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Who makes Expenses Plan for the Baltic States?

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The Baltic states today are no more a clean sheet of paper waiting for somebody to write something on. During almost 30 years of independence from the USSR the authorities have been cleaning the countries from the Soviet-era’s hangover and are writing new history by themselves. And the results of their activity are various and often disputable.

On the one hand the idea of gaining independence which was in the air for long time had been realized. But unfortunately this is the only great thing that happened to the Baltic states.

The first years of independent existence were marked by national enthusiasm. It seemed as if there were no unrealizable goals for strong in spirit Lithuanians, Latvians and Estonians. The three peoples were ready to move mountains. Almost thirty years have passed. And only now it becomes clear, that those who were given the power to decide for the whole nations did not always make right political and economic decisions. And they continue to be in error.

People’s interests are no longer in the list of priorities. The authorities very often forget that they were chosen by people, they are not Lords but they are servants for people’s good.

This fact is proved by the increasing immigration rate. The reality is that Latvia, Lithuania and Estonia are losing people. According to U.N. statistics, “in 2000 Latvia’s population stood at 2.38 million. At the start of this year, it was only 1.95 million. No other country has had a more precipitous fall in population — 18.2 percent. Only Latvia’s similarly fast-shriveling neighbor, Lithuania, is with a 17.5 percent decrease.” The officials’ explanation of such catastrophic statistics arouses surprise and even resentment. Do they really think that young people leave because “borders are open, information about life in other prosperous EU states is available and they just go to see the world.” NO! They do not just want to see the world, they just want to live in prosperous countries, because Latvia, Lithuania and Estonia are poor! Young generation even does not see any perspective at home. No enthusiasm is left, no more trust to the authorities exists. Who is to blame?

But now it is not so important to find those who are guilty, the question “what to do to stop loosing people” is on the agenda.

The scenario of a fairy tale when a hero comes and saves the country does not work in reality. It is time to stop choosing such heroes. Russia, US, NATO or the EU are not those who can make the Baltic states prosperous. It is enough to rely on their decisions and advice. What have the Baltic states achieved since gaining independence? They became a place for possible war conflict. Paradoxically, they took over this status of their own free will. First of all they permitted foreign troops deploying in their territories which irritates neighboring Russia and locals. The authorities allowed to build military warehouses, these steps aren’t also attractive for local population. The matter is foreign military activity is to some extend occupation even if it is conducted for the important purpose. Do the Baltic states really need foreign troops? They need foreign investments, foreign tourists, foreign goods, but not troops and old military vehicles that pollute their soil, air and water. The worst thing is the countries loose self-sufficiency and can’t exist without the so called “donors.” These “generous” countries feel free not only to advice, but to decide for the Baltic states.

One of such examples is the assessment of the Baltic states railways condition made by Modern War Institute at West Point in April 2018. According to the report, “currently, the Baltic states operate Russian-gauge railroad tracks, while other European NATO members utilize a standard European gauge. Such differences impose a big problem for NATO’s Logistics in Northeastern Europe. This incompatibility means that trains “carrying military equipment and supplies from larger NATO bases in Germany or Poland would have to transfer their cargo to Russian-gauge trains or proceed via ground convoys to their destinations. Not only are both options time-consuming, they require trained personnel and significant military resources (e.g., heavy equipment transporter systems, military police and security elements), as well as proficiency and familiarity in conducting such operations.” The documents of such type “advice” to rebuild Baltic rail infrastructure. By the way this will demand huge amount of money. Who will pay for new railway? Most likely the NATO problem once again will become the Baltic states’ problem. As well as the decommissioning of Lithuania’s Ignalina Nuclear Power Plant has become purely Lithuanian problem. Thus strengthening its Western flank NATO automatically makes the Baltic states poorer and weaker.

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Eastern Europe

What awaits Ukraine after US presidential elections?

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Who is the man that Kiev wants in the White House – Republican Donald Trump or Democrat Joe Biden? For a country like Ukraine, so sensitive to external influences, this is an overarching issue.

Joe Biden’s election in November would bring Ukraine into Washington’s sharper focus. However, important as this may seem to Kiev, this attention may prove excessive. During Biden’s vice presidency this attention was so intense that it bordered on personal interest, and, ultimately, even interference in Ukraine’s internal affairs.

