Crimea euphoria fades for some Russians

MOSCOW Sun Jul 6, 2014 7:15am EDT

Women inspect T-shirts, displaying images of Russia's President Vladimir Putin, which are on sale at GUM department store in central Moscow, June 11, 2014.  REUTERS/Sergei Karpukhin

Women inspect T-shirts, displaying images of Russia's President Vladimir Putin, which are on sale at GUM department store in central Moscow, June 11, 2014.

Credit: Reuters/Sergei Karpukhin

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MOSCOW (Reuters) - When she was asked to give up a day's pay to help Crimea, Russian hospital therapist Tatyana could not hide her anger - why should she subsidize others when struggling to make ends meet herself?

Living in southern Russia close to the border with Ukraine, Tatyana was caught up in the euphoria that gripped the nation when Russia annexed Crimea in March and still welcomes "our" people back in the fold.

But more than three months on, she is worried that her wage of 9,000 rubles ($260) a month is not stretching as far as it used to, and fears she will be forced to take on extra work to cover the rising cost of food and utilities.

Patriotism spurred by President Vladimir Putin's annexation of Ukraine's Crimea still runs deep in Russia, but the cold reality of paying for the Black Sea region is setting in and threatens to test an economy brought low by Western sanctions.

In Tatyana's hometown of Taganrog, the request for hospital workers to sacrifice a day's pay was taken up by only a few - by those people, she says, who wanted to impress their employers.

"The bosses informed us of this in June in a tone which made clear they recommended it ... They distributed and asked us to fill out a form for the donation. People started complaining - why should they donate to Crimea?" said Tatyana, 52, who declined to give her surname for fear of retribution.

"In our department, not one of us made the donation and our boss understood because she was of the same opinion," she said by telephone.

Initially people across Russia were keen to help Crimea, convinced by Russian media that the Russian-speaking region was under threat from fascists in the Ukrainian capital Kiev who, they were told, were behind the overthrow of a president sympathetic to Moscow in February.

Similar collections were set up in state enterprises and people were pressed to give "humanitarian aid".

Russians were also encouraged to visit Crimea - once the playground of the Soviet elite - and some state-controlled companies said they would ship their workers to the region's spas for group summer holidays.

Russia even started a new low-cost airline to Crimea, Dobrolyot (Good Flight), which made its maiden flight to the region's capital, Simferopol, last month.

But with the first wave of tourists back in Russia and complaining about bad service and amenities, the 'champagne effect' of feeling that Russia had outwitted the West over Crimea may have started to wear off.

Rising prices and stagnating wages may make hundreds more Russians think twice about the government's price tag of between 800 billion and 1 trillion rubles ($23-30 billion) for Crimea, and may come to pose the first real threat to Putin.


The Russian leader for now looks unassailable, with popularity ratings running at over 80 percent and his critics reluctant to speak out against him for fear of being labelled a traitor against the popular cause of building a Greater Russia.

Russian markets have bounced back, recovering all their losses since the start of the year to trade slightly higher, and some bankers are encouraging their clients to dive back into a market they say is undervalued.

But Russia's economy, riddled with corruption and nepotism, is still weak and, increasingly isolated by Western sanctions, is for now teetering on the edge of recession.

Fighting in eastern Ukraine, an influx of Ukrainian refugees and the threat of further sanctions all hang over an economy, which the International Monetary Fund sees growing by just 0.2 percent this year. Russia's central bank hopes for 0.4 percent and the Economy Ministry 0.5 percent growth.

After weeks of saying visa bans and asset freezes imposed by the European Union and United States against a number of firms and officials close to Putin could not harm the economy, Russian leaders are increasingly testy over the damage wrought if not by the current sanctions, then by the threat of more.

"In fact, we are dealing with a new offensive type of weapon," Russian Deputy Foreign Minister Sergei Ryabkov said of the U.S. sanctions in an interview with the Kommersant daily.

Investment has all but dried up, forcing the government to dip into reserves meant for pensions to finance projects, and the government says it will sell a stake in Russia's state-controlled oil company, Rosneft, to cover some of the costs of developing Crimea.

Finance Minister Anton Siluanov had to backtrack after coming under fire for saying that all the funds accumulated in Russia's personal pension plans in 2014 had been spent on "anti-crisis measures" and on Crimea.

