The visit, hours after Russia held talks on Ukraine with the
United States, is likely to anger Kiev and the West, which accuse
president Vladimir Putin of illegally seizing the Black Sea
peninsula after a March 16 referendum they say was a sham.
Shortly after landing in Crimea's main city of Simferopol with many
members of his cabinet, Medvedev chaired a Russian government
meeting attended by Crimean leaders and outlined moves to revive the
region's struggling economy.
"Our aim is to make the peninsula as attractive as possible to
investors, so that it can generate sufficient income for its own
development. There are opportunities for this — we have taken
everything into consideration," he told the televised meeting,
sitting at a large desk with Russian flags behind him.
"And so we have decided to create a special economic zone here. This
will allow for the use of special tax and customs regimes in Crimea,
and also minimize administrative procedures."
In comments that made clear Russia had no plans to give back Crimea,
he set out moves to increase wages for some 140,000 state workers in
Crimea, boost pensions, turn the region into a tourism hub, protect
energy links with the peninsula and improve its roads, railways and
Russia's swift takeover of Crimea, following the ouster of Moscow
ally Viktor Yanukovich as Ukraine's president in late February, has
caused the biggest crisis in East-West relations since the Cold War.
Medvedev's visit underlined the impotence of the West and Ukraine to
force Russia out following the formal annexation of Crimea, signed
by Putin, on March 21.
Medvedev arrived in Simferopol hours after U.S. Secretary of State
John Kerry met Russian Foreign Minister Sergei Lavrov in Paris late
on Sunday and reiterated that Washington considered Russia's actions
in Crimea "illegal and illegitimate".
The United States and European Union have imposed sanctions on
Russian officials, lawmakers and allies of Putin. They are
threatening broader measures if Russia, which has forces massed near
Ukraine's eastern border, seeks to take more territory.
HEAVY FINANCIAL BURDEN
The absorption of Crimea and its 2 million residents creates an
additional financial burden on Russia, which is struggling with slow
growth, rising inflation, a weak currency and unusually high capital
flight this year.
But Medvedev's remarks indicated the Kremlin hopes Crimea, which he
said had "colossal prospects" for tourism income, will become
Finance minister Anton Siluanov said last week that Russia would
spend up to 243 billion roubles ($6.82 billion) in Crimea this year,
to be financed from the budget reserve.
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The ultimate cost of its action in Crimea is likely to be far
higher: analysts in a Reuters poll last week slashed their forecasts
for Russian economic growth.
The region has an estimated 55 billion rouble budget deficit, and
the peninsula has been dependent on Ukraine for 85 percent of its
electricity, 90 percent of its drinking water and much of its food.
The reliability of those supplies is now in question. The local
authorities have said they will nationalize Ukrainian state-owned
business, including energy producer Chernomorneftegaz which is
exploring for oil and gas offshore.
Apart from hosting a Russian naval base, Crimea's biggest industry
is tourism as one of the former Soviet Union's few warm seaside
resorts. But until now, 60 percent of visitors arrived from other
parts of Ukraine, mostly by train.
Making it an attractive destination for Russians will be more
difficult, since they mainly arrive by air and have a wider choice
of holiday destinations. Crimea would have to compete with Bulgaria,
Turkey, Greece and Egypt, as well as Russia's own brand new $50
billion Black Sea Olympic resort in Sochi.
Kerry said after talks with Lavrov in Paris on Sunday that progress
on resolving the crisis over Ukraine depended on a Russian troop
pullback from Ukraine's borders.
Moscow has said the buildup is part of Russian military exercises.
It wants assurances that Russian-speaking regions in eastern and
southern regions of Ukraine have extensive autonomy and wants
Russian established as the second state language.
(Additional reporting by Steve Gutterman and Maria Kiselyova;
writing by Timothy Heritage; editing by Peter Graff)
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