Crimea will be a heavy financial burden for Russia
2014-04-01 15:00:51
The absorption of Crimea and its 2 million residents creates an additional financial burden on Russia, which is struggling with slow growth, rising inflation, a weak currency and unusually high capital flight this year.
But Medvedev's remarks indicated the Kremlin hopes Crimea, which he said had "colossal prospects" for tourism income, will become quickly self-sufficient.
Finance minister Anton Siluanov said last week that Russia would spend up to 243 billion roubles ($6.82 billion) in Crimea this year, to be financed from the budget reserve.
The ultimate cost of its action in Crimea is likely to be far higher: analysts in a Reuters poll last week slashed their forecasts for Russian economic growth.
The region has an estimated 55 billion rouble budget deficit, and the peninsula has been dependent on Ukraine for 85 percent of its electricity, 90 percent of its drinking water and much of its food.
The reliability of those supplies is now in question. The local authorities have said they will nationalize Ukrainian state-owned business, including energy producer Chernomorneftegaz which is exploring for oil and gas offshore.
Apart from hosting a Russian naval base, Crimea's biggest industry is tourism as one of the former Soviet Union's few warm seaside resorts. But until now, 60 percent of visitors arrived from other parts of Ukraine, mostly by train.
Making it an attractive destination for Russians will be more difficult, since they mainly arrive by air and have a wider choice of holiday destinations. Crimea would have to compete with Bulgaria, Turkey, Greece and Egypt, as well as Russia's own brand new $50 billion Black Sea Olympic resort in Sochi.
Kerry said after talks with Lavrov in Paris on Sunday that progress on resolving the crisis over Ukraine depended on a Russian troop pullback from Ukraine's borders.
Moscow has said the buildup is part of Russian military exercises. It wants assurances that Russian-speaking regions in eastern and southern regions of Ukraine have extensive autonomy and wants Russian established as the second state language.