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Ukraine

The Bad Economics Of Crimean Independence

Whatever political and ethnic forces are at play, all sides must remember that Crimea's finances and infrastructure are Ukrainian to the core.

The port of Sevastopol is the hub of the Crimean economy
The port of Sevastopol is the hub of the Crimean economy
Dmitri Butrin, Aleksei Shapovalov, Anna Colodovnikova and Anastasia Fomicheva

MOSCOW – The new regional government of Crimea would in theory be in a unique position to double-dip on aid from both Kiev and Moscow. It is just one twist in the crucial economic question that must be considered in any discussion of Crimean independence from Ukraine.

After a recent meeting in Moscow between Russian Prime Minister Dmitry Medvedev and senior finance officials of the new Crimea regional government, the Kremlin says it is preparing a financial aid package for Crimea. The Vice Premier of the new Crimean government said that the region would need around $1 billion in aid and $5 billion in “investment.” Considering the population of Crimea is around 2 million, that is less per capita than the aid that Russia gave to South Ossetia after hostilities broke out there with Georgia in 2008.

The Russian Finance Ministry hasn’t revealed the exact contents of its offer, but it seems to be considering some combinations of loans and pure aid.

The region of Crimea is entirely integrated into Ukraine. In spite of the fact that all of Crimea’s tax revenue stays in the region (other regions in Ukraine contribute 50 percent of tax revenue to the federal budget), around 70 percent of Crimea’s monthly government expenditures are funded by transfers from Kiev.

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