At the beginning of 2021, the “press service of the Ministry of Transport of the Republic of Crimea” announced the implementation of two large investment projects in the port sector. The first was the construction of a terminal complex for transshipment of oil products and gas in Kerch, the second was aimed at expanding the range of goods and repairing infrastructure facilities of the Feodosia trade port . Associate professor Andrei Chvalyuk will try to conduct an analysis of the socio-economic prospects for the implementation of these and some other Russian invaders’ announcements.
Let’s start with the “fresh” Kerch stories. The investment project “Port terminal complex for transshipment of oil products and gas “TES-TERMINAL-1”, initiated by LLC “TES-TERMINAL-1”, was approved at the meeting of the “Council for improving the investment climate of the Republic of Crimea” on March 23, 2020. The implementation of the project provided for the creation on the territory of the Kerch fishing port of a single port terminal complex for transshipment of light and dark oil products, as well as liquefied petroleum gas. It was announced that the implementation of the project would create more than 100 jobs .
Taking into account the fact that no more economic or social prerequisites for the creation of the terminal were indicated by the Russian invaders, we will assume that the main criterion for selecting this project was precisely the employment of a part of the previously laid off employees of the Kerch commercial and fishing ports. However, the goal was not achieved. According to the registers, the number of personnel of OOO “TES-TERMINAL-1” is 71 people . And there are prerequisites to believe that even this figure was created artificially, because other enterprises of this network (“TES-TERMINAL” and “TES-TERMINAL-2”), united by common founders, have a total of only 10 employees. This means that a banal transfer of employees from the old terminals to the new one was carried out.
LLC “TES-TERMINAL-1”, despite “received investments”, shows stable losses (from 13 to 33 million rubles per year) and regularly receives “orders and fines” for “violation of environmental legislation and safety measures during operations with oil products”. It is too early to say whether this project has paid off, but the fact that the land for the terminal was taken from the Kerch fishing port indicates certain trends in the “development” of the Crimean port economy.
The second investment project “Loading capacity, expanding the range of import and export cargoes and repairing the infrastructure of the Feodosia trade part” was implemented by the Russia-controlled “powers” of the peninsula according to the already worked out scheme for the development of funds for “targeted programs”, when the global “goal of the program” is divided into subtasks, of which one is executed.
The initiator of this project was the “Ministry of the Russian Federation for Crimean Affairs” with the support of the Federal State Unitary Enterprise “Rosmorport”. And initially the goal sounded like this “Construction, reconstruction and technical re-equipment of facilities for ensuring the safety of navigation in the seaports of the Crimean peninsula”. In fact, only one task was pulled under this wording “Equipping marine transport facilities with engineering and technical means to ensure transport security in the seaport of Yevpatoria, Sevastopol, Yalta, Feodosia, Kerch”. Out of 220 million rubles allocated for its equipment, the port of Feodosia received only 132 million rubles. Another 39.2 million rubles was spent on “Reconstruction of navigation safety systems”. The rest of the Crimean ports also received some crumbs from this “program” .
Despite the fact that in 2019 only 60% of the allocated funds were utilized, all objects were “accepted by the acceptance committee and put into operation”. It follows from this that the “estimated cost of work” was initially overstated in order to create opportunities for theft. Usually, “federal funds” are spent by Crimean “officials” at zero, but in this case something went wrong. Most likely, they could not come to an agreement with the “overseer” appointed by the Russian government over the procedure for disbursing funds.
All the work carried out was carried out under the articles “reconstruction” or “construction”, but even an ordinary person, based on the name of the initial task, it becomes clear that “water area safety” is not the criterion that alone is able to lead the port out of financial collapse. Especially when it is led by individuals prone to official forgeries. And although the “court” limited itself to “criminal-legal measures in the form of a fine of 30,000 rubles,” the port employees consider Ruslan Satanovsky, “the director of the Feodosia trade port,” to be an incompetent manager, making the port a loss-making enterprise. However, Ruslan Satanovsky successfully covers up his incompetence and unprofessionalism with the party card of “United Russia” .
Even if we assume that the money of the “federal program” was spent effectively, only one of the six Crimean ports received “cosmetic” repairs in fact, while the port equipment of the rest is also in an unsatisfactory condition. Since its inception in June 2014, the “State Unitary Enterprise” “Crimean Sea Ports” has not invested in fixed assets . This is not surprising, since the “enterprise” has never made a profit. The downward slope of “capitalization” resembles an extreme ski slope, and the overall financial situation is so sad that the “ports” do not even have enough money for salaries and they had to cut half of the staff. In the future, such an approach may lead to the fact that even those small volumes of cargo transshipment, which the Crimean ports now actually have, will be inaccessible to them due to the total wear and tear of equipment. Do not forget about the possibility of accidents, leaks of oil products that can pollute the harbor, as well as harm the life and health of the port workers and residents of nearby territories.
