In Crimea, Digest

By Neil MacFarquhar, New York Times, July 7, 2014

SIMFEROPOL, Crimea — Sergei V. Tur, a significant landowner, scowled beneath his desert camouflage cap as he watched a hulking combine chew through one of his golden barley fields, reaping part of what he predicts will be the best harvest in Crimea in three years.

The weather may be cooperating, but since the Russian annexation of the Black Sea peninsula in March, the political crisis has disrupted virtually every other aspect of farming — from irrigation to credit to exports. “On a scale of one to five, we are at negative three,” said Mr. Tur, the head of the Association of Farmers and Landowners of Crimea, with 300 members among the largest 1,700 farms.

Despite Russian promises of support immediately after the annexation, help from Moscow has been spotty at best. “It would seem reasonable to get some help from the Russian government, but I don’t see that the government is helping,” said Mr. Tur. Recently, he was called to a meeting with the deputy minister of agriculture, who praised the government’s pledge to fund 50 percent of a variety of new farm programs, Mr. Tur said.

“Where are we supposed to get the other 50 percent that we cannot pay ourselves?” asked Mr. Tur. Given that the sector generated $660 million in output last year, just behind tourism and manufacturing, it deserves more help, he said.

The problems are legion. Buyers from giant international grain trading firms like Cargill and Dreyfus avoid Crimea because of a Western boycott of its products. Ukraine closed the spigot for the main irrigation canal in April, starving the peninsula of essential water. No rice was cultivated, corn planted for feed was sharply curtailed and even widespread crops like wheat and barley were stunted, but generous rains helped bring them back.  With Ukrainian banks now shuttered and Russian ones barely established, farmers have struggled to get credit for essentials like seed and fertilizer. And farmers and agricultural companies hoping to break into the Russian market have suddenly found themselves caught in a transportation labyrinth.

Ferry service, the only link to mainland Russia, can involve a 15-hour wait on the best days. It often takes two or three days to clear the backlog when storms shut the service across the Kerch Strait, with vehicles backing up for miles.

Agriculture is not the only economic sector in disarray. Tourism, the foundation of the economy, is down by more than one-third this year, government officials and tour operators said, despite the Kremlin’s encouraging Crimean vacations, sometimes with reduced airfares.

Many bank customers, not just farmers, face trouble getting money because few banks are operating. Hotels and restaurants generally refuse credit cards. Major banks fear Western sanctions for working in Crimea, so mostly only small regional Russian banks are opening.

The legal system remains in limbo, since there is scant expertise in Russian law. Cellphone and wireless signals yo-yo up and down as the technology shifts from Ukrainian to Russian providers.

Some Crimeans complain that they face repeated unpleasant surprises. Prices for basics like milk have doubled. Where television cable service once provided a full array of international and Ukrainian satellite channels, it now shows only Russian channels.

The first concrete signs of blowback on the Russian economy are also emerging. The estimated cost of developing Crimea through 2020 ranges from $18 billion to more than $24 billion, according to various government projections. Moreover, the sanctions imposed for annexing Crimea have sapped confidence in the overall Russian economy.

The annexation still retains broad support in Crimea, since the many Russians living there yearned to be part of the motherland. Echoing the constant refrain of government officials, enthusiasts said they accepted short-term problems and were confident that matters would improve.

Crimea’s minister of agriculture, Nikolai P. Polyushkin, portrays his sector as robust. “Of course we have faced some very unusual problems that we have never faced before, but this transition is going pretty well,” he said in an interview. “We receive a lot of help from the Russian side.”

The Kremlin will provide $110 million to farmers this year, with only the distribution mechanism needing to be established, Mr. Polyushkin said. The Russian market will take whatever Crimea has to offer, he said, asserting improbably that there were “no barriers” to the Ukrainian market. True, the European Union last month banned all imports from Crimea, but if international buyers do not come, he said, “that is their problem that they lost Crimea.”

The lack of water from Ukraine? “It is a problem, but it is not a catastrophe,” said Mr. Polyushkin, who grew up on a collective farm here in Soviet times, when Crimea was an agricultural powerhouse. Photo The refrigerated storage hall of Skvortsovo, one of Crimea’s largest food producers, where sales are off by about 50 percent. Credit James Hill for The New York Times

Transportation issues with the ferry? “This problem has been resolved,” he said.

The minister’s assessment was so rosy, in fact, not to say remote from the reality farmers said they experienced, that it mostly provoked laughter from those outside government.

They said they faced significant hurdles with both production and marketing.

“Of course officials in their offices will say that all is well,” said Vitaly V. Polishuk, 42, the founder of Skvortsovo, one of Crimea’s largest food producers. When Mr. Polishuk, a former athletic trainer, started the company a decade ago, it was making a little more than 1,200 pounds of sausages a day in a small village factory; last year its sales hit about $55 million, the company said.

While Mr. Polishuk professed optimism about long-term prospects, both he and his managers said the company was trying to cope with the sudden loss of the Ukrainian market, where they were established players. Sales are off by about 50 percent and falling. Ukrainian companies have so far refused to pay roughly $2 million in outstanding bills, Mr. Polishuk said.

Mr. Polishuk and his managers are also a bit daunted about how to compete against what they frequently refer to in conversation as the “sharks” and “monsters” of the Russian market. Continue reading the main story Continue reading the main story Continue reading the main story

In Crimea itself, demand remains sturdy for Skvortsovo’s salami, hot dogs and other meat products like the football-size “Doctorskaya” sausage — modeled on a 1930s Soviet “health” product.

But that demand pales in comparison to previous years when six million summer vacationers tripled Crimea’s 2.3 million population. “This year we are only working at 35 percent of capacity,” said Sergei A. Sazhienko, the director of the company’s spotless, energy-efficient meat processing plant.

Skvortsovo also cultivates fruits and vegetables, particularly the cabbage, beets, onions and carrots needed for borscht. After Ukraine blocked the North Crimean Channel, the main irrigation vein off the Dnieper River, the company relied on reservoirs and a small local river for water. But if the canal remains blocked next year, Skvortsovo may not plant vegetables, field managers said.

The harvest of wheat and barley was down by about one metric ton per 2.5 acres because of the irrigation shortfall, said Dmitri V. Mozhaev, one of the company’s senior farm managers.

Growing produce is one thing. Getting it to Russia has become perhaps the bigger hurdle. It used to take trucks two days to cross eastern Ukraine to Moscow, but that highway runs through a combat zone. The ferry route and 1,250 miles of dubious highway beyond take a week to traverse. A costly bridge link to the mainland is at least four years away.

Mr. Polyushkin, the agriculture minister, said produce trucks were waived right onto the ferry. Farm managers said that was news to them. Not only does the produce have to wait, but once the trucks get into Russia, Ukrainian license plates make them targets for constant stops, searches and shakedowns by the Russian police, producers said.

A steady parade of senior Kremlin officials, including Prime Minister Dmitri A. Medvedev and numerous ministers, have all promised help, farmers said. But little that is concrete has materialized. “Russia talks about patriotism all the time, but they do not seem to be taking the simplest steps to promote Crimean goods,” said Gennadi V. Potapenko, a publicist working for Skvortsovo.


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