On the outside, the love affair between Ukraine and a possible Democratic president will most likely express itself in US support for Kiev’s confrontational actions and statements. With Biden at the helm, Washington could even try to influence the Minsk process. Kiev has on many occasions declared its desire to bring Washington and London into the Minsk talks. Neither the British nor the Americans have so far responded to this call, but the US Democrats are sure to ramp up their activity on this track. One should not expect too much here though, and a mere statement by Washington that the Minsk accords need to be revised will already come as a breakthough for Kiev. As for President Trump, he just couldn’t care less about the negotiations on Donbass, which he views as having nothing to do with America’s interests.

On Biden’s watch, Washington could resume the previous format of interaction between the US State Department and Kiev and bring back the post of the State Department’s special representative in Ukraine, which until the fall of 2019 was held by Kurt Volker – a semi-official channel of interaction that formally demonstrated Ukraine’s importance to the United States. The resignation of Volker, who failed to fully implement what he had been tasked by Trump in a country he did not care much about, could lead to the elimination of the position of the State Department’s special representative for Ukraine, as an unnecessary catalyst for US-Ukrainian relations. This means that the usual diplomatic channels (embassy) between countries are quite enough, that the interests of the president can be taken care of by trusted people (Giuliani), and issues of international politics should be resolved with Putin and Europe (Merkel and Macron), which is not doing enough to uphold Ukraine’s interests. To demonstrate the importance of the Ukrainian track, however, Biden may bring back the position of the State Department’s official representative in Ukraine.

With regard to Crimea, Ukraine is already urging NATO to build up its presence in the Black Sea to counter Russia’s alleged “aggression” and its “militarization of the occupied Crimea.” Ukraine’s First Deputy Foreign Minister Emine Dzhepparova [representative of the Mejlis of the Crimean Tatar people, banned in Russia – D.B.) has called on NATO to expand its foothold in the Black Sea region.

“The security of Ukraine and NATO are inseparable, and strengthening cooperation in the Black Sea is our common priority,” Dzhepparova wrote on her Twitter account. Under Biden, the United States can intensify its efforts in this direction.

The issue of NATO’s presence in the Black Sea region is always on the agenda, regularly escalating in connection with various events – in 2014 in Crimea, the war in Syria, etc. Last autumn, the RAND Corporation think tank published a report on how best to counter Russia’s influence in the Black Sea region. Its main conclusion is that due to the West’s shortsighted policy towards the two regional powerhouses – Russia and Turkey, as well as its underestimation of the political power wielded by their leaders, who subordinate their domestic and foreign policies to their countries’ interests, and not those of the “new world order” and “democratization,” it has lost this region and something needs to be done about it.

For Biden, the need “to do something” could become a source of confrontation with Russia. Biden could be all too happy to do this “something” through NATO, seeing this as a sign of support for Ukraine and Georgia, an opportunity to rein in Turkey’s growing assertiveness and bring Bulgaria and Romania closer into the game by stoking confrontation and militarization of the region with a possible supply to them of coastal missile systems. In general, one can expect an uptick in military-political interaction in the form of active cooperation between Ukraine and NATO, as well as arms deliveries.

The arrival of a Democrat to the White House may also ratchet up the internal political struggle in Ukraine, where the nationalist opposition, conditionally led by the “friend of the Democrats,” ex-president Petro Poroshenko, may try to regain power. Poroshenko, meanwhile, is being charged with high treason, corroborated, among other things, by his recorded conversations with Biden – both politicians have cases that they would very much like to hush up. Besides, the nationalists’ activity will inevitably impact the Minsk process, and, possibly, the situation along the disengagement line in Donbass.

What can Kiev expect from President Donald Trump? Less interference in its domestic affairs – once reelected, Trump will most likely lose interest in the active search for compromising evidence on Biden, although he is unlikely to give up this matter altogether. It will all depend on further confrontation between him and his opponents. The main danger for Trump after his re-election will be not so much the Democrats as such, but the political and social processes unfolding in the country, above all the Black Lives Matter campaign. The only thing that may get Trump interested in Ukraine is his ongoing confrontation with China. The United States is enthusiastically blocking the sale of Ukraine’s Motor Sich engine building corporation to the Chinese company Beijing Skyrizon Aviation.

The Americans see the deal as a security threat, since it would provide the Chinese with new aviation technologies. As for Motor Sich, the company has been forced to make a deal with the Chinese because of the loss of the market for its products and the breakdown of supply chains with Russia after 2014.

Blocking Russian gas supplies to Ukraine and attempts to disrupt energy cooperation between Russia and Europe (Nord Stream-2 “) is another factor that Trump and Kiev look eye to eye on, even though Kiev says that the continued transit of Russian gas across its territory is a guarantee of Ukraine’s European integration. Trump’s interest in Ukraine will depend on his pragmatic view of geopolitics and economics, as well as the political threats he may see coming from Kiev.

