The is­land of bu­reau­crats and sol­diers

How Rus­sia is turn­ing Crimea into a mil­i­tary base by chang­ing its econ­omy and so­ci­ety

The Ukrainian Week - - CONTENTS - Maksym Vikhrov

How Rus­sia is turn­ing Crimea into a mil­i­tary base by chang­ing its econ­omy and so­ci­ety

The oc­cu­piers widely ad­ver­tised the Kerch Bridge they opened in May 2018 as a sym­bol of po­lit­i­cal, ad­min­is­tra­tive and eco­nomic “uni­fi­ca­tion” with Rus­sia. The prob­lem is that the penin­sula’s econ­omy will not be res­cued by such pro­jects — its big­gest trou­bles are caused pri­mar­ily by Moscow’s pol­icy, not in­fra­struc­ture is­sues or in­ter­na­tional sanc­tions. The de­vel­op­ments in Crimea af­ter 2014 show that the oc­cu­piers are re­turn­ing it into the 18-19th cen­turies when it was noth­ing more than a south­ern mil­i­tary out­post of the em­pire.

This is bad news for the Crimeans — any­thing that does not serve Rus­sia’s mil­i­tary or ad­min­is­tra­tive needs will in­evitably stag­nate and grad­u­ally de­cline. Noth­ing short of ex­ter­nal in­ter­fer­ence will be able to change this.

THE GREAT DE­PRES­SION

The oc­cu­pa­tional au­thor­i­ties are not try­ing to con­ceal Crimea’s eco­nomic de­pen­dence. Ac­cord­ing to their data, Crimea’s2017-2018 bud­get has a deficit of RUB 2bn [cur­rent ex­change rate is RUB 67.18 per US dol­lar] with the rev­enues amount­ing to RUB 172.2bnand­spend­ing­toRUB 174.7bn. The ac­tual short age may be far higher: Vi­taliy Nakhlupin, the “first vice-premier” of Crimea, has said that the deficit of the 20172018 bud­get ex­ceeds RUB 20bn. The ma­jor source of this is the eco­nomic iso­la­tion re­sult­ing from the sanc­tions, shunned by in­vestors. Just two weeks ago, Amer­i­can Best Western Ho­tels & Re­sorts closed down in Crimea — this was the last Western ho­tel chain op­er­at­ing there. Ac­cord­ing to cur­rent data, some com­pa­nies, such as Volk­swa­gen, Adi­das, Puma and DHL, still work there as the EU sanc­tions only con­cern some sec­tors of the econ­omy. But this does not change the over­all re­sult dra­mat­i­cally. Rus­sian sta­tis­tics es­ti­mated to­tal for­eign in­vest­ment in Crimea at 7.2% in 2014, 3.3% in 2015, 3.4% in 2016 and 1.2% in 2017.

The Rus­sian busi­ness, too, is los­ing in­ter­est in the penin­sula. Back in 2014, Rus­sia ac­counted for 45% and 43.9% of the to­tal in­vest­ments and bud­get trans­fers in Crimea. Over 2016-2017, pri­vate in­vest­ments col­lapsed from 33.4% to 14.2%. Fear of in­ter­na­tional sanc­tions played a role in this af­ter they hit some Rus­sian com­pa­nies in­volved in the con­struc­tion of the Kerch Bridge. Over­all, 44 Rus­sian and Crimean com­pa­nies and 155 in­di­vid­u­als are cur­rently un­der in­ter­na­tional sanc­tions.

Sanc­tions are not the sole source of Crimea’s trou­bles. The oc­cu­pa­tional au­thor­i­ties pub­lish their sta­tis­tics se­lec­tively. They con­ceal the fig­ures for some in­dus­tries, in­clud­ing the ex­trac­tion of min­er­als, wa­ter sup­ply, ad­min­is­tra­tion and a num­ber of oth­ers. Still, the data that is avail­able pro­vides a good enough di­ag­no­sis of sys­temic trou­bles in Crimea’s econ­omy.

Crimean busi­nesses in­volved in agri­cul­ture, forestry and fish­ery, trans­porta­tion and stor­age, ended 2017 with losses. Ho­tels and restau­rants ended up in the same cat­e­gory. The to­tal num­ber of loss-mak­ing busi­nesses in the re­gion ranged be­tween 35% and 45% in 2017. These in­clude pub­lic en­ter­prises. The Crimean Sea­ports state-owned com­pany re­ported RUB 13.8mn of losses in 2014. In 2017, its losses rose to RUB 97mn. Crimean Au­to­trans­port, another state-owned com­pany, gen­er­ated prof­its in 2016 but ended 2017 with a deficit of RUB 228mn. The losses of Crimean Power Gen­er­at­ing Sys­tems grew from RUB 1.6mn to RUB 19.2mn be­tween 2015 and 2016.

