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According to the VTsIOM sociological service, Russian President Vladimir Putin's approval rating has reached new highs in the last two weeks, and is now at 68 per cent. — Reuters picAccording to the VTsIOM sociological service, Russian President Vladimir Putin's approval rating has reached new highs in the last two weeks, and is now at 68 per cent. — Reuters picMARCH 7 — The Crimean parliament's latest moves to become part of Russia raise a question: Has Russian President Vladimir Putin considered how much it will cost to absorb the peninsula and its roughly 2 million inhabitants? As improvised as the de facto invasion may seem, he probably has. The costs are likely to be high but not unbearable.

Europe is looking increasingly unlikely to impose meaningful sanctions on a country that — according to Eurostat data for 2011 — accounts for 7.1 per cent of European exports and 11.8 per cent of its imports. At today's European Union summit, German Chancellor Angela Merkel — whose country depends on Russia for about half its natural gas imports — called for moderation, and she almost certainly was not alone. The UK is loath for London's financial centre to lose Russian money. In Spain, Russian tourists are the biggest spenders at hotels and restaurants.

The US is unlikely to go it alone, so the harshest punishment the West can muster will probably be travel restrictions on Russian officials. Even an asset freeze seems unlikely, given that Russian retaliation could hurt US and European banks and businesses.

Annexing a relatively poor Ukrainian region, though, will be expensive. Crimea is the fifth biggest net recipient of budget subsidies among Ukraine's 26 regions. In the first six months of 2013, it received about US$500 million (RM1.6 billion) in such aid. If it is to keep receiving about US$1 billion a year from the Russian budget, it will be the fourth-largest budget drain among Russian regions in 2014. Subsidies per capita in Crimea will be higher than in the formerly secessionist region of Chechnya, where Moscow is injecting hundreds of millions of dollars a year to quell separatist tendencies.

Crimea's shaky economy depends on a few factories owned by Ukrainian billionaire Dmitri Firtash and on tourism, an industry that flourished in the peninsula in Soviet times. In 2013, tourism revenue, much of it from Russia, drove a positive services trade balance of US$446 million. That number is unlikely to grow after the annexation: Russian tourists have always been able to visit Crimea freely, and the Russian invasion isn't likely to make the region a big draw for tourists from the rest of the world.

About 60 per cent of Crimea's natural gas comes from a Ukrainian company that extracts it in the Black Sea and the Sea of Azov. The peninsula gets 80 per cent of its water and power from Ukrainian territory. These supplies will not be cut off, but Ukraine will probably want to charge more for them. Russia will either have to negotiate with an unfriendly government in Kiev or build parallel infrastructure, which will take years and billions of dollars.

In the Gallery


  • Trucks used by armed men are seen at the entrance to Belbek Airport in the Crimea region March 1, 2014. — Reuters pic

  • People hold placards during a small protest outside the Russian embassy in Kiev March 1, 2014. — Reuters pic

  • A woman holds a placard during a small protest outside the Russian embassy in Kiev March 1, 2014. — Reuters pic

  • A woman wears a ribbon in Ukraine's national colours around her braid in Kiev March 1, 2014. — Reuters pic

  • People march on the street with a Russian flag in Simferopol, Crimea March 1, 2014. — Reuters pic

  • People march on the street holding a Russian flag in Simferopol, Crimea March 1, 2014. — Reuters pic

  • A pro-Russian man (not seen) holds a Russian flag behind an armed servicemen on top of a Russian army vehicle outside a Ukrainian border guard post in the Crimean town of Balaclava March 1, 2014. — Reuters pic

  • Armed servicemen stand near Russian army vehicles outside a Ukrainian border guard post in the Crimean town of Balaclava March 1, 2014. — Reuters pic

  • Pro-Russian protesters with Russian flags take part in a rally in central Donetsk March 1, 2014. — Reuters pic

  • Protesters, some wearing national Ukrainian costumes, demonstrate against Russia’s military intervention in Crimea, in front of the Russian Embassy in Washington, March 3, 2014. ― Reuters pic

