Ukraine (closed; covers till August 2014)

[Firn]

I have to leave it there for now but there is some interesting stuff to add later.

A more recent paper on the Abkhazian economy:

B. Russian Financial Dependence

Abkhazia’s government is overwhelmingly dependent on Russia for budget and development funds. Since 2009 Moscow has provided about 1.9 billion roubles per year in direct budgetary support ($61-$67 million, depending on exchange fluctutions). In 2012, this amounted to 22 per cent of the official 8.6 billion rouble ($287 million) budget. But taking into account that Moscow allocated another 4.9 billion roubles ($163 million) that year as part of a “comprehensive aid plan” for infrastructure development, the actual subsidy for Abkhazia’s budget is at least 70 per cent. In addition, Moscow also hands out an estimated two billion roubles ($70 million) in pension payments for Abkhaz residents, most with Russian passports.

If we consider that example I think it is pretty likely that we see three major channels through which Russian money will flow into the Crimea:

1) Direct financial transfers to finance the Crimean speratist budget
2) Moscow-sponsered and cheaply financed infrastructure projects, mostly done by Russian companies
3) Direct transfers to retirees.

Only the first will be budgeted in, so as in the case of Abkhazia that portion alone would vastly underestimated the financial dependence.

The “[c]omprehensive aid plan for the socio-economic development of Abkhazia” is by far the biggest source of Russian funds – but also opaque and controversial Under it, Moscow orginally earmerked eleven billion ruble ($350 million) for frastructure projects in 2010-2012, including the rebuilding of roads, schools, government buildings and agriculture. Though many residents of Abkhazia say living standards have risen as Russian money has come in, some critics complain of a dependency syndrome, and both Abkhaz and Russian officials have alleged the funds have fuelled corruption. An opposition figure known for harsh opposition to the present Abkhaz leadership lamented: “Abkhazia’s economy is like a drug addict on Russian help. We want real help to support our economic development, not ‘façade’ assistance”.

The critical comments reflect my earlier concerns. The public sector will baloon compared to the private one, even if the multiplier will have partly a positive effect in some areas. Other parts of the private sector will be crowded out. This without taking even in consideraton the effect of the likely increased (up from bad) corruption and wrong investment allocation.

Italy's south encountered similar problems, but form a different basis and a different set of circumstances when forty to thirty years ago the state massively 'invested' into it. Ironically quite a few described it as 'drogato' by those public funds, which went mostly into the wrong hands and greatly increased in the long run the dependence on public spending. The gdp per capita rose for a short time to roughly 80% compared to the rest of the country but fell over the next twenty+ years to back to 60% or so...

To sum it up it the Crimean economy won't do well without getting very expensive for Russia, and in that case the long term growth doesn't look good either.