the Soviet Union could be. Far from the industrialisation and gulags of the icy Siberian tundra, Crimea was a sun-drenched land of wine production and resort life.
"We were used to good infrastructure, people who travelled a lot, and a relatively free intellectual life," said Sergei Kiselev, a pro-Russian professor at Taurida University in Simferopol. "That was why when it all collapsed, and we had the pain of perestroika, the bandit capitalism of the 1990s, and then the mess of the Ukrainian state, it was so painful."
It also explains why so many people, especially among the older generation, are nostalgic for the Soviet years, and see annexation by Russia as a small step back to an imagined life of plenty. In recent days there has been an outpouring of nationalist bravado about Russia as a great power and a financial saviour for the region, but there have also been more sober evaluations of what Russia may offer. For a large part, Russia feels attractive to many because of the depressed economic situation and wanton corruption of successive Ukrainian governments, including Russia's favourite, Yanukovych.
"The problem with these Ukrainians is that they don't know how to steal properly. They want the whole 100% for themselves and leave nothing for us," said 62-year-old Vasily, a Simferopol resident. "Putin is corrupt of course, but he steals in a cultured way. He says: 'I will take 50%, and give 50% to the people. We will get something at least.'" Reported by guardian.co.uk 7 hours ago.