Why not extend and reverse Nabucco?

This just in from London-based Polish gas expert Greg Pytel

Greg Pytel

Extended and reversible Nabucco – competitive and secure natural gas market for Europe

There has been an ongoing debate about constructing Nabucco pipeline: a pipeline designed to transport natural gas from Central Asia, Middle East, Caspian and even North Africa via Turkey and then Balkan countries to Hungary and Austria. Nabucco would bring a degree of diversification of gas supply routes to Europe from southern and eastern directions. At present there is a renewed initiative to make Nabucco happen.

In the background a new significant region of exploration and production of natural gas is emerging: Central and Eastern Europe, in particular Poland, Austria and Hungary. Whilst there was a lot of exploration work done in a number of past decades there was relatively very little, if any, of competitive, high-tech, modern nature. With degree of caution considering this and unconventional gas prospects, the region
looks very attractive.

The prospective natural gas conventional reserves in Poland, Austria and Hungary contain at least 4 tcm and with inclusion of unconventional gas they can be as high as 15 tcm or even more. Considering the real costs of Russian gas (from difficult and inaccessible regions transported for many thousand of kilometres), CEE gas, even from unconventional reserves, should be very competitive.

This makes a case for building Nabucco as reversible gas pipeline from Turkey, through the Balkans, Hungary, Czech Republic, Poland, Baltic states up to Finland.

The highlights of the reversible and extended Nabucco:

- trunk line allowing distribution of the locally produced gas, balancing supply and demand along north – south axis and interconnecting with the western European gas network in east – west direction: it resolves a great number of issues related to interconnections in north – south direction and it also eases the pressure on the issue of “feeding” the pipeline in Turkey (as it is a interconnector and transport route for local CEE gas production)

- new route of gas supply to Finland and the Baltic states opening a competitive market

- integration of 50 bcm Latvian storage facility into pan-European network

- Poland, Austria, Hungary are new significant producers with interconnectors north-south and east-west to unify the market

- connecting Italy, Balkans and down to Turkey with Turkey playing a special role of a hub for gas supply from North Africa, Middle East (Iraq, etc) and Central Asia, Caspian.

This results in 7 supply hubs for Europe:

1) Russia directly,

2) Germany/Austria (Russian gas when Nord and South Streams are built)

3) CEE own production

4) Norway

5) existing supply from North Africa

6) LNG

7) Turkey: gas from Central Asia, Middle East, alternative route for Russian gas and possibly North Africa. Furthermore it will be a significant step in development of ever closer relationships between the EU and Turkey.

Nabucco will be a trunk line allowing distribution of the locally produced gas, balancing supply and demand along north – south axis and interconnecting with the western European gas network. Furthermore it would enable the use of Latvian gas storage (around 50 bcm) for the benefit of the entire Europe, Baltic states, including Finland, and would provide alternative source of supply gas to Russian gas.

Reversible Nabucco, from Turkey to Finland, will be a significant step towards competitive and secure natural gas market in Europe integrating diverse routes of supply.

Germany's Lostpolitik

Constanze Stelzenmueller writes an interesting and thoughtful piece about German security and foreign policy
here. She wants Germany to be less neurotic, less stingy and more decisive--with a new national security commission (ie council) to run things. Great idea--but what happens if we then get Europe's most powerful country run by another Schroeder?

New anti-Putin site

As attention on the Sochi Olympics grows, so do the critics' efforts,
like this.

Applebaum-Sikorski

Long profile of Poland's power couple here in Polish Newsweek

Russia latest--from ex-ambassador Sir Andrew Wood

Sir Andrew Wood was one of the most able ambassadors Britain has sent to Moscow. Here are ten punchy points about the current political outlook. Well worth a look

Political writing at its best

Most politicians today talk like robots (I've just been watching Gordon Brown at the Chilcott inquiry) and when they write it's even worse. Even Barack Obama's "rhetoric" is more about delivery than real literary style. So (thanks Guistino) here is an example of a political document that is inspirational, elegant and brief.

Katyn update

The Kremlin is gradually sorting out (or at least defusing) its historical rows with the ex-captive nations. First it was Putin's visit to Hungary on the anniversary of '56 (see this report). Then it was Prague for 40 years after the 1968 invasion see this one, in Russian. Now comes Katyn, with official confirmation that Putin and Donald Tusk (the Polish prime minister) will be visiting jointly on April 7th. That follows a path-breaking visit to Gdansk in September to mark the outbreak of WW2.

