Annexing Crimea Could Prove Costly for Russia

It is unclear what benefits Russia would derive from annexing the peninsula.

If Russia annexes Ukraine’s Crimea, as the region’s parliament there says it wants it to, it could prove a costly enterprise with seemingly little benefit Russia does not already enjoy.

Lawmakers in the Black Sea region voted on Thursday to join the Russian Federation and promised to call a referendum on the Crimea’s status in ten days’ time.

Russian troops entered the peninsula in late February after Ukraine’s elected president, Viktor Yanukovich, was deposed following months of protests against his decision to pull out of trade talks with the European Union and deepen relations with his country’s former Soviet master, Russia, instead.

Russian president Vladimir Putin denied on Tuesday that he had sent soldiers but vowed to protect Russian speakers and Russian interests in a region that was part of the Russian Empire for almost two centuries before Soviet leader Nikita Khrushchev transferred it to Ukraine in 1954.

The Crimea headquarters Russia’s Black Sea Fleet at Sevastopol and the country has a lease on naval facilities there until 2042. Ukraine’s interim authorities do not propose reneging on the lease which is part of a broader agreement that gives them access to Russian natural gas supplies.

Annexation would permanently secure Russia’s military presence on the peninsula, which enables it to project power into the Black Sea and the Mediterranean beyond. Some 30 percent of Russia’s maritime exports are also transported through the Black Sea.

Moreover, possession of the Crimea could shorten the submarine part of Russia’s South Stream pipeline and thus make its construction less expensive. The pipeline is due to become operational and start pumping gas into Eastern Europe by 2015.

But there would be high costs as well. The value of Russia’s currency and Russian companies has already dropped as a result of its intervention in the Crimea which alarmed markets worldwide. If Russia admits the region, presumably as an autonomous republic, it would likely be cut off from the remainder of Ukraine and become wholly dependent on Russia for basic goods.

As Mary Mycio wrote for Slate earlier this week, the peninsula currently depends on the rest of Ukraine for virtually all its electricity and water and between 60 and 70 percent of its food. “That’s why the Crimea is even a part of Ukraine,” she pointed out. “Don’t believe that myth about the peninsula being a ‘gift’ from Soviet leader Nikita Khrushchev to what was then the Ukrainian Soviet Socialist Republic.”

While ethnic Russians and Russian speakers are in the majority in the Crimea, its native population is growing and likely to resist Russian annexation.

The Tatars, a Muslim group that was deported en masse to Central Asia by Joseph Stalin in 1944 on suspicion of collaborating with the Nazis, have been returning to the peninsula since the collapse of the Soviet regime in 1991 and are now estimated to make up 12 percent of the population.

Helena Yakovlev-Golani and Nadiya Kravets, postdoctoral scholars at the University of Toronto and Harvard University, respectively, write in The Washington Post that Tatar groups “have already called for Turkish mediation and refuse to recognize the recent seizure of power in Crimea as legitimate.” They warn that annexation by Russia could lead to sectarian unrest, if not violence.

The economic and political costs of sustaining the Crimea might nevertheless be bearable and Russia’s leaders could decide that strategic imperatives take precedence. But on this plain, it is also unclear what Russia stands to gain from annexation.

Mark Galeotti, a New York University professor and Wikistrat analyst, wrote at his blog last week that “Russia already ‘has’ Crimea in the ways that matter to it.” By annexing it, Russia would no longer be able to “use the peninsula as a political and economic agent inside Ukraine,” he argued.

It also makes this much more clearly a question of Ukrainian state sovereignty and would stiffen resolve in the country and ensure greater international support for Kiev. Russia often doesn’t mind being the bad guy but it doesn’t court that status willfully.

The European Union rushed in on Thursday with promises of €11 billion in financial aid — pending International Monetary Fund involvement — and finalized parts of the association agreement that Yanukovich had rejected. Ukraine will have enhanced access to the European single market. Leaders vowed to reduce tariffs for Ukrainian exports by €500 million per year for industrial goods and €400 million for agricultural and related products.

Such preferential treatment, The Economist points out, is subject to approval by the World Trade Organization — where it could be challenged by Russia. But an attempt to do so can take up to two years, “which gives ample time for the full free-trade deal, which is WTO-compliant, to be signed.”

So Russia’s intervention in the Crimea has already pushed Ukraine into the European sphere. Outright annexation would undoubtedly convince the authorities in Kiev that they have no choice but to accelerate the process.

One comment

  1. Great post.

    I think that what Russia wants from this, they can get without annexation. And if done properly, they could re-gain some ‘face.’ But, Crimea, Ukraine, and Russia are tied in an intricate dance of almost war for several weeks before we will see an end to this.


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