May 23, 2014 1:04 pm

Return to Crimea

The region is grappling with the queues, cost and bureaucracy of transition after Russia annexed the peninsula on the Black Sea. Are Crimeans still happy to have rejoined the motherland?
A rally in the west Crimean city of Yevpatoria, celebrating the annexation of Crimea©Yuri Kozyrev

A rally in the west Crimean city of Yevpatoria, celebrating the annexation of Crimea

The first time I phoned Sergei Tsekov, Crimea’s bombastic representative to the Russian Federation Council, he hung up on me.

I had called on the afternoon of February 22, shortly after arriving in Crimea’s administrative capital, Simferopol. Following days of bloody street fighting and sniper killings in Kiev, Ukraine’s then president, Viktor Yanukovich, had unexpectedly fled the capital, leaving Ukraine’s opposition leaders in control of the government.

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In Kiev, the mood was euphoric. Tsekov, a longtime pro-Russia politician, was furious. Hearing which publication I was from, he launched into a diatribe about how “thanks to the American leadership”, flags with swastikas would now be flying in central Kiev. “The western leaders brought Hitler – now there is Oleh Tiahnybok [leader of Ukraine’s far-right Svoboda party]. You’ve brought on a new conflict, good job,” he shouted, before putting the phone down.

I mention the exchange to Tsekov when we meet in Simferopol in late April, almost two months to the day after we first spoke. To my surprise, he remembers it: “I was in a difficult mood, it’s true,” he concedes amiably. “It was a hard week.”

These days, Tsekov, a jowly man whose hair sits flat on his head like a deflated pastry, is in considerably better spirits. Over the past eight weeks he has seen pro-Russia forces execute a swift takeover of the peninsula; his friend and ally Sergei Aksyonov become prime minister; a majority of Crimean voters elect to become Russian; and, finally, Russian president Vladimir Putin officially annex the peninsula into Moscow’s domain. (The annexation has yet to be recognised by the UN Security Council, the US or the EU.)

New prime minister Sergei Aksyonov inspects the Crimean army©Davide Monteleone

New prime minister Sergei Aksyonov inspects the Crimean army

At the end of March, a few days after his name was put on a US sanctions list, Tsekov became Crimea’s first-ever representative to the Federation Council, the upper house of Russia’s parliament.

While he will be based primarily in Moscow, he is back in Crimea for a few days, meeting with constituents to help smooth over some of the difficulties that have emerged during the transition to Russian jurisdiction. By early April, all the Ukrainian banks operating in Crimea had frozen their business there. One of the lenders, Privatbank, serviced almost 40 per cent of the Crimean population and was used by many local companies, as well as the local government, to pay their employees. As a result, many workers haven’t been paid in weeks and many residents risk losing their savings (the Russian government has so far promised only to reimburse up to $20,000).

Queues have become a regular feature of the peninsula, with residents lining up to apply for new passports and new bank accounts, or just to use the ATMs, which have set strict daily withdrawal limits. So far, the only businesses that seem to have benefited from Crimea’s repatriation are the Simferopol hotels, which have been full to capacity since the end of February, first with journalists, then with visiting Russian bureaucrats.

Waiting for Tsekov outside his office in late April, I see at least one of his constituents crying while waiting to meet him. His secretary, when asked how things are going by the cheerful senator, bluntly replies “not great”, before being shooed to the side by a Tsekov aide. But sitting down to talk, Tsekov firmly bats away any suggestion of Crimean economic woes. “We expected more difficulties – these aren’t difficulties at all!” he bellows. “There are some challenges. But when you’re here in Crimea, you see people are living normally, calmly and peacefully. We are happy because of the decision we’ve made. And the main thing is, we’ve managed to implement all this by almost entirely peaceful means.”

