Crimea Is Now Putin's Problem Child

Russian security services are cracking down on alleged corruption in the newly annexed peninsula

Russian President Vladimir Putin attends a meeting of the Russian Geographical Society’s Board of Trustees on April 27, 2015, in St. Petersburg.

Russian President Vladimir Putin attends a meeting of the Russian Geographical Society’s Board of Trustees on April 27, 2015, in St. Petersburg.

Photographer: Sasha Mordovets/Getty Images

President Vladimir Putin likened Russia’s 2014 annexation of Crimea to a family welcoming home a long-lost relative.

Now the family is showing signs of strain. Russia’s federal security service, the FSB, has opened criminal investigations of three high-ranking Crimean government officials, accusing them of graft and other misdeeds. Four regional cabinet ministers have been forced from office in the past few months over allegations of corruption. And Kremlin auditors reported in June that two-thirds of the money Moscow sent Crimea last year for road building couldn’t be accounted for.

Crimean Governor Sergey Aksyonov, elected in April 2014 with Putin’s blessing, has reacted angrily to the allegations. Addressing Crimean cabinet ministers on July 7, he accused Moscow of trying to “destabilize” Crimea and using “fabricated” evidence against those under investigation, who include the region’s industrial policy minister, its chief tax inspector, and the director of the port of Yalta. “No one will make victims of our officials,” Aksyonov said.

Concerns about corruption and mismanagement weren’t high on Putin’s agenda when the Aksyonov government took over, says Robert Orttung, a professor at the George Washington University’s Elliott School of International Affairs, who has studied corruption in Russian regions. Authorities in Moscow simply wanted to ensure that the new leaders “were going to back them up.” But now, Orttung says, “these guys are getting out of control.”

The Aksyonov government has waged a campaign of forced nationalization, enacting legislation last year that gave it broad powers to seize companies, real estate, and other private property. In some cases, hooded gunmen ejected people from their land and businesses. Russian citizens were among those whose property was taken; the country’s courts are now flooded with complaints by people seeking redress. The Crimean government said that forced property seizures ended in March, but by then investors had fled the region and its economy was in shambles.

That leaves Moscow on the hook. It’s already paying 75 percent of the Crimean government’s budget, while subsidizing pensions and other benefits for local residents. And the graft allegations raise questions about how the Kremlin can keep tabs on the $18 billion in aid it’s promised Crimea over the next five years. The money is supposed to be used for economic development and infrastructure, including construction of a bridge from the peninsula to the Russian mainland.

The FSB investigations probably reflect a struggle for control of “the main valves of corruption” in Crimea, says Andrew Foxall, director of the Russia Studies Centre at the Henry Jackson Society in London. “This same kind of thing happens in every Russian region.” Moscow tolerates some corruption among regional leaders, Foxall says, but expects them to share the spoils with Kremlin-backed interests. Those who don’t may be subjected to criminal investigation and arrest.

Crimea’s location on the Black Sea positions it to become “one of the main entry points for the shadow economy,” including smuggling of firearms and cigarettes, Foxall says. The FSB’s investigation of the Yalta port chief could reflect a fight for control of that facility, he says.

Accusations of rampant corruption could also give Moscow an excuse to scale back some of the $18 billion in promised aid. Keeping that pledge won’t be easy, with the economy in recession and the ruble’s value down almost 50 percent against the U.S. dollar since Crimea’s annexation. The Kremlin has failed to deliver promised aid to other regions, such as Russia’s Far East, which got only a small fraction of the more than $23 billion it was supposed to receive from 2007 through 2013.

For now, Aksyonov and his allies are talking tough. “We did not reunite with Russia to be subjected to the same horrors we had experienced” when Crimea belonged to Ukraine, regional lawmaker Sergei Shuvaynik said recently in a speech to the Crimean parliament. But in the end, Crimean officials will have to bow to the Kremlin or lose their jobs, Foxall says. “These are the rules of the game Crimea signed up for” when it voted for annexation. “It’s only now realizing this.”

No Banks, No Burgers: Life in a Russian Crimea

(Updates previous version to clarify that Kremlin auditors could not account for two-thirds of money sent to Crimea for road building.) 

 

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