Saturday, January 31, 2009

Are They for Real? Ukraine's Cantankerous "Leaders"

This seems almost surreal. After months and months of political wrangling, accusations, and mudslinging, it seems that neither President Viktor Yushchenko nor Prime Minister Yuliya Tymoshenko care about the country anymore. Their unwarranted respective “emergency” addresses (i.e. intensified bad-mouthing) to the nation yesterday proved just that.

Indeed, the vast majority of Ukraine's population is sick and tired of the fragmented ruling coalition government, or, conversely, a lack of government thereof. The people prefer to not see or hear from their so-called leaders anymore, yet the authorities can't seem to understand that.

Instead, Mr. Yushchenko and Ms. Tymoshenko are adding more fuel to the fire at the precise moment they should be taking a step back to allow new, fresh, and uncompromised faces to come to the fore, as the battle for the next presidential election in Ukraine starts to heat up.

Mr. Yushchenko must not be following the polls, which show that his approval ratings have been in the low teens for the past several years—and not showing any signs of improvement. The firebrand Ms. Tymoshenko, Ukraine's erstwhile richest women who made her first foray in the early ‘90s by selling homemade (bootlegged) copies of "Rambo" (and later in the murky oil and gas trade), would be keen to stay out of squabbling with the President, but that is apparently proving too difficult to do.

The results of this impotent government are as follows: record high inflation, surging unemployment, and a freefall in the national currency, the hryvnia. This is in addition to similarly drastic falls in many of Ukraine's main exports, such as aluminum, a dramatic slowdown in Ukraine's hitherto thriving construction industry, and a new and much belated gas deal with Russia (which means that, at least over the long term, Ukraine will be paying significantly more for its gas supplies). All of the aforementioned symptoms—except a worldwide slump in commodity prices—are direct or indirect results of the Ukrainian government’s incompetence.

Make no mistake about it: this paralysis is the government's collective fault. First and foremost, both Prime Minister Tymoshenko and President Yushchenko should admit to being culpable of these failures and resign. Unfortunately, as the case in Iceland showed this week, having a government resign is no quick solution to the underlying problems. At least in Iceland there quickly emerged an alternative figure to the ruling elite who commands a fair amount of popular support, but few Ukrainians can imagine another generation of politicians who will replace the incumbent elite. So equally as disappointing is the fact that there aren’t any fresh faces in Ukrainian politics, despite the marked increase in press freedom that the Orange Revolution provided.

And the sheer hypocrisy of Ukraine's government is repulsive, too. At precisely the moment both the President and PM individually call for national consolidation—a paradox if I ever saw one—they fling more mud at each other while simultaneously attempting to exonerate themselves of all blame.

Thankfully, Ukrainians know whom to blame for such a mess.

Perhaps when voting in the next presidential elections, the electorate will remember this childish behavior at a time of crisis and boycott the election in whole unless a bona fide alternative candidate emerges. There might not be much upside in doing such, but what is abundantly clear is that there is not much of a downside, either.

The economy is expected to contract by about five percent this year. Inflation is at 30% per annum. And thousands are being laid off by the week. If this continues, the country might not even survive until the next presidential election, for another rebellion, this time a counter-Orange Revolution, may result.

Friday, January 30, 2009

"101 Reykjavik"

I watched an interesting movie the other day, an Icelandic film titled "101 Reykjavik." The basic plot is a convoluted one with a mother who invites home a lady who happens to be her lesbian lover. Little does the mother's son, Hlynur, know that the friend is his mother's lover--and when mama is away, things turn hot between her son and her, er, his, lover. This love triangle and tryst of sorts makes for an interesting, entertaining film, although it's not my all-time favorite movie by a longshot. It is, however, definitely worth a view, not least to capture a sense of the oftentimes wild and partylike Icelandic mindset.
P.S. The movie is available via Netflix and probably several other places. In any case, Netflix is where I rented my copy, but Blockbuster Online might carry the film, too.

A Harangue: The Abominable State of our National Rail Service

While recently scrutinizing the earmarks of the nearly $1 trillion stimulus package that is being mooted in Congress as you read this, I was flabbergasted to learn the actual amount allotted for mass transit (specifically, rail) development for all the talk about long-term infrastructure investment, which is putatively one of the key aspects of this immense ordeal.