What to make of that? First, it is clear that Putin is trying to wrongfoot the Polish president Lech Kaczynski. He will visit Katyn later, on April 10th. So Tusk will reap the benefits of his softly-softly approach to Russia. Kaczynski, who comes from the other bit of Poland's divided conservative politics, is more abrasive.

Second, it is highly commendable that Russian television viewers will hear their prime minister publicly accepting that Katyn was an NKVD/Stalin/Soviet crime, not a Nazi one. The revival of "Katyn denial" has been one of the most atrocious features of the revisionist approach to Soviet history which has gained so much ground under the Chekist revival. Publicly accepting the truth about Katyn does not stop that process, but it certainly impedes it.

Thirdly, the Balts are next. It may be either Latvia or Lithuania which is first, but I suspect that the Kremlin will offer a deal in which it accepts that the "annexation" (not "occupation" happened against the will of the citizenry, without outright condemning it as illegal. In return, the Baltic side will have to drop claims for compensation. If that happens, it will put the remaining Baltic states (and especially Estonia) in a tricky position, with appeasement-minded western countries saying "oh please hurry up and bury your tiresome historical differences so that we can all get on with worrying about important things like gas supplies and warship sales).

My worry about this is that the regime is getting off lightly. In his speeches at these events Mr Putin accepts (in rather qualified terms) "moral responsibility". IE bad things happened and some of them were done by Russians, and although the Russian Federation now is not the same as the USSR, we are still sorry about it.

But he also relativises it. So Molotov-Ribbentrop was bad, not least because it was mistaken. But other countries (including Poland) did bad things to. In that way, the deplorable but essentially trivial Polish annexation of Teschen/Czieszyn/Těšín
somehow ranks along with the dismemberment of Poland, and the Molotov-Ribbentrop pact is just the eastern version of Britain's shameful Munich agreement.

That seems to me to dodge two fundamental questions. One is the evil of the Stalinist regime, which is qualitatively different to anything else (except Hitler or Mao) in modern times. I am reminded of the late Jorg Haider, who used to denounce Nazism because it had brought bad results. That was true, but not the main reason for denouncing it. Putin denounces the Soviet Union mainly because it failed, rather than because it was based on lies and mass murder.

The second question that gets dodged is the way in which modern Russia still has not really dealt with the Stalin/Soviet legacy.


In an ahistorical age, where everyone cares a lot more about live deals than dead bodies, I fear that Putin is getting away with it. Scrutinise what he says at Katyn closely.
(Update). As Paul Goble highlights on his excellent "Window on Eurasia", the Russian human-rights organisation Memorial has urged Medvedev to condemn Katyn as a crime against humanity. And here , Memorial calls on the Russian president to declassify the Katyn documents, to renew the investigation of the Katyn case, and to rehabilitate by name “in correspondence with Russian law” all those who were shot by the decision of the Soviet leadership on March 5, 1940.

Energy security in Europe

Central questions
Mar 4th 2010 | BUDAPEST AND WARSAW
From The Economist print edition


United in the cause of undermining Russian pipeline monopolies








DOES “Central Europe” exist? It depends on the political climate. Amid worries that France and Germany are stitching up the European Union’s decision-making, the Czech Republic, Hungary, Poland and Slovakia are reviving their ties and pushing shared ideas on energy security and relations with the east.

The alliance began in Visegrad, a Hungarian town, in 1991, when even the EU’s waiting-room seemed distant. Once dreams of joining Western clubs became reality, co-operation all but dissolved. New members shunned anything that made them seem different from the rest. Squabbles, most recently over the treatment of ethnic Hungarians in Slovakia, dominated Visegrad meetings. Some even suggested winding the club up.

Not any more. At a summit in Budapest on February 24th Visegrad showed signs of renewed life. The big shift is in Poland, where go-it-alone policies have given way to enthusiasm for working with the neighbours. Under the voting rules of the Nice treaty, in force until 2014, Visegrad countries have as many votes in the EU as France and Germany combined.

Next year Hungary and Poland will each have six months in the EU’s rotating presidency. Eurocrats in Brussels like to portray the rotating presidency as largely redundant now there is a permanent European Council president. The Poles and Hungarians are working closely together to disprove this. Hungary wants a “Danube strategy” to divert EU money and attention to the river basin. Poland supports this, in return for Hungarian backing for more EU aid to countries such as Georgia, Moldova and Belarus.

The group is gaining allies. “Visegrad-Plus” adds some neighbours, largely from the former Austro-Hungarian empire. Most of these (especially the core four) depend heavily on Russian gas and oil. These are typically costly and come from clapped-out fields along ageing pipelines through unreliable transit countries, with unwelcome political conditions attached.

