Yuriy Lashov / AFP / Getty Images

Russian reboot of Crimea brings rubles and confusion

It’s shock therapy for the peninsula’s economy, with changes to banks, laws and even the time zone

SIMFEROPOL, Crimea — When his university stipend finally arrived, several days late, Anton Zavalii was unquestionably relieved and also a bit puzzled.

A doctor at a city hospital also studying for his doctoral degree, he was accustomed to getting Ukrainian currency by debit card. Instead, he had to line up at a small window at the university bookkeeper’s office to get a thick stack of crisp, new Russian rubles, untouched by human hands. The bills were in precise numeric sequence.

Then he started trying to use the rubles around Simferopol, capital city of the Crimean peninsula. Taxi drivers looked baffled. Grocery store clerks were exasperated. No one knew exactly what to do with a currency that seemed to appear just overnight.

“The situation seems to be in suspended animation: not to one side, not to another side,” Zavalii said. “Everyone is just waiting for something to happen, and no one knows what it will be.”

Just weeks after its blitzkrieg annexation of this Black Sea peninsula, the Kremlin is trying to do shock therapy with the region’s economy, moving swiftly to remake everything from the banking system and the legal system to the prices being set at open-air farmers’ markets and regular grocery markets.

The March 16 referendum was orchestrated by Moscow to formally incorporate Crimea into Russia and was overwhelmingly supported by those who cast ballots — although a substantial proportion of the region's population refused to take part. Now, with the vote out of the way, the Kremlin is trying to make sure the transition is seamless and there is as little disruption as possible to Crimeans' daily lives.

For the moment, however, that appears to be wishful thinking.

Rubles and hryvnias

Lawyers and judges complain that the legal system is all but paralyzed. Shopkeepers post prices in both Russian rubles and Ukrainian hryvnias, but have to resort to hand calculators to make change. Black market currency-exchange rates are rising above official rates. Public sector workers are being advised to take their ruble salaries and stipends and immediately change them into hryvnias.

Prices for goods like gasoline and meat have risen 15 to 30 percent. Generators are being brought in to insulate institutions like hospitals from shortages in electricity transmitted from the mainland. Crimea’s main economic engine, tourism, is in danger, as the turmoil spooks tour operators and newly imposed visa requirements make vacations more of a headache.

Many shopkeepers are showing prices in both hryvnias, the Ukrainian currency, and Russian rubles, as shown here with these carp for sale.
Shamil Zhumatov / Reuters

The main airport is for now closed to all flights except those from Moscow. On March 29, Crimeans officially lost two hours, as the region shifted from the time zone of the capital, Kyiv, to that of Moscow.

“There is no law in Crimea right now,” said Yan Akhramovich, a Simferopol lawyer and member of the equivalent of the Ukrainian bar association. “Ukrainian law doesn’t work because we’re now supposed to be part of Russia. Russian law doesn’t work because there are no Ukrainian lawyers here who know Russian law.

“The courts don’t work,’’ he added. “The judges can’t work.”

Bank ATMs around Simferopol work sporadically these days, with many bearing paper signs apologizing for “temporary inconvenience connected with implementing new regulations of the Russian Federation.” At many small convenience stores and kiosks, prices remain in hryvnias, despite the official introduction of the ruble currency on March 24. At bigger supermarkets, goods display prices in both rubles and hryvnias, but cashiers make change only in hryvnias.

At one of the city’s main outdoor bazaars, signs taped to concrete posts stipulate the official exchange rate: 1 hryvnia equals 3.8 rubles. Unofficial currency exchanges use a 1-to-3.2 rate.

As she displayed her homegrown seedlings and spring bulbs for decorative flowers and plants, Tatyana Romanova, a 66-year-old retired health care worker, said Crimea had gotten nothing from the central government in Kyiv over many years, and she said she was confident Russia would develop Crimea’s economy.

“We’re civilized people. We know how to work hard for ourselves. Russia is our motherland, and now we are united,” she said.

No more mainland

In addition to being based largely on tourism, Crimea’s economy has long been heavily dependent on the Ukrainian mainland for basic commerce and trade: Water, electricity and nearly all transportation ties go through the Kherson region, the mainland district immediately adjacent to Crimea to the north. But those land links are now international borders, resulting in new customs inspections and recurring backups of cargo trucks. Ukrainian sugar producers last week announced a halt to all shipments to Crimea.