In an hours-long interview, President Zelensky’s former chief of staff, Andriy Bohdan, thus described the system of relations existing between the United States and Ukraine: “In general, there are three tracks, three points of negotiations with the United States. The first is intelligence and security services. We are blind kittens here, really, and all our military capabilities, the capabilities of our special services are information that the international community shares with us. And besides the war, these are drugs, crimes, security. These are plans in general, analytics – we have no analytics. The second negotiating track is diplomatic service. [On this track, according to Bohdan, conversations begin and end with the fact that NABU (National Security Agency of Ukraine, headed by Artyom Sytnik) created on Washington’s orders, is an important and untouchable organization – D.B.] And our third negotiation track is financial organizations. ‘Give me the money.’”

Democrats and Republicans alike perceive Ukraine as a buffer zone between Russia and Europe, Russia and NATO. Ukraine will remain a platform for creating reasons for sanctions, justifying sanctions, an active participant in and an accomplice to sanctions processes. Obviously, the sanctions confrontation over Nord Stream-2 is just beginning, and Ukraine, as a party fearing the loss of transit, has long been calling for sanctions against this Russian-European project.

Any of the two contenders for the White House will talk about providing financial assistance to Ukraine, with Trump being more pragmatic, and Biden – more “rhetorical.” With Biden in power, the Ukrainian economy could be reduced to handouts.

The US will not go overboard with its interference in Ukraine’s internal affairs though, because this is a costly affair (Ukrainian oligarchs have enough money to conduct any political campaign of any scale. Why would Washington spend money if it can exert influence or clinch an agreement?) Lobbying the interests of private individuals or politicians that are to Washington’s liking is no problem – suffice it to recall the story of the Burisma Company that tarnished the reputation of the Biden family. Influencing the political landscape by persecuting politicians and oligarchs is also an option (recall the recent cases of tycoons like Dmytro Firtash and Ihor Kolomoyskyi).

President Zelenskiy and many other Ukrainian politicians, dependent on Washington, now face the daunting and, at the same time, important task of choosing the right course of action before the US elections. According to some Ukrainian observers, Zelensky made his choice after long hours of brainstorming with his trusted confidants. It looks like this: “No sudden movements [until November 2020 – D.B.], no progress in the investigation of the criminal case against Biden and his son Hunter, no Burisma and no Derkach tapes. We imitate a “stormy discourse” in the Minsk format, pretend to support the “Belarusian Maidan,” but we lie low and carefully compare the ratings of Trump and Biden.”

In a nutshell, Ukraine is seen by Washington as just a platform for serving America’s geopolitical interests, which is also being used for party-political and private interests. Will anything change for Ukraine depending on who wins the November 2020 US elections? My answer is no.

From our partner International Affairs

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Azerbaijan-Russia Ties Face Increasing Challenges

Emil Avdaliani

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Russia-Azerbaijan ties face increased challenges as Baku accused Moscow of purposefully stoking the conflict by providing arms to Armenia. It is notable that this rhetoric develops when Turkey is particularly vocal in its military support for Azerbaijan. Though it still remains to be seen whether these signs evolve into a concrete policy shift in Azerbaijan, hopes for diplomatic solution of Nagorno Karabakh conflict recede, and Turkey and Russia up their military support for Baku and Yerevan.

Azerbaijan-Russia relations face increasing challenges as the geopolitical situation in the South Caucasus evolves. A series of events tested the bilateral ties and there is an increasing amount of evidence that some reconsideration of foreign policy on Azerbaijan’s part could be taking place. 

The first challenge was the July fighting on Armenia-Azerbaijan frontier, far from the actual source of conflict – Nagorno Karabakh. What could have been a relatively unnoticed confrontation, it drew international attention due to the geostrategic infrastructure which runs near the fighting zone in Azerbaijan’s Tovuz region. Those are:

  • Baku-Supsa and Baku-Tbilisi-Ceyhan pipelines, which deliver Caspian oil to the Black and the Mediterranean Seas;
  • South Caucasus natural gas pipeline, which will send Azerbaijani gas to the EU and plays a key component in Turkey’s emerging strategy of positioning itself as regional energy hub.

In addition, the region also has the Baku-Tbilisi-Akhalkalaki-Kars (BTAK) railroad (unveiled in 2017) and rarely mentioned the fiber-optic cables linking Europe with Central Asia. The Tovuz corridor also has a crucial Azerbaijan-Georgia highway, which allows Azerbaijan to connect to the Black Sea.