One way to change this would be to turn the east-west gas pipelines into a grid, with interconnectors running north to south. New Hungarian pipelines to Romania and Croatia will be finished this year. A Czech-Polish connector will open in the summer of 2011. An EU-financed Bosnian-Serbian link will be announced on March 5th. A second idea is coastal terminals in Poland and Croatia to import liquefied natural gas by tanker from countries such as Qatar. The third plan is Nabucco, an ambitious pipeline to connect Caspian and Iraqi gasfields to Europe via Turkey.

Visegrad is also pushing for EU rules on mutual help in

energy crises. These could offer the region greater security. But big obstacles remain. One is Russia, which is intensifying its co-operation with friendly energy companies in France, Germany and Italy. On a trip to France, Russia’s president, Dmitry Medvedev, started formal talks on the sale of up to four Mistral-class warships, while France’s GDF Suez gained a 9% stake in the Nord Stream pipeline.

Russia also continues to push South Stream, a Russian-backed Black Sea pipeline. But it now has less backing than Nabucco. The new Croatian prime minister, Jadranka Kosor, visited Moscow this week and signed up to receive gas from South Stream. But Hungary and other countries have stiffened Croatian resistance to other Russian plans, such as the attempt to gain control of an oil pipeline from the Croatian coast to Hungary. That is a lifeline for Hungary’s energy company, MOL, which otherwise depends solely on oil from the east and is fighting attempts by a Russian company, Surgutneftegaz, to gain control.

The biggest problem is that energy security costs money. Gas interconnectors, for example, sound fine. But the extra competition they bring hits market share for companies used to cosy national monopolies. The Visegrad governments may gripe about west Europeans. But they have plenty to do on the home front.

Molotov/Polonsky

The bloody age of Vyacheslav Molotov

Bullying bibliophile
Mar 4th 2010
From The Economist print edition


Stalin’s violent henchman and his library may have inspired a modern classic


Molotov’s Magic Lantern: A Journey in Russian History. By Rachel Polonsky. Faber and Faber; 388 pages; £20.

EXPATRIATE spouses living pampered lives in Moscow often think it would be nice to write a book about their time there. The material is irresistible: vastness, extremes, depths and delights. But the trite, coy and overly personal jottings that result often prove quite resistible. Rachel Polonsky moved to Moscow with her lawyer husband and stayed for a decade. Her perceptive and erudite book is the exception and sets a standard to freeze the ink in others’ pens.

Ms Polonsky was a fellow at Cambridge University who initially planned to spend her time in Moscow working on a follow-up to her previous book, a heavyweight study of Russian orientalism. Instead she has produced a spectacular and enjoyable display of intellectual fireworks for the general reader.

The book’s core is other books: the fragments of a library that Ms Polonsky discovers in her neighbour’s flat, which once belonged to one of Russia’s greatest monsters, Vyacheslav Molotov. Stalin’s most devoted henchman in the blood-drenched years of the Great Terror, Molotov signed a record 373 death warrants for senior officials, including his close colleagues. He also co-signed, with Hitler’s foreign minister, Joachim von Ribbentrop, another death warrant—the deal that dismembered the countries of central Europe and the Baltic states. Toasted by Molotov and Hitler at a banquet in Berlin, the Nazi-Soviet pact consigned millions to death, slavery and destitution.

The butcher was a bibliophile. His books, sometimes annotated, or even with his moustache hairs left, repellently, as page markers, are much in Ms Polonsky’s thoughts during her journeys to Russia’s bleak north, lush south and distant east. Her finely drawn literary travelogues on Taganrog, Murmansk, Vologda, Irkutsk and other places depict squalor, pomp, misery, exhilaration, heroism and brutishness, each cameo framed in its historical, cultural and physical context.

Some of the material comes from Molotov’s books, others from Ms Polonsky’s well-stocked mind. Few readers will have her encyclopedic knowledge of the works of Anna Akhmatova, Isaak Babel, Anton Chekhov, Fyodor Dostoyevsky, Alexander Herzen, Varlam Shamalov and Marina Tsvetaeva, to name but a few. But while reading the book they will feel that they do. Ms Polonsky wears her considerable learning lightly.

She has a knack for putting herself into other people’s shoes with empathy and skill. During a visit to Moscow’s luxurious Sadunovsky bathhouse she spots a fellow-bather reading Oswald Spengler’s “Decline of the West”; another is applying a home-made unguent consisting of cream and coffee grounds. Spengler, a German historian, thought that cities were ulcers on the body of Russia. What, she asks, would he have made of this scene? That prompts a captivating excursion into the mystical significance of the steam bath, from its rural pagan roots to modern urban body worship.

