Russian President Vladimir Putin has said that he had approved the programme of establishing an element of the Russian Military Forces in Crimea. During his meeting with Russian lawmakers the head of state noted that the ministry of defense had drafted an amendment to the arms programme and a special programme for the military forces in the region. In addition to that, according to Putin, the Russian authorities are going to spent some 700 billion roubles on the development of the region by 2020. "The main aim is to secure the successful development of Crimea and the city of Sevastopol, to make them economically self-sufficient," President Putin said.
Commenting on the amount of funds expected to be spent on Crimea, Deputy Head of the Economic Prognosis Institute of the Russian Academy of Sciences Alexcander Shirov noted that the figure voiced by the president equals the region's gross regional product for the mentioned period. "20 billion US dollars (the figure equivalent to that mentioned by the president) equals Crimea's gross regional product for the next five years. The gross regional product of Crimea is about 4-4.5 billion dollars per year. This means that we are going to spend on the region a sum equal to its gross regional product or 12 percent of the Ukrainian gross domestic product. In other words, the Ukrainian state would never spend the same amount of money on Crimea. This means that Russia is ready to the change the region's economy substantially.
Shirov also noted that in Crimea the Russian authorities mainly support two spheres - agriculture and industry, especially the defense industry. "The development of the defense industry is a very disputable question. Many experts believe that our spendings on the sector are ineffective. However the defense industry may be Russia's only sphere of production in which we are able to compete with foreign producers, except for the production of raw materials. This sphere is the only chance to increase exports of something other than raw materials. That's what we have been trying to do for the last 10-15 years. Moreover, it is clear that this sphere of production is necessary to secure the country's defense potential. This is why in this sector we are trying to use our own technologies and find substitutes for foreign products. In other words the effect the development of this sphere has on our economy is greater than that of other fields," the expert said.
According to the expert, in order to secure successful production in the field companies have to invest in scientific research and development of new technologies. "This means that this sphere can actually benefit from increased spendings on science. So the defense industry is the sphere of production, which can contribute very much to the economic development of the country. During Soviet times the defense industry was using resources extracting from other fields, while nowadays in can indeed stimulate successful development of the economy," he said.
Speaking about agriculture, Shirov said that the opportunities are scarce. "One should understand that Russia is a country in which agricultural production is very risky. Still we should and can increase the percentage of Russian products on the country's market," he said.
According to Shirov, one of the positive effects of the sanctions is that Russia will have to use its resources more wisely. "For the last two or three years we have been saying that we cannot support our banking system in order to provide businesses with accessible loans, despite the fact that we have great reserves. Companies suffered from an inability in invest in their development. Now it's clear that we will have to do something with this fact and that the banking system will receive the state's support," he said.
"The problem is that there will be no foreign loans any more. If we used our own money before that, it would not be so painful now," Shirov said. "It seems like now it is impossible and the economy will be damaged. The question is whether we will use our own reserves wisely enough in order to minimize this effect."
"When a country is suffering from foreign sanctions, experts often say that the sanctions are preventing economic growth. However I believe that the main problems the economy is facing are always internal. It would be unwise to blame the sanctions for the absence of economic growth, as some officials do," he said.
