Crimea Attracts Significant Foreign Investment Interest

By J29 (Own work) [CC BY-SA 3.0], via Wikimedia Commons

In the aftermath of the Ukraine Coup in 2014, which saw President Viktor Yanukovych deposed, in what became known as the “Kiev Maidan”, Crimea became part of Russia after almost 97 per cent voted in a local referendum supporting such a move. Last week, Crimea reinforced that political bond, giving 73 percent to the ruling United Russia party in the Duma elections. Ukraine did not recognise the outcomes of the referendum in Crimea in 2014, and accused Russia of annexation. Consequently Crimea became something of a geopolitical hot potato.

Crimea was a political embarrassment to Washington who did not foresee Russia’s actions and to this day insist that it was an illegal annexation and the US media suggested that the only industry in this “province of Ukraine” was repression, disappearances, political prosecutions and other legal and physical attacks on anyone questioning the Russian occupation.

In July 2016, Deputy Prime Minister of the Crimean government Ruslan Balbec said that training camps of Islamic radicals were allegedly detected near the northern Crimean borders, accusing Ukraine of complicit involvement. “The European Union should impose sanctions against Ukraine, as there is ongoing active work on the recruitment of terrorists on the territory of Ukraine. We regard the Ukrainian authorities as accomplices of terrorists, since they did not take any measures to neutralise the religious terrorist groups that are concentrated in the Kherson region of Southern Ukraine and involved in the blockade of Crimea,” a member of the Crimean government, Zaur Smirnov said.

In further developments, Russia’s main domestic security agency said one of its agents and an army soldier were killed while fending off what it described as a series of attempted terror attacks by Ukrainian “saboteurs” in Crimea. Ukraine denied these allegations. Vladimir Putin condemned what he described as a “stupid criminal action” by the Ukrainian authorities and vowed to take additional steps to ensure security of Crimea.

In August 2016, Russia deployed the S-400 “Triumph” anti-aircraft missile system on the coastal port of Feodosia as Moscow sought to fortify the contested Black Sea peninsula from potential NATO intervention. This air-defences system is capable of firing both long- and medium-range missiles and is designed to reach targets up to 250 miles away.

In the same month, Georgy Muradov, Crimea’s permanent representative with the Russian president, expressed his concern that the European Union must stop violating the Helsinki accords by preventing Crimean people from visiting their relatives, who live in EU countries. The Helsinki Final Act was signed by 35 countries in August 1975, to improve relations between the nations of the former communist bloc, comprising the Soviet Union and the countries of the Warsaw Pact. These accords included obligations to ensure people’s rights to free movement, exchange of information, education, cultural contacts and medical care.

“I want to call on the European Union to stop violating the Helsinki Final Act and not to block family ties of our Crimean communities with their fellow citizens who are living abroad. They are not granting visas, they are impeding communication between relatives which is a direct violation of the Helsinki Final Act. That refers to Germany, Bulgaria, Greece, Italy and many other EU states,” Muradov said at a press conference.

Despite the aforementioned difficulties in Crimea’s transition to Russia, foreign investment in Crimea continues to flourish, with prospective investors looking to take advantage of the Crimean tax-free economic zone.

In April, Italians visited Crimea looking for land to create an agro-industrial park via building greenhouses, the development of livestock breeding and processing agricultural goods. The climate is advantageous for such a venture and sanctions would not be an obstacle as they could sell the produce in the Russian market. This also has cost benefits in that there are no customs or logistical considerations to deal with.

In further developments, a delegation from Saudi Arabia expressed an interest in investing in the region in July, with a particular focus on tourism, agriculture and the production of building materials. French and Italian wine producers wish to develop grape and wine production in the region. Turkish and Chinese businesses are also planning large investments in the region. Turkish businesses are considering investing over $12 billion and have already signed a deal to construct a five-star hotel in Simferopol.

A delegation of German businesses recently arrived for a second visit. The first visit resulted in the establishment of the German-Russian Society for cultural and industrial relations. This visit proposed investment in recycling waste, hotels and tourism. The figures are modest at this stage – some €250 million – but that is perceived as just the start of a major investment initiative in the region. Bernhard Miller, from the delegation, stated that many German businesses are looking at investment opportunities in Crimea despite the ongoing sanctions. The German delegation were keen for the west to realise that Crimea is open for business and is an attractive investment proposition.

The development of the Crimea Bridge across the Kerch Strait is an ambitious project which is one example of Russia’s commitment to investment in the region. It will be 19km in length and is expected to carry 40k vehicles a day on the motorway bridge and a two track railway line carrying 47 pairs of train daily.

There is no doubt that investment in Crimea has only come about because of ceding to Russia. If it remained under the authority of Ukraine there was a reluctance to invest in the region due to concerns about the Kiev administration. Crimea has welcomed such investment opportunities with open arms allowing direct contact with Crimean officials minimising red tape and bureaucracy.

Whatever the West may choose to think, Crimea democratically chose to become a part of Russia and the only reason there is consternation in Washington and other nations is because of its strategic position in the Black Sea. The actions of Russia in Crimea in 2014, in the aftermath of the Kiev Maidan, were a clear demonstration that there was a shift in the global geopolitical landscape in progress. The last two years have served to reinforce that perspective as Russia goes from strength to strength on the world stage.

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