By Galina Korol | 2024-07-04

KYIV -- Talk has resumed in Russia about the Kremlin's alleged plans to create a new federal district called "Novorossiya" in Crimea and the occupied parts of the Donetsk, Luhansk, Kherson and Zaporizhzhia provinces in Ukraine.

"Of course a federal district will be created here, just like in all of Russia," the Russian-appointed governor of the occupied part of Zaporizhzhia province, Ukraine, Yevhen Balytskyi, told Russian news outlet RIA Novosti on June 6.

The district will include "new territories and territories that are again incorporated and liberated from the Ukrainian regime," he said.

Russian President Vladimir Putin must make the final decision, Balytskyi said. He did not provide an exact date but said he thought it would happen soon.

Putin spokesman Dmitry Peskov said the decision on creating a new federal district "with Donbas and Novorossiya" had not yet been made, Radio Free Europe/Radio Liberty project Novyny Pryazovya reported June 12.

Russian propaganda

Even talking about creating a new federal district aids the Kremlin's propaganda goals, analysts say.

After Russia occupied Crimea in 2014, the Russian government established the Crimean Federal District but then dissolved it in 2016 and merged the occupied peninsula into the Southern Federal District.

"This is Putin's favorite thing, to build a top-down command structure," Maxim Blant, a Russian economics correspondent and commentator in Latvia, told Kontur.

"There are regions, and then there are federal districts, and they'll probably create some sort of federal district," he said.

In creating a new district on Ukrainian territory, Zaporizhzhia provincial lawmaker Serhii Lyshenko said, the occupiers are primarily pursuing a propaganda aim -- namely, to demonstrate that they have captured a lot of territory.

"This will now be a new district -- 'the territory of the Russian Federation has expanded by an entire district,'" he told Novyny Pryazovya in an interview published in June.

"And if a whole new federal district is now incorporated, that means they really seized some territory. This is purely a propaganda effect."

The potential new district "also fits into the ideological rationale for the war," Russian Academy of Sciences Center for Middle East Studies deputy director Sergei Danilov told Kontur.

For local residents, nothing good will come from the creation of a so-called Novorossiya federal district, said Institute for Strategic Studies and Security director Pavel Lisyansky, who founded the Eastern Human Rights Group.

"Life in the occupied territories will get even worse," he told Kontur.

The occupiers are "saying that the majority of Ukrainians in the occupied territories are traitors and they're either Nazis or they've taken a neutral position, which for Russia can also be considered treason," he said.

"The people there remember what it was like to have a good life in the territories when these provinces were governed by Ukraine, and they know what it's like to live there now that they've passed into the occupiers' hands," Lisyansky said.

Strain on Russian economy

Residents of the occupied territories can expect a hefty tax hike, analysts say.

In May it came to light that the Russian Finance Ministry is preparing to update the tax system, effective January 1, 2025, Novyny Pryazovya reported June 7.

Individuals who earn more than 2.4 million RUB per year will face a tax rate of between 15% and 20%, with the corporate income tax rate rising from 20% to 25%.

Taxes for residents living under Russian occupation will triple, according to calculations by Andrei Orlov, former director of the Center for the Strategic Development of Territories in Melitopol.

"That's for individuals," Orlov told Novyny Pryazovya. "They're also planning to introduce taxes on savings up to 15%."

"Russia's economy is now at a breaking point; it has been targeted by numerous sanctions, and in two years it has basically depleted itself pure and simple," he said.

"The war is eating up a big chunk of resources, and as a result the Russian government now wants to claw these resources away from the public and from business."