The amount allotted for Amtrak to update and modernize our antiquated U.S. railways is just $850 million, or roughly 1% of the total. That is despite the fact that the national U.S. rail carrier would achieve quite obvious benefits for the general public:

1.) First and foremost, more jobs would be created--and on a truly national scale, both during the renovation and construction phase and afterwards (drivers, train conductors, etc.);
2.) Using the latest technologies, modernizing Amtrak would work toward increasing and promoting green energy, which is also a pillar of President Barack Obama's election platform;
3.) A direct result of an efficient, modern rail network is a decrease in the use of cars to get commuters and travelers to their destinations, hence a decrease in America's long-term demand for oil and, in a further result of such, increased guarantees of America's energy security;
4.) Increased commerce between America and Canada (another direct result of rail efficiency);
5.) Decreased greenhouse gas emissions due to more and more passengers opting to take the train rather than fly;
6.) Not least, an increase in the prices of homes that would be located along the newly built or updated rail lines. This is obvious, for these homes' accessibility, and hence demand, would be immediately increased;
7.) Increased tourism from Canada and nearly all other U.S. cities, thereby creating long-term jobs, more spending, and billions of dollars in continuous revenue.

True, many claim that using railroad en masse is not in the U.S. psyche. Well, sure it isn't if the journey from Boston to Washington on Amtrak today is no faster than one is by car. Or if there is only one route daily connecting such hubs as Seattle, Washington, and Vancouver in Canada. Or if the only decent route we have is the roughly 3-hour journey between Boston and New York City.

This is abominable, and neither is it warranted nor fathomable.

The U.S. deserves a mass transit rail system better than that of a third-world country. This past autumn, I ambivalently looked at China's "D" type express trains that completed the long journey from Shanghai to Beijing in only nine hours. Indeed, I felt a lot of admiration--and a modicum of envy--for the Chinese for rapidly building such a line to carry so many passengers so fast; however, at the same time I felt shame for our national U.S. railways and their dire state. How could I not feel otherwise when China, a country still much, mucher poorer than the U.S., also builds a self-driven maglev train that completes the 28-mile journey from Shanghai's Pudong Airport to the city in just 7 minutes?

I know for a fact tht I'm not alone in calling for such a project that accomplishes these aforementioned myriad goals at once. I suggest we all write to both our federal and state senators for a plea to both increase and expedite the resources used to fund Amtrak before it is too late.

Wednesday, January 28, 2009

33 Photos of Iceland...

I went on a 6-day trip to Iceland from June 3-8, 2008. It was definitely a memorable experience and my first time in such a sparsely populated yet naturally pristine country. And, yes, this was just four months before Iceland's banking and currency crises. Now the country is in the midst of a political crisis, too, which I'll write more about in a later post either today or tomorrow. For now, enjoy the pics from "the Iceland that was."

Some not-so-distant Memories...

Wow, what an (expensive) meal that was! ... (Vilnius, Lithuania -- January 15, 2008).

Friday, January 16, 2009

The European Union's Troubled Frontier

When many of the states of the former Warsaw Pact joined the European Union in 2004, followed by the addition of Bulgaria and Romania in 2007, nobody dared think that a return to the tumultuous days of the “Wild East” is possible. Certainly, it seemed like the stuff of surreal James Bond action movies—sooo 20th century.

Well, think again.

Within a span of four days in the last week alone, protests were in full blaze across Eastern Europe: first in the Baltic stag party hub of Riga on January 13 (pictured), followed by a mutiny in gas-deprived Sofia in the Balkans, and culminated by a failed coup de grace, or at least for the moment, in the Baltic cepilinai-devouring city of Vilnius—the capitals of Latvia, Bulgaria, and Lithuania, respectively.

The world, and Europe in particular, watched these events unfold. But there was little the European Union could immediately do in these small countries that have been hit exceptionally hard by the tsunami-like global economic meltdown.

The protestors’ qualms and demands were straight forward enough: corruption and low living standards in Bulgaria (not to mention a dearth of heating gas), a diminishing quality of life and rising unemployment (temporarily alleviated by a multi-billion euro IMF bailout) in Latvia, and a failure of the new majority in the Seimas (Parliament) to fulfill its economic promises in Lithuania. Most of the protestors—and the greater citizenry—rightfully want their governments to step down or hold early elections.

