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The Yalta Embankment, May 27, 2018
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Who told you there are Russian laws here? The trials and travails of small business owners in Crimea, five years after annexation

Source: Meduza
The Yalta Embankment, May 27, 2018
The Yalta Embankment, May 27, 2018
Alexey Malgavko / Sputnik / Scanpix / LETA

Five years ago, the boldest and bravest entrepreneurs from across Russia flooded Crimea. Shackled by international sanctions, most major businesses stayed away, and the new territory promised to be a land of opportunity for the go-getters undeterred. Existing local businesses also hoped for windfall profits, following annexation by Ukraine’s relatively wealthier neighbor. The past five years have shown, however, that the business climate today is bleaker not only than it was when Ukraine controlled the peninsula, but also in comparison to Russia on the other side of the Kerch Strait. Meduza visited Crimea to learn more about its business environment, and discovered that outsiders are still largely unwelcome.

part 1

Successful people

Two well-dressed men walk along a row of gray, dilapidated buildings in Simferopol. This used to be a plastics factory, but today it looks like the infrastructure abandoned in Chernobyl. One of the men is an entrepreneur from Moscow named Denis Smolentsev, who shares some news: “We’ve had developments: yesterday, we finally launched the production line. For two months, one [hired specialist] was telling us how hard it would be to get it up and running, and then another came along and got it going in a day. Except there’s a different problem with him: he goes on benders.”

Smolentsev came to Crimea from Moscow a few years ago, expecting to land a state contract. After the annexation, big money started flowing into the area, as Russia’s federal government unleashed spending on roads, public services, and amenities, in what was called “the restoration of Crimea’s infrastructure.” But state officials didn’t trust just anyone to do it, and it was only after several years and 20 million rubles ($309,750) invested in the area that Smolentsev got anywhere close to earning some money.

“When Crimea became ours, we had all these ideas. We thought Crimea would be built up,” he recalls. “My colleague and I rushed here from Petersburg. At first, we thought we’d help Petersburg road builders by supplying them with gravel. There’s a well-known Petersburg company that wanted to beat out everyone else and win the state contracts and it even brought over an asphalt factory to gain a competitive edge, but [then] the ‘VAD’ company came along.”

It proved impossible to take on VAD’s companies, which won contract after contract, amassing more than 100 billion rubles in major deals, all without the slightest competition. Eventually, Smolentsev’s Petersburg road builders left Crimea altogether, mothballing their asphalt plant, and soon Smolentsev’s partner went home, too. Smolentsev stayed put, but he vowed to build a business independent from the state.

Today, he manufactures plastic water pipes with a local business partner named Ruslan Kravchenko. Smolentsev wanted to sell him the polypropylene-pipe production facility outright, but in the end they agreed to become co-owners.

Even if the new venture is a success, however, Smolentsev says he’s decided to end his years-long journey in search of Crimea’s riches: “You want your business to be transparent and straightforward. It’s better to know what you’ll get in the end. But here you’re playing roulette.”

Just among his friends and acquaintances, Smolentsev says he knows about 20 people who came to Crimea after the annexation, inspired by the new possibilities. They’re all long gone now — some left immediately, and others went home after sinking huge sums of money into various projects. “A couple of years ago, a local woman — who later moved to Moscow, incidentally — said something interesting to me: ‘More than one of you mainland folks have stumbled here on the stones of Crimea.’ I laughed then, but I often remember the phrase now,” Smolentsev says.

Moscow businessman Denis Smolentsev (on the right) and his Crimean partner, Ruslan Kravchenko, at their manufacturing plant.
Alexey Chekhranov developed a unified personnel service for hiring freight handlers through bank transfers — an innovation for Crimea.

The former director of the container-cargo-handling Dalzavod-Terminal in Vladivostok, Alexey Chekhranov was also counting on government contracts when he relocated to Crimea. After the annexation, he dropped everything and moved from the Pacific Coast to the shores of the Black Sea, planning a cashless personnel service, selling labor through bank transfers. To this end, he set up a business offering freight handlers for hire. Crimea already had a market for freight handlers, of course, but Chekhranov knew how to win state contracts: “Everyone who worked in Crimea before Russia[‘s annexation] didn’t know the Russian regulations, and they weren’t offering these services through bank transfers. They only operated with cash, while we could move forward legally. We approached the state ourselves.”

