Business in Crimea: winds of change

Photo: Tairo Lutter / Postimees

Estonia’s agreement on Thursday for Europe to impose import restrictions to goods from Crimea and Sevastopol will first and foremost hit importers of wine and vodka. Estonians with investments in the seized peninsula hope the new Russian powers will support interests of foreign investors. The ever-declining Crimean economy is, rather, pointing towards dark clouds gathering.

Raivo Raidam, supplier of Massandra dessert wines, was sizzling with stress while talking of outlook of his business set up in Ukraine mostly.

«I have been linked with Ukraine and Crimea for 37 years already, and six months ago I could not have predicted this in my worst nightmare,» said Mr Raidam. «Had I known, I’d have bought up large quantities of Crimean wines, and brought it into Estonia.»

At the moment, Estonian storehouses hold enough of sweet Crimean wine to last till the end of the year, but with the trade restrictions looming, a buying spree may occur. «These are quality wines several decades old, and maybe I should raise prices now to make the wine last for two-three years,» meditated the businessman.

It is not excluded, however, that Ukrainian commerce chamber will still issue Crimean wine factories the certificate needed to export into Europe. Then, Mr Raidam may stay in his business in all serenity.

Legal fork

Hoping in Ukrainian kindness may not be enough, however: for most of its history, Massandra wine factory has been in state ownership and it cannot be excluded that Russia will claim it as war booty.  

When it comes to goods from Crimea, Estonia imposed limits on April 23rd already, as Tax and Customs Board declared Crimean and Sevastopol chamber s of commerce stamps invalid among Ukrainian certificates. Which means that regarding goods with stamps of Crimean chamber of commerce, its branches in Armyansk, Kerch, Feodossia and Simferopol, as well as of Sevastopol, the Ukrainian advantages and benefits do not apply.

As an exception, such products may be imported from Crimea as come with certificates issued by Ukrainian government. Over these past years, nearly ten Estonian companies have been importing vodka, wine and champagne from Crimea.

At an EU foreign ministers meeting in Luxemburg, this Monday, measures were agreed as part of non-recognition of annexation of Crimea. Thus, Crimean entrepreneurs are being forced to cooperate with the government in Kiev.

Rearranging business

Estonians who have invested in Crimea admit to being caught in a legal fork, so to say: in their daily lives, they are having to follow the Russian law gradually introduced – while not contradicting the Ukrainian ones.

«The trade restrictions related to non-recognition policy are needed because it is difficult for the European Union to tell the difference, id, with an exported product, we are having to do with economic activity by an entrepreneur in the seized territory, or by the occupant,» said real estate businessman Hillar Teder who, just before Crimea was occupied and annexed to Russia, had opened a fancy shopping mall in Sevastopol. «Luckily for us, Ukrainian and Russian law is pretty similar and it will take about a year, at least, for some kind of clarity to come.»

Security businessman Urmas Sõõrumaa said that in his field, business climate in Crimea got better. «There’s less corruption than a year ago, as now one does not have to offer [bribes] to please every official,» admitted Mr Sõõrumaa. «Whoever produced something, however... due to European restrictions, they will have to be seeking crooked ways.»

Meanwhile, Mr Sõõrumaa was at a loss to comment how his company USS Security would be affected by the restriction in Russia not allowing foreigners to do security business there.

Riigikogu member Tõnis Palts (IRL) acquired a seaside plot near Russian naval base next to Sevastopol, fit for a resort. He expressed hopes that the new powers at Crimea would not start spoiling his business.

«My local employees are busy trying to rearrange everything according to Russian law,» he said. «I do not believe that Russian would be interested in plaguing European investors with counter-sanctions, as they are rather interested in the wellbeing of [businessmen] like us.»