Plans for the economic renewal and modernization of Crimea were discussed at a recent economic forum in Yalta.
The second, International Business Forum of Yalta took place from April 13 to 15 at the luxury Mriya Hotel, southwest of the city. The forum discussed and debated strategies for how the peninsula can promote economically, notwithstanding Russia’s present economic turmoil and the economic sanctions imposed by Western countries. Experts attending the forum explained that the untapped potential of Crimea is huge, particularly in the tourism, health and IT industries.
The general tenor of the conference was that Russia’s economic turmoil and the Western sanctions are not so much obstacles as they are incentives to reach for new horizons of development. The conference was attended by 1,100 people, including 60 foreigners from 26 countries.
Sergei Aksyonov, Chairman of the Ministerial Council of the Republic of Crimea (as Crimea is now formally titled within Russia), promised in emphatic terms to the numerous business people attending the conference a “de-bureaucratization” of economic life. He praised what has been achieved so far, ever since Crimeans voted to secede from Ukraine on March 16, 2014.
Aksyonov’s list of achievements included access via the internet for investment proposals and document submissions to government authorities. The maximum processing time by officials has been set at 30 days. This compares to the two or three year waiting times that were typical when Crimea was still a part of Ukraine, he said.
There were no investment contracts with foreign investors signed at the Yalta forum. Andrei Nazarov, one of the forum organizers and a co-chairman of the Delovoy Rossii (‘Business Russia’) association, announced at a forum press briefing that meetings with German and other potential investors are planned for June.
Aksyonov explained (see 6′:40″ mark in this video) that for foreign investors, “it is important to sidestep the sanctions regime” by the West which targets Crimea. To prevent this, there are “a number of instruments through which foreigners may invest here and receive a cash flow to get the dividends which they expect.” He said he is confident that foreigners “would make use of this access”. Aksyonov didn´t said exactly which instruments foreigners can use to invest while avoiding the injurious sanctions. But what became clear at the forum is that Crimea will not stand by and allow itself to be economically isolated.
The goal of the economic forum was not only to discuss Crimea’s future but also to show that present conditions in the peninsula are calm. In a final briefing to foreign journalists, Aksyonov said that visiting foreigners are “surprised there are no tanks in the streets with us”. Upon visiting, they had become convinced that all is calm.
This author can attest to the claim of calm and no tanks in the streets, though Amnesty International claims that some members of the small opposition among Tatar people have been detained. But the dramatic travel warning presently in effect by the Foreign Office of the German government needs an urgent update. It says: “Traveling to the Crimean peninsula is strongly discouraged…
“Since June 2015, travel to Crimea from the Ukrainian mainland requires an entry permit from the competent authority of Ukraine. This is only issued under certain conditions, but under no circumstance is it granted for tourism purposes…
“In view of the current situation, consular protection for German nationals in Crimea cannot be provided.”
A new airport and a bridge from the Russian mainland
At the forum, Prime Minister Aksyonov announced that 12 investment agreements for Crimea have been concluded, for a total amount equivalent to 935 million euros. However, these are exclusively investments by Russian companies or the Russian state.
The majority of that investment – 427 million euros – is directed at the planned construction of a new airport in Simferopol, the capital of Crimea. The construction is scheduled to begin later this year and the opening is planned for 2018. The project will be financed by two small, Crimea banks, Genbank and RNKB, and by Rossiya Bank of St. Petersburg. The latter is an existing target of the Western sanctions.
The airport is one of the modernization projects that should bring tourism in Crimea to new heights. During the Soviet Union times, some 12 million people would visit the peninsula annually for vacations. The new Crimea is hoping to attain similar numbers. But this will obviously take time. In 2015, 4.2 million tourists visited. In 2016, 4.9 million are expected. Since Turkey is now boycotted by Russia as a holiday destination, Crimea will be a ready alternative for Russians. However, prices on the peninsula have increased by 20 percent so far this year.
Russia is currently investing large sums to free Crimea from its geographical isolation. While guests at the Yalta forum were listening to the speeches of Russian ministers, bankers and business leaders, in the east of the peninsula, the concrete pillars of a future bridge 19 kilometers long across the Kerch Strait connecting to Russia were under construction. This first direct road and rail connection to the Russian mainland is set for completion in December 2018.
‘We create problems which we then heroically solve’
Sergei Glasew, the left-wing, patriotic economic advisor to the Russian president, initiated one of his presentations, delivered to the final plenary session, with a pointed remark that provoked knowing smiles. He explained that he has participated in debates during the past 20 years on the economic development of Crimea, “but other than the participants in this present discussion, almost nothing has changed.” The old saying is true, he said: “We create problems and then we heroically solve them.”
Russian participants have gathered at the conference, Glasew said, “to convince foreign investors that they should invest in the economy of Crimea”. But every wise, foreign investor is justified in asking: “Why do you [Russians] not even invest in Crimea?”
The Russian central bank, according to Glasew, must finally get around to increasing the country’s money supply in order to stimulate economic investment. If the Russian state does not make loans available with lengthy repayment terms, don’t be surprised when no foreign investors show interest, he said.
