Crimea's Economy Summarized

Tyler Durden's picture


As the clock ticks down to tomorrow's Crimea referendum, where residents will vote to align with Russia or to stay in Ukraine, Russia Today looks at what the sunny Black Sea peninsula can offer economically and what ties it has with Moscow and Kiev. At first glance, Crimea has certain problems - a lack of energy, and more dangerously, freshwater resources. The republic's annual GDP is only $4.3 billion - 500 times smaller than the size of Russia’s $2 trillion economy. However, whatever the results of the referendum are, fixing the dilapidated state of infrastructure and transport could offer a real investment opportunity for both Russian companies and Crimean entrepreneurs.



But Tourism and Energy are key to its future:


The backbone of Crimea’s local economy is its bustling tourist industry, which draws in 6 million visitors per year during the summer season. But currently, 70 percent of the tourists are from Ukraine, and only 25 percent from Russia. Political rifts between Russia and Ukraine could turn off tourists, with tourism expected to drop by 30 percent this year.

However, if Crimea becomes a part of Russia it’ll become a more attractive holiday destination for Russia’s population of 142 million, whose per capita income is more than three times Ukrainians', according to World Bank estimates.

The average Ukrainian salary was 3148 Hryvna per month ($331) in February 2014, according to the Ukrainian Bureau of Statistics. In Crimea, the average is 2693 Hryvna ($283), whereas in Kiev, workers make nearly double, 4783 Hryvna ($503).

Oil and Gas prize

The big economic prize in Crimea lies to the south, in the Black Sea natural gas fields.

Extraction from these fields has the potential to be substantial - up to 7 million tons in annual production capacity, by Bloomberg estimates.

US ExxonMobil and UK/Dutch Shell have also been in talks with Ukraine about deepwater offshore oil drilling, but the only problem is, all this oil is located under Crimean waters. The deal is estimated at $1 billion.

ExxonMobil’s Black Sea offshore plans are currently on hold, senior vice president Andrew Swiger told investors at an early March meeting.

On Thursday, Crimea’s authorities took under their umbrella Ukrainian oil and gas fields in the Black and Asov seas, according to the speaker of Crimea’s parliament, Vladimir Konstantinov.

He supports Russia’s Gazprom taking control of the oil and gas assets.

"Russia, and Gazprom, should take care of the oil and gas production. It's not our issue," said Konstantinov, as quoted by RIA Novosti.


But as Russia Today notes, Sergey Aksyonov, Crimea’s Prime Minister and an advocate of joining Russia, has the hope that breaking away from Ukraine will transform the economy for the better. Aksyonov cited Singapore, which is an independent city-state, as an example to follow.


Crimea may not follow the same success path, but an option to boost growth is to make Crimea a special economic zone – with less taxes and financial regulation – which could spur growth and attract foreign investment. In 2005, Russia passed a law that allows for special economic zones, and has toyed with setting one up in the Far East, but so far, none have been established.

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Sat, 03/15/2014 - 20:22 | 4553374 ronron
ronron's picture

just listended to an interview with turd and the jackass. they showed disrespect for PCR. selling subscriptions. fuck these johny come lately's. 

Sat, 03/15/2014 - 20:51 | 4553495 prains
prains's picture

are you sure you weren't in the bathroom listening to yourself?

Sat, 03/15/2014 - 20:56 | 4553510 ronron
ronron's picture

speaking from your mothers basement. send turd a cheque sucker. hey fuck send one to the jackass. can you forge your moms name?

Sat, 03/15/2014 - 20:58 | 4553518 prains
prains's picture

do you pose Hulk Hogan style after you type?

Sat, 03/15/2014 - 21:04 | 4553534 ronron
ronron's picture

no i junk up front. loser.

Sun, 03/16/2014 - 00:15 | 4553955 prains
prains's picture

no your junk is up front, take a look in the mirror

Mon, 03/17/2014 - 04:58 | 4557619 svayambhu108
svayambhu108's picture

I guess across Soviet Union all the industry was on the majoritary russian's teritories, see Transistria.


