What role does Russia play in the Crimea after two years?

All is not well in Crimea. In April this year, at a meeting of the government committee in Sevastopol, members had to sing the Russian national anthem to celebrate Crimea’s “return home” to the motherland. But when the lyrics were projected onto a screen, they had been changed to a version that mocked Russia. The parodical text described Russia as insane and slavish. The local prosecutor quickly launched a criminal investigation and a proposal was put forward in the State Duma to make insulting the national anthem a criminal offence.

More than two years have passed since Russia annexed Crimea and started the integration of the peninsula into the Federation. During this time, a typical Russian regional administrative structure has been set up. The integration into Russia's economy is now over. The Russian tricolour now flies on government buildings in place of the Ukrainian flag. The rouble has replaced the hryvnia. It is Moscow that sets the local political agenda now.

Initially, Crimea was a daily feature in Russian media. Enthusiastic reporters and presenters spoke about Crimea’s return “home”. A bridge would be built, every kilometre of road would be repaired, every Russian family would holiday in Crimea, and every new innovation would be brought to the peninsula. Crimea was hailed as an object of universal pride in Russia.

But the enthusiasm is over now. Two years later, another side to Russia’s integration of Crimea is more evident: the constant and unshakeable feeling of suspense, Western sanctions, the blockade, intolerance of dissent, and the exiling and persecution of the Crimean Tatars.

The militarisation of Crimea

For centuries, Crimea has played an important strategic role for great powers seeking to dominate the region. Initially, it was a platform to project power into Eastern Europe. The Ottomans ruled it for three hundred years. At the end of the eighteenth century, Catherine the Great annexed Crimea, making it a launchpad from which Russia could project power into the Black Sea and beyond.

When Russia again annexed Crimea in 2014 it quickly set out to militarise the peninsula, beyond the presence of its existing Black Sea Fleet at the Sevastopol naval base. Crimea is now awash with weaponry and soldiers – some 28,000 in total. Moreover, according to strategic plans for 2020-2025 the Russian Ministry of Defence is going to deploy a total of 43,000. It is more than half the number that were present in Soviet times, but triple the number before annexation.

Moscow continues to upgrade and deploy new military hardware. All airports, militarily strategic roads, and ships are under full-fledged reconstruction processes, and the main aim is to militarise the peninsula to the same level as in Soviet times. Russia feels that Crimea could be its Achilles heel. As it currently has no land border with Crimea – the bridge over the Kerch Strait is still being built – the territory will remain a separate and exposed outpost of the empire.

Russian military exercises in the Black Sea in August 2016 showed that if tensions escalate, Crimea is likely to be the first outpost of Russia’s military might. Moscow is planning to deploy a regiment of long-range bombers that have a range that extends across the whole of Western Europe. It has also bolstered its Black Sea Fleet force in Sevastopol by adding several missile ships, new submarines, and a new frigate. The Russian Air Force has been expanded, too. New military airports have been opened all over Crimea, several new aircraft have been deployed, and Crimean airspace is now protected by S-400 surface-to-air missile systems. They allow Russia to control the skies above the Black Sea.

According to the pre-annexation agreement with Ukraine, Russia could only have forces associated with the fleet in Crimea. The deployment of tanks and other ground forces now changes everything. After the annexation, many Ukrainian servicemen decided to join the Russian armed forces meaning that Moscow has gained not only trained professionals and equipment, but also military bases in the territory. All this has significantly strengthened Russia’s military presence in the Black Sea region and has turned Crimea into a kind of “unsinkable aircraft carrier” for Russia. This became evident when Russia launched the air campaign in Syria using Crimea as a major transport interchange for its operations.

The recent disagreement over alleged Ukrainian insurgents trying to enter to peninsula so as to conduct terrorist attacks to destabilise Russian influence demonstrate that Russia could feasibly use the exposure of Crimea as a pretext to enter to Ukrainian mainland and open a second front against Ukraine.   

All the Kremlin’s men

Since the annexation, the Kremlin has largely relied on local nationalists to establish a new power vertical in Crimea. Russian Minister of Defence Sergey Shoigu and his loyalists have been in charge of the integration of the peninsula.

Shoigu’s longstanding confidant – Vice Admiral Oleg Belaventsev – was made presidential envoy to Crimea in March 2014. He has followed Shoigu from the Ministry of Emergency Situations to the Ministry of Defence. When Shoigu was the governor of Moscow region in 2012, Belaventsev headed the regional government. And when Shoigu was transferred to the Ministry of Defence, his protégé took over as General Director of Slavyanka – a company that provides services to the Russian army.

It was Belaventsev who drew up the personnel structure of the Crimean authorities, and made Sergei Aksyonov, who previously led the Ukrainian party Russian Unity, head of the Crimean government. Belaventsev also appointed Sergei Menyailo as governor of Sevastopol – a former military man who was deputy commander of the Black Sea Fleet during the war with Georgia in 2008. According to some sources, he is married to Shoigu’s sister.

The same nepotistic principles of recruitment have been at play in the lower levels of government too. The jobs of deputies, ministers, and heads of state-owned enterprises were distributed among friends and relatives of Prime Minister Aksyonov and local businessmen.

This means that all power in the republic is concentrated in the hands of one clan. This follows classic Russian management principles, with the only difference being that federal officials and members of Vladimir Putin’s team pay much closer attention to Crimea than to other regions.