A ‘pro-Kiev’ march in the Tatar-dominated town of Bakhchysarai after the referendum, which Crimean Tatars had boycotted©Davide Monteleone

A ‘pro-Kiev’ march in the Tatar-dominated town of Bakhchysarai after the referendum, which Crimean Tatars had boycotted

If Russia’s annexation of Crimea was a swift, smoothly run operation, Crimea’s transition period is turning into a considerably messier and more expensive operation for both the Crimeans and Russian taxpayers.

Over the next three years, Moscow will probably need to pour more than $22bn into the region, making Crimea the country’s newest post-Soviet megaproject. There is the annual $2bn that will go towards paying Crimea’s pensioners, who make up more than a quarter of the population; the $1.5bn that will go towards closing Crimea and Sevastopol’s current budget deficits this year; and a long-awaited bridge and train tunnel that will connect Crimea to Russia’s mainland. While the government’s official estimate for the bridge project is less than $3bn, a final figure of $5.6bn has already featured on a leaked document – and experts point out that the initial estimate for the $51bn Sochi Olympics was just $12bn.

On the ground, even the most diehard Russia supporters are being forced to reconcile their love for the motherland with unending bureaucratic miseries that seem plucked from the pages of Kafka or Gogol. On the motorway, billboards advertise remedial accounting courses for veteran book-keepers, who will now need to learn Russian accounting standards from scratch to continue practising. On the radio, law firms are recruiting new clients who need help obtaining their new Russian passports, re-registering their land or re-registering their companies. Business advocacy groups are holding daily seminars on everything from how to compete in state auctions to how to make your business comply with Russia’s environmental laws.

At a café I visit, the bill is tallied in both Ukrainian hryvnia and Russian roubles (when I choose to pay in roubles, my change comes in hryvnia), while some of the hypermarkets have separate queues for the different currencies. At other shops, the exchange rate is worked out, customer by customer, on calculators.

A prominent local businessman, jubilant about Ukraine’s future following Yanukovich’s overthrow in February, now sits sullenly in his office, bog-eyed after flying in overnight from Moscow, where he had been trying to sort out the endless administrative and financial challenges that are pushing his company into the red.

The owner of a chain of shopping centres, he is now required to pay his employees in roubles while still selling goods in hryvnia – a lossmaking operation given skyrocketing inflation and the constantly fluctuating exchange rate. His stores will now have to pay customs duties on the Ukrainian goods they stock their shelves with, plus Russian sales tax on the goods they have already paid Ukrainian sales tax on. At a personal level, he has lost access to a Ukrainian bank account where he kept a significant portion of his wealth and expects, as a resident of Crimea, he will now have trouble getting new Shengen [EU] or US visas. “It seemed like we were going somewhere,” he sighs, “and now we’ve ended up in a totalitarian country.”

But despite the logistical problems, many Crimeans would argue that bureaucratic chaos is preferable to what might have happened had Russia not intervened. Sitting in his office in late April, Tsekov claims that Kiev’s decision to launch a military operation in east Ukraine was proof that Crimea had been at high risk of attack. “The people in the Ukrainian parliament, they’re unwell people. They are psychologically unwell,” Tsekov says, before moving on to attack the west for supporting Kiev. “If there is a global conflict, the blame for that will lie on the shoulders of Europe and America. Imagine if we had waited until May [for the Crimean referendum], imagine the escalation there would have been in Crimea and what sort of conflicts we would have seen . . . The situation was so acutely dangerous.”

Igor Bakov, a pony-tailed government engineer, agrees with him. A Russia supporter, Bakov moonlighted in a regional self-defence militia during the recent troubles and claims he hasn’t received his salary for nearly two months – first because he was volunteering for a militia, and second because his employer, the local government, has had its bank account frozen. The situation is squeezing Bakov’s family finances – his wife has just had a baby. But Bakov says it is the best outcome Crimea could have hoped for, especially given the spate of violence that has erupted in east Ukraine: “This is a scenario that could have happened in Crimea if Russia hadn’t interfered.” Many of the Crimean self-defence forces have now travelled to east Ukraine, where they are lending support to the pro-Russia separatists there, he says. “If my wife hadn’t just given birth a few weeks ago, who knows where I’d be right now?”