Thus in July Azerbaijan faced a threat to its major income. Damage to the infrastructure would also diminish the country’s geopolitical weight as a safe source of oil and gas. While fighting in or around Nagorno Karabakh takes place occasionally and at times reaches a serious level, such as in 2016, it nevertheless fits into the overall narrative of more or less predictable military scenarios which military and political leaders in Baku would expect. The Tovuz fighting, on the other hand, goes against most military narratives and required Baku’s tougher reaction. This is how the ties with Russia, Armenia’s major economic and military ally, come under intense scrutiny in Baku.

It is has always been a long-term challenge for Azerbaijan. Baku occasionally expresses its concerns on Russia’s military support for Armenia, but the criticism has usually been aired though newspapers and media rather than by high-level political figures. This changed following the July fighting.

Reasons are multiple. First, Russia (using its 102rd military base in Gyumri) and Armenia launched snap combat drills on July 17-20, just as the fighting in Tovuz region was still unfolding. Second, a series of flights of Russian military cargo planes to Armenia took place right after the July fighting. 

In a notable change of tone the Azerbaijani president Ilham Aliyev surprisingly publicly complained to his Russian counterpart Vladimir Putin, stating that the recent reports on allegedly increasing Russian military support (400 tons of military hardware) for Armenia raise concerns and questions in Azerbaijani society. Perhaps as a reaction to growing bilateral differences, the Russian defense minister Sergey Shoigu visited Baku to assure the Azerbaijani public that the flights were not of a military nature, but rather transported materials for the 102nd military base.

However, the affair did not end there as a senior adviser to Aliyev, Hikmet Hajiyev, on August 29, following Shoigu’s visit, claimed that “the explanation by the Russian side is not entirely satisfactory.” This effectively meant publicly refuting the Russian defense minister’s statements, further aggravating differences between the two states.

A September 1 article by Nezavisimaya Gazeta claimed that Azerbaijan had readied 500 Syrian militants in preparation for a “blitzkrieg against Armenia” and that Turkey has its troops on Azerbaijani soil. Baku vehemently criticized the report calling it “slander and [a] dirty campaign against our country.” 

Yet another sign of troubled ties is the September 6th decision by Azerbaijan’s Defense Ministry opting out the Russia-led “Caucasus-2020” military drills (planned to be held in the southwest of Russia). Only two servicemen will be sent as observers. Though officially no concrete reasons for the withdrawal were given, it is possible to link the decision to Azerbaijan’s recent grievances at Russia.

Some larger reasons too might be at play motivating a change in Azerbaijan’s rhetoric. The Minsk Group, the body that aims to facilitate the negotiations between Armenia and Azerbaijan is faltering. No concrete way to resolve the stand-off is present and the July fighting has just showed that diplomatic tools are receding. A vacuum is being created for regional powers to fill in. This is how Turkey comes to play an increasingly larger role in Baku’s strategic calculus.

Indeed, as the July fighting unfolded Turkey has been especially supportive of Azerbaijan. For instance, Turkish President Recep Tayyip Erdoğan noted “Turkey will never hesitate to stand against any attack on the rights and lands of Azerbaijan, with which it has deep-rooted friendly ties and brotherly relations.” Turkey’s Defense Minister Hulusi Akar even warned that Armenia will be “brought to account” for its “attack” on Azerbaijan. Then large Turkish-Azerbaijani military exercises followed.

Turkey’s calculus here is clear as the country needs to defend the vital oil, gas and railway infrastructure coming from Azerbaijan. And considering how far has diplomacy receded around Nagorno Karabakh issue, Turkey and Russia are set to play an even larger military and economic role in the South Caucasus. For the moment open rivalry will be avoided, but for Moscow and Ankara the region represents yet another area of covert competition along with Syria and Libya.

However, casting Azerbaijan-Russia relations as deteriorating is not entirely correct. Intensive cooperation still exists between the states. Azerbaijan’s Minister of Foreign Affairs, Jeyhun Bayramov, paid an official visit to Russia on August 26 at the invitation of Russian Foreign Minister, Sergey Lavrov.

In late August-early September Azerbaijani servicemen participated in the “Tank Biathlon” and also won the Sea Cup competition – both held as part of the “International Army Games – 2020” organized by the Russian Ministry of Defense.

