By John Bonar
Surrounded by the Black Sea, the Crimea peninsula is more than twice the size of Yorkshire and about the same size, at 10,425 sq. miles, as the US state of Maryland. It is a hive of activity with new building ranging from a recently finished new terminal at Simferopol International Airport to a $4.5bn new road and rail bridge across the Kerch Strait connecting Crimea to Russia. The hills around the historic Black Sea town of Yalta are sprinkled with new hotels and apartment blocks. Since the 2.248 million inhabitants voted in 2014 to secede from Ukraine and rejoin Russia Crimea has lived on the edge.
While most of the inhabitants – a mix of ethnic Russians (58%), Ukrainians (24%) and Crimean Tatars (12%) – can relax that their languages are now enshrined as the three official languages of Crimea – a handful of former Tatar officials have sought the support of Kiev in voicing disagreement with the Referendum. These individuals are behind most of the claims that resonate in international bodies of human rights abuses by the Russian “invaders”.
On a week’s visit there in November for the conference on “Crimea in Modern International Context. Friends of Crimea Forum.” I found no invaders; no tanks parading the streets of Yalta and Simferopol and no gun-toting thugs manning checkpoints. In fact the only policeman I saw was the escort officer for our busload of delegates as we visited Vorontsov Palace for a classical concert.
In the words of retired British Major General Mungo-Melvin , in his weighty tome, Sevastopol’s Wars: Crimea from Potemkin to Putin, “throughout Sevastopol’s rich past one detects strong evidence of a patriotic and zealous revolutionary spirit. Sevastopol has energised and enthused its garrison, fleet and citizens alike for over two centuries: it survives today.”
There was no Russian invasion of Crimea in 2014.
The Russian forces there were for the defence of Sevastopol under a Treaty with the Ukrainian government of the day and their movement into other parts of Crimea at the invitation of the regional government for peace-keeping purposes was also governed by the same treaty. By November last year, they were long-since back in their barracks.
Not only within the Crimean population but in mainland Russia from Moscow to Vladivostok the re-union of Crimea with Russia is overwhelmingly welcomed with emotional rejoicing.
There is no disputing that the over-reaction of the West – United States, the EU and United Nations – in refusing to recognise CrImea as part of Russia and the imposition of sanctions against Russia and particularly Crimea has had an impact. More than anything it has strengthened the resolve of the Russian people to withstand the attack. The spirit of Leningrad, Stalingrad and Sevastopol is resurgent among the majority of the Russian people.
If you want to do business with Crimea, you first of all have to visit there.
There are no direct international flights, so it is via St. Petersburg, Moscow, Yekaterinburg, Sochi, Novosibirsk or Rostov on Don. Once in Crimea most credit and debit cards will not work. Your last chance to get cash is via ATMS at the airports in mainland Russia. If you want health insurance, most western companies will not accept your claims even if they accepted your money for a policy. Best use a Russian company such as Alfa Strakhovaya (https://russiatravelinsurance.com/) .
Book hotels in advance and see if they have a payment arrangement with a mainland travel agent or other representative. There are no Hiltons or Holiday Inns but there is a very pleasant huge Intourist hotel in Yalta and London travel agent and visa facilitator, The Russia House, can arrange payment (+44 020 7403 9922).
These inconveniences may not last long as reality sinks in on the European Union that with Russian counter-sanctions banning the import of agricultural products from sanctioning countries, Europe is paying the price for an American initiative. Austria, France, Germany and Italy are among the countries paving a path to Moscow’s door. Polish apples, Greek peaches, Irish butter, Italian cheese and Scottish smoked fish are all banned from Russian grocery shelves. UN Special Raporteur, Idriss Jazairy, published a report last September that the European Union has been losing at least $3.2 billion every month as a result of the anti-Russian penalties over the last three years.
The side effect has been that Russia has gained a large degree of self-sufficiency in the agriculture sector, particularly in grain, poultry and pork. Tumbling oil prices which hit Russian incomes also contributed to a drop in demand.
So, outside of sanctions, which the New York born commentator Paul Goncharoff, who is a consultant to Yes! To Business says, “If one looks at both sides of the narrative coin and carefully reads through the reportage, it is increasingly obvious that the re-integration of Crimea back into Russia is a fait accompli to all except those already in perpetual denial,” where do real opportunities lie?
In the Soviet era Crimea evoked thoughts of sanatoriums in the healthy micro-climate, tourist filled beaches and wine making. All of these are attracting renewed attention today but also financial structures such as offshore trusts, decentralised new financial instruments from the world of blockchain and crypto-currency and power generation from alternative sources of energy are all worthy of consideration.
Even in Kiev, or Kyiv as the Ukrainians call it, some see crypto currency as a solution to Crimea’s banking ostracization. Mikhail Chobayan, founder of a Kiev cryptocurrency agency, has said that the likes of Bitcoin may allow Crimeans to pay for purchases made online. “Crimea has been fully deprived of an international banking system and activities involving international exchange are virtually impossible there. I am referring to purchases made online, payment for goods and services, financial operations, and so forth,” he said.
“If you wish to pay for goods and services through standard methods, such as a bank, experts say that residents in the Crimea must exert a great deal of effort. To do this, you must go to a department of the bank, stand in line, open an account, and insert rubles. And then you must go to the Krasnodar region, visit a different bank, open an account there, take funds from the Crimean account to the continental, and only then make a payment. It is unrealistic for a busy person to do this procedure. Therefore, my colleagues from Sevastopol and Simferopol buy bitcoins with rubles and freely pay for all that they need,” says Chobayan.
