Ukraine (closed; covers till August 2014)

[Firn]

Some interesting details about the Crimean economy, or it's dependence on the Ukrainian mainland. It is good to see that the author picked up an issue about I wrote more the a week ago. While I got the water and electricity pretty right, I was wrong about the natural gas 'imports'. The gas fields around the Crimea allow it to cover it's need all but in winter.

Crimea relies on the rest of Ukraine for 80-85 percent of the water that it consumes, 82 percent of electricity and 35 percent of gas, according to Mykhailo Honchar, a leading energy analyst at Kyiv-based think tank Strategy XXI. Access to these vital resources will loom prominently amid diplomatic discussions this week ahead of the so-called referendum.

....

“And Crimea doesn’t have its own supply of coal and oil products to speak of,” said Honchar.

The infrastructure between the occupied Crimea and Russia sustained didn't transport most of the goods and must be highly strained already by the military built-up. Critical nodes will be the the ferry service(s) in the Kerch straight and the ports, mostly Sevastopol. As far as I could tell goods still flow through the the land-bridges with Ukraine, but the checkpoints manned by self-declared milita and the increasingly sorry state of the security and rule of law must have taken it's toll. Needless to say for Ukraine it would be easy to stop the traffic there completely.

In general I think it was a pretty smart, likely lucky non-decision, not to cut the occupied territories off at once. This has allowed the seperatists to cut themselves into their own flesh by their actions and checkpoints.

Economically, Crimea cannot survive on its own without money from Kyiv. It requires some $700 million in financial assistance from the state to meet its annual expense budget. Vesti daily reported on March 11 that Crimea would need an estimated $5 billion in investments to integrate its economy and infrastructure with Russia. But for the time being, it remains reliant on Ukraine.

There is little doubt that the Crimea contains a relative high amount of retirees, among them a disproportional number of ethnic Russians which tend to be older then the overall populations. This is certainly one of the reasons why the Crimea takes more from the Ukraine then it pays in.

The unpaid supporters of the Russian invasion tend to be both old and ethnic Russians. Cutting off the pensions after the illegal 'referendum' will hit them hard, but allow the Russians to step in forcefully. The question is if this matters, and likely the Urkaine is better off by shutting off payments sometimes after it, if the situation does not change much. The same goes for the electricity, easy to do and it hits hard.

The author did not mention the demand shock in tourism. I saw it earlier as one of the biggest problems for the Crimean economy, as one of the two big pillars looks like it will crumble. The Kyiv Post had interesting recent numbers on that.

Overall the seperatists have certainly already inflicted massive damage on the occupied territory. Kviev can easily add to it greatly. Russia will likely pour in billions but there are of course many elements of an economy which can not be fixed in the short term. Plus with 'Goblin' the (ex?-)criminal leading a regime one can count on an greatly increased amount of curruption and missmanagement. The other occupied lands locked in 'frozen conflicts' by Russian are not exactly shiny examples of wide-spread economic growth and rule of law...