Russia has reverted to the tradition of entrusting the running of Sevastopol city to military personnel, specifically someone from the navy. However, the Kremlin’s reliance on military men that have been parachuted in by Moscow has caused infighting with local civilian elites in Sevastopol. They have tried to put up a fight, but their ardour has been tempered by the 120 criminal cases opened against them for corruption and abuse of power.

In February 2016, there was a very personal an attack on Aksyonov himself after there was a leak that he had been involved in one of the biggest criminal groups in Ukraine in the 1990s. The leak was meant to remind the local Crimean elite that the FSB had files on them that it could use at any moment. There have been purges in the Crimean elite of those close to Aksyonov and Konstantinov (speaker of parliament) and who were active in the criminal world of the 1990s. Aksyonov was not happy about this and has requested several times that Moscow fire the head of the FSB.

Putin’s statement that the person responsible for embezzlement of funds for the Kerch Strait Bridge "should be hanged" has discredited the civilian authorities yet further. This was a warning to Aksyonov and his government. With people like Aksyonov in positions of power, the Kremlin clearly prefers to have the military in control of Crimea. 

Business, supply, and demand

After the annexation, it seemed that the most difficult task for Moscow would be the integration of civil servants, authorities, and management. But it turned out to be harder to integrate local businessmen than officials to the new Crimea. Companies registered as Russian are afraid of operating in Crimea for fear of Western sanctions. Consequently, Crimea has its own banks, mobile phone operators, and other businesses designed to create the appearance of the presence of Russian business.

During the transitional period, which lasted more or less until the end of 2014, Russian power structures were created based on the existing Ukrainian ones. The titles and structures were renamed, but the people stayed the same. The same thing happened with the police and the justice system, though judges had to pass additional qualifying exams to retain their positions.

The Russian strategy to integrate Crimea was fairly straightforward. If a civil servant expressed their loyalty to the new regime, they could keep their job even if this meant violating the oath of allegiance to Ukraine. To integrate this loyal majority, a multitude of regulations was passed – from a new constitution and a presidential order of 23 March 2014 to create executive bodies, to the procedures for issuing Russian passports and official documents on the basis of Ukrainian documents.

There is a so-called “dacha amnesty” that will last until 2018 in Crimea. This gives people the possibility to claim ownership of land in Crimea with minimal documentation as proof. This procedure is important for those who were unable to re-register their land in time under the new rules. Even on such a sensitive issue as land tenure, there was an attempt to avoid friction. However, it is hard to say how effective this has been.

However, with private entities the situation has been more complicated.

Crimean companies have been forced to reorient themselves to the Russian market. But as there is no land link between Russia and the peninsula, all goods have to be transported by ferry across the Kerch Strait. This means that prices for both imported and exported goods are higher in Crimea, and this discourages many potential mainland suppliers. Delivery times are also longer. Before the annexation, goods came in over land from Ukraine in two days. Delivery from Russia takes a minimum of five days and up to two weeks.

Local companies in Crimea are not used to keeping large reserves and coordinating large-scale logistics for imports, preferring instead to order goods as they need them. This led to a difficult transition period as Crimeans had to get used to Russia’s slower pace of delivery.

Tourism – the republic’s traditional strong suit – is also under pressure. Russians seeking alternatives to Turkey and Egypt are not exactly rushing to Crimea. It's not just the poor quality of service and unjustifiably high prices. The catch is in the logistics again. A comfortable trip to Crimea involves flying there, which automatically rules out a cheap holiday. One can also get to Crimea by ferry (or train or car) but this is very inconvenient. Moreover, the airport and the ferry both have limited capacity, which limits the extent to which tourism can be developed.

Only Russian airlines fly to Crimea, further limiting international tourism. In 2014, Aeroflot opened a subsidiary company in Crimea, Dobrolet, which immediately came under sanctions and so was closed a few months later. This was when Aeroflot decided to serve Crimea with its own flights. Ironically, now the company sells tickets on its website to Simferopol, and New York and Berlin. But flight prices will remain relatively high unless there are direct state subsidies for flights, which seems unlikely at this point.

Despite the increase in advertising and the active promotion of subsidised trips through trade unions, Moscow has forecast that for 2016 there will be fewer than five million tourists travelling to Crimea. When Crimea was part of Ukraine there were about six million per year. This is unlikely to change soon. Rather, Western sanctions and transport difficulties unilaterally imposed by Ukraine will only make Crimea’s economic problems worse, exacerbate unemployment, and drain the Russian budget further.

Today, government expenses are about three times greater than revenues. In 2016, the government has estimated 24 billion roubles of income and 86 billion roubles in expenditure. The difference will be covered by the national budget. So two of every three roubles in the Crimean economy are made up of subsidies. Local businesses survive because of public sector employees who buy their goods on state-subsidised wages. All this together creates a positive view of Russia as a "liberator" and "defender", instead of "conqueror" and "invader".

The difficult economic situation and the obvious inefficiency of the local authorities has not had much impact on people’s political loyalties. Almost everyone has signed up for a Russian passport, though just 20,000 Crimeans have given up their Ukrainian one (and these are mostly government officials and security forces who probably had little choice in the matter. Most people have two passports now – Ukrainian and Russian – and are hedging their bets in this time of deep and continuing uncertainty.

People no longer recognise their home. Reality has been turned on its head – transforming Crimea from tourist hotspot to military outpost. Russia has turned Crimea into a powder keg – but there’s no telling when it will light the fuse. 

The European Council on Foreign Relations does not take collective positions. This commentary, like all publications of the European Council on Foreign Relations, represents only the views of its authors.