The rest of the world, and first and foremost the politicians of the aforementioned countries, should heed their restive citizens’ outcries, not least because such problems have been years in the making. To ignore protests of the kind experienced this past week may by easy in countries with a combined population of 14 million people, but it would be an unforgivable mistake in the long run. So what should the leaders of these states—and heads of other countries in the greater region—actually do (besides holding early elections if that is what the majority of their people indeed demand)?

First, the governments should be held more accountable than they have been. For example, the embarrassment that Bulgaria suffered by having had billions of euros in aid from the EU withheld due to a failure to effectively clamp down on corruption is a problem that has festered too long in this Balkan state. Quite understandably, this money could have been used to raise pensions or increase the minimal wage in such a turbulent economic climate. Intriguingly, the Turkish squat toilet that the Czech presidency has used to stereotype Bulgaria may have actually had an underlying jibe to it: this is where money that could have been yours has gone. Thus, is it really surprising that Bulgarians want an answer later rather than never?

Second, economic prudence and responsibility should be paramount for countries with such breakneck rates of growth. The “Baltic Tigers,” on average, have been growing at some 8% per annum for most of the last decade—and Estonia and Latvia often faster than that. Unfortunately, the prophecy that what comes up must come crashing down rang hollow to politicians’ ears. Nearly two years ago, the International Monetary Fund and other economic statistical organizations labeled as worrisome the Baltic states’ twin success story: surging economies (largely thanks to cheap and increasingly available credit) and their resulting booming property markets. It warned Estonia and Lithuania—and, chiefly, Latvia—that hard landings were all to real if competent policies were not enacted soon. Hence it is not surprising that particularly Latvia, the EU’s fastest growing economy at (+)10% in 2007, will be its most lethargic in 2009: its economy is expected to contract by about (-)5%. Its politicians paid little attention to such warnings, quite sure that EU membership would result in untold economic miracles and aid. This has proven to be a painful blunder.

Third, the region’s politicians have to learn how to compromise. This may have been exemplified without blemish by the failure of Russia and Ukraine’s leaders to reach a gas deal in a conflict that was first manifested in 2006, but one whose seeds were sown during Ukraine’s Orange Revolution one year earlier (read the post below for more background history). True, neither country is an EU member, but the failure of leaders to represent their people’s interests is only too true in neighboring EU member states. Hungary’s unstable government, which has been running budget deficits seemingly forever, was embroiled in political chaos since 2006 when Ferenc Gyurcsany, its Prime Minister, admitted to having lied to his people. For others such as Poland and Slovakia, at present the EU’s healthiest economies, the governments of both countries are increasingly acrimonious (the former) or downright racist (the latter). Even the Czech Republic, with a pro-EU parliament but eurosceptic President, has come to represent the EU’s eastern half as a Pandora’s box of political indecisiveness rather than being a paragon of political efficiency.

Indeed, the ground was always ripe for such (un)popular rebellions if economic growth had slowed sharply, as it has now. Yes, the parliamentary coalitions in Eastern Europe are almost always motley (Poland), tenuous (Latvia), or downright xenophobic (Slovakia), if not a combination of all of the above. Perhaps this is what we should expect from new democracies. Alas, pan-European problems such as these cannot help the European Union’s bigwigs but question if they made a mistake in accepting the eastern region’s countries as full-fledged members too early.

Luckily, at least they can rest assured that such bedlam will not break out in Estonia. If judging by stereotypes is anything to go by, as the Czech presidency unproductively poked fun at last week, then Estonians’ super slow action-cum-reaction demeanor to all things not overtly Russian may result in them noticing that the Baltic Tiger economic miracle is gone just as things start improving again.

Tuesday, January 13, 2009

Pipeline Politics: Thoughts on the Russia-Ukraine-EU Gas Fiasco

It is not just the futility of this squabble that is flabbergasting, but also the underlying reasons of the protracted crisis, as well as the two bellicose countries' subsequent actions.

Obviously Ukraine and Russia could have reached an agreement on the price of Russian gas to Ukraine, considering they were only some $49 apart on price (per 1,000 cubic meters) at one point (and considering that Russia had agreed to pay market prices for its gas transit if Ukraine would pay market prices for its gas deliveries). However, due to the intransigence of both parties involved, the losses have been much greater on both sides.

