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Crimea is Becoming a Russian Money Pit

By Sheril Retson

After the drunken euphoria of annexing Crimea, Putin’s Russia finds itself with a bad hangover. The peninsula is a money pit: Inflation is high and Russian taxpayer money injected into Crimean infrastructure and used to subsidize pensions and benefits for local residents is now either unaccounted for or eaten away by the rising cost of living on the peninsula. Russian tourists promised Potemkin’s “paradise” find themselves in Soviet era housing—offering poor service at exorbitant prices. Lacking the revenue once brought in by regular Ukrainian visitors, Crimea clings to Russia to save it. In an ideal world, both regions would re-evaluate their positions, cut losses, and part ways. But not in Putin’s Russia. With the country in deep economic recession, the government opts instead to build a $4.5 billion bridge. 

When Russia annexed Crimea in 2014, the takeover was a true propaganda success. Russia positioned itself as a country ready to actively defend its interests in the international arena and able to bear the c osts of its actions. Yet, the economic sanctions brought against Russia in response to the illegal annexation have heavily impacted Crimean economy. Over 60 percent of local firms have stopped operating, and the number of individual entrepreneurs has decreased threefold

The Crimean tourism industry was hit especially hard. According to Ewa Fischer and Jadwiga Rogoża of the Centre for Eastern Studies, Crimea had around 6 million visitors a year before the annexation. In 2014, the number of vacationers declined to 3.8 million before dropping an additional 35 percent in the first half of 2015. Prior to 2014, over 70 percent of visitors came from Ukraine. Since Western companies stopped organizing tours to Crimea, hardly any foreign visitors came in 2014 or 2015. The majority instead came from Russia—mostly thanks to a massive state-run campaign promoting “patriotic vacations” in Crimea and subsidizing the visit for Russian public officials, youth, and pensioners. 

Citing the lack of physical connection between the mainland and the peninsula as the impediment to Crimea’s prosperity, the Russian government announced an ambitious plan to connect Krasnodar Kray and Crimea with a 12-mile rail and motor bridge stretching over the Black Sea. According to Daria Litvinova of The Moscow Times, with outrage growing due to the collapse of the transportation system on the peninsula, the Kremlin's decision to build the bridge could still be considered politically astute despite the prohibitive costs, poor geological conditions, high seismic activity, and adverse weather. 

Building the railway and motor passage will likely eat up 70 percent of the Russian Federation’s annual funding for all roads and bridges, but there does not appear to be a clear economic imperative for constructing the bridge, nor does the government have any reliable estimates on when and how the bridge would recoup its costs. So, why do the Russian people continue supporting a project with the potential to deepen the economic recession? The reason lies in the Russian psyche. The Soviet propaganda machine, perfected by Putin’s information war, successfully cultivated generations of Russians with unwavering beliefs in a bright future at the expense of everyday survival. Enthused by the illusory idea of an unbreakable Russian spirit and projects that rekindle memories of grandeur, like the Baikalo-Amur Siberian Mainline, which runs to the north of the Trans-Siberian Railway in eastern Russia, many Russians see the Kerch Bridge as the next shining symbol of Russia’s glory and might. The bridge is seen to fix everything—the crumbling economy, the failing infrastructure, the lackluster service. Most importantly, it shows the rest of the world that Russia is stronger than ever in the face of its enemies’ plans to bring the country “down to its knees.”

Where does this leave Crimea? Analysts predict that, at least until 2020, Moscow will continue subsidizing a region far larger than the other breakaway regions Russia supports—it is 40 times the size of South Ossetia, eight times the size of Abkhazia, and four times the size of Transnistria. Without foreign investment or money flowing in from Ukraine, Moscow will have no choice but to keep the peninsula afloat. Crimea’s public sector employees and pensioners will continue to see their benefits eroded by high inflation. The small business owners will continue spiking prices during summer months to offset the loss of revenue during the winter, when weather conditions keep visitors away. The Kerch Bridge will be completed, but with Russian government once again allowing its citizens to vacation in Turkey, the flow of tourists into the region will diminish. If Russians are also allowed to vacation in Egypt, it will all but eliminate the tourist traffic to the Crimea region. With a lack of competition driving the incentive to improve customer service and accommodations, the Crimean tourist sector will continue to erode—forcing people to relocate or find other means of survival. Putin’s nationalist idea of resewing the Soviet Union one piece at a time will continue bringing short spurts of euphoria, but will largely be forgotten by Russians in their everyday struggle to make a living. In the end, the Kerch Bridge will be a bridge to nowhere.



Sheril Retson is an Executive MBA graduate at St. Mary’s College of California. 

[Photo courtesy of]


Anonymous's picture
Actually the US was looked on

Actually the US was looked on as an out of control bully when Bush was president. Perceptions of the US have vastly improved since Obama became president - particularly in Europe but also in every other continent. Russia on the other hand is now the most unpopular country in the world - see for example Your rewriting of the history of the Ukraine crisis is similar nonsense. There was never a dictator threatening to ban the Russian language in Ukraine for example.

Anonymous's picture

The Moscow Times is a virulently anti-Russian, Western-owned rag sheet which can not publish a single story without bashing or demeaning Russia, the Russian government, Russian organizations or individual Russians. Unlike the US, all points of view (Freedom of the Press) thrive in the media. Cutting and pasting from the Moscow Times is similar to cutting and pasting from any similarly Russo-phobic Western media outlet, like, well, ALL of them. An "executive MBA" who sits in an ivory tower, her opinions guided by CNN, does not live in the real world - a world which has seen, in the past 8 years, the esteem of the United States of America fall to gutter levels. The USA is now looked on by the rest of the world not as a democratic ideal, but as an out-of-control bully, amoral, judgmental, even funding the terrorists it claims to be at "war" with. "Putin’s nationalist idea of resewing the Soviet Union"... Putin is far less nationalist than a rogue US State Department and NATO which willy-nilly bombs countries around the world and is now engaged in Syria to overthrow yet another government by military force. Crimea has been Russian for centuries (if the writer had been there she would know this), despite the Ukrainian Khrushchev's redrawing of the map of the USSR in the 1950's. Crimea seceded from Ukraine after a violent US-funded coup (according to the State Department's Victoria Nuland) in Kiev overturned a legitimately-elected government, and the newly appointed dictator threatened to ban the Russian language. "...but will largely be forgotten by Russians in their everyday struggle to make a living." Crimeans also enjoy a quadrupling of their formerly-pitiful pensions under Russia - maybe that's why they don't want to work. "In the end, the Kerch Bridge will be a bridge to nowhere." Gotta get in that Sarah Palin bashing!
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