One of the first contracts awarded to Chekhranov and his company, “Successful People,” was part of Crimea’s new population census. His freight trucks helped deliver enormous boxes of blank forms. Having earned some money on this job, Chekhranov took out another loan and decided to continue working as a state contractor.

He built a factory workshop to recycle scrap tires into crumb rubber, and then he built another two facilities to manufacture rubber tiles (which are used at playgrounds and sports centers). Chekhranov wanted to create a full-service company in the public-space sector that would corner the market on playground construction. But then something went wrong: “I got mixed up with Sevastopol. Terrible contracts — the appraisals were totally off. There’s no other way to put it: I don’t fucking understand it. They had me in a real pinch, I fell behind schedule, and the money was running out. I signed [contracts for] 10 sites, and I should have earned 2 million [rubles, or $31,130], but instead I lost about six [$93,380].”

After Chekhranov scored these orders and took out a loan to complete the work (at a predatory 10-percent monthly interest rate, no less), one of his factories burned down. Today, his business has filed multiple lawsuits for upwards of 18 million rubles ($279,540). Chekhranov has stopped trying to win state contracts for playgrounds, and now he just sells his rubber tiles to third-party contractors. For his next project, he’ll be manufacturing gates and benches from recycled plastic bags and sand (which produce a material that is actually stronger than concrete). He then wants to sell this technology to other businesses across the country. Most importantly, he plans to move to Moscow.

Chekhranov sums up his experience in Crimea like this: “There was the illusion that you could create something big here — that you could develop it and maintain it. But it isn’t so. In my situation, it definitely wasn’t. To gain a foothold and stay, you’ve got to accept the local rules and scale back your ambitions. You get a workshop and hit the brakes, earning 300,000 to 500,000 rubles [about $6,200] a month, and you become an affluent Crimean. Then you buy some property, and after 50 or 60 years you can become truly wealthy. That’s the only way. Or you go into politics here and rise like that.”

part 2

Wine

The most romantic and simultaneously logical business for Crimea’s Mediterranean climate is winemaking. That, at any rate, is what Pavel Pestov decided when he began growing berries: first for investors in Moscow, and then for himself as an independent winemaker. The vineyard business took off especially because of Crimea’s generous subsidies to anyone ready to cultivate vines. State funding compensates up to 80 percent of the startup costs for new vineyards.

According to Pestov, the subsidies work: “Today, an investor can get a vineyard almost for free, thanks to state assistance. Investors are slowly waking up to the fact that it’s a good time to invest their own money and earn it back within a year.” All you need to do is obtain official status as an agricultural producer and register your business in Crimea. It costs about $20,000 to seed a hectare of vineyard (roughly $8,090 per acre). “They subsidize no more than 300,000 rubles [$4,655] per hectare [about $1,885 per acre] on the mainland, where the returns are two-to-three times lower,” Pestov explains.

Unfortunately, this is where the good news ends for Russians with dreams of their own Crimean vineyard.

Winemaking entrepreneurs run into a wall when they try to buy land on the peninsula: profiteers charge exorbitant prices and the state bureaucracy is nearly impenetrable. Pestov found a way around this: to start his vineyard, he reached an agreement with 10 partners who own the land that belonged to a former collective farm. He now has roughly 100 hectares (almost 250 acres) at his disposal, and he’s been planting grapes there and receiving state subsidies for four years.

The second major obstacle Russians face when trying to break into Crimea’s winemaking business is that they aren’t permitted, strictly speaking, to produce wine on their own. All alcohol manufacturers in Russia are required to register with the Unified State Automated Information System (EGAIS), but only large enterprises have the wherewithal to navigate this unruly bureaucracy. “You can’t make wine in your own basement, like they do at Italian and French farms,” Pestov says. “You have to meet all these requirements. And it’s not just an administrative barrier, but a higher entrance fee [into the market].” Pestov found a workaround here, as well: he cut a deal with the “Zolotaya Balka” (Gold Beam) winery, and he releases his “Dva Serdtsa” (Two Hearts) brand on their label.

