Crimeans vote on whether they want to stay part of Ukraine or join the Russian Federation this weekend. Regardless of the outcome, which Western leaders have already decried as illegitimate, the vote signals a shift in Western-Russian relations.
Tomorrow, the 16th of March, a referendum will be held in Crimea to vote on whether the region will leave Ukraine and become part of the Russian Federation. The legality of this referendum is tenuous: Ukraine’s interim Prime Minister Arseniy Yatsenyuk said the move had no legal grounds, while Geoffrey Pyatt, the US ambassador to Ukraine, said that the United States would not recognise the results of the referendum. Russia feels differently.
The referendum is expected to be pro-Russia, as Crimean MPs have already voted to join Russia and the referendum is expected to be a confirmation of that vote. But what does a yes vote to join Russia actually mean for Crimea? And for Russia itself?
Russia and Crimea bound together by history
The Russian TV anchor Dmitry Kiselev speaks of Crimea as being “a personal matter for all of us [Russians]”. Even though many analysts point to the manufactured nature of the crisis, there are emotional and historical ties between Russia and Crimea. To manufacture a crisis you need to have the raw material.
The Russian elite during the Tsarist period was captivated by the idea that it would be the liberator of Greek Orthodox Christians, and it would extend South to liberate Constantinople and Athens, with Russia becoming a classical power. However, the only piece of the classical world that Russia ever conquered was Crimea.
This notion continued during Soviet times, when Crimea was described in propaganda as the treasure of the Union. The Soviet Union then built giant holiday camps for millions of people in Crimea. Hence, what is important for the crisis today is that for Russians, Crimea is different to the other areas lost by the Soviet Union because they have actually been there. For millions of Russians, Crimea has warm memories.
Additionally, Russia never really “lost” Crimea. Many analysts point to the importance of Premier Nikita Khrushchev transferring Crimea to the Ukrainian Soviet Socialist Republic in 1954. However, at the time this actually had little practical meaning and was more of an administrative change as the area was still under the USSR.
In addition to these emotional and historical ties, there is of course the strategic element: the city of Sevastopol is an important base for Russia’s naval fleet. A 1997 treaty with Ukraine allowed Russia to lease the base at Sevastopol and keep its Black Sea Fleet intact. The lease is valid for another 28 years and is not set to expire until 2042.
What a Russian Crimea would look like
The Russian official rhetoric surrounding Crimea has been about genuine self-government, devolution of power from the centre and respect for the rights of ethnic minorities, which have been violated by past and present Ukrainian governments. However, as highlighted by Dr. Tomila Lankina “over the past 13 years, Russia itself underwent a series of reforms essentially doing away with elements of genuine federalism and local governance, as well as some semblance of a coherent nationalities policy associated with the presidency of Boris Yeltsin.”
If Crimea were to become part of Russia it is likely to be subject to some form of direct administration or, at the very least, high levels of de facto central control over political and governance issues. This is because Russian federal legislation has special provisions for governance of localities with substantial military, scientific, or strategic significance and Crimea is likely to remain heavily militarised.
The issue of the Tatars is important, with the leaders of the Tatar community having made clear their strong position on the preservation of Ukraine’s territorial integrity as they continue to associate Russia with Stalin’s famine in 1932-1933, which killed around half of the Tatar population, and May 1944 when Stalin deported all the Crimean Tartars, with many dying in the process. In addition, ethnic minorities within non-ethnically defined Russian oblasts often face marginalisation and stigmatization. Hence, Putin may face issues with a hostile Tatar community which makes up around 12 percent of the Crimean population.
It is also important to note that not all ethnic Russians, who make up around 60 percent of the Crimean population, want Crimea to become part of Russia. Crimea, as with Ukraine as a whole, is a multi-ethnic, multi-lingual, and multi-confessional country. There are generational differences as old people with nostalgia may feel differently about the issue of joining Russia than the younger generation that have been born Ukrainian and cannot remember the times under the Soviet Union, whether they are ethnic Russians or not.
A good time to invest in Russia?
Unless Russia accepts a US proposal to stop its expansion into Crimea and start discussions with Ukraine’s new government, European nations have pledged to punish Russia with sanctions, which are likely to include asset freezes and travel bans. The Obama administration has not set a deadline for sanctions or indicated a specific Russian action that would trigger them. Despite these threats, Russia continues to tighten its grip on the area.
The crisis has been reflected in the Russian markets. The MSCI Russia index currently trades on a 12-month forward price-to-book ratio of 0.54, which means that investors can buy about £1 in assets for every 50p in the Russian market. Russia is also the worst performing equity market compared to other emerging markets. It is reaching a point where investors are unwilling to consider Russia. For those willing to take big risks, this could be an opportunity. Investors need to ask themselves if, and how, Russian businesses will pull through the crisis.
According to Stephanie Flanders, chief market strategist for JP Morgan asset management, in terms of Russian equities a large proportion of the bad news is already ‘in the price’. When markets are this cheap it does not take much of a recovery for investors to receive strong returns. Hence, if you believe in the financial markets reverting to the mean, you should be interested in the Russian equity markets. The success of Russia is also closely linked to commodity markets, such as the price of oil which has plateaued since 2010 and is currently around 100 dollars per barrel.
Russia will not become part of the West
It is unclear what will happen after the referendum – Western leaders have already declared the vote illegitimate and said that no matter the outcome, they will not accept Crimea joining Russia, even if it is by democratic process. This links back to what is seen as the unlawful use of force by Russia towards Ukraine. However, regardless of what happens with Crimea, the crisis has signalled a paradigm shift regarding the West and Russia.
For Ukraine, Russia’s actions in Crimea have pushed the two countries further from each other. The likelihood of a Eurasian Union with Ukraine in it is now very small. A geopolitical realignment in the West, which could involve moving bases and troops around Europe, is likely in the medium to longer term.
As noted by Anne Applebaum, there will be a new way of thinking about Russia. Up until now, many have thought of Russia as a sort of flawed Western country that could be integrated into Europe if it was involved in enough Western institutions. However, it has become clear that Russia sees itself very differently and has different ideas about international law and politics, and it is going to be playing by different rules.
This is not about having an ideological competition as during the Cold War, but the idea of Russia becoming a liberal, democratic country has, if not been destroyed, at least been shifted far, far into the future. While it is in both Russia and the West’s best interests to remain on good terms due to economic dependency, especially with Russia being the largest exporter of gas to the EU, one inescapable fact has become clear: Russia is not going to become part of the West.
