| MOSCOW, March 17
MOSCOW, March 17 It will replace Egypt as a
tourist hotspot, its offshore oil and gas reserves will cement
Russia's position as the world's top energy producer, and its
spas will revive the state sector's weary workforce. At least,
that's how Russia presents Crimea.
Many in Russia hope the annexation of the southern Ukrainian
region will offer only benefits and an opportunity to celebrate
the "return home" of Russia's more than 1 million "brothers"
after being handed to Ukraine 60 years ago.
But the joy they felt when Crimeans voted resoundingly to
join Russia in a referendum on Sunday may be tempered when it
comes to the tough budget decisions needed to prop up an economy
dependent on Ukraine for energy, water and food.
Russia's chief cheerleader on Ukraine, parliamentarian
Leonid Slutsky, would not be drawn into listing the potential
pitfalls of welcoming the region of 2 million people into the
Russian Federation. He preferred to focus on the winners.
"Those who most benefit ... are the simple people, the
simple Crimeans who today are completely different from those
people I saw two weeks ago, with their faces lit up, kissing
their ballot papers," Slutsky said from the capital Simferopol.
"People are happy ... they are protected, they will return
to the country where they wanted to be for at least the last two
generations, and finally because historical truth, this
historical justice, will prevail," he told Ekho Moskvy radio.
What they regard a historical justice, making up for Soviet
leader Nikita Khrushchev's decision to hand over Crimea in 1954,
will also return a favourite holiday destination, where Soviet
industrial workers were sent to take in the sea air.
After Crimea's parliament voted on Monday to nationalise the
region's main energy company, Chornomornaftohaz, Russia may be
in a better bargaining position to wrest the offshore and shelf
rights in the Black Sea.
But while the vote plays on Russia's emotional ties to the
Black Sea peninsula, few are considering how much money may be
needed to turn around a region of shabby hotels, poor service
and a large black economy.
Crimea, a lush region known for its palm-fringed seafront
boulevards and rocky hills, is subsidised and depends on Ukraine
for 85 percent of its electricity, 90 percent of its drinking
water and much of its food.
Karen Vartapetov, an analyst at Standard & Poor's rating
agency, calculated that Moscow would need to pay 38 billion
roubles (just over $1 billion) a year to bring Crimea's per
capita budget revenue to the same level as Russia's poorest
regions, such as North Ossetia and Kabardino-Balkaria in the
restive North Caucasus.
"CRIMEA WEEKEND" HURTS
It would mean lifting pensions for about 560,000 pensioners
from an average $150 a month to Russia's minimum of $180. The
average wage in Crimea stands at $270 a month, compared with
$660 just over the border in Russia's Krasnodar region.
Russian officials say they are ready to send anywhere from
30 to 40 billion roubles in financial aid to Crimea to help it
move under Russian control - a process Deputy Finance Minister
Sergei Shatalov said would "have a very serious impact".
"There will be changes in tax laws, the issue of forming a
customs service, an internal revenue service, and the
registration of legal entities and individuals, inventories and
rules to adapt to the Russian tax system," he told reporters.
"I think it will require some time, perhaps there will be a
period of transition. I do not rule out a special tax regime."
It will all happen when Russia's economy is weakening at an
accelerating pace, partly because of its actions in Ukraine,
where Russian forces have seized Crimea and Moscow supported the
referendum in which official results showed almost 97 percent
voted in favour of joining Russia.
According to economist Jouko Rautava, of the Institute for
Economies in Transition at the Bank of Finland, economic growth
in Russia in 2014 could dip below 1 percent after the "Crimea
weekend" - well short of the Russian central bank's forecast for
1.5-1.8 percent expansion.
That will mean federal and regional budgets will have to
stretch further to cover Putin's orders to provide better wages
for public sector workers, benefits for mothers and
"The problems in the (Russian) regions are getting worse,
and there are about 10-15 regions which urgently need financial
aid to fulfil Putin's orders," said Vartapetov.
"This is a question of priorities; to help the Russian
regions or send that help to somewhere else, to another
territory," he said, adding that Crimea could cost less to
Russia if it kept taxes on profits like other Russian regions,
rather than sending them to the centre as it does now.
TURNING THE TIDE
Vartapetov said at least 10 Russian regions have debts of
around 100 percent of their revenues. "Access to the debt
markets for them is extremely difficult, and they can only hope
for help from the federal budget," he said.
"And the regions will need more every year because the
economy is slowing, tax collection is stagnating and expenditure
is growing; deficits are just widening."
Some analysts say that over time, the potential for domestic
resentment will grow, unless Crimea offers Russia something in
Its offshore oil and gas reserves could extend Russia's
energy reach, and Crimea's new leaders have already suggested
Gazprom should buy its energy major Chornomornaftohaz.
But with Western sanctions targeting those who have
"undermined the territorial integrity" of Ukraine, Russian
companies could come under pressure if they start taking over
formerly Ukrainian firms.
Some analysts say Russia may resort to a tried and tested
way of solving financing conundrums - bring in the oligarchs.
After funding much of the construction of Russia's Winter
Olympic venues in the Black Sea resort of Sochi, widely expected
to have cost more than $50 billion, some Russians suggest Putin
will persuade them to stump up cash again to transform Crimea's
tired resorts into world-beating tourism hubs.
"Crimea would be another headache and a new 'Sochi Olympics'
for the Russian oligarchs, who will be forced once again to
plough their money into a Kremlin-designed project," said a
source close to state energy company Rosneft.
($1 = 36.6510 Russian Roubles)
(Additional reporting by Vladimir Soldatkin, Darya Korsunskaya,
Thomas Grove and Natalia Zinets in Kiev, Editing by Timothy
Heritage and Will Waterman)