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Crimeans Line Up on Karl Marx Street for Ruble Lifestyle

Two men carry a Russian flag after storming the base in Novofedorivka, some 50 km (30 miles) west of Simferopol, Crimea, on March 22, 2014. Photogarpher: Max Vetrov/AP Photo Close

Two men carry a Russian flag after storming the base in Novofedorivka, some 50 km (30... Read More

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Two men carry a Russian flag after storming the base in Novofedorivka, some 50 km (30 miles) west of Simferopol, Crimea, on March 22, 2014. Photogarpher: Max Vetrov/AP Photo

In Simferopol, the capital of the Crimea region annexed by Russia from Ukraine, Vyacheslav Luniov joined a crush of locals scrambling to stow their money into a Sberbank branch on Karl Marx street.

As Russia was completing the Black Sea peninsula’s absorption, Luniov, 48, opened an account at the Moscow-based bank and began switching hryvnia for rubles to safeguard his goods trading company against potential financial difficulties. Luniov said he was jolted into action when the Ukrainian bank where he has done business for years imposed withdrawal limits.

“I was worried about my business and money, even before the referendum,” said Luniov, waiting in the line of prospective customers snaking out the door on the avenue named after Marx, the 19th century German economist and philosopher who wrote the Communist Manifesto and Das Kapital.

Full Coverage of the Crisis in Ukraine:

As the West and Russia remain entangled in the worst political stalemate since the end of the Cold War, Crimeans are seeking to mitigate the effect of changing countries at a moment’s notice. While most of the region speaks Russian and many residents already display Russian flags, they still need to brace for legal, political and law enforcement changes that will inevitably disrupt daily lives.

Photographer: Vincent Mundy/Bloomberg

Pedestrians pass a sign advertising foreign exchange rates including rubles, euros and dollars outside a currency store in Kiev, Ukraine, on March 14, 2014. Close

Pedestrians pass a sign advertising foreign exchange rates including rubles, euros and... Read More

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Photographer: Vincent Mundy/Bloomberg

Pedestrians pass a sign advertising foreign exchange rates including rubles, euros and dollars outside a currency store in Kiev, Ukraine, on March 14, 2014.

In Simferopol, a city where Soviet-era shabbiness mixes liberally with designer stores catering to rich Russian tourists, communist-designed Ladas held together by duct tape and spare parts sit on unevenly paved streets alongside late-model BMW and Mercedes luxury cars.

Russian Guarantees

Russian flags are unfurled across the city, and outward signs of pro-Ukrainian sentiment are rare. At polling stations during the March 16 referendum that approved the region’s split from Ukraine, which Kiev, the U.S. and the EU reject as illegal, local authorities hung banners with “10 guarantees for Crimea,” including property assurances, children’s rights to Russian schools and basic medial care.

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The annexation may eat into the coming tourist season, for example, as it may dissuade Ukrainian speakers, who make up almost two-thirds of tourists to Crimea, from traveling to area resorts, said analysts including Roman Solomonyuk, the deputy director of the Lviv, Ukraine-based Center for Information Problems of Territories at the National Academy of Sciences of Ukraine.

There may also be a temptation by the Kiev authorities to withhold services in a region that depends on the mainland for 80 percent of its energy and utility resources.

Painful Reality

“The main problem for Crimeans now is to find the basic means to survive,” said Solomonyuk. “In a couple of months, the euphoria of the pro-Russian Crimean population will begin to ebb. Will Russia invest enough money to substitute these losses? I am not sure.”

The annexation comes almost six years after Russia enforced its control over South Ossetia and Abkhazia in a war with Georgia, with similar arguments.

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“The reality will be bitter,” said Alexander Rondeli, who heads the Georgian Foundation for Strategic and International Studies in Tbilisi. “It’s not easy to pull off improvements so quickly.”

Russian President Vladimir Putin and allies who are on a list of sanctions have scoffed at U.S. efforts to forestall Cremea’s annexation. Putin on March 21 signed legislation to absorb the peninsula and its port, Sevastopol, from Ukraine, which on the same day signed the political chapters of an Association Agreement with the European Union.