. . .

Tatars in Simferopol organise a self-defence unit; many feel ethnic tensions are rising©Davide Monteleone

Tatars in Simferopol organise a self-defence unit; many feel ethnic tensions are rising

The only people who have tried to pose any real opposition to what is happening are the Crimean Tatars, the indigenous minority that makes up about 12 per cent of the local population and had been supporting the Ukrainian opposition movement in Kiev before the annexation. On my April trip I meet the head of the community, Refat Chubarov, in his office in the Simferopol headquarters of the Mejlis, the Crimean Tatar parliament. It’s just after 2pm and he has already smoked half a pack of Marlboros, judging by the ashtray on his desk.

Chubarov’s previous appointment was with a local Tatar entrepreneur, who wanted to know how he would manage to keep his small samosa business afloat and support his family, given the rising cost of ingredients. The woman sitting outside his office, waiting to see him next, is on the verge of tears: her 14-year-old son was beaten up by a group of Russian teenagers after they heard him speaking Crimean Tatar to her on his phone, and he is still in hospital recovering.

A few nights earlier, as he was driving home, Chubarov had been stopped by armed men who asked to see his documents. While they eventually let him go, the new Crimean prosecutor had separately informed him that criminal charges would probably be brought against him because he had been deemed a person likely to incite mass public disorder. A week after Chubarov and I met, the Crimean prosecutor called him into her office for a second time, threatening to bring further charges against him and disband the Mejlis.

Like the majority of Crimean Tatars, Chubarov boycotted the referendum. “We didn’t want these changes and didn’t expect anything good to come from them. And no good has come,” he says. Along with battling new economic problems, the Tatars now feel that the local ethnic Russian population has turned against them. “It’s a new reality. Everyday xenophobia is rising. Before, it was there but it was latent. It wasn’t out in the open.”

Zair Akadyrov, a young Tatar journalist, echoes Chubarov’s concerns about the new Crimea, which he says are also starting to resonate beyond the Tatar community. Turkish Airlines was planning twice-daily flights from Crimea to Istanbul but these have now been cancelled. Resort towns and tour companies are writing off holidays planned by Ukrainian and European tourists, who they fear will no longer be comfortable visiting the peninsula.

“There is a risk that Crimea will become like an Abkhazia or Ossetia,” Akadyrov says, referring to the two breakaway Georgian republics. “The older generation really wanted to become part of Russia and they are ready to stand in all the queues now and put up with the administrative difficulties,” he adds. But for the younger generation it’s more difficult: “They grew up in Ukraine and were nurtured by Ukrainian culture.”

Akadyrov is still puzzling over how Russia managed to take “first Sevastopol, then Simferopol, then all of Crimea” in under a week – and how everything could change so quickly. At the time, he adds, it was happening so fast “we weren’t even paying attention”.

On the morning that Yanukovich fled Kiev and Ukraine’s anti-government protesters came to power, I was on a plane to Crimea, following a warning from a senior Russian official to the Financial Times that if there was a coup in Kiev, Russia would “go in and protect” Crimea.

Women dance during a pro-Russia pre-referendum rally in Simferopol©Yuri Kozyrev

Women dance during a pro-Russia pre-referendum rally in Simferopol

Within 24 hours, scores of local men were signing up for militias preparing to defend the region from “the Kiev fascists”, and mass anti-Kiev rallies were being planned. Though some claim the demonstrations were orchestrated by Moscow, local pro-Russia activists insist to this day they were organic. “When Putin says that a lot of the things that happened were a surprise, even for him, he is talking about what happened in Sevastopol,” says Igor Soloviev, one of the key activists in the naval port city. “It wasn’t planned. There was no special FSB [security] operation.”