Vineyards along the road leading to the village of Soniachna Dolyna, Crimea. November 13, 2017.
Sergey Malgavko / TASS / Scanpix / LETA
Oak casks with “Massandra” wine in Crimea. March 2015.
Max Vetrov / Sputnik / Scanpix / LETA
Pavel Pestov, a winemaker who produces “Dva Serdtsa” wine in cooperation with “Zolotaya Balka.”

Pestov says he envies some of the newcomers to the winemaking industry in Crimea that manage to grow at breakneck speed. One of the biggest investors in Crimean vineyards is the company Alma Valley, which is believed to be owned by VTB Bank President and Chairman Andrey Kostin. In 2017, the company increased the area of its vineyard sevenfold.” “He was even able to buy land in Sevastopol, where no entrepreneur has been able to get anything, as everyone is told that there’s no land to sell,” Pestov says in awe.

Another major wine investor in the peninsula is Rossiya Bank, whose largest shareholder is Yuri Kovalchuk, one of Putin’s close friends. In 2017, Kovalchuk’s business empire spent 1.5 billion rubles ($22.3 million) to acquire a factory in the area to produce “Novyi Svet” (New World) champagne. This February, Russia’s Bureau for Presidential Affairs transferred ownership of Crimea’s historical “Massandra” winery to the regional government. A day later, local officials announced Massandra’s privatization. Once again, Yuri Kovalchuk hopes to be the buyer, and he’s also set his sights on Crimea’s “Inkerman” winery.

It is legal, incidentally, to grow small European-type farms in Crimea and make wine, so long as you don’t sell it, and serve it only to your family and guests.

Five years ago, Alexey and Irina Nosyrev dropped everything and left the metropolis of Rostov-on-Don for Crimea. At Mount Demerji, about eight miles outside the city of Alushta, they built a farm with 60 goats, and today they produce different kinds of cheese using the milk. The farm doubles as a tourist attraction: Alexey manages the goats, and Irina organizes tastings for guests, and they also supply cheeses to local restaurants. Relying entirely on word of mouth, the farmers receive up to 10 small tour groups a day. The Nosyrevs also make wine for themselves using grapes they buy in town.

The couple initially thought about starting their own business somewhere in Europe’s wine region, but they fell in love with this spot in Crimea. They paid the deposit for their land back in December 2013, when the peninsula was still under Ukrainian sovereignty, and they completed the purchase after Russia’s annexation. “We’re not political — we’re just doing what we love,” Irina says.

From Mount Demerji, it’s unclear whether Crimea belongs to the Turks, the Russians, or the Ukrainians. The visible ruins of the Funa Fortress left by the medieval Principality of Theodoro are a reminder that the winemakers who once farmed these lands spoke Gothic and Greek, and at various times shared the area among Alans, Greeks, Circassians, Goths, Crimean Karaites, and Armenians.

part 3

The sea

Land in Crimea, or rather the shadowy market for this land, can be an insurmountable obstacle for any investor — even investors who want to build their businesses at sea.

The former director of “Conti” (St. Petersburg’s biggest casino), Sergey Tatko is another businessman who dropped everything and moved his family to Crimea. He initially hoped to find land to build an Alpine-style hotel and brewery in the foothills of the Crimean Mountains, but he couldn’t find a place for it. Next, he went looking for land to build a vineyard, but this fell through, too, when he discovered that the prices offered by real-estate speculators reached $1.5 million per hectare (about $607,030 per acre), and a market for state land simply didn’t exist.

Tatko says he also faced his new compatriots’ cultural prejudices. “Everyone’s attitude toward me was, oh, here comes the rich Russkie. They even called me an occupier, and that wasn’t all,” Tatko says, smiling sadly. “The worst thing is that it’s precisely this theme here — the, hey, the rich Russkies are coming, so let’s fleece them — the market environment generally spoils everything.”

