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Crimea’s economy finds new bearings amid anti-Russian sanctions

Experts believe that the parallel processes of economic liberalization and expansion of the government’s presence in the Crimean economy should not be considered as something abnormal

MOSCOW, January 29. /TASS/. The people of the Crimean Peninsula and the city of Sevastopol, which joined Russia after the March 2014 plebiscites, are getting successfully integrated with the Russian realties, including economic ones, despite anti-Russian sanctions by the West and Kiev’s unfriendly attitude. Experts believe that the parallel processes of the economy’s liberalization and the expansion of the government’s presence should not be considered as something abnormal. Both regions are very special in many respects.

Russia’s Minister for Crimean Affairs, Oleg Saveliev, briefed the State Duma on what has been and is being done to facilitate the peninsula’s integration with mainland Russia.

"The first strides have been taken," he said. Both the federal budget and sponsor regions were disbursing funds. Since the moment of unification with Russia the average wage in Crimea has been up 50%, and in Sevastopol, 90%. Pensions have grown, too. To put Crimea’s power and water supply infrastructures and transport in order nearly 700 billion roubles of federal budget money will be required.

The federal and regional authorities are certain that the Crimean economy has very good chances of developing itself in the context of Western sanctions - by offering lucrative conditions to investors. In this sense great hopes are pinned on the special economic zone in Crimea. The procedures of its registration are to begin in February or March. Local businesses will be exempt from the property and land tax, the transport tax and the profit tax for a period of ten years.

The state-run enterprise Krymtekhnologii, a manufacturer of computer technologies, has already declared the intention to become a participant of the special economic zone. The sanctions have stripped this company, which among other things develops software, of access to required equipment.

In the meantime, the Crimean authorities have been stepping up the nationalization of enterprises. A decision has been made to nationalize the power supply company Krymenergo, affiliated with the DTEK holding company, belonging to Ukrainian multi-billionaire Rinat Akhmetov. Crimea’s inter-bank currency exchange has been nationalized.

There are plans for creating ten government-owned unitarian enterprises for the production of eggs, milk, fruit and other foods. The head of the Crimean Republic, Sergey Aksyonov, hopes that local food production will be able to restrict food prices, which were up 50% last year.

Experts deny, though, that this is a road leading back into the Soviet past.

"There has been no considerable expansion of the government’s presence in the economy. The peninsula is a vast field for doing business," the daily Nezavisimaya Gazeta quotes the leader of Crimea’s branch of the Delovaya Rossiya (Business Russia) association, Aleksey Grintsevich, as saying.

"In any case the Crimean economy will be developing along its special path," the head of the state administration of the economy chair at the Russian Academy of the National Economy and Public Administration (RANEPA), Vladimir Klimanov, told TASS. "In that sense it can be likened to the Kaliningrad Region. In any territory that in some way is isolated from the rest of Russia’s territory or foreign partners any combination of liberalization and nationalization processes in the economy, however weird it may look at first sight, is quite normal. This phenomenon will be observed in the future again and again," the analyst said.

This unique situation, he said, will determine the development of Crimea’s economy for decades to come, and the state program for Crimea’s development will be adjusted depending on the circumstances.

In general, Klimanov, said the process of the newly-incorporated regions’ economic integration was "fast and painless."

"The speed of many processes that in all other situations might have lasted for decades is a sure sign there were objective reasons for integration," he said.


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TASS may not share the opinions of its contributors