An affable 36-year-old programmer who takes a side interest in politics, Soloviev was one of a dozen activists who organised a 20,000-strong, pro-Russia demonstration in Sevastopol on February 23 and put forward Alexei Chaliy, a prominent Russian businessman, as governor – chosen because “we thought he was tied to Putin”. He wasn’t: a Kremlin representative called the activists a day later asking if they had Chaliy’s phone number. But it didn’t seem to matter. As Chaliy set to work governing, Crimea’s pro-Russia lawmakers began trying to disband the current parliament.

On February 26, thousands of pro-Russia and Crimean demonstrators faced off outside the Crimean parliament building in demonstrations that left two pro-Russia protesters dead.

During my interview with Tsekov in April, the lawmaker claimed that on that night he, the parliament’s speaker and Sergei Aksyonov, the head of Crimea’s leading pro-Russia party, gave the order for dozens of self-defence troops and former Ukrainian riot police to storm the next morning in a pre-dawn raid.

At around 4:30am on February 27, eyewitnesses reported seeing dozens of heavily armed men raid the parliament and government building, followed by the Ukrainian police officers inside quickly surrendering. By dawn, the men had replaced the Ukrainian flag flying on top of the buildings with a Russian one.

. . .

A self-defence unit guarding Simferopol’s main administration building after the annexation©Davide Monteleone

A self-defence unit guarding Simferopol’s main administration building after the annexation

These days, the Ukrainian government building is still guarded by local troops. Inside, Crimea’s new administration is hastily redrawing the economic landscape, aided by a revolving door of visiting Russian bureaucrats.

In his office on the second floor, Rustam Temirgaliev, Crimea’s first deputy prime minister, has half a dozen Russian officials waiting in reception and a book on his desk entitled Crimea with Russia for Eternity. Crimea’s point man for the economic transition, Temirgaliev is more upfront than other officials on the current difficulties. He admits there have been missteps, such as the time in mid-April when the government announced that the hryvnia would soon be going out of circulation, causing mass panic on the local currency market – “a mistake”. Hryvnia inflation is a constant problem, he adds, as is the lack of a mechanism to regulate the real hryvnia-rouble exchange rate.

Overall, however, Temirgaliev, like the other officials I spoke to, insists he thrilled by how much Crimea has managed to accomplish and paints an idealistic picture of its future, buoyed by foreign investment, tourists and Russian capital. “Lots of Russian companies are interested in investing in Crimea,” he declares, citing plans to turn the peninsula into an offshore territory “that will still be a subject of the Russian Federation but have a special tax regime and legal status, a free flag for the courts and absolutely transparent customs rules and procedures”.

In April, Putin submitted a bill to the lower house of Russia’s parliament to turn the southern part of Crimea into a gambling zone, complete with five-star hotels and casinos fitted out to the highest international standards. “It will be a big territory with a huge volume of international investments, including from US companies – I won’t say which ones so they don’t find themselves in an unpleasant situation,” Temirgaliev boasts. “We want to compete with Macau for the Chinese, Monaco for the Europeans and, to a certain extent, be a competitor with Las Vegas.”

A Crimean Las Vegas is still a distant fantasy. But for now, most Crimeans who supported Russia in the referendum are willing to indulge the dream, mindful of how quickly the situation has already changed (in their minds for the better), and the endless loop of protests and violence that is now pervading the rest of southeastern Ukraine.

“If the people of Sevastopol hadn’t gone out on to the street, if there hadn’t been this mass popular support, we wouldn’t have got anything. It would have ended like Donetsk,” Soloviev says. “At most, all we would have won is the kind of breakaway status that Abkhazia has.”

When the anti-government protests were taking place in Kiev last year, Soloviev and his wife had been agonising about whether they and their three children should leave Crimea for Russia. In the end, it all worked out for them. As a beaming Soloviev says, “Russia came to us.”

Courtney Weaver is an FT correspondent in Moscow.

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