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By Olesya Astakhova SIMFEROPOL, Crimea (Reuters) - A year after Russia's takeover of Crimea sparked a wave of euphoria across the Black Sea peninsula, residents are suffering growing hardship as prices rise and many fear for the future. Russia's flag is flying across Crimea on the anniversary of what President Vladimir Putin calls the region's historic "return home" after Russian troops seized control of it from Ukraine and the people backed annexation in a referendum. Since then Putin's popularity has soared - his face looks down from banners and is emblazoned on T-shirts - and some Crimeans, such as pensioners, say they have benefited. But foreign investors have fled, the banking sector is paralyzed and many other residents are struggling to make ends meet. "Crimea will be a backwater of Russia. What's good here? The prices are crazy and salaries are laughable," grumbled 35-year-old taxi driver Nikolai, deftly negotiating potholes and rutted roads in the center of the capital, Simferopol. Life was hard when Crimea was part of Ukraine but it is proving no easier as part of Russia, which has been hit by Western economic sanctions over the annexation of Crimea and Moscow's support for separatists fighting in eastern Ukraine. "Ordinary Russians lost out with the annexation of Crimea," said Sergei, a construction goods retailer from Kiev who moved to Simferopol last year with his wife and children after protests that turned violent in the Ukrainian capital. "Across the whole of Russia, prices are going up, there are sanctions, the rouble has devalued," he said, closing the kitchen window to stop his neighbors overhearing. Such discontent has not prevented the celebrations which began on Monday in Crimea, the anniversary of the referendum which showed 97 percent support for joining Russia. The days-long party will also include a concert in Moscow on Wednesday. Although the European Union and the United States swiftly imposed sanctions on Moscow following its move on Crimea, Putin made clear he had no regrets in a television documentary aired on Sunday. "The ultimate goal was to give people a chance to express their opinion on how they want to live in the future," he said of the referendum, describing the dispatch of Russian forces to Crimea as intended to prevent bloodshed and save lives. Despite the problems they face, most Crimeans are still glad to be part of Russia, its leaders say. "The president's ratings in Crimea are almost 100 percent," Crimean Prime Minister Sergei Aksyonov told Reuters in a modest office with the Russian and Crimean flags. "Nine out of 10 people say they support (the annexation), and would vote the same way again," he said. KREMLIN RULES OUT GIVING CRIMEA BACK The Kremlin is standing firm over the annexation, though the United States and the EU on Monday again condemned the takeover of Crimea, portrayed the referendum as a sham and said sanctions would remain in place. Even some Western diplomats, however, say there is little chance Russia will hand Crimea back to Ukraine. "Crimea is a region of the Russian Federation and of course the subject of our regions is not up for discussion," Kremlin spokesman Dmitry Peskov said on Tuesday. Many Russians say Crimea's annexation rights a historical wrong by Soviet leader Nikita Khrushchev who gave the territory to Ukraine in 1954, long before the Soviet Union collapsed. Russia has underlined its commitment to Crimea by announcing a military build-up on the peninsula, home to Russia's Black Sea fleet and to more than 2 million people, of whom around 60 percent are ethnic Russians. It has also promised to pour in money to boost the local economy and help residents. Some pensioners say they now receive much bigger pensions and are happy with the support from Russia. "Life has changed for the better. Pensions and salaries got bigger, roads are being repaired, and in general the government started working," said one who gave his name only as Alexander. Businessmen, however, complain of growing obstacles. "In Ukraine, everything was simple," said 41-year-old Emil Mustafaev, a real estate developer from Sevastopol. "Now everything is closed to us." He said he could no longer buy building materials he needs from Ukraine, which has severed all rail connections to the peninsula, while only Russian airlines now fly to Ukraine. Many supplies from Ukraine have been disrupted: Farmers lack water to irrigate crops, residents face frequent power outages and it is proving hard to attract tourists to Crimea's beaches. The Crimean government said tourist numbers more than halved in 2014, down from 6 million visitors the year before. Moscow has promised to establish alternative routes and has awarded a $3 billion contract to Arkady Rotenberg, a Putin ally, to build a bridge across the Kerch Strait that would connect Crimea to the Russian mainland. Referring to the bridge, a tour operator who gave his name only as Ivan said: "Without the bridge there will be no boom." SECURITY CONCERNS In the last year, Crimean authorities have nationalized scores of Ukrainian enterprises, said Simferopol lawyer Zhan Zapruta, who works to protect shareholders' rights. "Aksyonov has this desire to return Crimea to the conditions of the Soviet Union ... to take all structures that make any real money," he said. The prime minister rejected the lawyer's accusation, saying: "We have no personal aims for nationalization." But residents say foreign businesses are also put off by a deterioration of law and security. "Self-defense" volunteers can be seen patrolling streets, clad in camouflage and wielding batons. Some describe an atmosphere of harassment and fear, saying there have been numerous abductions and security forces have detained people on false accusations. Crimea's Tatar Muslims, who number about 240,000, complain of intimidation and violence. "Since Russia annexed Crimea, the de facto authorities are using a vast array of bully boy tactics to crack down on dissent," said John Dalhuisen, Amnesty International's Director for Europe and Central Asia. He said the abductions had prompted many critics to leave Crimea, adding: "Those remaining face a range of harassment from authorities determined to silence their opponents." (Additional reporting by Denis Dyomkin and Olga Petrova, Writing by Olesya Astakhova and Jack Stubbs,; Editing by Timothy Heritage and Sophie Walker)