CRIMEA CRISIS

Problems and Prospects

Department of Management Studies

University of Dhaka

CRIMEA CRISIS

Problems and Prospects

Prepared for
Mohammad Mohiuddin
Professor
Department of Management Studies
University of Dhaka

Prepared By
Ch. Nabil Al Nahin
ID: 3-13-25-009
Department of Management
University of Dhaka

April 18, 2014

Letter of Transmittal
April 18, 2014
Mohammad Mohiuddin

Professor
Department of Management Studies
University of Dhaka
Dhaka-1000

Subject: Submission of report on Crimea crisis.

Dear Sir,
Here is the report on the Crimea crisis: Problems and Prospects
that you requested to prepare last April 02, 2014.
The report is prepared on the data collected from different sources.
Data is classified and tabulated with objective judgement.
Recommendations are only subjective judgement of mine.
I truly appreciate this assignment and I enjoyed it very much. I have
put a lot of effort on preparing this report and I sincerely hope that
the report and the recommendations will be useful.

Sincerely yours,
Ch. Nabil Al Nahin
ID: 3-13-25-009
Department of Management Studies
University of Dhaka
Dhaka-1000

TABLE OF CONTENT
Part

Page

Letter Of Transmittal

Table of Content

ii

Synopsis

iii

Introduction

Overview on Crimea

Population and Language

Economy

History of Crimea

Tatar deportation

Why Crimea is part of Ukraine

The black sea fleet

Importance of Crimea to Russia

What people of Crimea Want?

Legal aspects

Recent events

Ukraines Response

Russias Response

International response

Sanctions

International recognition

Problems

Recommendation

Bibliography

10

SYNOPSIS
Introduction
The Crimea crisis unfolded in late February 2014 in the aftermath of
the Ukrainian Revolution, which resulted in President Viktor
Yanukovych's impeachment by the Ukrainian parliament after his
flight from the capital, setting May 25 for a new presidential
election, the appointment of an interim President, and the formation

of an interim government. The Yatsenyuk Government attained

recognition from Western countries. However, the Russian
government held that Yanukovych was illegally impeached and
continues to regard him as Ukraines last democratically elected and
legitimate president, while considering the Yatsenyuk government
illegitimate.

Problems
As the showdown continues, the crisis in Ukraine looms over both
the domestic Ukrainian and international economy. Since the
beginning of the protests, Ukraines government has slowly started
to tumble economically. Russia had planned to give Ukraine $15
billion in aid but once the new government took over, Russia took
back this offer. Ukraines hryvnia has been falling against the dollar
in recent weeks, but since the conflict in Crimea began, the hryvnia
fell to a record low of 11.65 against the U.S dollar. The Ukrainian
economy may also suffer raises in prices of the natural gas from
Russia that flows through Ukraine to the rest of Europe. Ukraines
economy is on the brink of default and if it does not receive aid
soon, it can completely collapse. The IMF is currently working on
raising the $35 million that Ukraine needs.
It is not only Ukraines economy that is taking a big hit. The Russian
ruble has also hit a record low 36.4 against the dollar. On Monday
March 3rd, the Moscow Interbank Currency Exchange (MICEX) fell
around 11% losing around 58 billion since the market closed on
Friday. The RTS Index dropped 12%. Gazprom, a state-controlled
natural-gas monopoly that is a key export of Russia, dropped 14%,
roughly 15 billion in market value in one day.
Stock markets around the world also took a hit from the current
crisis in Ukraine with the Dow Jones Industrial Average falling 153.68
points, or 0.94%. At the same time, investors turned to safer
investments during time of crisis, such as gold, which rose as high
as $1,355 an ounce on Monday. With Ukraine being one of the world
top exporters of corn and wheat, agricultural commodities are
beginning to see raises in price, and have potential of rising even
higher if exports halt.
The growing concern in Europe is a steady supply of natural gas that
comes from Russia through Ukraine, supplying 30% of Europes
natural gas. This is one of the main causes why the many countries

of the European Union, especially Germany, which gets 40% of its

natural gas from Russia, have been trying to keep economic
sanctions on Russia off the table.

Recommendation
The Crimea crisis puts world peace in danger but the good thing is
all the parties are still optimistic about diplomatic solution. The main
considerable issue while solving the problem should be what the
people of Crimea want. No such steps should be taken that put
Russia in a position where they are forced to take a wrong decision
and make the situation even worse. The situation should be handled
with a lot of patience and maturity. It should be kept in mind that
putting Russia under economic sanction not only hamper Russias
economics but it also effects other countries economics specially
who import gas from Russia or who rely on export in goods to Russia
for majority of their foreign earnings.

