The government of Crimea is considering a massive privatization program of local wineries, aiming to attract additional funds for the wine sector’s development, according to the press service of the Crimean government.
Wineries located on the Crimean Peninsula with a production capacity of at least 100,000 bottles per year will be the subject of privatization. It’s another step in the development of the local industry, following the recent sale of Novy Svet, the largest winery in Crimea.
"We believe it would be better for the Crimean winemaking industry to sell the majority of the existing wine-producing enterprises to private investors,” said Sergei Aksenov, governor of Crimea, in a recent statement. “Most of the local wine assets are currently controlled by the state; however there is a possibility the situation will change in the coming years.” He also noted that private owners have different incentives than the state.
Aksenov believes the Crimean government will receive a double benefit from such privatizations, the first of which is adding additional funds to the government’s budget. The second is the development of an industry which will emerge as a major tax payer.
Novy Svet, Crimea’s oldest winery, was sold to Southern Project, a local company owned by Russian billionaire Yuri Kovalchuk. The oligarch, according to Russian media reports, is close to Russia’s President Vladimir Putin, who helped him to purchase the asset.
The price realized for Novy Svet at auction was close to its reserve of 1.5 bn rubles ($30m); the sale was criticized by observers, however, as the real value of the asset could be as much as three times higher.
The auction was conducted without competition from foreign investors, even though representatives of some well-known EU producers had announced their interest in buying Novy Svet, complete with nine vineyards to a total area of 93,538 square metres.
If other wineries are sold in such a way, Crimea’s wine industry could end up being run by owners who have little understanding of the wine trade.
Novy Svet was established in 1878 by Prince Lev Golitsyn, the founder of Russian winemaking. In the 1880s, he was the first winemaker granted the right to use the emblem of the Russian Empire on the label, and in 1896 wine under the Coronation brand was created in honour of the coronation of Emperor Nicholas II. In 1900, Novy Svet received a Grand Prize at the World Exhibition in Paris.
According to estimates from the Russian Ministry of Agriculture, the total value of winemaking assets in Crimea is around $1.55bn.
Eugene Gerden
