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Eastern Europe

Time to re-think about Eastern Partnership?

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Azerbaijan is reluctant to actively participate in the EU’s Eastern Partnership Initiative.It is the only country in the South Caucasus region that still engages with the EU through the outdated Partnership and Cooperation Agreement signed in the late 1990s. Although the parties have been negotiating on a new treaty since 2017, there are still indifferences that hinder the progress. Until recently, the incumbents in Azerbaijan appeared confident about the overall process and chose not to rush to conclude the new agreement before they resolve all controversies.

In his last interview with the local journalists in December 2019, President Aliyev highlighted that the main reason for not signing the agreement is not the EU but Azerbaijan. There he commented on the unresolved issues and emphasized one more time that Azerbaijan is not asking for anything from the EU. On the contrary, Azerbaijan itself is a donor country. Thus,it expects equal partnership, not a unilateral instruction list from the EU. Going further, he criticized the EaP format, saying nothing is uniting EaP members except being post-soviet countries.His final remarks on EaP were more disappointing for the technocrats in Brussels when he said Azerbaijan is not leaving EaP, but it is not a necessary program for us.

When Aliyev gave the interview, he could not foresee that all hell might break loose soon. The indicators that made him confidently downgrade EaP and the EU might suddenly evaporate. Actually, the forecasts by the World Bank and other organizations about the growth of the Azerbaijan economy in 2020 were quite optimistic – around 3.3 %. According to the latest estimates, the number of tourists coming to the country would be at its peak in 2020 thanks to, at the same time, the major international events- Formula 1 and European Football Championship. To facilitate the arrivals of the fans and to attract more tourists, Azerbaijan activated the fifth and seventh freedoms of the air from January 2020. The price of the oil was around 60 dollars per barrel, and the completion of the Southern Gas corridors would bring additional revenues from the gas trade. Besides, after the structural reforms, Azerbaijan was ranked 25th in terms “Ease of Doing Business’ by the World Bank what made the officials optimistic about increased foreign direct investments in upcoming years in different sectors, especially transport and logistics.

And here comes COVID-19. The pandemic hits the entire world and slows down the global economic activities. The demand for oil goes down dramatically. In March,Russian and Saudi Arabian gambling amid OPEC+ talks slumps the oil price further. WTI crude oil futures collapse to negative prices for the first time in history.

Nowadays,the Azerbaijani oil brand – AzerLight is circa $ 20per barrel. According to  Rovshan Agayev,if the average price fluctuates around $25 compared to 2019, Azerbaijan will receive 5 times less revenue from the sale of the oil in 2020. The earnings from tourism and agriculture also will significantly go down. The global recession and so-called de-globalization put Azerbaijan’s heavily invested connectivity projects under the risk.

Taken, the significant portion of Azerbaijan GDP comes from the export of the hydrocarbon resources,as soon as oil prices slumped, panic ensued. Traumatized by the devaluations of 2014 and 2015, people rushed to exchange their savings. As the banks were not able to meet unexpectedly grown demands for foreign currencies, big rows emerged in front of the banks. Although there were strict quarantine measures in Azerbaijan due to COVID-19, since mid-march, the banks are full of people. The recent closure of the four banks proves the panic is not ungrounded.

Currently, Azerbaijan uses its own resources and capacities to handle the situation.  To do so, the government expends the reserves accumulated in the oil fund to keep the national currency – manat stable. Yet, in a worst-case scenario, Azerbaijan also will need assistance from its international partners. But the number of partners, capable of and ready to assist Azerbaijan is limited. Besides, the pandemic puts extra pressure on international financial institutions, as many countries require urgent assistance.

Unusually nowadays, with its flaws and deficiencies, the most active actor in the South Caucasus is the EU. It seems the EU tries to use the momentum to exert its global leadership. Conventionally it takes a lot of time for the EU to agree upon at various institutional levels before taking action. This time the EU’s response was relatively prompt. In late March, the EU pledged about 16-billion-euro assistance in the fight against the coronavirus pandemic and its consequences. Later the “Team Europe” package reached more than 20 billion euros.

The EU has the utmost interest in the resilience of the neighborhood countries, including Azerbaijan. The EU mentions this in all documents addressing neighborhood, such as revised ENP, Global Strategy, and many others. In the recent “Eastern Partnership policy beyond 2020” proposal, the EU confirms again that the resilience of EaP countries remains a priority for the EU. According to the proposal, the EU will continue to employ the incentive-based approach – more for more and less for less- to contribute to EaP’s resilience. Put it differently, the degree of the EU’s engagement with EaP countries will contingent on incentives coming from them.

