Thursday, February 25, 2010

Ukraine speech

Greetings everyone. I'm sorry I haven't updated more often. Casualty of school business. Viktor Yanukovich was inaugurated as the fourth president of independent Ukraine today, I don't have time to write a full article about this but generally, it's a disappointment and we can only hope that he surprises us by showing some commitment to reform and democracy and having the right priorities. It's happened before with checkered politicians. Ukraine bears watching the next several months because the political shake-up isn't over yet, Prime Minister Yulia Tymoshenko is not accepting Yanukovich's victory and a new parliamentary election is to be expected, the economic situation is still very bad, there is actually some risk of default although I'm not sure how serious of one, and people have been turned fairly indifferent to politics, which is usually a bad sign.

I gave a speech about the Ukrainian economy at a panel at SAIS last Tuesday, the 16th, with famous economist and Ukraine expert Anders Aslund, my classmate Greg Fuller and our professor Mitchell Orenstein, I talked about what we learned in our visit to Kyiv from January 10 to January 13. Here's the text of my speech:

"We spent two and a half days in Kyiv doing interviews last month, from January 11 to January 13, just before the first round of the presidential election. We spoke to former finance minister Viktor Pynzenyk, the EU, US and Polish missions in Kyiv, the World Bank, journalists, businesspeople in banking and other sectors, and academics in think tanks and universities. Some were deeply pessimistic about the short-term future for Ukraine and its economy, as the country deals with continued political and economic instability and structural challenges, while others were optimistic about Ukraine’s potential as an emerging growth market.

A quick overview of the economy. Ukraine is a late-reforming post-communist economy which joined the World Trade Organization in May 2008 after years of strong growth of about 7 to 8%. This is, along with continued free and fair elections, the landmark success of the Orange Revolution and the presidency of Viktor Yushchenko. Since then, the economic news has been largely bad. Ukraine is still one of the poorest countries in Europe and the global financial crisis hit the export-dependent economy hard. Ukraine was one of the first countries to ask for and receive help from the International Monetary Fund as the global economic downturn came into full force in October and November 2008.

The IMF granted a $16.4 billion loan which helped mitigate the downturn. With help from the IMF, the Ukrainian government had three key goals: help the economy adjust to the new realities by floating the exchange rate and other measures, restore confidence and financial stability by recapitalizing viable banks, and protect vulnerable groups in society through targeted social spending. The Ukrainian currency, the hryvnia, had been pegged to the dollar which resulted in one of the highest inflation rates in the world, up to about 30% in early 2008, now it was floated and lost 40 percent of its value quickly. But only $11 billion of the IMF package has been paid out, with the fourth tranche suspended due to disagreements over the 2010 budget and a generous social spending law passed in the run-up to the election.

One key conclusion from the interviews on our trip is that Ukraine’s political polarization and electoral competition have impeded the economic recovery. Ukraine’s divisions had prevented good governance and reforms before the crisis, and they have also been a challenge in the response to the recession. President Yushchenko, the government of Prime Minister Yulia Tymoshenko, and the opposition led by Viktor Yanukovich have not worked together well in the crisis, while populism and electioneering have led to an international record for spending on pensions as a percentage of GDP (almost 20%). In Ukraine, many people said that having a clear-cut winner in the presidential runoff was more important than who won, because the continued instability caused by a protracted fight could only hurt the country and its economy.

The prevailing opinion among our contacts was that although the IMF rescue had helped, the IMF had actually been too lenient with Ukraine. Businesspeople said it was correct for the IMF to not deliver further tranches of aid because conditions were not fulfilled. Viktor Pynzenyk, who resigned as finance minister in February 2009, said the IMF did not play a beneficial role for Ukraine because it covered up problems and did not force Ukraine to cut spending further when the 2009 budget was based on an unrealistically optimistic growth forecast.

Some people we talked to expected the economy would get worse in 2010, with private loans coming due and a risk of government default. Pynzenyk argued that the government and IMF have prevented people from feeling the crisis so the necessary support for tough reforms isn’t there. He said that Ukraine could still avoid default if they make the right decisions but said it was difficult to predict what President-elect Yanukovich would do. Yanukovich’s Party of Regions drove the passage of the budget-busting social standards law which if fully implemented will cause default. However, others dismissed the possibility of default.

