Thursday

22nd Feb 2018

Feature

Sanctions on Crimea hurt some more than others

  • A 'ruStore' in Simferopol. The brand only exists in Crimea and is used to bypass EU and US sanctions. (Photo: Loreline Merelle/Jean Comte)

Three years after Crimea's annexation by Russia, the sanctions imposed by the EU and US on the peninsula have had a negative impact on certain sectors, while some local producers claim to have increased their production. Others have found ways of avoiding the sanctions altogether.

In the middle of Gorky Street, the main shopping area in the Crimean capital city Simferopol, there is a medium-sized shop selling Apple products.

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  • Olef Nikolaev's replica French cheese business was boosted by the sanctions, which put restrictions on the real products. (Photo: Loreline Merelle/Jean Comte)

The logo, the store's flashy interior and its products are all a familiar sight – almost identical to any other Apple store around the world.

There is one main difference, however. This particular shop is a "ruStore", a completely different brand that only exists in Crimea.

Apple stopped its economic activities on the peninsula in early 2015, and ordered retailers to stop selling its products and online services.

It closed every one of its stores, and banned access to the "iStore" – the online shop where you can download the full range of Apple apps.

The company's decision came right after the sanctions were imposed, in response to Russia's illegal annexation of the territory from Ukraine in March 2014.

The EU sanctions forbid the sale of goods related to certain sectors – such as energy, tourism or infrastructure. EU companies are also prohibited from acquiring shares of any Crimean companies or creating joint ventures.

However, when asked by EUobserver whether a customer could still use the online iStore, the ruStore employee said that it was "really easy" and that all her customers can access the applications database, and download the apps.

But given the sanctions, how does this work?

The customers register as living in Krasnodar, a Russian city close to Crimea, and therefore appear to be officially living in Russia. This means that the sanctions impacting the peninsula do not affect them.

On further inspection, it turns out that circumventing the sanctions is actually quite easy.

Lenin Street

"When buying our iPhones, we just write 'Lenin Street, Krasnodar' for the place of accommodation", Anife, a young Crimean, told EUobserver.

"I've never been to Krasnodar, but I'm sure there is a Lenin Street there – there is one in every Russian city!"

Apple didn't answer a request to comment.

"That could prove negative for Apple in terms of reputation", said a lawyer working on trade issues.

He went on to stress that companies usually avoid any "grey areas," in regard to sanctions on Russia and Crimea.

Firms can set up a subsidiary in Russia, meaning they must only comply with Russian law. This allows US or EU companies to avoid the sanctions, as EU sanctions only apply to EU companies, and US sanctions to US companies.

It is also possible to ship goods to Crimea via Moscow, through other Russian shipping companies. Or they can register in Krasnodar, just like the ruStore customers, tricking EU and US clients.

According to one Crimean source, several local IT companies are officially registered in Krasnodar, but actually operate from Simferopol. He explained that 70 or 80 percent of IT-related services had to relocate outside of Crimea since the annexation.

Another Crimean resident, Vladimir, says that EU and US sanctions make his daily life more complicated. For example, he cannot use his Crimean credit card outside of Russia. His mobile phone operator, "MTC", is unable to call outside of the peninsula.

Vladimir also explained that following the annexation, he had been paid in cash by his company. "I [could] only open a bank account one year ago", he said, complaining that he must now pay taxes.

Prices of goods and products are also higher following the annexation. Vladimir and several other Crimeans told EUobserver that prices had increased by 20 or 30 percent, and have not since fallen.

The rise in prices is mainly due to the closing of the only land access to the peninsula by Ukraine, leading to food shortages and forcing its inhabitants to get food and drinks with the use of Russian ferries, which go to and from Kasnodar.

Moscow has invested massive amounts to improve the overall economic situation of Crimea. Some political analysts estimate the amount to be around $3 billion per year.

One of the most costly Russian investments is constructing a bridge across the Kerch strait, linking the peninsula with Russia.

But the work has proven to be technically challenging, as the strait is very deep, has unstable ground, and is subject to harsh meteorological conditions – strong winds, and ice in the winter. Work will not be finished before 2018.

Tourism down

European and Ukrainian tourists have stopped visiting the peninsula since the beginning of the annexation.

The former Tatar capital of Bakhchysarai, one of the most popular destinations in Crimea, looks almost deserted. The streets are empty, and the tourism office is closed.