After searching unsuccessfully for land, Tatko decided to embark on another kind of business that’s new to Russia: mussel farming. When his Italian friend explained how mussels are relatively low-maintenance and you don’t need to feed them, Tatko started studying the industry literature and set out to become the Crimean coast’s mussel tycoon.

Throughout the entire Black Sea today, about 52 tons of mussels are farmed each year. In Italy, meanwhile, any one of the country’s dozens of mussel farms produces up to 3,000 tons. Tatko wanted to reach a production volume of 1,000 tons over three years. He submitted a winning bid on a water area in the Black Sea, and invested in the construction of a catamaran with all the necessary deck equipment. In the first stage of the project, Tatko spent about 40 million rubles ($621,325). In the second stage, however, the ship’s launch was delayed. All over again, he ran into real-estate problems. After deciding to become a mussel magnate, Tatko was still unable to buy or even rent the property he needed to build a coastal factory. “I’ve been turned away at all different levels. As of today, I’ve had nine official rejections. This is all after the governor’s Investment Attractiveness Commission met and issued orders to facilitate acquisitions and help investors in every possible way.”

Tatko can’t walk away from the project — he’s already sunk too much of his money in it. Plan B currently looks like this: if they won’t give him land at the shore, then he’ll build a warehouse inland. Without direct access to the sea, however, his production capacity will be magnitudes lower.

The owners of the neighboring water zone aren’t faring much better, Tatko says. After winning the right to use the adjacent sea area, the company gave up: “They also had big plans for mussels. They spent a year trying to make heads or tails of everything, and then they threw in the towel. Just the other day, they got a call saying their site will be taken away in a month, since they didn’t start production in the allotted time.” According to Tatko, officials have been soliciting bids on new fishing sites for eight months now: “Zero applicants. Bidding to take on a fishing site? Not a soul. Nobody’s that stupid.”

Tatko says he doesn’t plan to leave Crimea, but he strongly advises his friends in St. Petersburg to keep their distance: “I had an idea to hang a banner in Petersburg that would say, ‘Forget about coming to Crimea with investment projects. Putin’s not in charge here, and his orders and laws carry no weight.’”

Sergey Tatko, the former director of St. Petersburg’s biggest casino who’s currently trying to become Crimea’s “mussel king” (though, so far, without much success).
Yuri Airapetyan, the president of Crimea’s “New Formation” entrepreneurs’ organization, says local state officials deliberately impede investment projects.
The Crimean Bridge
Serget Malgavko / TASS / Scanpix / LETA

The land problem is crucial for investors, admits Valery Vasyunin, who heads the Sevastopol branch of the “Opora” All-Russian Non-Governmental Organization of Small and Medium Business. “At conferences, they say, ‘We’ll select real estate for investment projects,’ but the result is disagreement between the land office, the business, and the region’s leadership. The first don’t want to consent, the latter can’t move forward, and the third group won’t allow it. There are lands tied up in the courts, and there are third-party encumbrances. There are lands where it’s unclear how the paperwork was drawn up, and they’re just out there, available to the public like they’re free. An investor shows up, spends his time and money to draw up a project design and a financial blueprint, and then it turns out that the land is occupied,” Vasyunin explains.

Yuri Airapetyan, who heads a different organization representing businesses in Crimea, says it’s not administrative barriers but corruption that is decisive in shaping the peninsula’s business climate: “From the perspective of the investment community, it would be untrue to say that everything is great. If you hear that, [then know it is] a brazen lie. Some state officials deliberately impede this or that investment project. Maybe they want compensation for their labors.”

Airapetyan recalls how Vladimir Korsun tried to establish a major goat-cheese production plant in Crimea, before the project stalled. After selling his stake in the cheese-manufacturer “Karat,” Korsun planned to invest 4 billion rubles ($62.2 million) in the new facility, which would have employed roughly 1,000 people. The head of Crimea supported the venture enthusiastically, but everything came to a halt when it got to the local level. “The head of this tiny district managed to stall the whole project. He wasn’t ready to allocate the necessary land. Imagine him looking into my eyes and saying, ‘And who told you that Russian laws operate here?’” Airapetyan says angrily. “This person was in the Party of Regions, and now he’s changed his colors and he belongs to United Russia. Do you remember that TV show ‘Sleepers’? About people in government, science, and education who were really serving another state’s interests and they activated only when there was instability. In Crimea, I’m often reminded of this show.”

part 4

The climate

Vladimir Ezhikov, the young head of Sevastopol’s Economics Department, has a welcoming smile that doesn’t leave his face even when he discusses what enrages the region’s investors. Talking about the problems with real estate and paperwork, he says, “In the Ukrainian days, a lot of the land issues were resolved informally. There are two problems here. People came with boundaries on land plots that didn’t match what was on file, or they stated types of use that also didn’t conform.”