First of all, Europe's decision to let Russia and Ukraine sort their own problem out is analogous to letting two toddlers fight over a candy bar without any supervision... until it is too late and the chocolate has fallen on the ground, thus leaving it for nobody. Europe, due to its wealth of opinions toward Russia and strained resources of the Czech presidency (among other reasons), didn't get involved until Russian gas imports were halted. The Russians blamed the Ukrainians, while the Ukrainians blamed the Russians, but that is irrelevant at the moment. After all, the Europeans paid for Russian gas, and it is Ukraine's duty to be a reliable transport country, just as it is Russia's obligation to be a reliable provider and country of provenance. Now 18 countries in Europe have been affected, and although many of those significantly affected are not EU members, the results have been nothing short of catastrophic: halted automobile production Slovakia, thousands of homes without heating in Bulgaria during a chilling winter, school closures in the Balkans due to a lack of heating. This damage pales in comparison to the roughly 1.2 billion euro price difference that Ukraine and Russia were bickering about.

As for Ukraine, its EU aspirations have been gravely hurt, not to mention its ruling politicians' NATO aspirations. Likewise, expect a slew of litigation to come its away from affected neighbors, such as Hungary, which has already filed a lawsuit against Naftogaz, Ukraine's state-controlled energy group. And this is not to mention the incompetence of Ukraine's cantankerous ruling coalition of Prime Minister Yulia Tymoshenko (pictured above) and President Viktor Yushchenko on the eve of elections next year. Rather than put their differences aside for once and present a united solution, they are still at each others throats. And it seems preposterous for some Ukrainian politicians to use this crisis as a platform to argue for Ukraine's expedited acceptance into EU structures ("the Russians are bullying us and you guys--that is, Europe--so we should all be in this together"). If anything, this conflict will delay that. It's almost as if a child does the opposite of what his parents expect of him--say, steals something from someone at school--and then comes home and asks his parents to buy him an expensive gift because he was so brave.

Russia risks a forever tarnished reputation as a reliable exporter, foregone sales, and a rapid buildup of gas storage. Prime Minister Vladimir Putin estimates that some $800 million in revenue has already been lost as a result of this latest ongoing spate--about one-half of the price difference that Russia and Ukraine could not agree on. Meanwhile, unless gas starts moving quickly westwards, Russia will have to burn off its gas to make room for new production--a move that, at its core, is unfortunate in light of the severe loss of revenue that Gazprom has suffered this year due to the global financial crisis and, thus, its tumbling share price. Surely Moscow's hatred of Ukraine's leadership--and especially of its weapon shipments to, and support of, Georgia--had much to do with its stance on the price it demanded Ukraine pay for its gas this year, but this will do Moscow no good in Europe's eyes. On the other hand, its argument of paying market prices for the gas is perfectly understandable, except that it's hard to determine what exactly the market prices are now that oil prices have dropped so quickly. The problem is that gas prices follow the trajectory of oil prices with a six-to-nine month lag.

Unfortunately, this conflict is far from over, and there are many more reasons why this is such. For one, a murky Swiss-registered intermediary called RosUkrEnergo, jointly owned by Russia's state-controlled Gazprom monopoly and two Ukrainian businessmen, profits handsomely off of this. The lack of resolution of both countries' officials to excise this shady middleman, despite what some of them publicly say, isn't surprising, for they, probably indirectly, get a cut of the profits in return for allowing this company to serve as the "solution" in the convoluted gas transport scheme, as negotiated back in January 2006. Europe's mooted Nabucco pipeline, which is to transport Caspian gas to Southeast Europe via Turkey, thereby bypassing Russia, still appears to be in its planning stages. Russia's other pipelines--the Nord and South Stream--are several years from completion, while its current transit pipeline network through Belarus is already at full capacity--and can supply only about a quarter of Russia's gas exports, or 5% of Europe's total consumption, at that.

There is no easy solution to such a conflict.

The only certainty at the moment is for all of us to expect a repeat of this annual New Year's gift unless a durable agreement isn't reached soon or alternate pipeline routes are developed.

Ah, yes, as someone recently quipped, "From Russia Without Love."
P.S. By the way, for any readers interested in supporting the side they believe is right (i.e. less wrong) in this conflict, you can cast your vote here: . At the moment, Russia is ahead of Ukraine by about 60:40.