The oc­cu­pa­tional au­thor­i­ties de­clared mul­ti­ple plans of a pri­va­ti­za­tion cam­paign but never car­ried them out. What’s worse, pri­vate busi­ness in Crimea is in a more dire po­si­tion af­ter the as­sault of the oc­cu­pa­tional au­thor­i­ties against it: while 54,000 pri­vate com­pa­nies and 135,000 in­di­vid­ual en­trepreneurs were reg­is­tered in Crimea in 2014, two years later the Rus­sian sta­tis­tics counted 22,000 pri­vate com­pa­nies and un­der 40,000 in­di­vid­ual en­trepreneurs. Ac­cord­ing to es­ti­mates by the ex­perts of the Maidan of For­eign Af­fairs, a Kyiv-based NGO, small busi­nesses gen­er­ated 31.2% of jobs in the re­gion in 2011. Over the years of oc­cu­pa­tion, this in­di­ca­tor has fallen to 19.5%.

Crimean ex­ports of­fer another in­ter­est­ing case. The re­gion is see­ing an in­creas­ing trade deficit, its ex­ports go­ing down from US $79.5mn in 2015 and US $47.7mn in 2016 to US $29.8mn in 2017. Its im­ports are far higher, al­beit shrink­ing as well from US $100.1mn in 2015 down to US $63.4mn in 2017. It there­fore comes as no sur­prise that Crimea’s “Coun­cil of Min­is­ters” pub­lished a bud­get fore­cast in the win­ter of 2018 claim­ing that the re­gion will have to be sub­si­dized at least through 2030. The au­thors of the fore­cast claim that any im­prove­ments will come from “rev­enues from Rus­sia’s bud­get sys­tem”, i.e. sub­si­dies. Crimea is al­ready heav­ily de­pen­dent on them as 82.5% of all in­vest­ments in the penin­sula are the funds from the fed­eral bud­get, while the share of sub­si­dies in the rev­enue sec­tion of the bud­get is as high as 67%.

Where ex­actly the sub­sidy money is go­ing is a big ques­tion. Over the years of the an­nex­a­tion, Rus­sian in­vest­ment in the re­gion has amounted to nearly US $6bn. These are the fig­ures from re­ports and state­ments by the oc­cu­pa­tional au­thor­i­ties. What they don’t in­di­cate is the de­pre­ci­a­tion of Crimea’s cap­i­tal as­sets, in­clud­ing build­ings and con­struc­tions, ma­chin­ery and equip­ment, trans­porta­tion and so on — num­bers on these barely change in the stat­ics over the years of the oc­cu­pa­tion. The “of­fi­cial” sta­tis­tics es­ti­mated it at 70.5% in 2014 and at 69.8% in 2016. No se­ri­ous mil­i­tary pro­jects, other than the Kerch Bridge, have been im­ple­mented in the re­gion. Prom­ises have been float­ing around to re­model Bel­bek, a mil­i­tary air­port, into a civil­ian one, but the lat­est de­lay resched­uled it to 2020. Another pro­ject for 2020 is to com­plete Tavrida, the fed­eral high­way be­tween Sev­astopol and Kerch. Mean­while, Moscow seems to be busy with mil­i­tary pro­jects of scales that leave any­one guess­ing. The fund­ing that re­mains af­ter that is not a re­source for the de­vel­op­ment of Crimea’s econ­omy, but the life sup­port ther­apy that keeps the re­gion from ul­ti­mate degra­da­tion by merely slow­ing down the process.

THE IL­LU­SION OF THRIV­ING

The is­sue of the qual­ity of life in Crimea has been side­lined mean­while. Ac­cord­ing to Rus­sian sta­tis­tics, aver­age monthly in­come per capita was RUB 15.600 in 2014, RUB 18.000 in 2016, and RUB 21.300 in 2017, and RUB 24.000 for Sev­astopol in 2017. The same fig­ure for the South­ern Fed­eral District of Rus­sia was RUB 27.200, and RUB 31.400 across Rus­sia. Ap­par­ently, the an­nexed Crimea is not among Rus­sia’s most af­flu­ent re­gions. Still, even these fig­ures are to be in­ter­preted with cau­tion.