Introduction
The Crimean crisis is an ongoing international crisis principally
involving Russia and Ukraine. Most developments apply to the
Crimean Peninsula, a region which until February 2014 was
administered by Ukraine as the Autonomous Republic of Crimea and
currently administered by the Russian Federation as the Crimean
Federal District.
The crisis unfolded in late February 2014 in the aftermath of the
Ukrainian Revolution, which resulted in President Viktor
Yanukovych's impeachment by the Ukrainian parliament after his
flight from the capital, setting May 25 for a new presidential
election, the appointment of an interim President, and the formation
of an interim government. The Yatsenyuk Government attained
recognition from Western countries. However, the Russian
government held that Yanukovych was illegally impeached and
continues to regard him as Ukraines last democratically elected and
legitimate president, while considering the Yatsenyuk government
illegitimate.

Overview on Crimea
The Crimean Peninsula, also known simply as Crimea, is a major
land mass on the northern coast of the Black Sea that is almost
completely surrounded by water. The peninsula is located just south
of the Ukrainian mainland and west of the Russian region of Kuban.
It is surrounded by two seas: The Black Sea and The Sea of Azov.

Population and Language

Population of Crimea is around 2 million. Ukraine's 2001 census
showed around 58% were ethnic Russian, 24% ethnic Ukrainian and
12% Tatars. According to the 2001 census, 77% of Crimean
inhabitants named Russian as their native language, 11.4% Tatar;
and 10.1% Ukrainian.

Economy
Crimea's temperate climate makes it a popular tourist destination
for Ukrainians and Russians, especially Yalta, where the Soviet, U.S.

and British victors of World War Two met in 1945 to discuss the
future shape of Europe.
It accounts for three percent of Ukraine's gross domestic product,
with 60 percent of its own output made up by services. The land is
intensely farmed, with wheat, corn and sunflowers the main crops.
Extra water supplies are brought by canal from Ukraine's Dnieper
River.
History of Crimea
Crimea was absorbed into the Russian empire along with most of
ethnic Ukrainian territory by Catherine the Great in the 18th century.
Russia's Black Sea naval base at Sevastopol was founded soon
afterwards.
More than half a million people were killed in the Crimean War of
1853-56 between Russia and the Ottoman Empire, which was
backed by Britain and France. The conflict reshaped Europe and
paved the way for World War One.
In 1921, the peninsula, then populated mainly by Muslim Tatars,
became part of the Soviet Union.

Tatar deportation
Stalin accused the Tatars of collaborating with the German occupiers
and deported them to Central Asia and Siberia in 1944. Many of
them did not survive.
Only as the Soviet Union collapsed were they allowed to return. By
the time over a quarter of a million did so in the early 1990s.
There were persistent tensions and protests over land rights, and
allocation of land to Crimean Tatars was a contentious issue.
After Ukrainian independence, political figures from the local Russian
community sought to assert sovereignty and strengthen ties with
Russia through a series of moves declared unconstitutional by the
Ukrainian government.
The 1996 Ukrainian constitution stipulated that Crimea would have
autonomous republic status, but insisted that Crimean legislation
must be in keeping with that of Ukraine.
Crimea has its own parliament and government with powers over
agriculture, public infrastructure and tourism.

The Crimean Tatars have their own unofficial parliament, the Mejlis,
which states its purpose as being to promote the rights and interests
of the Crimean Tatars.

Why Crimea is part of Ukraine

Crimea only became part of Ukraine when Soviet leader Nikita
Khrushchev gave the peninsula to his native land in 1954. This
hardly mattered until the Soviet Union broke up in 1991 and Crimea
ended up in an independent Ukraine. Despite that, nearly 60 percent
of its population of 2 million identify themselves as Russians.
The black sea fleet
On Crimea's southern shore sits the port city of Sevastopol, home to
the Russian Black Sea Fleet and its thousands of naval personnel.
Russia kept its half of the Soviet fleet, but was rattled in 2009 when
the pro-Western Ukrainian President Viktor Yuschenko warned that it
would have to leave the key port by 2017.
Shortly after pro-Russian Viktor Yanukovych was elected president in
2010, he agreed to extend the Russian lease until 2042 in exchange
for discounts on Russian gas supplies. Russia fears that Ukraine's
new pro-Western government could evict it.
Russia's Black Sea base in Sevastopol gives Moscow access to the
Mediterranean. Ukraine's fleet, carved out of the same Soviet fleet
as Russia's, is also based there.