It is reliably known that the cargo turnover of the ports of Crimea at the end of 2020 fell by 45.8% compared to 2019, to 2.35 million tons. Transshipment of goods in the port of Kerch amounted to 1.55 million tons (minus 50.1%) . In September 2019, the “government” of Sevastopol provided the “directorate” of the “Port of Sevastopol” with a “subsidy” in the amount of 54 million rubles to pay off the “current debt”. The “administration” believes that the situation could be changed by “cooperation with private business interested in increasing the transshipment of cargo”. So the matter is “trifling”, in fact, to find such a business. The “searches” are rather peculiar. “The Feodosia oil depot has already been sold at auction, large businessmen want to develop this cluster,” Sergey Aksyonov, the “head of Crimea,” revealed the details. He stated that “negotiations are underway on the lease of the capacities of the ports of Feodosia and Kerch”, that “large Russian companies are ready to privately provide cargo turnover in the Crimean ports” . However, the matter does not go further than statements.
On February 16, 2021, the “Minister of Transport of the Republic of Crimea” Yevgeny Isakov said that “a number of investment projects are at various stages of preparation, one of them is the development of yacht tourism in the region. The creation of modern yacht marinas and port points will lead to an increase in the number of tourists” . This idea is not new. Back in 2008, it was raised by Natalia Logunova in her Ph.D. dissertation done in the Taurida National University . Later, in December 2014, she will defend her “doctoral dissertation” in the occupied Crimea on “Theoretical and methodological foundations of the strategic development of cruise tourism” . However, let’s move from theory to practice.
According to the Russian invaders themselves, there are two problems on the way to the development of yacht tourism in the Crimea: there are no berths for yachts, and each exit to the sea must be “coordinated with the border service”. Besides the fact that berths must be booked two months in advance, yachts are strongly tied to the weather. “The head of the committee for resorts, tourism and sports” of the “State Council of the Republic of Crimea” Alexey Chernyak said that 5 billion rubles were allocated for the reconstruction of quays and marinas, but “multiple departmental instructions and orders, the requirements of which have lost their logic and relevance over the years, all they also hinder the development of yacht tourism in Crimea”. However, the “official” announced that the text of the amendments to the “federal development program” of Crimea has already been prepared , which means that money for “bringing the Crimean yacht marinas to international standards” will soon be allocated.
However, there is another problem on the path of strategic enrichment of the Russian occupiers and collaborators, which for some reason everyone forgets, and it is international sanctions. Not all yachtsmen go on their own ships, many lovers of sea trips and of gastronomic tours take yachts for rent. Moreover, yachts, like merchant ships, are also required to have an automatic identification system (AIS), albeit of a lower class. And if the AIS shows that a foreign ship has entered the Crimean port, the way to other ports, for example, Turkey, will already be closed for it. This monitoring system seriously limits the commercial use of yachts on the Crimean routes. This means that sane shipowners will not take such a risk.
On July 8, 2021, the notorious “Deputy Prime Minister” of the Crimean “government”, “Permanent Representative of Crimea under the President of the Russian Federation” Georgy Muradov proposed to use the Crimean ports for the supply of goods from the countries of the Caribbean region. According to well-established logistics, cargo, for example, from Nicaragua, Cuba and Venezuela, goes to Russia along the northern route for more than a month and a half. But, as Georgy Muradov noted “our Crimean route is the shortest and most effective. In seventeen days, you can bring all goods from Latin America to the ports of Crimea for all of Russia. Time costs are reduced by almost three times”. According to the “official”, Crimea “is a key transport hub for the development of Russian trade relations with the countries of Latin America, the Middle East and North Africa” .
It is not clear why the Russian invaders did not think about the need to restore the supply chain of the peninsula earlier. After all, the fact that the “Crimean bridge” would entail a drop in the profits of the Crimean ports was known long before the end of its construction. However, the port economy seemed to be deliberately declining for several years. Assets were sold at the price of scrap metal, employees were massively reduced, land plots were alienated, so that later, when the “Crimean Sea Ports” will cease to show losses (if it really stops, while there are no tendencies for this) to loudly report on another victory.
The plans for trade with the countries of the Caribbean region are based on an “agreement on trade and economic cooperation”, which was signed on July 2 this year in Managua by the Ministry of Production and Trade of the Republic of Nicaragua and the “Council of Ministers of the Republic of Crimea”. Businessmen intend to export wheat to Central America, and import coffee and fruits, – according to the website of the “government of the Republic of Crimea” . However, propaganda is propaganda, but in real life, the entire world export of the coffee crop from Nicaragua in 2019 amounted to 472 million dollars, that is, approximately 134 thousand tons .
Therefore, if all of it, “at zero”, will be brought to the Russian market through one Crimean port, it will give it an ephemeral increase in cargo turnover by a couple of percent. Well, in real life, even these percentages will not reach either the Russian Federation or the Crimea, because Nicaraguan coffee comes to the Russian market as a whole 1 (one) percent of the annual export. Knowing the real tastes of Russians in the beverage industry, this is not at all surprising. Therefore, these unfortunate couple of thousand tons of Nicaraguan coffee can be delivered literally in one flight, and within the framework of not “merchant shipping”, but by yacht tourism. We remembered coffee for a direct reason, since all other exports of agricultural products from Nicaragua (bananas, sugar, and citrus fruits) are simply uncompetitive on the Eurasian markets without special quotas and concessions. In fact, Russia needs to subsidize Nicaragua for fantastic amounts so that several ships with such illiquid products come to the Crimean ports a year. Well, it’s very good that the aggressor’s economy is being developed by persons with Mr. Muradov’s “business acumen”.