Firstly, of­fi­cial sta­tis­tics are hardly re­li­able -- the real wages of Crimeans are sig­nif­i­cantly be­low the nom­i­nal num­bers. The oc­cu­pa­tional ad­min­is­tra­tion re­ports the aver­age wage in fi­nance and in­sur­ance at RUB 65.200. But data­bases of va­can­cies across Rus­sia rarely list such of­fer­ings: only two out of 201 full-time job of­fer­ings in this seg­ment start at RUB 50,000, while the rest nor­mally range be­tween RUB 12,000 and 20,000. The same goes for the min­ing in­dus­try. Sta­tis­tics list the aver­age wage there at RUB 58,000 while the data­base of va­can­cies of­fers such fig­ures for one in ev­ery four jobs only. The of­fi­cially de­clared wage for doc­tors is at RUB 50,000 but the real of­fer­ing is at RUB 20-25,000 with ex­tra bonuses for ad­min­is­tra­tive po­si­tions. More gen­er­ally, only 11% of job of­fer­ings in the data­base of va­can­cies for Sim­fer­opol pay over RUB 30,000. 17% of­fer RUB 25-29,000, and the rest of­fer less than that.

Se­condly, the in­come sta­tis­tics is af­fected by the mil­i­ta­riza­tion of Crimea. Ac­cord­ing to the Rus­sian De­fense Min­istry, the wages for Rus­sian con­tract ser­vice­men range be­tween RUB 20,000 for a rank-and-file sol­dier and RUB 67,600 for a pla­toon com­man­der. Civil­ian per­son­nel at mil­i­tary units and or­ga­ni­za­tions within the Rus­sian MoD frame­work is paid be­tween RUB 11,000 and 40,000. High wages are also typ­i­cally paid to the func­tionar­ies of the oc­cu­pa­tional regime. All this re­sults in a se­ri­ous gap be­tween the earn­ings of most Crimeans and the mil­i­tary and bu­reau­crats. The same dis­pro­por­tion ex­ists be­tween the pen­sion­ers who make up 31.5% of Crimea’s pop­u­la­tion or nearly 0.7 mil­lion peo­ple. Ac­cord­ing to the oc­cu­pa­tional ad­min­is­tra­tion, the aver­age pen­sion in Crimea is RUB 12,000 and RUB 13,000 in Sev­astopol. The gap lies be­tween nor­mal pen­sions and those paid to the re­tired mil­i­tary who pre­ferred to retire in Crimea back in the soviet days.

Thirdly, the ques­tion is who ex­actly re­ceives high wages? The an­nex­a­tion of Crimea was fol­lowed by the in­flow of Rus­sians to the penin­sula. Ac­cord­ing to Ukraine’s State Sta­tis­tics Bureau, the pop­u­la­tion of Crimea was 2.3 mil­lion peo­ple be­fore Jan­uary 1, 2014, in­clud­ing 386,000 in Sev­astopol. Ac­cord­ing to the of­fi­cial Rus­sian sta­tis­tics now — how­ever re­li­able it is — Crimea’s pop­u­la­tion shrank to 2.2 mil­lion by Jan­uary 1, 2018, in­clud­ing to 362,000 in Sev­astopol. The high­est in­flow of im­mi­grants to Crimea is from Rus­sia. Over 2015-2017, 52,500 peo­ple left Crimea and 88,200 ar­rived to the penin­sula (this does not take into ac­count Sev­astopol). 54.5% of the new res­i­dents have come from Rus­sia. Sev­astopol has seen an even higher in­flow of the Rus­sians: 21,700 peo­ple ar­rived in the city over 2016-2017, 62.6% of them Rus­sians. It is there­fore rea­son­able to as­sume that most of the widely ad­ver­tised “high Rus­sian wages” are not of the Crimeans, but of the Rus­sians who have set­tled in the penin­sula in the past few years.

THE AR­CHI­TEC­TURE OF LOY­ALTY

Emine Dzhep­arova, Deputy Min­is­ter of In­for­ma­tion Pol­icy, be­lieves that the real num­ber of Rus­sian im­mi­grants in Crimea can be dou­ble or triple the of­fi­cial num­ber. Ex­perts of In­for­ma­tion Re­sis­tance, a vol­un­teer in­tel­li­gence and an­a­lyt­i­cal group, as­sume that

RUS­SIA'S POL­ICY OF CADRE COL­O­NIZA­TION, MIL­I­TA­RIZA­TION AND IN­TE­GRA­TION WITHIN PUTIN'S AU­THOR­I­TAR­IAN REGIME HAS VIR­TU­ALLY KILLED ALL OF THE RE­GION'S STA­TUS AS A PLAYER IN THE PO­LIT­I­CAL PROCESS. THE MOST CRIMEAN ELITE CAN HOPE TO GET NOW IS SMALL RENT FROM THE SUB­SI­DIES CON­TROLLED BY THE CU­RA­TORS IN MOSCOW

the pop­u­la­tion of Crimea has changed by 17-25% over the years of oc­cu­pa­tion. What­ever the ac­tual num­bers are, this de­mo­graphic Rus­si­fi­ca­tion of Crimea is ce­ment­ing the oc­cu­pa­tional au­thor­i­ties.