Importance of Crimea to Russia

Russia and Crimea have deep historical ties. Russian President
Vladimir Putin said in a recent speech that everything in Crimea
speaks of our shared history and pride.
Russias parliament voted to admit Crimea last week, and Putin
signed a law to complete the process. But Russia had been moving
to take the peninsula, and it took control of several Ukrainian
military bases.
Ukraine is angry about the developments, but a lot of people wonder
whether it can do anything. There were problems before Ukraine and
Russia started fighting over Crimea. Ukrainians were trying to decide
whether they should be closer to Russia or to Europe. There were

huge protests, and then last month, Ukraines president fled to

Russia. The countrys new leaders signed an agreement with the
European Union last week.

What people of Crimea Want?

Most people in Crimea wanted to break away from Ukraine and join
Russia. They voted about a month ago, and most people who
participated said yes. The night of the vote, thousands of people ran
out into the streets of Crimeas capital to celebrate. But not
everyone was happy, and some people didnt vote because they
think joining Russia is a bad idea.

Legal aspects
The Russian-Ukrainian Partition Treaty on the Status and Conditions
of the Black Sea Fleet signed in 1997 and prolonged in 2010,
determined the status of the military bases and vessels in Crimea
prior to the current crisis. Russia was allowed to maintain up to
25,000 troops, 24 artillery systems (with a caliber smaller than 100
mm), 132 armored vehicles, and 22 military planes, on the Crimean
Peninsula and Sevastopol. The Russian Black Sea fleet had basing
rights in Crimea until 2042. However it is controversial if the recent
troop movements were covered by the treaty.

Recent events
February 26, pro-Russian forces gradually took control of the
Crimean peninsula. Russia claimed that the uniformed men were
local self-defence forces, but they are generally reported in nonRussian media to be Russian military personnel without insignia.
February 28, The Supreme Council held an emergency
session where it terminated the Council of Ministers and replaced
the Chairman and Prime Minister of Crimea, Anatolii Mohyliov, with
Sergey Aksyonov.
March 11, the Supreme Council and the City Council of
Sevastopol jointly expressed their intention to unilaterally declare
Crimea's independence from Ukraine as a single united nation with

the possibility of joining the Russian Federation as a federal subject.

The question of independence was put to a referendum.
March 16. Official returns indicated nearly 96% in favour,
with a turnout of over 83%, despite a boycott by Tatars and other
opponents of the referendum. The Ukrainian parliament declared the
referendum unconstitutional.
17 March, the Crimean parliament declared independence
from Ukraine and asked to join the Russian Federation. President
Putin claimed Crimea as a part of Russia on moral and material
grounds, citing the principle of self-determination and Crimea's
strategic importance for Russia.
On March 24, the Ukraine Ministry of Defence announces that
approximately 50% of Ukrainian soldiers in Crimea have defected to
the Russian military.
March 27, the U.N. General Assembly passed a non-binding
resolution 100 in favour, 11 against and 58 abstentions in the 193nation assembly that declared invalid Moscow-backed Crimea's
referendum.

Ukraines Response
The Ukrainian government states that the new Parliament and the
Prime Minister of Crimea is an unconstitutional one that was formed
by force and not democratically. They criticize the Russian
government for interfering and provoking conflict and there has
been talk about sealing the Ukraine-Russia border. On March 1st, the
Ukrainian government put their army on full alert and they have
called up the reserve army. With tensions high, the Ukrainian army
has shown restraint against Russian forces that surround their bases
and have stated that they will fight till the end. Recruitment offices
all around Ukraine have seen massive amounts of people of all ages
showing up to enlist into the army to fight for their country. Former
Ukrainian President Leonid Kravchuk, age 80, vowed to take up arms
to defend his homeland. The government is warning of a Russian
army build up near the border of Eastern Ukraine and do not rule out
the possibility of another invasion into the eastern regions. The
Ukrainian government is appealing to the international community
to help against Russian aggression. Interim Prime Minister Arseniy

Yatsenyuk said, Nobody will give Crimea away. Supporters of both

sides are currently protesting on the Crimean Peninsula.