Sun, 03/16/2014 - 17:30 | 4556183 JuliaS
JuliaS's picture

You misspelled "moron" when making your avatar.

Sun, 03/16/2014 - 06:44 | 4554319 silvermail
silvermail's picture

Dear ronron,

I wonder why your health care does not increase your dose of tranquilizers for you?

I'm sure it would help you.

Sat, 03/15/2014 - 20:24 | 4553379 williambanzai7
williambanzai7's picture

Sat, 03/15/2014 - 20:27 | 4553397 ronron
ronron's picture

as usual. you nail it.

Sat, 03/15/2014 - 21:15 | 4553564 ronron
ronron's picture

nail guns are more fun.

Sat, 03/15/2014 - 21:10 | 4553553 TahoeBilly2012
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Has Rand lost his mind? I just read his Time blathering. I donated and made calls way back when and I am disgusted with him. Is everyone fucking crazy in DC? 

Sat, 03/15/2014 - 21:12 | 4553556 ronron
ronron's picture

yep. all nuts.

Sat, 03/15/2014 - 21:26 | 4553594 Bonapartist
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It happened on his trip to Israel. If you are seeking change from ANY elected official in the US you are kidding yourself.

Sun, 03/16/2014 - 00:59 | 4554031 Kirk2NCC1701
Kirk2NCC1701's picture

Yup, and if you also visit the Queen (like Romney, Obama and Merkel), you KNOW you're gonna have a "Come to Moses" meeting.

Sat, 03/15/2014 - 21:47 | 4553635 Volkodav
Volkodav's picture


almost totally

I think Kunninich speaking out against...

Sun, 03/16/2014 - 01:05 | 4554046 Schmuck Raker
Schmuck Raker's picture

"Is everyone fucking crazy in DC? "

It's generally better for a trick question to be less obvious

Sat, 03/15/2014 - 20:48 | 4553484 ronron
ronron's picture

he needs a sand wedge in his hand. for a snow man.

Sat, 03/15/2014 - 21:09 | 4553546 LMAOLORI
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That should be an EMPTY SUIT in the middle

Sat, 03/15/2014 - 22:21 | 4553717 sunaJ
sunaJ's picture

...or a teleprompter for the head.


Sat, 03/15/2014 - 22:43 | 4553763 zhandax
zhandax's picture

The shrunken head seems fitting, though.

Sun, 03/16/2014 - 07:49 | 4554369 silvermail
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I wonder how long it will be before these people in Donetsk, will kill the Nazis, just as the Nazis were killing people in Kiev?

I specify, Donetsk - is not the Crimea. But the power of Kiev fascists, people in Donetsk also do not recognize.

Sun, 03/16/2014 - 17:31 | 4556188 JuliaS
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Beetlejuice, beetlejuice, beetlejuice.

Sat, 03/15/2014 - 20:30 | 4553389 Joenobody12
Joenobody12's picture

How about export some fish to feed the residents of Fukushima.

Sat, 03/15/2014 - 20:27 | 4553394 IridiumRebel
IridiumRebel's picture

Let's go to war over a great place to fucking holiday!

Sat, 03/15/2014 - 20:32 | 4553420 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Desalinization plants could be a profitable investment opportunity.

Sat, 03/15/2014 - 20:48 | 4553486 Boomberg
Boomberg's picture

Yes they could build a plant on the coast and dig a freshwater canal inland to Simferopol. It would be called Crimea River. 

Sat, 03/15/2014 - 20:39 | 4553428 CrashisOptimistic
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The ton to barrel conversion for oil is 7.  So the claim is production of 49 million barrels/year, which is over 100K bpd.

At $110 Brent, that's billions per year.  

I question the estimate.

Sat, 03/15/2014 - 21:10 | 4553433 news printer
news printer's picture
Ukrainian Army BEGGING for money

Support Ukrainian Army – Call 565

| 15.03.2014 |  |12:57|

Saturday, March 15. UKRAINE – Action on logistic and medical support for Ukrainian Armed Forces. Just call ‘565’ from mobile phone and transfer UAH 5 for needs of the Ukrainian Army.

