Crimea Could Become an Expensive Liability for Putin
Until a few months ago, Russian President Vladimir Putin’s 2014 seizure of Crimea looked to be the pinnacle of his two-decade reign. The dramatic military takeover of the Ukrainian peninsula transformed European geopolitics. Even more importantly for Putin, it brought momentous change within Russia itself, where it created the so-called “Crimean Consensus” and generated a massive wave of public support for the Kremlin’s confrontational stance towards the Western world.
While Russian public backing for the annexation remains strong, initial euphoria had already begun to wane long before the start of the current coronavirus crisis. The sanctions-hit and stagnating Russian economy now finds itself facing the twin blows of plummeting energy prices and one of the world’s most severe coronavirus outbreaks. Meanwhile, the costs of integrating Crimea into the Russian Federation continue to rise. Nobody seriously questions Putin’s resolve to maintain control over his greatest prize, but as Crimea becomes more of a burden on the Russian state budget, it will increasingly be perceived as an expensive political liability. This is according to the Atlantic Council.
Considerable amounts of Russian budget money have already been poured into Crimea. The largest single expense so far has been the construction of the so-called Crimean Bridge across the Kerch Strait, which provides a vital physical link connecting the occupied peninsula to Russia. This constitutes an impressive engineering achievement, but it is no panacea for the numerous challenges facing Crimea and its full integration into the Russian economy.
Moscow’s generous donations to the Crimean budget are thought to have reached USD 20 billion in the five years from the annexation until 2019, and have helped to fuel significant economic growth in some sectors. However, Crimea’s main revenue generator prior to annexation, the peninsula’s tourism industry, has been hard-hit since 2014. The number of visitors from the Ukrainian mainland has plummeted, while foreign tourism from beyond the former USSR has dried up almost entirely.
Russian tourists have helped make up for this shortfall. However, with the Russian economy facing recession and strong competition for tourist rubles coming from the likes of Turkey and Egypt, Crimea’s tourism industry risks suffering permanent decline over the next few years. In the short-term, recent reports suggest that coronavirus restrictions may have a devastating impact on the 2020 summer tourism season in Crimea.
Probably the biggest single challenge facing Crimea’s Moscow-installed authorities is the peninsula’s growing freshwater shortage. Ukraine’s decision to shut off the flow of water from the Dnipro River into the North Crimean Canal in spring 2014 has left Crimea facing mounting difficulties. The peninsula has now returned to the conditions of the 1950s, a time before the canal was built when the Crimean population was significantly smaller.
The situation has now become so dire that it has led to speculation over the possibility of a new Russian military advance into mainland Ukraine in order to secure access to Dnipro River water supplies. Short of military intervention and in the absence of significant desalination facilities, it is not clear how Russia can otherwise resolve the issue. With Ukrainian public opinion firmly against any concessions regarding the supply of river water for occupied Crimea, there appears to be little potential for a political solution to this mounting ecological crisis.
From falling tourist numbers and dwindling water supplies to international sanctions and the technical difficulties of integrating the Crimean economy, the many challenges created by the 2014 annexation will all be magnified by the crisis that is current taking shape in Russia. The Russian economy was already looking sluggish prior to the onset of the coronavirus crisis and the drop in global energy prices. Many now expect the damage to be severe. As government resources grow scarcer and more Russians are told that they must do without state support, criticism of the largess bestowed upon Crimea will inevitably become more vocal.
None of this will be sufficient to convince Putin of the need to retreat from Crimea. Indeed, it is almost impossible to envisage a set of circumstances that would persuade the current Russian leader to hand the peninsula back to Ukraine. Nonetheless, the ailing Russian economy currently looks ill-equipped to accommodate the rising costs of the Crimean annexation or the long-term expenses of the peninsula’s integration. Unless Russia’s economic fortunes dramatically improve, what was once Putin’s crowning glory may come to be seen primarily as an unwelcome drain on government funds. Eventually, the final vestiges of the political capital gained by the annexation could evaporate like the last drops of water in the North Crimean Canal.