Concerns about corruption and mismanagement weren’t high on Putin’s agenda when the Aksyonov government took over, says Robert Orttung, a professor at the George Washington University’s Elliott School of International Affairs, who has studied corruption in Russian regions. Authorities in Moscow simply wanted to ensure that the new leaders “were going to back them up.” But now, Orttung says, “these guys are getting out of control.”
The Aksyonov government has waged a campaign of forced nationalization, enacting legislation last year that gave it broad powers to seize companies, real estate, and other private property. In some cases, hooded gunmen ejected people from their land and businesses.  (my emphasis) Russian citizens were among those whose property was taken; the country’s courts are now flooded with complaints by people seeking redress. The Crimean government said that forced property seizures ended in March, but by then investors had fled the region and its economy was in shambles.
That leaves Moscow on the hook. It’s already paying 75 percent of the Crimean government’s budget, while subsidizing pensions and other benefits for local residents. And the graft allegations raise questions about how the Kremlin can keep tabs on the $18 billion in aid it’s promised Crimea over the next five years. The money is supposed to be used for economic development and infrastructure, including construction of a bridge from the peninsula to the Russian mainland.
The FSB investigations probably reflect a struggle for control of “the main valves of corruption” in Crimea, says Andrew Foxall, director of the Russia Studies Centre at the Henry Jackson Society in London. “This same kind of thing happens in every Russian region.” Moscow tolerates some corruption among regional leaders, Foxall says, but expects them to share the spoils with Kremlin-backed interests. Those who don’t may be subjected to criminal investigation and arrest.
Crimea’s location on the Black Sea positions it to become “one of the main entry points for the shadow economy,” including smuggling of firearms and cigarettes, Foxall says. The FSB’s investigation of the Yalta port chief could reflect a fight for control of that facility, he says.
Accusations of rampant corruption could also give Moscow an excuse to scale back some of the $18 billion in promised aid. Keeping that pledge won’t be easy, with the economy in recession and the ruble’s value down almost 50 percent against the U.S. dollar since Crimea’s annexation. The Kremlin has failed to deliver promised aid to other regions, such as Russia’s Far East, which got only a small fraction of the more than $23 billion it was supposed to receive from 2007 through 2013.
For now, Aksyonov and his allies are talking tough. “We did not reunite with Russia to be subjected to the same horrors we had experienced” when Crimea belonged to Ukraine, regional lawmaker Sergei Shuvaynik said recently in a speech to the Crimean parliament. But in the end, Crimean officials will have to bow to the Kremlin or lose their jobs, Foxall says. “These are the rules of the game Crimea signed up for” when it voted for annexation. “It’s only now realizing this.”
No Banks, No Burgers: Life in a Russian Crimea
(Updates previous version to clarify that Kremlin auditors could not account for two-thirds of money sent to Crimea for road building.)