If you want to transfer other amounts there have been opened accounts:

Beneficiary: Ministry of Defense of Ukraine

Code of Single Register of Enterprises and Companies of Ukraine: 00034022

Bank: State Treasury Service of Ukraine, Kyiv

Sort Code MFO: 820172

Registration accounts:

31254307218611 – logistic support

31257304218611 – medical support

And they just Repelled A Russian Army "Invasion"?

They are out of money.

Sat, 03/15/2014 - 21:31 | 4553601 Bonapartist
Bonapartist's picture

I'd help out but I just made a large donation to Hezbollah. 

Sat, 03/15/2014 - 22:26 | 4553728 sunaJ
sunaJ's picture

Hey, don't speak so magnanimously - tax dollars are an extortion, not a donation. :)


Sun, 03/16/2014 - 00:30 | 4553979 Independent
Independent's picture

They are broke because they shipped all their gold to the USA.  Also as far as those priceless Schythian gold artifacts I am sure they will find their was to safety deposit boxes belonging to Yani and the rest of the Matzo Mafia Clan including Nuland's

Sun, 03/16/2014 - 00:42 | 4553999 news printer
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5 UAH = 0.5 $
Sun, 03/16/2014 - 01:13 | 4554059 Kirk2NCC1701
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Well, the $1Billion that Kiev would like, as would Exxon, could be paid with the 25 tons of Chinese gold that was on the Malaysian flight.

Do the math: 25 tons is 25000 kg. At $1350/Toz., that's a 1 BILLION DOLLAR HEIST.

You'd need help from the Inside though... E.g., keep a bunch of people on Standby, even though the seats are available, the co-Pilot would have to take out the Captain, the passengers would have to asphyxiate at Max. Altitude, evade commercial radar at select points, and fly for a bunch of hours to a "friendly" airstrip (like Diego Garcia).

Then you'd have to get the plane maker (Boeing) to keep quiet for a few.days about the real-time engine telemetry (vital signs) and GPS track.

Kerry to China: "About your UN vote on Crimea... we think we know where your gold is, thanks to Boeing and NSA/DOD data..."

Sun, 03/16/2014 - 11:00 | 4554747 Bonapartist
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Oceans 14

Sat, 03/15/2014 - 20:37 | 4553445 ebworthen
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"US ExxonMobil and UK/Dutch Shell have also been in talks with Ukraine about deepwater offshore oil drilling, but the only problem is, all this oil is located under Crimean waters. The deal is estimated at $1 billion." we know why the EU and John Kerry have their panties in a bunch.

Sat, 03/15/2014 - 23:18 | 4553481 CrashisOptimistic
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The numbers don't add up.

$1 billion deals in oil are always configured to be something like $15 million to do some seismic studies, then if they are promising another $30 million to drill a hole or two.  Then if they are favorable more money and more money.

You have to jump thru a lot of hoops to get to the $1 billion, which is why signing such a deal means nothing.

The estimates in the chart look shaky.  People never estimate flow rates.  They only estimate reserves.  The flow rate can't be known without core samples and other drilling results


Sun, 03/16/2014 - 16:10 | 4555921 windcatcher
windcatcher's picture


In reply to crashisotimistic: Your statement “the flow rate can't be known without core samples “proves that you are an idiot. Ha. Ha.


You make a good example of how an idiot full of shit can score 15 up ticks on ZH with dumbfounded idiocy. Ha

Sun, 03/16/2014 - 19:56 | 4556687 zhandax
zhandax's picture

The amount of oil isn't a factor.  The currency it is sold in is.

Sat, 03/15/2014 - 21:15 | 4553562 windcatcher
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In reply to ebworthen: 

Gee, I wonder if the 10 billion dollar FRACKING deal recently signed between the Ukraine and Chevron/Shell will have an effect on Crimea’s economy?


Sat, 03/15/2014 - 23:26 | 4553849 CrashisOptimistic
CrashisOptimistic's picture

It's like the $1 billion above.  It's a $5 million deal.  Not $10 billion.  Seismic studies will be done, and nothing may be found.