In the east, Kerch is the only Crimean region to share a border with Russia proper; however, the Strait of Kerch separates the two, and ferry service between the two sides of the strait is nowhere near able to accommodate passenger or cargo traffic to make up for the loss of the mainland access.

The Kremlin has promised to build a bridge over the strait, which is about 3 miles wide at its narrowest point. It’s a multibillion-dollar project that will take years to complete.

Moscow and its allies in the unrecognized government now running Crimea have tried to remain sanguine about the region’s transition, insisting that by January 2015 the peninsula will be fully integrated into Russia’s economic and administrative bureaucracies.

“Crimea has moved away from politics and is all focused on work now,” Vladimir Konstantinov, speaker of Crimea’s parliament, was quoted as saying by the ITAR-Tass news agency on Saturday. “People are accepting all problems of the transitional period with understanding.”

“The deadlines set out in the plans will be met,” he said. “We are getting substantial financial aid, and all financial questions are being solved.”

During a highly publicized visit to the region last week, Russian Prime Minister Dmitry Medvedev also tried to hammer home that point, promising increased pensions and salaries for the region’s residents and proposing discounted airfares for Russian tourists coming to Crimea this year.

"Our aim is to make the peninsula as attractive as possible to investors, so that it can generate enough income for its own development," Medvedev said in a meeting with local leaders that was broadcast live on Russian state television.

Russia’s decision to introduce visa requirements for Crimea also complicates things. For the moment, the rules don’t affect Ukrainians, only foreigners who would otherwise need a visa to enter Russia. That may change, however, should bilateral ties between Kyiv and Moscow worsen. Still, for most foreigners, getting a Russian visa is an unpleasant headache involving official invitations, notarized letters and other documentation. At Russia’s consulate in Kyiv last week, employees seemed unsure exactly what the rules were, when they took effect and where exactly foreigners could receive a visa to enter Crimea.

A native foreigner

Interviews with dozens of people in Simferopol and outlying districts, however, showed that many were nervous about how anything could make up for the loss this year of tourist revenues, the region’s lifeblood.

“There’s no local industry or production here in Crimea. Tourism is overwhelmingly Crimea’s business. And this year it’s totally ruined,” said Said Seitumerov, who runs a restaurant in the historic district of Bakchisaray, an ethnic Tatar town located about 20 miles south of Simferopol.

A cashier counts out a pension payment in rubles in Simferopol, although confusion over the exchange rate means many still use hryvnias.
Shamil Zhumatov / Reuters

Meanwhile, at Vernadsky Tavriisky National University in Simferopol, students fretted about their own administrative fates: Would Ukrainian diplomas be recognized under Russia’s higher educational system, for example? Three fourth-year political science students joked that they might have to become migrant laborers in Russia or work in a fast-food restaurant.

“We’re thinking people. We have analytical minds. The entire economy here is tied to Ukraine: water, electricity, tourists. If Ukraine cuts us off, then what? We’re all supposed to go out and buy candles?” said one of the students, Alim Azapov.

“The best thing you can say right now is at least there hasn’t been war,” he said. “It all would be funny if it wasn’t so sad.”

The legal limbo afflicting Crimea now is also highlighted by the question of citizenship. Many, if not most, Crimeans are seeking Russian citizenship; local authorities in Simferopol and the peninsula’s other main cities have set up a special department to handle the crush of demand. For those on limited incomes — retirees, for example — they can’t receive their state pensions without a passport.

For those who want to keep their Ukrainian citizenship, however, authorities have set up a byzantine process and a strict deadline of April 18 to do so; those who don’t meet the deadline automatically become Russian citizens.

Liza Bogutskaya, a 50-year-old Simferopol interior designer who is an ethnic Russian, said she’s gone nearly every day over the past few weeks to passport and migration offices trying to clarify the process of how she can retain her Ukrainian passport and citizenship.

“It’s like a parent with a child now: ‘Here, eat your oatmeal, whether you like it or not. It’s good for you,’” she said.

At one point, Bogutskaya, who has chronicled her bureaucratic adventures on her Facebook page, submitted an affidavit stating she was refusing Russian citizenship. The document itself looked as if it had just been printed off on a computer printer, without any legal markings or seals. In return, she received a receipt asking for her signature, to acknowledge that she was aware of the "potential legal consequences" of refusing Russian citizenship.

She scoffed at the idea that she could face some criminal penalty for remaining a Ukrainian citizen, as she put it, in her country.

“I was born here, I was brought up here, I’ve lived here all my life and now I’m a foreigner?” she asked.

“It’s like Alice in the looking glass around here,” she said.

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