When told about entrepreneurs’ struggles in Crimea and Sevastopol and asked if there are any success stories the department would highlight, Ezhikov recalls the “IT Crimea” Technopark, which bills itself as “the Russian Silicon Valley.” The facility is scheduled to open “soon” in the city’s tallest building, which was built in 1986 and formerly housed the Radiocommunication Design Bureau. The high rise is known locally as the “Odekolon” (Cologne), because its round “top” resembles the lid of a perfume bottle. Ezhikov is eager to talk about the technopark’s investors: “It’s a Petersburg company. They bought the building in Sevastopol, investing a total 1.5 billion rubles [$22.3 million], the first stage of which was already released in April. There will be modernized offices with coworking spaces and conference halls and comfortable accommodations for IT experts. The whole region, after all, offers a comfortable living climate and there’s great IT potential here.”

Ezhikov’s department provided Meduza with the phone number for Oleg Korolev, the technopark’s executive director, but the first thing he asked when contacted was “May I say something bad about the department?”

“IT Crimea” executive director Oleg Korolev outside the “Odekolon” high rise that is supposedly poised to host a new state-of-the-art technology center.

Korolev says his company really did want to come to Crimea after 2014 and build “something like Silicon Valley,” where the climate is almost Californian, and the authorities were promising to help attract high-tech firms. After all, people can work in IT from almost anywhere on Earth. Cooperation with Sevastopol’s authorities has disappointed Korolev most of all. The city has not only been unhelpful, but it’s even failed to do what is required by the law and within the time allotted by federal regulations.

“You see, the project came out exactly the same as it went in,” Korolev says, addressing Sevastopol’s authorities. “And now [officials] complain that nobody is coming [to invest]. Have you considered asking why? We’re not even requesting assistance; we’re raising issues that they’re supposed to address and resolve within the legal timeframes. And what kind of assistance can there be when the inquiries are held up for four months… You start to think that maybe you’d be better off moving to another region. You start looking at other regions, and you realize that maybe it’s even warmer there. Not in terms of the temperature outside the window, but when it comes to the investment terms and the business climate.”

Korolev confesses that he feels a “certain skepticism,” and recalls how his team recently met with Kaliningrad Governor Anton Alikhanov. After that meeting, they decided to halve their number of planned IT positions in Crimea and move those jobs to Russia’s westernmost region on the Baltic Coast.

part 5

The Gartenal Estate

About 20 kilometers (12.4 miles) from Simferopol, not far off the highway to Feodosia, the road is riddled with potholes big enough to swallow a small car. Follow this route to the village of Donskoe, and after passing rows of ramshackle small homes, you suddenly come to a large, Bavarian-style estate. This destination illustrates how local small and medium businesses are trying to merge the legacy of Crimea’s Ukrainian era with today’s Russian reality. The estate also demonstrates how local entrepreneurs have learned to benefit from life as a part of Russia.

The “Gartenal Estate” includes a small hotel in a wooden building comprising six rooms, a guest house, a small petting zoo, a pond, and a huge cottage that’s currently closed because they were unable to rent it out. The idea for a German-themed estate in the heart of Tavria belongs to businessman Igor Ogorodnik, who also built the compound. After Ukraine’s Orange Revolution, he spent 2005 and 2006 as Crimea’s economic minister, before returning to the private sector and serving simultaneously as Germany’s honorary consul in Simferopol. Hooked on German culture, Ogorodnik decided to build an entire Bavarian village, but he failed to turn this country club into a functioning business. After the annexation, Ogorodnik moved to Australia, while his son stayed in Kyiv, not especially eager to return to Crimea. In the end, the republic’s former economics minister entrusted the manor to his nephew, who completely neglected the property.