The next day, he said Russians "would lose nothing", but stopped short of saying whether the sum of $8 billion would be returned to the personal pension plans.

While such measures may take a while to hurt the population, Karen Vartapetov, an analyst at Standard & Poor's rating agency, said a more immediate danger was the stagnation of real disposable incomes, which show only 0.2 percent real growth (adjusted for inflation) this year.

"Zero growth of real disposable incomes against continuing growth of public sector pay indicates that salaries in the private sector and non-salary incomes are shrinking," he said.

"The economy outside the public sector has been stagnating."

On top of this, the Finance Ministry's efforts to try to meet Putin's demands to increase public sector pay, including proposing a new regional sales tax, mean that prices could rise further, putting pressure on stretched salaries.

In the major cities such as the capital Moscow and Russia's second city of St Petersburg - where Putin faced street protests in the winter of 2011-12 that at times drew tens of thousands - core inflation running at an annual rate of more than seven percent has had little impact on a population largely wealthy enough to cover higher prices.

But in Taganrog, Tatyana has little to fall back on out of her 9,000 rouble per month salary.

"Prices are continually rising, for utilities, and for food," she said.

"I also rely on private consultations ... I give consultations outside work hours at people's homes. Plus some patients also give tips, or bring presents to consultations at the hospital, but there are fewer and fewer of them."

($1 = 34.3325 Russian Roubles)

(additional reporting by Alexander Winning, Katya Golubkova, Lidia Kelly and Gabriela Baczynska, editing by Anna Willard)

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Comments (23)
And the real money isn’t being spent by Russia yet on the infrastructure requirements, i.e. the bridge to connect to the Russian mainland, electrical service, water and sewage treatment plants.

Jul 06, 2014 9:39am EDT  --  Report as abuse
pyradius wrote:
Well, that sure was a short honeymoon, wasn’t it?

To anyone who likes to point to Putin’s approval rating, just remember folks, in Soviet Russia, Poll Rates You!

Jul 06, 2014 10:25am EDT  --  Report as abuse
EconCassandra wrote:
@ pyradius –

Well, that sure was a short honeymoon, wasn’t it?

To anyone who likes to point to Putin’s approval rating, just remember folks, in Soviet Russia, Poll Rates You!


You may be interested in the truth for a change, or perhaps not, since it would disrupt your whole core belief system that the US wealthy class is somehow better and more deserving than everyone else.

I understand that for a sycophant such as yourself it could lead to serious mental issues — like thinking for yourself for a change.

By the way, since you mention your intimate knowledge of Russian polls, you should have mentioned that Putin’s popularity is around 80% approval rating, while Obama’s is challenging Bush II for the worst president the US has ever had.

In any case, since you asked, this is what Russia is doing for Crimea that Ukraine never did — lift them out of grinding poverty.


Russia agrees to open gambling zones in Crimea, Sochi

The Russian State Duma has approved a bill to establish gambling zones in Crimea and Sochi. It’s aimed at making the areas more popular for tourists, and attracting more investment.

The exact location of the gambling zones will be determined by the local government, ITAR-TASS said.

“The creation of a gambling zone in Crimea will attract additional investment to the region, create jobs and improve the tax base,” said Anatoly Karpov, the First Deputy Chairman of the Duma Committee.

A gambling zone could add an additional $720 million into the Crimean economy, say analysts. Moreover “an increase in tourism as well as the development of hotel businesses and catering can be expected,” Karpov added.

The head of the Crimean government Sergey Aksyonov said that most probably the gambling zone will be located in Yalta, but where exactly has not been decided.

“It will be set in a certain single spot,” Aksyonov promised.

Investment is expected to be at least $100 million and could reach $1 billion. Many potential investors have already sent proposals to the authorities.

At the second reading of the bill on Friday government officials supported the amendments to establish a gambling zone in Sochi.

Most likely it will be located in Gornaya Karusel which is part of the Esto-Sadok Krasnaya Polyana resort. It currently belongs to Sberbank and does not attract tourists.

Gambling was restricted in Russia in 2009 and is only allowed in Altai, Krasnodar, Primorye and the Kaliningrad regions.


I have to leave to do some personal things now, Pyradius.

So don’t worry if I seem non-responsive to your never-ending wealthy screed.

I will not abandon you in your never-ending search for truth, justice and the American Way.

Jul 06, 2014 3:36pm EDT  --  Report as abuse
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