Crimea has lesson for Brexit. Trade overpowers politics.

Crimea: Failed Policy of Sanctions Nearing Its End

Crimea: Failed Policy of Sanctions Nearing Its End

On June 16, 2014, several months after Crimea became part of Russia, Ukraine closed the peninsula to international navigation. Subsequently the EU, the US and some other countries slapped severe sanctions on Crimea virtually prohibiting all trade and investments. They also banned entrance into Crimean ports but too little effect. Two years on, despite the fact that legal pitfalls surrounding operations in Crimean ports have only deepened, shippers are routinely defying political and economic sanctions put in place, as well as the threat of imprisonment, in order to continue to do business in the area.

According to a recent report made public by the Organized Crime and Corruption Reporting Project, hundreds of vessels flying flags of various countries continue to visit the peninsula.

Over 600 vessels have dropped anchor in Crimean ports.

Europeans are also doing business with Crimea despite the sanctions: over the past two years, 24 vessels bearing EU countries’ flags, 43 vessels registered in the EU and 22 vessels owned by EU beneficiaries have entered Crimea.

According to Lloyd’s List Intelligence data, for the full year 2015, vessel calls to closed Crimean ports have ballooned by more than 50% since the sanctions were introduced in 2014.

Vessels with links to Germany, Greece, Italy, the UK, Bulgaria, Cyprus, Denmark, the Netherlands, Estonia and Lithuania stopped at the peninsula’s ports.

Often ships switch flags to evade consequences. They also practice switching off electronic navigators linking them to the Automatic Identification System (AIS), a global network that tracks ships using satellites, reports from passing ships and radar.

It’s not about lucrative trade only, but also investments.

The tax-free economic zone makes Crimea particularly attractive. The Italian company Ecologia e Ambiente plans to invest €300 million in the development of grape growing and winemaking in Crimea. The head of the Italian Baracchi winery Riccardo Baracchi visited Crimea in June. He said he intends to set up production of his wine in the region.

A group of Italian investors visited Crimea in April looking for land to build an agro-industrial park.

They plan to attract dozens of Italian agricultural technology companies to participate in the project. The businessmen are interested in building greenhouses, wine growing, livestock breeding and processing agricultural goods.

French wine producer Liber Pater Bordeaux is ready to develop winemaking in Crimea.

Massive investments are expected to come from Turkey and China.

For instance, Turkish businessmen plan to invest over $12 billion in Crimea. They have already signed a deal to construct a five-star hotel in Simferopol.

In July, a group of Saudi businessmen visited the peninsula to express interest in investments.

Priority areas for cooperation between Crimea and Saudi Arabia are tourism, agriculture and production of building materials.

Investments into transport infrastructure are on the agenda of talks with foreign businessmen.

It should be noted that Crimea had no foreign investments at all under Ukraine’s rule.

The sanctions regime is weakening against the background of mounting political pressure exerted by European politicians willing to end it.

The Dutch Party for Freedom, the third largest powerful party in the Netherlands, is preparing an in/out referendum on the country’s EU membership.

If the voters say yes to exit, the anti-Russian sanctions will be lifted. Tom van Grieken, chairman of the Flemish far-right party Vlaams Belang, has also called for scrapping the punitive measures.

A number of EU member states came out in support of lifting the anti-Russian restrictions. In April, the lower chamber of the French Parliament voted for the cancellation of the ineffective boycott, and in the beginning of June, a similar resolution was adopted in the Senate. Similar resolutions were voted for in the regional parliaments in Italy (Veneto, Liguria and Lombardy) as well as in the Parliament of Cyprus. Many MPs from Germany, Belgium, Hungary and Greece also support the idea.

A group of Italian MPs has decided to pay a personal visit to the Crimean Republic in order to get firsthand information on people’s lives and the political situation on the ground. This information was confirmed on August 27 by Alexey Pushkov, the head of the Foreign Affairs Committee in the State Duma.

Some Italian lawmakers visited Crimea in May and French MPs visited the peninsula in July.

In the United States, Donald Trump, the Republican candidate in the presidential race, has said that, if he is elected president, he would consider recognizing Crimea as Russian territory and lifting the sanctions against Russia.

«The people of Crimea, from what I’ve heard, would rather be with Russia than where they were», he said at a wide-ranging news conference.

The very fact that the GOP candidate openly doubts the wisdom of such policy has delivered a severe blow to those who advocate the continuation of the «economic war» with Russia.

The sanctions are increasingly often breached with businessmen finding ways to get around them. The idea to prolong the punitive measures against Russia is evidently losing political support. Several EU countries, including Austria and Hungary, have expressed interest in lifting, or at least softening, them. The time is ripe for the West to negotiate its way out of the sanctions box in which it is stuck. After two years, it’s time to make a deal with Russia and move on to tackle the burning issues overloading the agenda.

With all the facts mentioned above, it is becoming clear that the sanctions are doomed to become a thing of the past pretty soon. All in all, it leads to the conclusion that Crimea is in for a period of significant investments, boosting trade and economic prosperity. Actually, the above mentioned facts corroborate the fact that Russia has actually won the sanctions war.

ALEX GORKA | 03.09.2016


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