The EU’s emergency support package for Eastern Partnership countries in early April shows the ‘more for more principle’ at work.  The EaP countries having association and enhanced agreements with the EU receivegenerous aid while Azerbaijan gets the smallest portion- 14 million euros. This number is even four times less than the amount given to Belarus. It is a tribute paid to Azerbaijan leadership’s attitude towards the EU and EaP.

To mitigate the negative repercussions of the pandemic, Azerbaijan will need assistance from the EU. Practice shows the EU could mobilize investments and loans when required. In case of an emergency, Azerbaijan might also ask the EU  to do so. Besides, in the long run, the EU’sinstruments and know-how might be helpful for Azerbaijan in its much-needed diversification endeavor and structural reforms.

Taken, the EU recently revised its neighborhood policy, and EaP is much more flexible and tailor-made nowadays, there is a great potential for cooperation, especially in fields of sustainable development, energy, transport, and logistics.  Thus, rather than downgrading the EU and praising Azerbaijan’s strategic partnerships with nine EU members, Azerbaijan should use those countries to improve its collaboration with the EU.

To sum, although Azerbaijan is not happy about it, the technocrats in Brussels are not willing to devise an alternative framework to collaborate with Azerbaijan. Whether Azerbaijan likes it or not, for the EU, Azerbaijan is an Eastern Partnership country. It means the EU will continue to regulate its cooperation with Azerbaijan according to the policy documents designed for EaP and the principles defined in them.Thus, to secure future assistance from the EU to lessen the consequences of the pandemic, Azerbaijan should avoid employing unnecessary rhetoric and accommodate the current EaP framework rather than wasting time to alter it.

More meaningful and reciprocally beneficial cooperation is still possible in the margins of the current EaP. Resolving the indifference sand replacing the outdated PCA with a new agreement in a due time might be the right policy to achieve this.In its turn, the EU should also encourage Azerbaijan to -change its attitude towards EaP through real actions on the ground – by demonstrating objectives defined in EaP documents are not empty promises, and the EU genuinely stands with Azerbaijan.

Eastern Europe

Latvia developed new tasks for NATO soldiers

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Member of the Latvian Saemas’ national association “Everything for Latvia!” and Freedom”/LNNK Jānis Dombrava stated the need to attract NATO troops to resolve the migration crisis. This is reported by la.lv.  In his opinion, illegal migration from the Middle East to Europe may acquire the feature of an invasion. He believes that under the guise of refugees, foreign military and intelligence officers can enter the country. To his mind, in this case, the involvement of the alliance forces is more reasonable and effective than the actions of the European border agencies. Dombrava also noted that in the face of an increase in the flow of refugees, the government may even neglect the observance of human rights.

The Canadian-led battlegroup in Latvia at Camp Ādaži consists of approximately 1512 soldiers, as well as military equipment, including tanks and armoured fighting vehicles.

Though the main task of the battlegroup in Latvia is country’s defence in case of military aggression, Latvian officials unilaterally invented new tasks for NATO soldiers So, it is absolutely clear, that Latvian politicians are ready to allow NATO troops to resolve any problem even without legal basis. Such deification and complete trust could lead to the full substitution of NATO’s real tasks in Latvia.

It should be noted that NATO troops are very far from being ideal soldiers. Their inappropriate behaviour is very often in a centre of scandals. The recent incidents prove the existing problems within NATO contingents in the Baltic States.

They are not always ready to fulfill their tasks during military exercises and training. And in this situation Latvian politicians call to use them as border guards! It is nonsense! It seems as if it is time to narrow their tasks rather than to widen them. They are just guests for some time in the territory of the Baltic States. It could happen that they would decide who will enter Latvia and who will be forbidden to cross the border!

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Eastern Europe

Changes are Possible: Which Reforms does Ukraine Need Now?

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Photo: Robert Anasch/Unsplash

The past 16 months have tested our resilience to sudden, unexpected, and prolonged shocks. As for an individual, resilience for a country or economy is reflected in how well it has prepared for an uncertain future.

A look around the globe reveals how resilient countries have been to the COVID-19 pandemic. Some have done well, others less so. The costs of having done less well are almost always borne by the poor. It is for this reason the World Bank and the international community more broadly urge—and provide support to—countries to undertake economic and structural reforms, not just for today’s challenges but tomorrow’s.