  • Armed men stand guard at the local government headquarters in Simferopol, Crimea, March 3, 2014. ― Reuters pic

  • People attend a protest rally against Russian intervention in Crimea, in front of Russia’s embassy in Riga March 3, 2014. ― Reuters pic

  • A baby sits in a stroller with a poster in the colours of the Ukrainian flag, which was placed by its mother, during a protest march in support of peace in the Ukraine in Times Square in New York, March 3, 2014. ― Reuters pic

  • Members of Crimean self-defence units stand guard near local government headquarters in Simferopol, March 3, 2014. ― Reuters pic

  • Ukrainian servicemen play with a football near Russian military vehicles at the Belbek Sevastopol International Airport in the Crimea region March 4, 2014. — Reuters pic

  • Ukrainian serviceman Igor Filonenko holds the hand of his wife Julia through a fence at an air base located in the village of Lyubimovka near a local airfield, southwest of Simferopol, Crimea's capital March 5, 2014. — Reuters pic

  • Ukrainian servicemen stand guard at an air base located in the village of Lyubimovka near a local airfield, southwest of Simferopol, Crimea's capital March 5, 2014. — Reuters pic

  • Pro-Russian demonstrators take part in a rally in the Crimean town of Yevpatoria March 5, 2014. — Reuters pic

  • People hold a rally in the Russian southern city of Stavropol, in support of the people of Crimea, March 7, 2014. — Reuters pic

  • A Ukrainian sailor stands guard on top of a Ukrainian navy ship at the Crimean port of Yevpatorya March 8, 2014. — Reuters pic

  • A Ukrainian sailor stands guard on top of a Ukrainian navy ship at the Crimean port of Yevpatorya March 8, 2014. — Reuters pic

  • Pro-Ukrainian supporters join hands as they take part in a rally in Simferopol March 9, 2014. — Reuters pic

  • Soldiers, believed to be Russian, ride on military armoured personnel carriers on a road near the Crimean port city of Sevastopol March 10, 2014. — Reuters pic

  • Women with their mouths taped over attend a pro-Ukraine rally in Simferopol March 13, 2014. — Reuters pic

  • Women talk as they take a walk with a child in a pram while armed men, believed to be Russian servicemen, follow them outside a Ukrainian military base in Perevalnoye, near the Crimean city of Simferopol, March 14, 2014. — Reuters pic

  • Men walk in the old town of Simferopol near the Kebir-Dzhami mosque March 14, 2014. — Reuters pic

  • Crimean Tatars attend a Friday prayer at the mosque in Bakhchisaray March 14, 2014. — Reuters pic

  • A girl rides a bicycle at the Monument to defence of Sevastopol at the Crimean port of Sevastopol March 14, 2014. — Reuters pic

  • UDAR (Punch) party head Vitaly Klitschko speaks to Ukrainian soldiers during a military exercise near Zhytomyr March 14, 2014. — Reuters pic

  • People participate in the ‘Brotherhood and Civil Resistance March’ in Moscow March 15, 2014. — Reuters pic

  • A pro-Russian supporter displays a flag with pictures of Russia's Prime Minister Dmitry Medvedev (left) and President Vladimir Putin during a rally in Sevastopol, Crimea March 15, 2014. — Reuters pic

  • An election commission official installs a Crimean flag during preparations for a referendum at the polling station in Simferopol March 15, 2014. — Reuters pic

  • Election commission officials count ballots as they take part in preparations for a referendum inside a school in Sevastopol March 15, 2014. — Reuters pic

All told, it looks like a good deal for Putin compared with the US$50 billion price for the Winter Olympics that just ended in Sochi. At taxpayer expense, the Russian president is acquiring a priceless resource: an explosion in public support. According to the VTsIOM sociological service, Putin's approval rating has reached new highs in the last two weeks, and is now at 68 per cent. That's worth more to the Russian leader in his 14th year in power than any accolades from the West could ever be. — Bloomberg

* Leonid Bershidsky writes on Russia, Europe and technology for Bloomberg View. Follow him on Twitter at @Bershidsky.

 * This is the personal opinion of the columnist.

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