The region is structured in such a way that without subsidies from mainland Ukraine, Russia, or any other potential allies, Crimea will remain one of the poorest corners of Europe, with a highly seasonal economy and interruptions in drinking water and electricity. By the way, the website http://krim.flado.ru/krim/orgs/list hosts a directory of Crimean organizations, where you can find almost any enterprise on the peninsula.
According to Siluanov's calculations, the budget deficit of the Crimean autonomy now amounts to 10 billion hryvnias (just over a billion dollars at the current exchange rate). In this sense, Crimea differs little from Ukraine as a whole, which today also cannot make ends meet and is mostly eating up its money.
Earlier, Crimean Vice Premier Rustem Temirgaliyev cited different figures. According to him, about a billion dollars is needed to support the budget system (which more or less aligns with preliminary data from the Russian Ministry of Finance) and another three billion dollars for investments in the peninsula's economy.
It is not entirely clear, however, for what period the funds mentioned by Siluanov and Temirgaliyev should be allocated. Last year, the total budget expenditures of the republic reached 5.5 billion hryvnias, subsidies and subventions from the state treasury of Ukraine were 2.7 billion hryvnias, and the deficit amounted to approximately 300 million hryvnias. According to Temirgaliyev's estimate, in 2013 the republic paid 2.7 billion hryvnias to the Ukrainian budget, meaning they received as much as they gave.
Why does Crimea so urgently need investments? The fact is that currently the peninsula is not self-sufficient in a very large group of essential goods and resources. If we assume for a moment that the Crimean autonomy separates from Ukraine, then it will have to purchase these resources at market prices. The possibility that Kyiv might want to impose some form of blockade on Simferopol cannot be ruled out either.
The main issue that currently worries Crimeans is the availability of drinking water. There are no large rivers or freshwater lakes on the peninsula. A significant portion of water enters the republic through the North Crimean Canal, which receives water from the Dnieper. Currently, Crimeans use water from the "mainland" for free, and it is far from certain that this state of affairs will continue in the event of separation from Ukraine. Moreover, according to local environmentalists, the canal is heavily polluted and silted, and already some of the water cannot be purified to the required quality standards. The autonomy has no funds of its own to clean the canal, and organizing a water supply from Russia (for example, from the Kuban region) in a short time is unrealistic. Some of Crimea's internal reservoirs are also in poor condition.
The same difficulties apply to electricity. Except for small solar and wind power plants, there are no local sources in Crimea, and more than 90 percent of consumption (1,200 megawatts of capacity) comes from supplies from mainland Ukraine. According to the new prime minister of the autonomy, Sergei Aksyonov, a contingency plan for the peninsula (if Kyiv does stop supplies) has already been developed—"with the assistance of Russian colleagues." But what specific measures are meant is not yet known—it is hardly possible to run a power line across the Kerch Strait in the shortest possible time.
Gas is actually the only thing that Crimea does not lack. In 2013, gas production by the company Chernomorneftegaz reached 1.65 billion cubic meters. The autonomy consumes less than a billion cubic meters per year, showing a positive balance, and supplies fuel to the "main" part of the country. Most likely, the republic will need supplies of oil and gasoline, but organizing them is relatively easy.
Eliminating these "bottlenecks" in the economy will require hundreds of millions (if not billions) of dollars and at least several years. However, it is unlikely that Crimea can achieve such rapid economic growth to generate the sums needed for large-scale infrastructure investments on its own. The autonomy's economy is quite archaic and narrowly specialized.
Its main industry, as for the last hundred years, remains tourism. Last year, the number of tourists reached almost six million people, only slightly behind the record of 2012. Most local households are connected to this sector in one way or another—either directly or through related industries.
Annual profits from the tourism sector amount to billions of dollars, but a significant portion of these revenues is hidden. Crimea, as in Soviet times, primarily attracts lovers of "wild" vacations. Locals typically rent out their apartments and rooms for the tourist season. Naturally, this entrepreneurship almost always avoids the tax inspectorate. It would be strange to expect that the new authorities will be able to change the situation quickly enough. And to establish organized recreation on the peninsula, massive investments in updating infrastructure are needed, similar to those that took place in Sochi.
However, this does not guarantee an influx of tourists, but prices will almost certainly increase. Currently, the tourist attractiveness of Crimea is such that residents will earn a living in any case, although perhaps not this year: according to several tour operators, the current season in Crimea is already ruined.
Almost all sectors of the Crimean economy serve only domestic consumption. The exception, besides tourism, is winemaking, which has been actively developing here since the 19th century (in fact, Crimea became the first center of the Russian wine industry). Russia has been and remains the largest importer of Crimean wine. Outside the CIS, the products of Massandra and Inkerman can interest only lovers of geographical exotica.
In recent years, wine supplies to Russia have declined. This was partly due to the tightening of customs control on the Russian-Ukrainian border last year, which also affected Crimean products. The constant increase in Russian excise taxes on alcohol also played a negative role. However, even under such circumstances, Crimea supplied over 18 million bottles of wine to Russia in 2013 (30 percent less than in 2012). Overall, Crimean wines occupy a very substantial share of the Russian market – about 6 percent.
Given that wine consumption in Russia is generally growing at a fairly rapid pace, Crimeans have good prospects for earning more in this area. However, investments are still needed here. Grapevines on the peninsula often live longer than 40 years – this is the maximum period of fertility, and new plantings require money. It is not certain that the winemakers of Crimea, which has an almost ideal climate for growing quality wine, will be able to fully renew their 'fixed assets' without outside help.
Even if we assume that Crimea manages to achieve independence, it will not be able to become a self-sufficient state. To raise its economy even to the level of an average Russian region (in terms of GDP per capita it lags behind most of them), the republic needs huge investments – it cannot cope on its own.
Dmitry MIGUNOV,
«Lenta.Ru».