When Russia annexed Crimea just over three months ago, lots of residents expected life under the Kremlin’s guidance to result in a boost in the quality of life. But the opposite is proving true. Spiraling inflation is fueling discontent on the peninsula.
Residents are experiencing constant price hikes for food and drugs. Vladimir Klychnikov, head of Crimea’s Federation of Trade Unions, summarized residents’ discontent during a recent meeting of the Crimean government, saying that prices for many staples have “doubled, whereas wages cannot keep up pace.”
Wage and pension increases are indeed lagging behind rising costs. Russia’s Deputy Prime Minister for Social Issues Olga Golodets reported that since the annexation average public-sector wages in Crimea have been raised by about 22 percent to 11,820 rubles (about $337), and average pensions have increased by 50 percent to 7,958 rubles (about $227). Meanwhile, wages in the private sector have remained largely stagnant.
Crimea’s retailers cite disrupted supply networks from Ukraine as the main reason for price hikes. The Russian-Ukrainian crisis forced entrepreneurs to find new suppliers in Russia, where wholesale prices are much higher. Transport costs have also increased for retailers.
In the face of the new economic realities, Crimean de-facto prime minister Sergei Aksenov seems prepared to use Soviet-style methods to try to contain market forces. He charged that “prices for food and medications must not rise” and threatened to fine, prosecute and close down businesses for raising prices. In effect, Aksenov has placed many retailers in an impossible situation: do not comply and get closed down, or sell below cost and go out of business.
“I paid 140 rubles (about $4) for a kilogram of chicken today,” says a Crimean resident, who asked not to be named fearing repercussions. “Even in Kyiv, the priciest place in Ukraine, prices are lower by a third or even half. At the same time, my salary has not been raised at all. The government has ordered private enterprises to increase their employees’ salaries, but my boss told the staff recently that ‘government rulings or not, I simply do not have money to give you raises.’”
Broadly speaking, economic storm clouds are gathering over Crimea. Russian annexation has caused problems for the peninsula’s vital economic spheres. The tourism sector, in which up to 70 percent of working Crimeans generate all or part of their income, is projected to experience a drastic decline this summer season. In addition, the agricultural sector, which employs around a fifth of working Crimeans, is poised for serious trouble after Kiev moved to limit water supplies to Crimea. Before annexation by Russia, the peninsula obtained about 85 percent of its water from mainland Ukraine.