BLOG
March 18th, 2014
Courtesy of the Wall Street Journal, a look at the potential water politics surrounding Russia’s decision to annex Crimea:
Crimeans voted on Sunday to break away from Ukraine and join Russia, but the bonds of a Soviet-era infrastructure will be harder to break.
The dry, windswept peninsula has few of the resources to support the fabled resorts and ports for which it is valued. With no land bridge to Russia, it relies on Ukraine for about 25% of its gas, 70% of its water, and 90% of its electricity, all of which it imports over a small strip of land that connects it to the mainland.
It is a dependence that could prove explosive, as was shown by Russia’s seizure of a gas-distribution plant on mainland Ukraine over the weekend, suggesting that Moscow could try to grab other infrastructure to secure supplies into Crimea.
A Crimean government spokesman said the move was necessary because of a shut-off at the station that left parts of eastern Crimea without heat or electricity. The Ukrainian government denied that there had been a shut-off.
The loss of Crimea is a political body blow to the new government from Kiev, but it also relieves Ukraine of an annual $1 billion budgetary drain. If Moscow follows through with its annexation of Crimea, the peninsula’s lingering dependence on Ukraine for sustenance could ironically give Ukraine some leverage in dealing with Moscow.
Kiev can theoretically cut the utilities’ supply to the breakaway region, although when it comes to electricity it may be disruptive to the national electricity grid system.
“Ukraine may limit gas, electricity, water supplies to Crimea, close the border to the delivery of goods and cut off budget money supply,” said Oleh Ustenko, director of the Center for World Economics and International Relations at the Ukrainian Academy of Science.
Crimean officials have put on a brave face, saying the peninsula may survive without supplies from the mainland, and without support of the budget. Analysts say Ukraine is highly unlikely to order a cutoff of utilities to Crimea because of the havoc it would create on the peninsula.
But the supply lines into Crimea are fragile and easily threatened if fighting were to break out between Russian and Ukrainian forces. Crimea covers about 10% of its electricity needs through small generation plants, and the rest is brought in through two sets of power lines from mainland Ukraine.
Its water is brought in through the North Crimean Canal, built in the Soviet era and finished in 1971. Crimea has enough water to supply households, but it relies on the mainland for water to irrigate fields and to use in factories.
The peninsula satisfies about three quarters of its natural-gas demands from its own sources, thanks to booming offshore production.
The uncertainties over supplies into Crimea as well as political instability will scare off tourists, 70% of whom were from Ukraine last year. Crimean infrastructure and hotels have languished from a lack of investment.
“Now Crimea has rolled back by years, when it comes to investment,” said Mr. Ustenko.
Even before the crisis, Mr. Ustenko said that many investors steered clear of Crimea because of infrastructure problems and high levels of criminal and “shadow economy” activity. Now, it will now be out of the question for international, Ukrainian or Russian private investors to put new money into the region, he said.
The Russian government will by default now have to be the main source of investment for Crimea. A senior official in the Russian government said Moscow realizes the costs, which may amount to $4 billion in the first year alone.
The move to annex Crimea is popular within Russia, however. “It is a once in lifetime opportunity, and no one will quarrel about the price tag,” the person said.