Five years ago exactly the same geology was explored in Poland.  The hype about the big deals they were signing with Exxon and ENI was just as loud.  Exxon and Eni drilled some exploratory wells.

Found nothing.  Pulled out and left last January.

The crushing lesson of modern reality is that oil is not everywhere.  It's much more rare than it used to be.  Phrasing things as "$10 billion dollar deals" implies that "well there must be something there or $10 billion would not be changing hands". 

$10 billion isn't changing hands.  The money is incremental, and it shuts off to zero quite soon when there is nothing there, long before even the first 100 milion, let alone billions.

Sun, 03/16/2014 - 00:01 | 4553932 windcatcher
windcatcher's picture


In reply to crasisoptimistick: Your full of appologetic bull-shit dude, there is big difference between a million dollar deal and a billion dollar deal; you are the one who is out of touch with reality.--Ohhh, you say, we have to spend money to make it happen. Ha Ha.


The mode of operation for IMF austerity in Ukraine is this: Chevron is to receive the three oil lines for FREE. A German corporation is to receive the steel and coal. The Ukraine People face austerity with 50% rise in heating and cooking oil, and cuts in retirement and social services. The Ukrainian farm land is to be sold to foreign corporations.


Sun, 03/16/2014 - 09:04 | 4554305 Urban Redneck
Urban Redneck's picture

Without reading the actual contract/MOU underlying the deal (whose signing was moved up a month under mysterious circumstances)- it was for $350 million in Exploration Investment with a potential for $10 Billion in Production investment.  There would be milestones within the $350m that must be met before even the whole $350m is spent.  Furthermore, privatizing the 50% of Naftogaz that isn't already owned by a certain oligarch is likely to trigger a MAC clause within the contract (which may be desirable to said certain oligarch given Naftogaz's Capex plans announced at the beginning of 2012).  

People who think they have experience by reading books are dumb enough, people who cite YouBoob videos as an argument of how things actually work are in a whole another league of stupid.

Sun, 03/16/2014 - 12:49 | 4555098 windcatcher
windcatcher's picture


In reply to urban idiot and shit for brains: Neither one of you corporate apologist mouth pieces have presented an argument with fact just your vague, ”its not real”


Like all investments in oil and gas exploration and production there are thresholds in investment and return on investment; you idiots seem to think that concept is somehow new. Ha Ha.


The standard oil and gas deal goes like this: The oil company invest in exploration and production and the host country receives 50 % of the production for a certain amount of years with options to extend the contract for additional years. Yes, I am stupid because I read books like the Aramco hand book that details such contracts. Ha Ha.


You see Nulend standing in front of a huge Chevron banner announcing that the USA has spent 5 billion dollars on Ukraine and you want people to think it is not real! 5 billion dollar expenditure for what? Secure a 10 billion dollar oil and gas deal?


You Chevron drone idiots will argue that the USA didn't spend all the 5 billion dollars all at once so it really isn't a 5 billion expenditure to privatize and sack out the Ukraine. Ha Ha.


Under IMF rule the 50% in oil and gas reveniues go directly into the IMF just to pay the interest and the principle will never be paid.

Sun, 03/16/2014 - 14:17 | 4555475 g speed
g speed's picture

boy am I stupid--I thought oil and gas mineral rights came first?? like in who owns it then lets deal----but hey--learn every day

Sun, 03/16/2014 - 21:25 | 4556725 Urban Redneck
Urban Redneck's picture

Cite the EXACT fucking IMF rule idiot, or shut the fuck up.  Then try actually negotiating E&P contracts (which are completely separate from the $5B Nudelman was yapping about). 

Sat, 03/15/2014 - 21:42 | 4553628 Lost Word
Lost Word's picture

Royal Dutch Shell = Rothschild ?

Sun, 03/16/2014 - 00:07 | 4553943 Freddie
Freddie's picture

I thought it was the royal Dutch family and BP was the Red Shield klan of Satan but I am sure the Red SHield owns a lot more.

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