Mark Zuckerberg, founder of Facebook, recently called cryptocurrencies one of the most interesting questions in technology right now. He added that today, many have lost faith that “technology would be a decentralizing force.”
He said, “There are important counter-trends to this – like encryption and cryptocurrency – that take power from centralized systems and put it back into people’s hands…I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.”
The Yalta International Economc Forum (YIEF), which will take place for the fourth time on April 19-21 this year is a showcase and platform for investment deals to be made. This year organisers anticipate 500 international participants from 60 countries to swell the total participation to over 3,000. This is an increase of the two thousand people, including 220 foreigners from 46 countries who attendance. At YIEF 207 more than 30 contracts valued at more than 100 billion rubles (approximately $1.8 billion) were signed.
The YIEF’s organizers expect over 500 international participants from 60 countries to assemble in Crimea to attend this year’s Forum, said Andrey Nazarov, co-chairman of the Organizing Committee of YIEF 2018 and co-chairman of the Delovaya Rossiya All Russia Public Organization.
The event is expected to discuss issues of the global economic agenda, such as the blockchain and cryptocurrency technologies.
Georgy Muradov, Crimea’s Deputy Prime Minister and Permanent Presidential Representative of the Republic of Crimea, suggested that YIEF 2018 discuss creating cross-border transport corridors and developing artificial intelligence.
“One issue suggested for consideration is establishing international cryptocurrency exchange in Crimea. Crimea is a free economic zone; for our partners, its status entails certain specifics and some foreign states do not understand how to work with Crimea, since it is de facto in Russia, but they do not want to recognize it as part of Russia. Such a situation allows us to launch good international experimental sites in Crimea”, Mr. Muradov thinks.
Andrey Kalinin, President of the Opora Rossii All-Russia Public Organization, advised that YIEF participants should discuss the prospects for developing Crimea as a business education centre, similar to Malta.
“Every pre-requisite is there: hospitable climate, the logistics will soon be excellent, too. Why not make Crimea a second Malta, in a sense? If the universities have enough publicly financed slots, if the costs of paid-for education are low enough, it will be an excellent place to get a good education, including a business education”, Mr. Kalinin believes.
The main venue for YIEF is the Mriya resort and spa (https://mriyaresort.com/en/about/) situated on the south coast midway between Yalta and Balaclava. This 5-star hotel is rated as the best in Crimea, designed by the celebrated British architect Sir Norman Foster and accommodation consists of 360 deluxe rooms, 48 suites and 14 adjacent villas. It certainly sets the bar for middle class tourism which many see as the future for the region.
Climbing onto the same bandwagon are a group of Chinese entrepreneurs and investors from a Bahrain sheikh’s entourage who are considering a project to establish a series of 8 yacht marinas and four sheltered storm harbours along the coast at a total cost of some EUR 20 bn. The groups are both already in touch for about a year with Aleksei Andrutsky, President of the Yachting Sport Federation of the Republic of Crimea.
Has said that while the Chinese sponsors are ready to invest in building of a full-scale yacht marina network, they are facing some competition from the entourage of a sheikh from the Kingdom of Bahrain, and soon the arabs will announce their position regarding possible participation in building yacht docks on the Crimean shore.
“Negotiations regarding possible participation by foreign investors in these projects were held during the Russian Investment Forum in Sochi; we are still in touch with them and we plan to continue these talks at the Yalta International Economic Forum. We believe that, at the YIEF, we will reach certain agreements and sign an investment contract. We look forward to investors coming to Crimea and launching the transformation of the peninsula’s yachting infrastructure”, said Mr. Andrutsky.
According to the Delovoy Krym magazine, the marina network would include Kerch, Shcholkino, Ordzhonikidze, Sudak, Alushta, Yalta, Evpatoria, and Sevastopol and would take five years to complete.
Mr. Goncharoff, writing for the Russia Insider web site, reports that “trusts for the protection of foreign business have gone beyond discussion and are soon to be implemented. Foreigners and foreign companies, even those set up as local blind trusts, who make the investment decision in favour of the Crimea can rely on the full weight and support of the Russian government to assure smooth problem-free operation and repatriation of profits.”
One of the success stories post-sanctions has been agricultural development in the Crimea region, writes Mr. Goncharoff. “Concessional lending instruments have seen noted use. Favorable credit instruments have been created for agriculture, there are also mechanisms to compensate farmers for their investment costs, i.e.; greenhouses, machinery, as they know that 70% of these invested funds will be returned to them through specific state aid”, he reports
“In other developmental areas, the Crimean Council Of Ministers designated a 41-acre plot in the spa resort called “Zhemchuzhina” near Yalta as the nation’s soon-to-be gambling zone. Tourism has long been a major source of revenues for Crimea, with local officials estimating that when it opens (probably in 2018) it could attract as many as 500,000 additional tourists a year and provide employment for up to 2,000 locals.
The climate combined with resources from healthy herbs to therapeutic mud means the sanatoria and spas along Crimea’s southern coast are a haven for alternative medicine. While any are run down from a lack of investment there are some new build spas being launched. Out on the southwest of the peninsula on the territory of what is described as “the oldest balneological and mud resort in the USSR” a new 800-bed facility is nearing completion. The operators talk of specialising in the treatment and rehabilitation of patients with pathology of the musculoskeletal system, primarily, children with scoliosis.
Whatever your niche, you can probably carve it in Crimea, with a friendly, spirited people surrounding you.