One country where the dialogue on reform has been longstanding and intense is Ukraine. This is particularly true since the economic crisis of 2014-2015 in the wake of the Maidan Revolution, when the economy collapsed, and poverty skyrocketed. Many feared the COVID pandemic would have similar effects on the country.

The good news is that thanks to a sustained, even if often difficult, movement on reforms, Ukraine is better positioned to emerge from the pandemic than many expected. Our initial projection in the World Bank, for example, was that the economy would contract by nearly 8 percent in 2020; the actual decline was half that. Gross international reserves at end-2020 were US$10 billion higher than projected. Most important, there are far fewer poor than anticipated.

Let’s consider three reform areas which have contributed to these outcomes.

First, no area of the economy contributed more to the economic crisis of 2014-2015 than the banking sector. Powerful interests captured the largest banks, distorted the flow of capital, and strangled economic activity. Fortunately, Ukraine developed a framework to resolve and recapitalize banks and strengthen supervision. Privatbank was nationalized and is now earning profits. It is now being prepared for privatization.

Second, COVID halted and threatened to reverse a five-year trend in poverty reduction. Thanks to reforms of the social safety net, Ukraine is avoiding this reversal. A few years back, the government was spending some 4.7 percent of GDP on social programs with limited poverty impact. Nearly half these resources went to an energy subsidy that expanded to cover one-in-two of the country’s households.

Since 2018, the Government has been restructuring the system by reducing broad subsidies and targeting resources to the poor. This is working. Transfers going to the poorest one-fifth of the population are rising significantly—from just 37 percent in 2019 to 50 percent this year and are projected to reach 55 percent in 2023.

Third, the health system itself. Ukrainians live a decade less than their EU neighbors. Basic epidemiological vulnerabilities are exacerbated by a health delivery system centered around outdated hospitals and an excessive reliance on out-of-pocket spending. In 2017, Ukraine passed a landmark health financing law defining a package of primary care for all Ukrainians, free-of-charge. The law is transforming Ukraine’s constitutional commitment to free health care from an aspiration into specific critical services that are actually being delivered.

The performance of these sectors, which were on the “front line” during COVID, demonstrate the payoff of reforms. The job now is to tackle the outstanding challenges.

The first is to reduce the reach of the public sector in the economy. Ukraine has some 3,500 companies owned by the state—most of them loss-making—in sectors from machine building to hotels. Ukraine needs far fewer SOEs. Those that remain must be better managed.

Ukraine has demonstrated that progress can be made in this area. The first round of corporate governance reforms has been successfully implemented at state-owned banks. Naftogaz was unbundled in 2020. The electricity sector too is being gradually liberalized. Tariffs have increased and reforms are expected to support investment in aging electricity-producing and transmitting infrastructure. Investments in renewable energy are also surging.

But there are developments of concern, including a recent removal of the CEO of an SOE which raised concerns among Ukraine’s friends eager to see management independence of these enterprises. Management functions of SOE supervisory boards and their members need to remain free of interference.

The second challenge is to strengthen the rule of law. Over recent years, the country has established—and has committed to protect—new institutions to combat corruption. These need to be allowed to function professionally and independently. And they need to be supported by a judicial system defined by integrity and transparency. The move to re-establish an independent High Qualification Council is a welcome step in this direction.

Finally, we know change is possible because after nearly twenty years, Ukraine on July first opened its agricultural land market. Farmers are now free to sell their land which will help unleash the country’s greatest potential source of economic growth and employment.

Ukraine has demonstrated its ability to undertake tough reforms and, thanks to the COVID-19 pandemic, has seen the real-life benefits of these reforms. The World Bank looks forward to providing continued assistance as the country takes on new challenges on the way to closer European integration.

This article was first published in European Pravda via World Bank

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Eastern Europe

Liberal Development at Stake as LGBT+ Flags Burn in Georgia

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Photo: Protesters hold a banner depicting U.S. Ambassador to Georgia Kelly Degnan during a rally against Pride Week in Tbilisi, Georgia July 1, 2021. Credit: REUTERS/Irakli Gedenidze

Protests against Georgia’s LGBT+ Pride parade turned ugly in Tbilisi on July 5 when members of the community were hunted down and attacked, around 50 journalists beaten up and the offices of various organizations vandalized. Tensions continued the following day, despite a heavy police presence.

