Promises, promises: Will Russia deliver in Crimea?

Whether taxes will fall and salaries will rise in a Russia-allied Crimea is not at all certain.

Andrew Lubimov / AP
Pro-Russian residents of the Crimean city of Sevastopol celebrate in the city's central square on Mar. 17, 2014, after residents in Crimea voted overwhelmingly to secede from Ukraine and join Russia.

For many of Crimea's pro-Russia voters, today marked a new era of shining possibilities.

The prospect of a much brighter future was loudly touted in the runup to Sunday's referendum, in which Crimea voted overwhelmingly to leave Ukraine and join Russia: taxes would fall, pensions would rise, teachers' and doctors' incomes would double. Crimea’s mostly ethnic Russian population would be safe from a Ukrainian central government run by extreme nationalists.  

“Things are going to be excellent for us, now that we’ve cut all ties to Ukraine," said Anastasia Korneva, who like many others today was out on the streets, waving Russian flags and celebrating.

But even as Crimea's parliament moved symbolically to synchronize with Moscow's time zone, the immediate future remains highly uncertain, amid disputes over the vote's validity and the realities of a fragile economy that has long relied on state subsidies. Moscow says it will decide March 21 whether to accept Crimea’s request to join the Russian Federation.

“I think Crimean people have hardly thought about the economic consequences of the referendum,” says Vadim Karasyov, the director of the Kiev-based Global Strategies Institute. “There are some irrational motives behind this decision. They feel as if they are returning to Soviet paradise. But Russia has got its own problems, and they will still grow.”

Hundreds of thousands of ethnic Ukrainian and Crimean Tatars, who boycotted Sunday’s vote, denounced the regional government’s results and declared the referendum illegal. For these voters – and for the government in Kiev, which says it will not acknowledge the referendum results – they were still part of Ukraine. 

“We are still in Ukraine, albeit a lawless one in which people seem to think that it’s normal for unknown, armed men to be walking in the streets,” said Tatiana Skorik, an ethnic Ukrainian in Simferopol, referring to the Russian soldiers who have surrounded Ukrainian military bases. “At this point, it seems as if these crazies supporting this referendum are trying to ruin my life and Ukraine.”

At what cost for Moscow? 

Logistically, Crimea’s separation from Ukraine might not be that simple. The peninsula gets the majority of its electricity, water, and gas supplies from companies based on the Ukrainian mainland. As long as Kiev continues to refuse to acknowledge the separation referendum, it’s unlikely that Ukraine will cut off these supplies to Crimea.

But should Crimea indeed become part of Russia, Kiev could demand sharply higher rates for its resource deliveries. In that case, Russia may need to invest billions into building an alternative supply chain.

In fact, should Russia agree to take on Crimea, it might not be cheap – though Moscow is more than willing to incur these costs. Crimea contributes only about 3 percent of Ukraine’s gross domestic product, and the region is one of the largest recipients of state subsidies. The peninsula's industrial development is weak compared with the rest of southern and eastern Ukraine. Tourism accounts for about 6 percent of its economy, and more than 60 percent of those tourists come from Ukraine, a trend that could change if Crimea's Black Sea resorts become Russian territory.

“In short, Ukraine gives more to Crimea than Crimea gives to Ukraine,” says Vasil Yurchishin, the head of the economic programs at the Razumkov Center in Kiev.

Potential economic worries didn’t stop Crimea’s regional parliament Monday from swiftly moving ahead with preparing the peninsula for integration with Russia. The parliament said that the region will adopt the Russian ruble as the regional currency, phasing out the Ukrainian hryvnia by 2015. Declaring itself independent from Kiev, the parliament then announced that it would nationalize all Ukrainian state property, including two regional energy companies, Chornomornaftogaz and Ukrtransgaz, paving the way for Russia’s Gazprom to purchase the entities.

The changes were widely accepted by the Crimeans supporting Russian integration.

“We are now just waiting for our brothers from eastern Ukraine to join us in Russia,” said Anastasia Korneva. “Western Ukraine can become its own country. We don’t care. We don’t need those aggressive nationalists here.”

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