This is ag­gra­vated by the fact that many peo­ple loyal to Ukraine have left Crimea af­ter 2014. If they had stayed at home, these peo­ple could have be­come do­mes­tic op­po­si­tion to the oc­cu­pa­tional regime. By and large, Crimean Tatars re­main the one lo­cal group most loyal to Ukraine, but their in­flu­ence is weak­ened by rel­a­tively small num­bers. Ac­cord­ing to Ukrainian sta­tis­tics, Crimean Tatars ac­counted for 11% of the penin­sula’s pop­u­la­tion in the early 2014, i.e. 232,000 peo­ple. By con­trast, the im­mi­grants from Rus­sia — espe­cially the mil­i­tary and the bu­reau­crats — are both com­fort­able with the sta­tus quo and ex­tremely loyal to Rus­sia and Vladimir Putin who has given them the op­por­tu­nity to mi­grate to the penin­sula. Crimean pen­sion­ers, too, are loyal to Rus­sia as many of them served in the soviet army or spe­cial ser­vices and un­der­went the re­spec­tive ide­o­log­i­cal prepa­ra­tion.

Rus­sian sta­tis­tics es­ti­mated to­tal for­eign in­vest­ment in Crimea at 7.2% in 2014, 3.3% in 2015, 3.4% in 2016 and 1.2% in 2017

Thirdly, Moscow’s cadre pol­icy for Crimea en­sures that it stays un­der its tight con­trol. Af­ter the an­nex­a­tion, the “gov­ern­ment”, “par­lia­ment” and “Supreme Court” of Crimea were chaired by the lo­cals as be­fore — Sergei Ak­sionov, Vladimir Kon­stanti­nov and Igor Ra­dionov. In the Rus­sian sys­tem, how­ever, these po­si­tion are quite nom­i­nal since the in­sti­tu­tions of par­lia­men­tarism are vir­tu­ally de­funct in Rus­sia while re­gional self-gov­er­nance is ce­mented within the power hi­er­ar­chy. The rest of the key po­si­tions in Crimea were taken by the tried and tested cadres from Rus­sia. The “Pros­e­cu­tor’s Of­fice” of Crimea is chaired by Oleg Kamshilov, ex-first deputy pros­e­cu­tor of Moscow. Chief of the “po­lice” is Pavel Karanda, ex-deputy head of the Rus­sian In­te­rior Min­istry’s Depart­ment in Vologda Oblast. Vik­tor Pala­gin was trans­ferred from Bashko­rostan to head Crimean FSB. Even the “Min­istry of Emer­gen­cies” in Crimea is chaired by Alek­sandr Yere­meyev who was trans­ferred from Siberia. Be­fore the an­nex­a­tion, all these po­si­tion had been oc­cu­pied by peo­ple from the Party of Re­gions. Rus­sian ex-deputy min­is­ter of in­dus­try and trade Dmitriy Os­vian­nikov was “elected” as “Gov­er­nor of Sev­astopol” at a pseudo-ref­er­en­dum. A group of “Crimeans” is now present in the Rus­sian State Duma. But they will hardly spoil their ca­reers in Moscow to help their dis­tant com­pa­tri­ots. Oth­er­wise, Crimea has no rep­re­sen­ta­tives of its own to lobby for its re­gional in­ter­ests in Rus­sia. Even if the lo­cal elite in­cor­po­rated within the oc­cu­pa­tional struc­tures dares to rebel against the bu­reau­crats im­ported from Rus­sia, it will have no chance of suc­cess as the re­gion is en­tirely de­pen­dent on trans­fers from the Rus­sian bud­get.

MOSCOW’S TOY

All this makes the con­se­quences of the an­nex­a­tion for Crimea far deeper than mere po­lit­i­cal sub­or­di­na­tion to Moscow and in­ter­na­tional sanc­tions. First and fore­most, the an­nex­a­tion is chang­ing its econ­omy. Far from in­vest­ing into the de­vel­op­ment of the ter­ri­tory it has oc­cu­pied, Rus­sia is qui­etly trans­form­ing Crimea from the “re­sort of the en­tire Soviet Union” into its mil­i­tary out­post. It is dif­fi­cult to say how strate­gi­cally im­por­tant it is for Rus­sia. But the ef­fect of this mil­i­ta­riza­tion is al­ready ob­vi­ous. The in­dus­tries that could have be­come the foun­da­tion of the re­gional econ­omy, in­clud­ing tourism, are not de­vel­op­ing. As a re­sult, the penin­sula is tum­bling into an ev­ery deeper de­pen­dence on sub­si­dies from the fed­eral bud­get. In their pro­pa­ganda, the oc­cu­piers present this as the chal­lenges of the tran­si­tional pe­riod. But some de­struc­tive pro­cesses are look­ing ever more ir­re­versible.