This is the story according to Alexander Dyachenko, who now oversees Gartenal. Three months ago, he took a chance and bought the entire estate. His goal this spring is to transform the Germanophile hostel into an amusement center, and he’s enlisted several partners, including some whose line of work has little overlap with recreational business.

Alexander Dyachenko is trying to transform the Gartenal estate into an amusement center with equestrian theater and medieval tournaments.

“There are many times more entrepreneurs in Crimea now, and competition is tough,” Dyachenko explains. “[Under Ukraine] everything was already in place, and there was a pool of entrepreneurs already formed. Russia created new opportunities, and the market reset. Then everybody jumped in.”

Dyachenko jumped in, too, agreeing to an unexpected business proposal. Managing the Gartenal estate is one such leap. You might call Dyachenko a very active, but not altogether successful businessman. In November 2013, when thousands of people in Kyiv flooded Khreshchatyk Street, Dyachenko decided to quit his job as a manager at Crimea’s biggest product distributor, in order to develop his own project. He borrowed money from his friend’s father, but the venture came to nothing: his supplier company’s clients hired his managers out from under him, and the business was left with millions of rubles in debt.

Social work ultimately saved Dyachenko from depression and suicide: he joined the “New Formation” entrepreneurs’ organization for small and medium businesses. Now he’s busy with the country hostel, though he’s still paying back his old loans. The plan is to attract tourists to a pseudo-Bavarian village, and stage horse attractions for them.

The estate’s first subtenant is a 28-year-old Crimean man named Nikolai Kazachenko, who agreed to relocate an entire equestrian theater with jousting, fire shows, gymnasts, and extreme stunts from Lazarevskoye in the Krasnodar Krai to Crimea. The 25-person troupe will reside permanently on the estate, beginning in May. The project will cost 20 million rubles ($310,685), and the relocation’s co-investor is the travel company “RusKrymTur,” which promises to provide transportation for 800 tourists every day. It’s Kazachenko’s job to attract the bulk of these visitors.

The Gartenal Estate is counting on school group tours, where Kazachenko has an unexpected advantage. His main business is the manufacture and sale of clothes, including the popular youth brand “Bandit.” Kazachenko has been doing this since 2012. As a first-year college student, he realized that soccer fans in Crimea couldn’t get enough fanny packs. First he brought in the merchandise from China, and then he started ordering them from a local garment manufacturer. After Russia annexed Crimea, he decided to open his own workshop, where he started making affordably priced clothes, focusing on t-shirts and shorts for soccer fans. This is how “Bandit” streetwear took off. In Russia, Belarus, and Ukraine, Bandit currently has 20 franchises.

In 2014, entrepreneur Mikhail Glagola thought Russia’s annexation of Crimea was an “extremely unclear event” that did no favors for local businesses.
Nikolai Kazachenko, the creator of the popular youth clothing brand “Bandit,” which manufactures clothes for Sberbank, Russian Railways, and even the Federal Protective Service

Kazachenko also does business with several major enterprises, such as uniforms for staff at Russian Railways and Sberbank. “What happens is the state agencies negotiate with us, announce that they’re accepting procurement bids, and then they win it for us. They get together all the documentation, and the main thing for us it to deliver the product on time,” Kazachenko says. “I don’t know how it is across the country, but in Crimea there’s just nobody who can manufacture quality clothes at affordable prices on schedule.” He maintains that he won these state contracts without connections: he’s from a family of modest means, and his father worked as a security guard. His first investment in the clothing business was just 10,000 rubles ($155, by today’s exchange rate).

Kazachenko recently signed a contract with the Federal Protective Service to supply “smart clothes”: jackets designed with a rough surface that can be used to reload a pistol, shaving a full second off the time needed to insert another clip. Ironically, the jacket’s design belongs to a Crimean engineer who now lives in Lviv. For understandable reasons, he leaves out this prototype when sharing his portfolio with Ukrainian clients.

