Crimea annexation comes with host of problems for Russia

Simferopol referendum Ukraine Russia

Russia will bear the brunt of recently annexed Crimea’s long-term economic, financial and political problems.

President Putin made a triumphant visit to Crimea on the 9th May, as the region held its first Victory Day commemorations since being annexed by Russia. Mr. Putin extolled Crimea’s “return to the motherland” before tens of thousands of people. However, there are a number of outstanding issues in the region.

Crimea was bound to have a number of immediate problems, especially related to infrastructure. The region is dependent on Kiev for 80 percent of its electricity and nearly two-thirds of gas supplies. Access to water is a major problem as Crimea relies on the Ukrainian mainland for 80 percent of its water supply. The amount of water flowing through the North Crimea Channel into the peninsula less than 60 percent of what it was before the Russian occupation.

Much of Crimea is farmland and this lack of water is likely to have a drastic effect on this year’s harvest. Kiev claims that Crimea has accrued nearly $200,000 in debt for its “unauthorised water intake.” Similarly, the energy debt has reached $74.1 million with the local Crimean branch of the Ukrainian DTEK company declaring that it could switch off the energy supply.

Crime has also been plagued by currency issues, with the transition from the Ukrainian hryvnia to the Russian rouble. The economy faces significant inflation, with some analysts recently estimating a 50 percent rise in the price of food and essential commodities over a period of two weeks.

Salaries and pensions remained unchanged. Banks are also running out of money. This has been exacerbated with the National Bank of Ukraine declaring on the 6th May that it is illegal for any Ukrainian banks to continue operating in Crimea.

The Guardian recently reported that even though there are a number of difficulties in Crimea, “many residents are still prepared to give Russia the benefit of the doubt.”

To make matters worse, a major Ukrainian news site found that the website of the President of Russia’s Council on Civil Society and Human Rights had posted a report (which was quickly taken down) showing that the real turnout of Crimean voters in the referendum was only 30 percent. If only 15 percent of Crimean citizens actually voted for annexation, the “many residents” referred to by the Guardian are likely fewer than the majority.

Long term, Crimea could place a significant financial burden on Moscow due to the 560,000 pensioners and 200,000 government employees that make up the population. In addition, the region is likely to see issues with the Tatar community that makes up 12 percent of the Crimean population, which had a strong position on the preservation of Ukraine’s territorial integrity.

Signs of upcoming, ethnic tensions can already be seen with the prevention of the Tatar political leader, Mustafa Abdülcemil Kırımoğlu, from entering the Crimean Peninsula by pro-Russian forces on the 2nd and 3rd of May. There are even reports of security service monitory and threats to confiscate land from Crimean Tartars – these allegations need to be investigated thoroughly.

Worryingly, Putin’s appointed Crimean leader Sergei Aksenov (nickname: ‘the Goblin’) has created a ‘Commission for the Struggle against Terrorism’. The fight against terrorism is often used as an excuse to crush social unrest in the increasingly authoritarian Eurasia.

President Putin has declared that he wants to create a gambling zone in Crimea to alleviate the financial reliance of Crimea on Russia. The success of this project, at least in the near future, seems unlikely. It is not surprising that Mr. Putin’s statements were met with silence from gaming developers.

Crimea has a long way to go before it disappears from Russia’s list of problems, let alone becomes the chosen destination for Russian high rollers.

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Categories: Europe, Security

Author:Tiia Lehto

Tiia Lehto is currently a master’s candidate in MSc International Political Economy at the London School of Economics (LSE). She received her BSc in Economics, Politics and International Studies (with a major in Economics) from the University of Warwick in 2013. She has lived in seven countries within Europe and Asia, and has completed internships within a number of industries and functions varying from Finance to Sales and Marketing. During her time at LSE, in addition to her core course she is taking ‘Politics of Money in the World Economy’ to deepen her knowledge of the intersection between financial markets and politics, and is gaining regional expertise from the course ‘Russia and Eurasia: Foreign and Security Policies’. In addition, she is the president of the LSE SU Political Risk & Investment Society, and enjoys travelling and sports.

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