Russias Response
When Russia dispersed their army into the Crimean Peninsula, they
claimed that they were protecting ethnic Russians and Russians
citizens in the region, calling the new government neo-Nazi and
fascist extremist. President Putin still considers Yanukovych as the
President of Ukraine and claims the new government to be
illegitimate. Russia claims that Yanukovych, who in their eyes is still
the president, asked Russia to send troops into Ukraine to help
protect the citizens and stabilize the country. They claimed that
ethnic Russians were being persecuted and suppressed. Many
journalists on the ground in Crimea and elsewhere in Ukraine have
stated that this was not true that there was or is any threat to ethnic
Russians. Many, but not all, ethnic Russians welcome the Russian
invasion. Many of the ethnic Russians in Crimea enjoy more
freedoms under Ukrainian government then Russians currently living
in Russia. Ongoing peaceful anti-war and anti-government protests
in Russia have been taking place with dozens of people being
arrested. Many Russians from Russia are traveling to Ukraine to join
anti-government protests in the East and the New York Times has
labelled these individuals as protest tourists. Russian state-owned
media has been caught spreading propaganda to the people of
Russia and the world. A recent poll by the Kremlin released a survey
on Monday that showed 73% of Russians reject Russias intervention
in Ukraine.
After the fall of the Soviet Union, Ukraine acquired the nuclear
weapons that Russia had placed in the region which made Ukraine
the third largest nuclear power at the time. In 1994, Ukraine, Russia,
the United Kingdom and the United States signed the Budapest
Memorandum under which Ukraine gave up its nuclear weapons. In
return, the nations agreed to respect Ukraines sovereignty and to
refrain from threatening or using force against Ukraine. Russias
decision to send troops into Crimea was a clear violation of this
treaty.

International Response

Many of the worlds leaders, especially from North America and from
countries that are part of the European Union, have voiced their
opinion against Putins invasion of Crimea and back the new
government in Ukraine. They demand that Russia immediately
withdraw its troops out of Ukraine and back to their naval base in
Sevastopol. Members of the G7, which includes Britain, Canada,
France, Germany, Italy, Japan, and the United States, have
condemned Russia for violating Ukraines sovereignty and have
suspended preparations for the G8 summit which was to take place
in Sochi, Russia in June. On March 3rd the United Nations held a
meeting to discuss the situation in Ukraine at which the United
States Ambassador to the UN stated:
It is a fact that Russian military forces have taken over Ukrainian
border posts. It is a fact that Russia has taken over the ferry terminal
in Kerch. It is a fact that Russian ships are moving in and around
Sevastapol. It is a fact that Russian forces are blocking mobile
telephone services in some areas. It is a fact that Russia has
surrounded or taken over practically all Ukrainian military facilities in
Crimea. It is a fact that today Russian jets entered Ukrainian
airspace. It is also a fact that independent journalists continue to
report that there is no evidence of violence against Russian or proRussian communities.
The United States has been urging both the United Nations and the
Organization for Security and Cooperation in Europe (OSCE) to send
international peacekeeping missions to Crimea to help resolve the
issue politically. Furthermore, the United States is threatening
sanctions against Russia and has currently suspended both trade
talks and military relationships with Russia. The European Union has
also threatened sanctions against Russia, but without unanimous
agreement the extent of the sanctions vary. German Chancellor
Angela Merkel, while on a phone call with President Obama,
questioned whether Putin, was still in touch with reality. Poland, a
strong supporter of both Ukraines Euromaidan and the current crisis
in Ukraine, called on NATOs North Atlantic Council to hold a meeting
after stating it feels threatened by Russias movement into the
region. This meeting is scheduled for March 4th.
Kazakhstan, one of Russias closest allies turned its back on Russia
for the first time on such a major international issue. Kazakhstans
Foreign Minister, Erlan Idrisov, expressed his concerns regarding the
situation in Ukraine and commitment to not use force to resolve this
situation.

Sanctions
Sanctions were imposed to prevent Russian and Crimean officials
and politicians traveling to Canada, the United States, and the
European Union. They were the most wide-ranging used on Russia
since the 1991 fall of the Soviet Union.
Japan announced milder sanctions than the US and EU. These
include suspension of talks relating to military, space, investment,
and visa requirements.
In response to the sanctions introduced by the U.S. and EU, the
Russian Duma unanimously passed a resolution asking for all
members of the Duma to be included on the sanctions list. Head of
the opposition A Just Russia party Sergei Mironov said he was proud
of being included on the sanctions list, "It is with pride that I have
found myself on the black list, this means they have noticed my
stance on Crimea." Russian companies started pulling billions of
dollars out of Western banks to avoid any asset freeze.
Three days after the lists were published, the Russian Foreign
Ministry published a reciprocal sanctions list of US citizens, which
consisted of 10 names, including House of Representatives Speaker
John Boehner, Senator John McCain, and two advisers to President
Obama. The ministry said in the statement, "Treating our country in
such way, as Washington could have already ascertained, is
inappropriate and counterproductive," and reiterated that sanctions
against Russia would have a boomerang effect. Several of those
sanctioned responded with pride at their inclusion on the list,
including John Boehner who, through his spokesperson Michael
Steel, said, The Speaker is proud to be included on a list of those
willing to stand against Putins aggression." John McCain who
tweeted, "I'm proud to be sanctioned by Putin - I'll never cease my
efforts and dedication to freedom and independence of Ukraine,
which includes Crimea."
On March 24, Russia has imposed retaliatory sanctions on 13
Canadian officials including members of the Parliament of Canada,
[239] banning them from entering Russia. Foreign Affairs Minister
John Baird, said the sanctions were "a badge of honour." Former
Minister of Justice Irwin Cotler also said that he considered the
sanctions a badge of honour, not a mark of exclusion.
Expanded Western sanctions in mid-March coursed through financial
markets, hitting the business interests of some Russia's richest