Evgeny Arkharov, the owner of several bars in Crimea, is another probable subtenant at the Gartenal Estate. He visited the compound’s tavern to test out the kitchen, and says he likes the idea of entertaining people with horses. “We’ll [rent the tavern] only if there’s an equestrian theater, because otherwise there’s nothing to do here,” Arkharov says, delivering his verdict. He became a small business owner around the time Russia annexed Crimea, and he’s accustomed to acting cautiously. “[In 2014] we didn’t understand how to operate. We didn’t really understand how to live. The market has changed completely. Before, our work was at a middle-high-level invoice, but now the invoice is either the bottom or the very top.”

Arkharov focused his efforts on the economy’s low-cost sector. Today, he owns three bars in Simferopol, including the popular “Tortuga,” where the homemade liqueurs go for 75 rubles ($1.16) and clientele of all ages dances feverishly to songs by the Ukrainian duet Potap and Nastya. Meduza’s correspondent visited this bar on a Tuesday night, and almost every table was occupied. The establishment is especially crowded every 15th and 30th of the month, when civil servants come to spend their advances and paychecks. Arkharov now factors it into his business planning.

Local entrepreneur Mikhail Glagola is also thinking about becoming a subtenant at the Gartenal estate. When the market “reset” in 2014, he lost his business, but then he built another even bigger enterprise. Like most business owners in Crimea at the time, Glagola was anxious when Russia’s tricolor was raised in place of the Ukrainian flag: “I’m a businessman, and for me the whole thing was extremely unclear. To be honest, in terms of business interests, we didn’t need it.” Five years ago, Glagola owned two nightclubs in Simferopol. He had to close both and sell them almost immediately after the events of early 2014. “Prices skyrocketed overnight. They blocked goods coming in from Ukraine, and they started shipping everything from the mainland, and prices spiked three-to-four times. If a liter of milk [about a quart] cost 20 rubles [$0.31], then it suddenly became 80–100 rubles [about $1.40] — literally in just two months. People stopped going to clubs. They couldn’t afford it.”

Glagola lost $30,000 getting out of the nightclub business, but by then he’d already found a new niche: full-service street advertising. He effectively introduced Crimea to outdoor advertising screens, and his agency also designed the ads in house. He ordered the first screen from China when his address was still in Ukraine, and by the time the package arrived, it had come to Russia. Then he flew to Sheremetyevo Airport for advice from some Russian customs officials he knew, to determine what his next move should be.

“They [customs officials in Crimea after the annexation] were spooked. There was insane corruption under Ukraine, and nobody even hid it. When [negotiating informally] how much something might cost, they just stuck a finger in the air and calculated the amount of ‘thanks’ needed. In Russia, that kind of thing doesn’t fly, and so they were afraid to budge. But they still wanted to fleece you somehow — they just didn’t know how.”

The fence along the border between Crimea and Ukraine. December 2018.
Alexander Polegenko / Sputnik / Scanpix / LETA

Conferring with his friends in Moscow’s customs office helped Glagola. When talking to Crimean customs officials who didn’t know the new Russian regulations, Glagola’s knowledge of Russian laws saved him. He told the authorities how they should proceed according to the new rules, and they agreed. As a result, Glagola was able to enter the multimedia outdoor advertising market ahead of everyone else, and he managed to install five screens in just his first year of operations. To this day, he remains Crimea’s only supplier, and he’s now got 15 screens up and running across the peninsula. His company’s rate of return has reached 60 percent.

Meanwhile, Glagola is reinvesting all his profits into further growth. Unlike his Crimean colleague who rents space at the Gartenal Estate and talks about how local entrepreneurs have “started jumping in,” Glagola leapt high and far, managing to expand his business from Crimea to St. Petersburg. He currently has an advertisement screen inside the Moskovsky railway station, and he plans to expand his carrier network in St. Petersburg to seven. The niche market turns out to be underdeveloped here, as well: nobody offers screens as big as 400 square meters (4,304 square feet). Each advertising screen will earn him 15 million rubles ($232,890) a month. Back home in Crimea, he can use this money to invest in the Gartenal Estate.

Stepan Pozhidaev

Translation by Kevin Rothrock

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