The shadow economy has grown in the economic crisis to the point where it may be over a third of Ukraine’s true economy, and it has acted as a cushion. Ukraine’s economy hasn’t really shrunk as much as the statistics indicate. The Orange Revolution has been called “the revolt of the millionaires against the billionaires,” billionaires referring to the powerful oligarchs who run much of the economy. What has happened is that a good proportion of the millionaires have gone underground because the problems with bureaucracy and kickbacks haven’t been fixed. We were told there are a lot of good policy ideas floating around and also lots of good legislation already passed that goes unimplemented. One of our contacts said his college friends complained about “so many regulations, forms, taxes, extortion, officials coming to their office to demand money.” In Ukraine you have to bribe people but your bribes won’t get you results as reliably as in some other corrupt countries like Russia. Serhiy Tihipko, a successful banker who finished a strong third behind Yanukovich and Tymoshenko in the January elections after staying out of politics since the Orange Revolution, owed much of his success to rhetoric about streamlining the bureaucracy to make Ukraine more business-friendly. Tihipko has a good shot at becoming prime minister so perhaps we will see action on this front.

There are some reasons to be optimistic about the Ukrainian economy going forward. The reliance on steel exports was one of the major problems Ukraine had in the crisis, as production dropped precipitously. But the devalued currency will help exports grow this year, while some of our contacts were optimistic that the crisis would push the country to diversify its exports. The President of the American Chamber of Commerce was very optimistic about the economy’s long-term prospects, comparing Ukraine with the BRICs as a growth market with strong margins for multinational corporations while still painting a picture of a tough environment in which to do business. EU membership seems pretty far away but an Association Agreement with a deep free trade area should come into effect during the Yanukovich presidency. And the Euro 2012 soccer championship, which Ukraine is co-hosting with Poland, is welcomed because it will leave behind a legacy of improved infrastructure.

I think we did get the sense that life was going on a bit more normally in Kyiv than in Riga, that the crisis had struck Latvia harder than Ukraine. This is the result of several factors. The boom and bust in Riga was bigger, with faster growth in Latvia before the crisis, and the economy has simply shrunk more in Latvia, while Ukraine’s shadow economy means that the shrinking of the economy there is actually smaller than it looks on paper. Also, Latvia’s government has embraced tough austerity measures in hopes of gaining entry to the Eurozone, while Ukraine’s has been less cooperative with the IMF as irresponsible politicians jockey for votes. And I think that to some extent Ukrainians, having lived through a rougher last two decades than Latvians, are more used to dealing with the turbulence.

The election was of course won by Viktor Yanukovich, the villain of the Orange Revolution, with a margin of about 3.5% of voters. Yulia Tymoshenko has refused to concede defeat, which is in line with what many of our contacts predicted she would do if she lost narrowly, but she is limiting her challenge to the results to the courts and telling her supporters not to take to the streets. The OSCE said the elections were free and fair, Yanukovich has been recognized as the new president by world leaders, and the results are not going to be overturned, but the new political order could take some time to emerge with the possibility of Yanukovich calling snap parliamentary elections to help form a new government. In short, there is a great likelihood of continued political fighting, while the 2010 budget necessary for further IMF help is yet to be adopted by the Verkhovna Rada. Ukraine’s economy is not out of the water yet."

Wednesday, February 17, 2010

Commentary on Europe, 2008-2009

Here's my blog posts about European politics from my first year at SAIS. PostGlobal is a blog run by the Washington Post which unfortunately went on "extended vacation" last summer, but for the year before that they subcontracted their European coverage to SAIS students and I helped coordinate the project as the student leader in Bologna and wrote six commentary pieces. This was a great experience which I was thankful for but the headlines are sometimes vague so I sum them up:

July 27, 2009 - Resetting Russian Relations - actually this one is about German policy on Russia, and the difference between the political parties, it's related to a paper I did in the spring semester.

April 6, 2009 - Russia's Olympic Election - Boris Nemtsov, a Kremlin critic, ran for mayor of Sochi, the Black Sea resort town where the 2014 Winter Olympics will be held. So the race developed into a bit of a zoo with a lot of interesting characters. Nemtsov didn't win.

January 16, 2009 - Artwork, Toilets, and EU Identity - On the infamous Entropa art installment in Brussels by Czech artist David Černý.