The idea of exporting agricultural products from Crimea does not look so idiotic, but it still strange in the context of the fact that a significant part of the peninsula belongs to the zone of risky farming. According to the “State Program for the Development of Agriculture and Regulation of the Markets of Agricultural Products, Raw Materials and Foods of the Republic of Crimea,” the peninsula itself does not have enough food. Although it is possible the numbers were deliberately underestimated in order to receive “federal subsidies”. Once the scheme for the export of grain has already been turned around and everything ended as expectedly sad. Since the spring of 2018, Crimean agrarians predicted a grain crop failure due to drought. However, the Russian authorities in the Crimea have been shipping Crimean wheat all summer “to help brotherly Syria”. And in the fall, the shortage of grain had to be compensated from the stocks of the Russian intervention fund for agricultural products . Then the Russian invaders temporarily abandoned the idea of grain export, but now the topic is gaining momentum again.
As the Russia-controlled propaganda resource “Tavrida” reports with reference to the “Ministry of Agriculture of the Republic of Crimea” this year, Crimean wheat is exported to six countries of the world, including “for the first time in the Congo”. Also, the Crimean wheat will go to Syria, Lebanon, Libya, Turkey and Egypt. To circumvent the sanctions, the transportation of some of the grain will be taken over by intermediaries – first of all, the Krasnodar Territory , and therefore the Crimean wheat will enrich primarily the Caucasian ports of Russia and relevant businessmen. Syria, Egypt and other countries of the Middle East are the traditional destinations for the export of Ukrainian wheat, which was previously shipped through the Crimean ports. Having occupied the peninsula, the invaders did not come up with anything new in this area; they simply used the trade channels for the sale of grain that had been developed over the years. And the volumes of trade declared by the Russian invaders cause an ironic smile.
In August 2019, the TASS agency reported that the volume of Crimea’s foreign trade with Syria for the first time exceeded 200 thousand dollars. According to the expert on communications in the field of economics in the public and private sector Maxim Gardus, this corresponds to one small ship with grain .
On October 11 this year, the Russia-controlled press reported that the Feodosia seaport was “being reconstructed in order to increase its capacity”. 15.9 million rubles were allocated for the “design work”. The “federal government agency” “Directorate for the construction and operation of Rosgboardguard facilities in the city of Simferopol” was the customer and LLC “Stroyspetsproekt” was “the winner of the open tender for the development of a project for the reconstruction of a sea checkpoint in Feodosia”. Reconstruction of the port assumes an increase in throughput up to 712 ship calls per year with the volume of containers transported 124.6 thousand per year, up to 350 per day. Currently, the actual throughput of the checkpoint is 59 vessels per year .
However, experts believe that the Feodosia port could get at least some profit by accepting small consignments of bulk cargo, while container transportation in the world is subject to stricter control. Therefore, the entry of container ships from the civilized world into the occupied Crimea is doubtful. As for goods from Russia, it is much easier and faster for the aggressor to deliver them to Feodosia via the “Crimean bridge”. The desire of someone to solve the problem of traffic flows in this way is most similar to an attempt to master “budget money” . One cannot but agree with this statement. Perhaps that is why the “design work” was given to the firm, which agreed to perform them for a large amount, so that there was something to get back as a kickback.
Let us cite an excerpt from a fresh scientific article by the Crimean researcher Margarita Vakhovskaya, who, unlike the Kremlin ideologists, perfectly understands the futility of the planned “reanimation” measures of the ports of the peninsula. Such citation will be an epilogue or, more correctly, as an epitaph to the assessment of all the Russian invaders’ plans for the development of the Crimean ports.
As this former employee of the National Academy of Nature Conservation and Resort Construction points to the dominant role of road transport in the transportation of both passengers and cargo in Crimea. Expectations of a significant drop in prices for consumer and other goods on the regional market of the peninsula associated with the opening of the “Crimean bridge” and the construction of the main sections of the “Tavrida” highway did not come true.
Vakhovskaya points out that, first of all, this can be explained by the different magnitude of multidirectional material flows, when the incoming material flows significantly exceed those leaving the territory of the Crimea, that is, the cost of transportation is not distributed evenly to all commodity units transported in both directions, but is fully included in the cost of incoming goods. The researcher states that this is due to the “dead-end” transport status of the peninsula in the current conditions, due to the low rates of development of industrial production, as well as agricultural one .
Well, it’s very hard to argue with that. Therefore, no “triple dose” of the Nicaraguan maragogype in the cups of the Simferopol “officials” will change the deplorable situation in the port economy of the peninsula.