This is espe­cially true for the state of the en­vi­ron­ment. Ukraine’s Min­istry for the Tem­po­rar­ily Oc­cu­pied Ter­ri­tory re­ports that 70% of Crimea’s green steppe has either dried up or has been more dam­aged com­pared to the pre-an­nex­a­tion pe­riod. Deputy Min­is­ter Yuriy Hrym­chak says that the penin­sula is re­turn­ing to the state in which it was re­turned to the Ukrainian SSR in the mid-1950s and the re­vi­tal­iza­tion of Crimea was launched with the main­land’s re­sources. If this trend per­sists, Crimea will turn into a sup­ple­ment of Rus­sian mil­i­tary bases, not the win­dow of the Rus­sian World as many in Rus­sia had claimed.

Sim­i­lar pro­cesses are tak­ing place in the so­cio-po­lit­i­cal field. Rus­sia’s pol­icy of cadre col­o­niza­tion, mil­i­ta­riza­tion and in­te­gra­tion within Putin’s au­thor­i­tar­ian regime has vir­tu­ally killed all of the re­gion’s sta­tus as a player in the po­lit­i­cal process. The most Crimean elite can hope to get now is small rent from the sub­si­dies con­trolled by the cu­ra­tors in Moscow.

At the same time, Moscow does not price Crimea’s loy­alty too dearly. Chech­nia will re­ceive RUB 27bn in sub­si­dies in 2018 and Dages­tan will get RUB 59bn. Yaku­tia will re­ceive RUB 43.9bn, fol­lowed by RUB 39.3bn for Kam­chatka Krai and RUB 27.1bn for Al­tai. Crimea will re­ceive a mere RUB 17.1bn in sub­si­dies.

Crimea’s in­te­gra­tion into the Rus­sian sys­tem is chang­ing the way its re­sources and power are dis­trib­uted — these are con­cen­trated more and more in the hands of “the pres­i­dent’s men”, pri­mar­ily of­fi­cials and siloviki, the law en­force­ment bloc. Be­ing part of these struc­tures in Rus­sian opens some good prospects in terms of ca­reer, sta­tus and in­come. Mainly, how­ever, it pro­tects the in­di­vid­ual from other bu­reau­crats and siloviki. Those who live on sub­si­dies and do­na­tions, in­clud­ing pen­sion­ers, pub­lic sec­tor em­ploy­ees and re­cip­i­ents of all kinds of priv­i­leges can pro­vide some sta­bil­ity as well — their loy­alty re­in­forces Putin’s hi­er­ar­chy dur­ing the pe­ri­ods of the grow­ing pub­lic frus­tra­tion in Rus­sia.

The one class that will have a hard time in Crimea is the mid­dle class. The at­tack against the lo­cal busi­ness which the oc­cu­piers launched af­ter the ag­gres­sion may well just be an in­tro­duc­tion. While in 2014 Rus­sia guar­an­teed the own­ers that their prop­erty would re­main in­tact based on Ukrainian doc­u­ments, in the spring of 2018 Rus­sia’s Min­istry of Econ­omy drafted amend­ments to this. They abol­ish guar­an­tees for the ob­jects with own­er­ship rights ac­quired af­ter Jan­uary 1, 2008. If these amend­ments are en­acted, this will open end­less op­por­tu­ni­ties for con­fis­cat­ing peo­ple’s prop­erty.

More­over, the re­dis­tri­bu­tion of prop­erty was launched in Crimea in 2014 be­fore any amend­ments. The Crimean so­ci­ety seems to have got the mes­sage: Crimeans are no longer the masters of their penin­sula. The new masters have their own plans for the re­gion and have no in­ten­tion of get­ting con­sent from the lo­cals.

The land of fa­tigues. Like Kalin­ingrad Oblast, Crimea is pri­mar­ily the mil­i­tary base al­low­ing Rus­sia to de­ploy huge forces right un­der the West's nose

The bridge is ours. Con­nec­tion with the main­land Rus­sia will make mil­i­tary lo­gis­tics eas­ier for Rus­sia but will not solve Crimea's eco­nomic prob­lems

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