January 7, 2009 - For New EU President, A Baffling Array of Challenges - The Czech Republic takes over the rotating presidency of the EU and copes with war in Gaza, the cutoff of gas to Ukraine and Eastern Europe, and Nicolas Sarkozy.

October 24, 2008 - Reason Rules in Tussle with Kremlin - McCain and Obama's stances on Russia compared, and what Russia and Georgia think of them.

October 14, 2008 - McCain Falls Plainly on Spain - John McCain gratuitously insults Spain, and what Nicolas Sarkozy, Gordon Brown, Angela Merkel, and Silvio Berlusconi think of the candidates McCain and Obama.

Thursday, February 11, 2010

Writings Archive: Hunter S. Thompson obituary

The good doctor Hunter S. Thompson killed himself almost five years ago now, February 20, 2005. Rest in peace, friend. Anyway, my tribute to him in the pages of my college newspaper is still one of my favorite of my published writings and it's come up in conversation a few times recently, so here's the link - get hits for The Bowdoin Orient. I'll republish some of my old pieces here, good to have an online archive. This magnet is on my fridge. I recommend Fear and Loathing in Las Vegas for a taste of Hunter's fantastic writing for any of you who might not have read it, but for any junkies of American politics, Fear and Loathing on the Campaign Trail '72 is even better.

What Will Yulia Tymoshenko Do?

Let's begin with Ukraine. Without writing a long, winding piece about what I saw in the country from January 10 to January 13 (we might get around to that soon enough though), the Ukrainian election has been a story I've been following for years, practically, and which finally culminated (during this week of blizzard-induced calm in Washington) in the more interesting second vote, the runoff between Prime Minister Yulia Tymoshenko and Viktor Yanukovich, who's served two terms as premier and two terms in jail (in his youth) and was the villain of the Orange Revolution who tried to steal the 2004 election, and failed.

Yanukovich has won this time. Tymoshenko is not giving up though. From what I was reading in the days before the election, there were some hijinks such as a modification to election laws several days before the vote which made Tymoshenko reasonably cry foul. And yet the OSCE and EU quickly greeted the vote, in which Yanukovich won by about 3.5%, as legitimate, free and fair. This Kyiv Post article sketches out Tymoshenko's case for not conceding, which it doesn't appear that she's doing - - the story bears watching over the next few days, if only because it will help determine Tymoshenko's future role as strong leader of the opposition - or not? - and the wrangling won't help the economy, which I've been studying in the crisis.

(I'm working on a written report based on the trip to Ukraine and Latvia with my SAIS professor and 12 other students, and on Tuesday next week I'm talking at a presentation about the trip.)

My take is that I expected Tymoshenko to contest the results because of some problems (everything's relative I guess, American elections are far from perfect as 2000 (Florida) and 2004 (Ohio) attest and OSCE is a pretty credible source) but then the international reaction and margin of victory are enough to make hers look like a lost cause, to the point where many of her supporters are hoping she just transitions into opposition. I do think she was the better option for the country by far because I think she would have been able to work effectively with both Russia and the West, necessary for Ukraine, and I don't think Yanukovich will have great relations with the US and EU.

So keeping an eye on Tymoshenko and the ongoing developments in Kyiv, while she's keeping an eye on me from the poster on my kitchen wall, the one where she's got her braid down and is playing with her white tiger. The grain one pictured is in my bedroom.


Hello everybody,
So after months of procrastination, I'm back in the blogosphere with a blog that's not for my job, although since I'm a writer with ambitions of making a living with my pen (OK, laptop) and my mind, it's somewhat related to that. My topics here are my interests and things I enjoy writing about, primarily travel (I'm the type of guy who counts countries and states, and I'm at 27 countries, 25 of which are in Europe, and 25 of these United States, respectively), politics with a strong concentration on the areas of the world which most fascinate me and which I study - Europe from Iceland to Moscow to Ankara - but also unavoidably also covering some of what goes on in the city of my birth and current residence, Washington, books (I'm a voracious reader and I'll try to write about them for once), perhaps music and movies, which I've long loved critiquing. So here we are. "maps" is the title because I love travel, love collecting maps (I've got Europe and the Western Balkans hanging in my bedroom), and the Yeah Yeah Yeahs song (second most-played on iTunes on my 4-month-old computer) popped into my head at the time of decision. I'm sure it's taken but whatever.