people. The Americans' centred on the heart of Moscow's leadership,

though the EU's initial list shied from targeting Putin's inner circle.
As ratings agencies Fitch and Standard & Poor's downgraded
Russia's credit outlook, Russian banks warned of a sanctions-induced
recession, and the country braced for capital outflows for the first
three months of 2014 to reach $70 billion, more than the entirety of
outflows for 2013. Novatek, Russia's second-largest gas producer,
saw $2.5bn in market value wiped out when its shares sank by
nearly 10%, rendering Putin's close friend Gennady Timchenko, who
has a 23% stake in the company, $575m poorer. "I do hope that
there is some serious diplomatic activity going on behind the
scenes," said one Russian banker, though others were more
sanguine on the question of whether the sanctions would have any
enduring effect, and Russians, top and bottom, seemed defiant. The
official Russian response was mixed.

International recognition
Five members of the 193 members of the United Nations have
explicitly accepted the Republic of Crimea and Sevastopol as federal
subjects of Russia:
1.
2.
3.
4.
5.

Afghanistan
Nicaragua
Russia
Syria
Venezuela

Problems
As the showdown continues, the crisis in Ukraine looms over both
the domestic Ukrainian and international economy. Since the
beginning of the protests, Ukraines government has slowly started
to tumble economically. Russia had planned to give Ukraine $15
billion in aid but once the new government took over, Russia took
back this offer. Ukraines hryvnia has been falling against the dollar
in recent weeks, but since the conflict in Crimea began, the hryvnia
fell to a record low of 11.65 against the U.S dollar. The Ukrainian
economy may also suffer raises in prices of the natural gas from
Russia that flows through Ukraine to the rest of Europe. Ukraines
economy is on the brink of default and if it does not receive aid

soon, it can completely collapse. The IMF is currently working on

raising the $35 million that Ukraine needs.
It is not only Ukraines economy that is taking a big hit. The Russian
ruble has also hit a record low 36.4 against the dollar. On Monday
March 3rd, the Moscow Interbank Currency Exchange (MICEX) fell
around 11% losing around 58 billion since the market closed on
Friday. The RTS Index dropped 12%. Gazprom, a state-controlled
natural-gas monopoly that is a key export of Russia, dropped 14%,
roughly 15 billion in market value in one day.
Stock markets around the world also took a hit from the current
crisis in Ukraine with the Dow Jones Industrial Average falling 153.68
points, or 0.94%. At the same time, investors turned to safer
investments during time of crisis, such as gold, which rose as high
as $1,355 an ounce on Monday. With Ukraine being one of the world
top exporters of corn and wheat, agricultural commodities are
beginning to see raises in price, and have potential of rising even
higher if exports halt.
The growing concern in Europe is a steady supply of natural gas that
comes from Russia through Ukraine, supplying 30% of Europes
natural gas. This is one of the main causes why the many countries
of the European Union, especially Germany, which gets 40% of its
natural gas from Russia, have been trying to keep economic
sanctions on Russia off the table.

Recommendation
The Crimea crisis puts world peace in danger but the good thing is
all the parties are still optimistic about diplomatic solution. The main
considerable issue while solving the problem should be what the
people of Crimea want. No such steps should be taken that put
Russia in a position where they are forced to take a wrong decision
and make the situation even worse. The situation should be handled
with a lot of patience and maturity. It should be kept in mind that
putting Russia under economic sanction not only hamper Russias
economics but it also effects other countries economics specially
who import gas from Russia or who rely on export in goods to Russia
for majority of their foreign earnings.

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