It is still hard to see whether Azerbaijan’s changing rhetoric towards Russia is more than just a temporary, tactical maneuver. It could be a clever diplomatic game Azerbaijan has always pursued since 1990s – namely, facing its larger neighbors against one another. Nevertheless, the rhetoric and recent political decision signal a search for reconsideration of some basic elements in Baku’s strategic vision. Turkey’s bigger role is likely to be sought more intensively, while hopes for a diplomatic solution to the Nagorno Karabakh conflict would further recede.

Author’s note: first published in caucasuswatch

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Putting People in Control of Their Land to Realize Ukraine’s Potential

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Land reform will allow Ukraine to capitalize on its economic potential and improve the lives of Ukrainian people – but a lot still needs to be done before a successful land market opening.

I have now had the privilege of being the World Bank’s Regional Director for Eastern Europe for a little over two months. Returning to Ukraine after almost twenty years, I have been impressed by many recent achievements on Ukraine’s reform path.  Many of these are complex, and consequential – creating an independent gas transmission system operator that is already helping safeguard Ukraine’s gas transit revenue; continuing, in the face of opposition and setbacks, to strengthen anti-corruption institutions; undertaking the difficult process of resolving non-performing loans in state-owned banks; and moving, amidst the unprecedented global pandemic, to protect pensioners and other poor and vulnerable Ukrainians.

Today, the immediate challenge Ukraine faces is the COVID-19 pandemic – first to immediately reduce both the mounting toll on health and lives, and then to rebuild livelihoods and incomes. But what reforms are most needed to restore and even improve incomes for the average Ukrainian in the aftermath of the epidemic?

There are many that are required. But for me, the greatest promise is offered by the set of measures around agricultural land reform. Here again, much has been accomplished, most notably when, this past March , the Rada voted to end the nearly two-decade old moratorium on the sale of farm-land. This was a critical first step to unlocking Ukraine’s greatest source of growth. But it is not enough. The next and necessary step is to advance fundamental measures around the governance of land – to allow ordinary people and local governments to benefit from their land without intimidation, bureaucratic interference or corruption.

Land reform that truly allows owners and users to take control of their land can be transformative. By World Bank calculations, for Ukraine as a whole, this can permanently add almost one percentage point a year to economic growth. For landowners currently leasing out their land, this could provide up to  $3 billion every year. For rural residents and small farmers, this can create some  $24 billion of collateralizable assets that allow them to invest in irrigation, horticulture or non-agricultural small enterprises. And for local communities and local governments, this can provide an income stream of up to  $2 billion annually to better the lives of Ukrainians.

The Ukrainian authorities have already made enormous strides in this direction by passing a package of legislation that reduces raider attacks and land-related schemes, makes land data publicly accessible, and allows local communities to plan land use.

But there is much more legislation around land governance that is needed to ensure all the benefits of land reform for every Ukrainian. And just passing the laws is not enough – once that is done, there is the need to draft implementing regulations, to set up institutions to administer these regulations, and to actually implement measures.

Moreover, for improved land governance to lead to more investment, and thus income, it is especially important that Ukrainian landowners or land users be aware of their rights and how to exercise them, and have these rights protected. This is particularly true for small and medium farmers. They must be able to have any actual or attempted violations of their rights redressed quickly. Farmers and other private participants must know how to use land as collateral to access credit. Banks and other financial institutions must be able to professionally assess the value of the collateral and have the incentives to lend to smaller borrowers. Once relevant laws and regulations are in place, there is thus a need for a broad-based legal awareness and a financial literacy campaign.

All of this takes time – and time is running out.

By the most conservative estimates, the needed regulations, institutions and implementation could take at least nine months. The land market opens on 1 July 2021. So, it is essential to pass the appropriate laws by the end of September, at the very latest.

If this deadline is missed because of entirely avoidable delays, there is a real risk that on the date the land market opens, Ukraine will miss this golden chance. Even more, there is the danger that opening the land market in the absence of these strong legal and regulatory safeguards will result in an echo of the 1990s privatization – leaving the market vulnerable to the powerful and well connected and actually worsening land-related corruption and inequality.

Together with our partners, the World Bank has long advocated land reform as a key for Ukraine to develop the productive potential of its abundant land resources. We see this as central to revitalizing the incomes of average Ukrainians, especially in rural areas.

This is a once-in-a-generation opportunity to unlock the sector’s growth potential through investment in high value-added crops and agri-processing and, most important, to transform the welfare of millions of Ukrainians. Ukrainian parliamentarians and policymakers have to ensure that we do not miss it.

World Bank The article was first published in Ukrainska Pravda

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