Obama Meetings

U.S. President Barack Obama today begins a week-long series of planned meetings with European leaders that will now focus on a united stance against Russia, which imposed travel bans on some U.S. politicians in retaliation for sanctions.

While global tensions rise amid speculation that Russia may have its eyes on other eastern parts of Ukraine -- about 2,000 pro-Russian activists in the eastern Ukrainian city of Donetsk held a rally on March 22 -- Crimeans are trying to sort through the immediate effect of becoming Moscow’s subjects.

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Almost 60 percent of the more than 2 million residents in Crimea, which was bequeathed to Ukraine in 1954 by Soviet leader Nikita Khrushchev, consider themselves Russian. Moves to return to the motherland accelerated after last month’s ouster of Ukrainian President Viktor Yanukovych and the installation of a western-leaning government in Kiev.

The main challenge will be the currency switch, said Igor Yurgens, who heads the Insor policy research group in Moscow. Crimeans need to move fast into the Russian banking system, he said, while local government agencies need quick reforms to stamp down on rampant corruption.

‘Good Position’

“Otherwise, I think they are in a really good position now compared to their neighbors from eastern Ukraine,” Yurgens said. Russian lawmakers introduced a bill allowing compensation of as much as 700,000 rubles ($19,300) to Crimean citizens who lose deposits held in Ukrainian banks, according to the Duma’s website.

“Moscow, driven by this patriotic euphoria, instructed all the key institutions, including the central bank, the Finance Ministry and the Transport Ministry to do their best on the Crimean transition,” he said. “Crimeans will get their manna from heaven now.”

Though the Kiev government has stuck to its claims that no citizen was threatened since Kremlin-backed Yanukovych fled to Russia, many in Crimea maintain that they wanted Russian protection against who they see as fascists in the capital 800 kilometers (500 miles) to the north -- the main argument for backing the break from Ukraine.

Seeking Stability

Marina Serovatskaya, a farmer’s wife in her sixties, has lived in Simferopol since 1983, after moving there from Kazakhstan, another then-Soviet republic. She said she lived “really well” in the city for decades, until the uprising that overthrew Yanukovych’s administration for its refusal to sign an EU pact in favor of an aid package from Putin.

“How could I stand that, so that’s why I voted for Russia,” Serovatskaya, dressed out in a black fur coat as she left the Sberbank. “With Russia, we are assured of stability.”

The Russian ruble will begin circulation as early as today, according to Vladimir Konstantinov, the speaker of the local parliament, Russia’s state-owned RIA Novosti news service reported. Last week, some restaurants, bars and shops in Simferopol began accepting rubles and legal currency.

“So far we haven’t received any instructions or recommendations regarding the move to the ruble system,” said Aleksandr Shevchenko at the local Ukrsibbank unit of BNP Paribas SA. (BNP) “Yes, people are worried and concerned and they call us all the time.”

As Russians move in, others inevitably are forced out, such as Crimean Tatars, who are being ordered to vacate part of their land, “which is required for social needs,” RIA Novosti cited Crimean Deputy Prime Minister as saying March 18.

Local Problems

At the Intourist Hotel in the seaside city of Yalta, Svetlana Grobovetskaya, a 27-year-old Russian speaker who used to work for the hotel, sees trouble ahead.

“I am for Ukraine,” she said. “It can’t simply be logically better with Russia.” Though authorities expect a boom of Russian tourism, “local businesses will suffer. I would rather stay with Ukraine as independent and autonomous.”

“There will be lots of problems, as Crimea has lots of people who will want to remain Ukrainian, some of whom will refuse to take Russian citizenship,” said Daniel Serwer, a senior fellow at Johns Hopkins University’s School of Advanced International Studies in Washington by e-mail. “I am not sure how the Russians will handle this.”

At the Sberbank branch back in Simferopol, the green logo drew residents from around the city to its tellers. Luniov clutched a fistful of bank statements and other documents as he stood on Karl Marx Street with his wife and son.

“I am angry and upset,” he said as the line inched forward. As he talked, his wife insisted that life will be better for them now. “So I am going to use Sberbanks from now on.”

To contact the reporters on this story: Helena Bedwell in Simferopol at hbedwell@bloomberg.net; Stepan Kravchenko in Simferopol at skravchenko@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net James M. Gomez

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