Transition problems in connecting to Russia
The re-connection of Crimea to Russia in March 2014 was clearly desired by a majority of the population. But a tremendous number of problems have arisen in that process, costing a lot of time, attention and money.
Following the sabotage in November 2015 in southern Ukraine of the electricity lines supplying Crimea, which cut nearly all power supply in Crimea, a connection to the Russian power grid was rushed into service in stages in the form of temporary power cables under the Kerch Strait. In a few weeks, this measure will be fully operational. This will bring Crimea’s electricity supply from Russia up to 800 megawatts daily, which together with the small amount of electricity which Crimea generates itself will suffice for its immediate needs. But many other problems remain:
*All of Crimea’s administrative apparatus had to learn to work on the basis of Russian laws.
*Many government documents are written in Ukrainian and require translated to Russian.
*Ukraine has blocked food shipments to Crimea by road, and so food must be brought to the peninsula by ship.
*Citizens had to re-register their cars. Now they must also re-register their real estate holdings according to Russian laws.
West European experts provide modernization concepts to the forum
Several guests from the European Union were given the opportunity to present their ideas on modernization of Crimea from the main stage of the forum.
1. Jean Pierre Thomas, the head of the finance company ‘Thomas Vendome Investment’ and a former advisor to French President Nicolas Sarkozy, called on entrepreneurs in Europe to invest now in Crimea. If sanctions are lifted -they cannot last longer than one or two years, Thomas said -an established presence in Crimea will be a great advantage.
Thomas suggested investing in university cooperation. Such cooperation does not fall under the sanctions. He said the low ruble exchange rate is an advantage in cases of a new investment, because the wages are low compared to western Europe. Entrepreneurs in Europe should rethink their strategies of simply exporting goods and services to Russia. Instead, they should invest in Russia and export manufactured goods from there.
2. Several tourism experts from western Europe advised to aim a significant part of the development of the tourism industry at a luxury clientele. Dominique Fashe and the Moscow lawyer Karl Eckstein, who serves as Honorary Consul for Russia in Switzerland, presented concepts whereby a tourism infrastructure would be created in Crimea to make it an attractive destination for high income earners. They proposed building marinas, golf courses, concert halls, expanded ski areas with new lifts, clearly delineated eco-trails and mountain hotels.
These proposals left out reference to existing tourism, which is particularly attractive for low income earners. What is obvious to the visitor to Crimea is that proposals for high-class tourism will be difficult because much of the peninsula is already covered in hotels, especially on the south, Black Sea coast.
Russia will soon have its own cash transfer system
A particularly evident sign of how much Crimea is affected by sanctions is the challenge of cashless money transactions. ATM machines here feature the logo of the little-known Russian National Commercial Bank (RNKB). This bank has become the main bank on the island after the large Ukrainian financial institutions, such as Privat Bank, closed but also after UniCredit Bank of Austria and Sperbank, Russia’s largest bank, withdrew from the peninsula, out of fear of Western sanctions.
A representative of the National Payment Card System announced to the forum that a money payment system under the name ‘Mir’ will be launched in June in Russia. The name translates as ‘peace’, or ‘Earth’. The new system will allow citizens in Crimea to use a Mir credit card and to withdraw cash from ATMs. This will supplant Visa and MasterCard, whose use here is very difficult if notimpossible
Kiev to impose entry bans for visitors to Crimea?
Besides the already mentioned politicians and entrepreneurs attended the economic conference, there were representatives of political parties from western and eastern Europe in attendance, including Axel Kassegger and Barbara Rosenkranz, MPs of the Austrian right-populist Freedom Party; the Czech MEP Jaromir Kochlitschek; the Italian deputy Stefano Valdegamberi of the Veneto region party of Luca Zaia; and Christo Marinov of the right-wing Ataka party in Bulgaria.
Among the few, prominent left-wing guests at the conference were Konstantinos Isyhos, the former deputy defense minister of Greece and member of the left-wing, Popular Unity split from the Syriza Party, and Nicaragua’s ambassador in Moscow, Juan Araya.
Ukraine was clearly not pleased by the participation of foreigners in a conference taking place on “Russian-occupied territory”. The right-wing German MEP, Marcus Pretzell, demonstratively announced via Facebook his journey to the Yalta forum, whereupon the Ukrainian Ambassador to Germany, Andriy Melnyk, said via Twitter that Pretzell’s journey will have “hard legal consequences”.
According to media reports, foreigner journalists who visit the “Russian-occupied” territories of Crimea, Donetsk or Lugansk are being indefinitely prohibited from travel to Ukraine by the Ukrainian government.
 In addition to the electricity сables under the Kerch Strait, energy supply in Crimea will be consolidated in the next few years with a natural gas pipeline from the Russian mainland and several natural gas power stations to be constructed.
More articles in English by Ulrich Heyden are on CounterPunch here. The above article was translated to English for Counterpunch by Roger Annis, in collaboration with Ulrich Heyden.