On the face of it, the Georgian state condemned the violence. President Salome Zourabichvili was among the first with a clear statement supporting freedom of expression, members of parliament did likewise and the Ministry of Internal Affairs condemned any form of violence.

But behind the scenes, another less tolerant message had been spread before the attacks. Anxiety about this year’s events had been rising as a result of statements by the government and clergy. Prime Minister Irakli Garibashvili suggested the march “poses a threat of civil strife.” The Georgian Orthodox Church meanwhile condemned the event, saying it, “contains signs of provocation, conflicts with socially recognized moral norms and aims to legalize grave sin.”

For many, these statements signified tacit approval for the abuse of peaceful demonstrators. Meanwhile, the near-complete absence of security at the outset of the five-day event was all too obvious in Tbilisi’s streets and caused a public outcry. Many alleged the government was less focused on public safety than on upcoming elections where will need support from socially conservative voters and the powerful clergy, in a country where more than 80% of the population is tied to the Georgian Orthodox Church.

The violence brought a joint statement of condemnation from Western embassies. “Violence is simply unacceptable and cannot be excused,” it said. The Pride event was not the first and had previously been used by anti-gay groups. Violence was widespread in 2013 — and the reality of attacks against sexual minorities in Georgia remains ever-present.

In a socially conservative country such as Georgia, antagonism to all things liberal can run deep. Resistance to non-traditional sexual and religious mores divides society. This in turn causes political tension and polarization and can drown out discussion of other problems the country is marred in. It very obviously damages the country’s reputation abroad, where the treatment of minorities is considered a key marker of democratic progress and readiness for further involvement in European institutions.

That is why this violence should also be seen from a broader perspective. It is a challenge to liberal ideas and ultimately to the liberal world order.

A country can be democratic, have a multiplicity of parties, active election campaigns, and other features characteristic of rule by popular consent. But democracies can also be ruled by illiberal methods, used for the preservation of political power, the denigration of opposing political forces, and most of all the use of religious and nationalist sentiments to raise or lower tensions.

It happens across Eurasia, and Georgia is no exception. These are hybrid democracies with nominally democratic rule. Armenia, Georgia, Kyrgyzstan, and others have increasingly more in common, despite geographic distance and cultural differences.

Hungary too has been treading this path. Its recent law banning the supposed propagation of LGBT+ materials in schools must be repealed, European Commission President Ursula von der Leyen said on July 7. “This legislation uses the protection of children . . . to discriminate against people because of their sexual orientation . . . It is a disgrace,” she said.

One of the defining features of illiberalism is agility in appropriating ideas on state governance and molding them to the illiberal agenda.

It is true that a mere 30 years since the collapse of the Soviet Union is not enough to have built a truly liberal democratic state. Generations born and raised in the Soviet period or in the troubled 1990s still dominate the political landscape. This means that a different worldview still prevails. It favors democratic development but is also violently nationalistic in opposing liberal state-building.

Georgia’s growing illiberalism has to be understood in the context of the Russian gravitational pull. Blaming all the internal problems of Russia’s neighbors has become mainstream thinking among opposition politicians, NGOs, and sometimes even government figures. Exaggeration is commonplace, but when looking at the illiberal challenge from a long-term perspective, it becomes clear where Russia has succeeded in its illiberal goals. It is determined to stop Georgia from joining NATO and the EU. Partly as a result, the process drags on and this causes friction across society. Belief in the ultimate success of the liberal agenda is meanwhile undermined and alternatives are sought. Hybrid illiberal governments are the most plausible development. The next stage could well be a total abandonment of Euro-Atlantic aspirations.

Indeed what seemed irrevocable now seems probable, if not real. Pushback against Georgia’s Euro-Atlantic choice is growing stronger. Protesters in front of the parliament in central Tbilisi violently brought tore the EU flag. Twice.

The message of anti-liberal groups has also been evolving. There has been significant growth in their messaging. The anti-pride sentiment is evolving into a wider resistance to the Western way of life and Georgia’s Western foreign policy path, perhaps because it is easily attacked and misrepresented.

To deal with this, Western support is important, but much depends on Georgian governments and the population at large. A pushback against radicalism and anti-liberalism should come in the guise of time and resources for the development of stronger and currently faltering institutions. Urgency in addressing these problems has never been higher — internal and foreign challenges converge and present a fundamental challenge to what Georgia has been pursuing since the days of Eduard Shevardnadze – the Western path to development.

Author’s note: first published at cepa

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