"You can count European tourists on one hand", said Ivan Petrov, who owns the café Pushkin in the city centre.

European Backpackers and Ukrainian tourists used to stop by for a coffee before visiting the palaces and mosques around the city.

"Currently, we have twice fewer tourists. Look, I don't even have an English-menu anymore", he added, showing us the Russian-only menus.

The situation appears to be similar in Sevastopol, the seaside city of Crimea known for its picturesque landscapes along the Black Sea.

"We had 500,000 tourist in 2013, and 270,000 in 2014", said Alexander Zheleznyak, the head of the municipal tourist office in Sevastopol.

Since the sanctions have been in place, visiting Crimea has become much more complex for foreign tourists.

First of all, access has become more complicated – as there is no more direct flights from the US, EU or Turkey to Crimea.

The situation is also uneasy on the ground, where western bank cards and phone operators do not work. Tourism insurance plans have also been rendered ineffective.

Nevertheless, both Petrov and Zheleznyak claim to have succeeded in keeping their businesses afloat, either by increasing prices, or by relying heavily on Russian tourists, whose numbers have increased following the annexation.

"Russian tourists spend much more than other tourists", Zheleznyak, from the tourist office, explained. According to his calculations, the total number of tourists in Sevastopol has started to go up again – reaching 365,000 in 2017.

This Russian businessman concluded, therefore, that the sanctions are "a bit mythological".

Zoo distress

Oleg Zoubkov, the owner of the two biggest zoos in Crimea, does not share Zheleznyak's optimistic view.

EUobserver met with Zoubkov in Taigan, a zoological park an hour's drive from Simferopol, which hosts dozens of lions roaming around in the vast enclosed space.

Taigan zoological park, near Simferopol. Due to the sanctions, its owner has not been able to get any new animals over the last three years. (Photo: Loreline Merelle/Jean Comte)

Due to the sanctions, this former pro-Russian activist has not been able to get any new animals in the last three years.

"I need to have them from Europe, but am not allowed to," he said, stressing that animals from Europe are "of better quality" than the ones from Russia.

Zoubkov also complains of other problems, for example regarding specific products from the German company Siemens, which are needed to build the cages.

And, of course, tourist numbers have also gone down. He has 3.5 times fewer visitors to his Simferopol park, and 8.5 times fewer at his zoo in Yalta – despite his claims that "hundreds of thousands" of people still visit every year.

Zoubkov thought of moving his zoos out of Crimea, but quickly realised how complicated it would be to move hundreds of animals to Turkey or Europe.

Any upsides?

Despite some of the major businessmen in Crimea complaining, other local traders seem to manage quite well with the sanctions and the new economic situation.

In Sevastopol, EUobserver met with a local businessman who describes the events as an opportunity.

Olef Nikolaev, a psychologist, said that he was "lucky" to have such restrictions in place. Nikolaev lives in the countryside near to Sevastopol.

Around seven years ago, he began producing replica French cheeses – such as Camembert. "It was only a hobby, then", he said.

Following the closing of the Ukrainian border and the various trade restrictions, his products suddenly became impossible to get on the peninsula.

He then became the supplier of most local restaurants, transforming his small hobby into a good business.

"I am producing one tonne per year, four times more than before the sanctions", he said. "I hope the sanctions will remain in place".

Feature

Crimeans seek stable life under Russian control

Since Russia annexed Crimea in 2014, there has been a somewhat mixed reaction to the increased Russian presence on the peninsula. Some welcome it, others reject it in hushed voices.

EU visa waiver looms for Russia-annexed Crimeans

Visa liberalisation for Ukrainians entering the EU will also apply to inhabitants of the peninsula taken over by Moscow in 2014. But the issue poses administrative as well as political problems.

West told Ukraine to abandon Crimea, document says

US moved warships out of Russia's way. Germany urged Ukraine not to fight - newly-published minutes of a Kiev crisis meeting in 2014 show how the West let Putin seize Crimea out of "fear."

EU warns Turkey over 'threat' to Cyprus

The European Commission called on Ankara to refrain from doing "damage to good neighbourly relations", after Turkish vessels stop a rig from reaching a gas drilling zone.

EU warns Turkey over 'threat' to Cyprus

The European Commission called on Ankara to refrain from doing "damage to good neighbourly relations", after Turkish vessels stop a rig from reaching a gas drilling zone.

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