Ms Polonsky’s interest in the spiritual comes across strongly. She highlights the significance of Aleksandr Men, an inspirational Orthodox priest murdered as the Soviet Union died. Her description of the Bolsheviks’ desecration of the Savvino-Storozhevsky monastery in the midst of the last monks’ final liturgy is memorable. So is her icy account of the creepy religiosity, bordering on paganism, that is to be found in the upper reaches of the current Russian regime.

The contempt she feels for the greed, filth and viciousness that she encounters is all the more compelling for being understated. Her sympathy and affection for the finest bits of Russia’s past and present shine through—whether for the civic traditions of ancient Novgorod, for the aristocratic rebels of the Decembrists or for more modern martyrs such as the Mandelstams or Anna Politkovskaya, a journalist murdered in 2006. The reader catches only fleeting glimpses of Ms Polonsky herself. That contrasts pleasingly with the self-centredness that is present in so much other Western writing about Russia. As her book shows, the author has grit, charm and style—and a gift for traveller’s tales.

Estonia and defence spending

Why does Estonia spend so much more on defence than Latvia and Lithuania? And is it a good idea? Cynics say that Estonia can't be credible in defence if the other Baltic two have in effect given up. Estonia should stop bothering with even vestigial territorial defence and concentrate solely on international obligations. I think that would be a big mistake. Defence spending is about credibility, both in military and political terms. Trying to meet the 2% of GDP target shows the Estonian people that the state is serious about defence (and therefore serious about other things. It also signals that to the outside world. Here Kurt Volker, the former US Ambassador to NATO, praises Estonian defence thinking. And in this speech
he gives some general thoughts about the Atlantic alliance.

New Ukrainian column

I have started a regular column for the excellent Ukrainian weekly Tyzhden. Here is the first one (with a link here to the Ukrainian version)

“Dokumenty pazhaluista”

(What can Europe do to help Ukraine? And what can Ukraine do to help itself?)

Given the amount of time and money European Union countries have spent advising Ukraine on the reform of public administration, it is shocking and shameful that their own consulates in Kyiv and elsewhere epitomise the problem, rather than advertising the solution. It may not be possible to convince voters in the EU that Ukrainians should have visa-free access immediately. But it should certainly be possible to provide the visas in an efficient, polite, honest and open way. The current system offers no real obstacle to people-smugglers and crooks, while imposing huge and humiliating burdens on the ordinary decent people wanting to visit for work, pleasure or study. It is a scandal that it is far easier for a citizen of Turkey to get a visa for the Schengen zone than it is for a citizen of Ukraine.

I would like to see the Ukrainian media and NGOs attack this problem head-on, providing a detailed ranking of the consulates in terms of convenience of opening hours, politeness of staff, speed of service and use of modern technology. Those that make people queue on the streets in sub-zero temperatures will come bottom. Those that use the internet intelligently, and treat applicants as honoured guests, rather than lying nuisances, will come top. Imagine the shock if it turns out that the best service comes from China, say, or Egypt, rather than the arbiters of good government in the EU and North America.

The next stage should be to present the findings to those in charge of the consular services with the question (asked politely of course) what they intend to do to improve their ranking and when. Then follow-up the exercise at six-monthly intervals and see which promises are matched with action and which prove to be just empty words. Transparency and accountability are fine things and the EU and America are right to preach them. But they are even more effective when those who preach them also practise them.

An important feature of this exercise is that Ukrainians would no longer be the supplicants, patiently waiting for outsiders to give them things. Instead, Ukrainians would be saying: “we are the people of one of the largest countries in Europe. We may be poor and badly led, but we also choices about how we spend our time and money, about where we work and study, or buy and sell. If you want our attention, show us some respect”. That is not a message that the rest of Europe has heard before. It would be good to deliver it.

At the same time, of course, Ukraine needs to improve its own image.

I am rather sceptical of the portentous discussion about “foreign policy orientation”. In the end, image follows reality, and so long as the reality of Ukraine is of a country run by the provincial Soviet nomenklatura and their business chums, the bad image will be hard to shift. The more Ukraine imitates the corruption and incompetence of the Russian system, the closer it will become to Russia. And the more it adopts western-style public administration, the closer it will come to the world’s richest and happiest countries.

The election result may mean that big changes are off the agenda. But small steps can be effective too. Too take one example, familiar to foreigners but probably not to Ukrainians themselves, examine the “landing card” issued to foreigners on inbound flights. This is, in effect, Ukraine’s visiting card: it may be the first official document that outsiders encounter.

It is a strikingly shoddy affair. I could almost believe that it was designed by Modest Kolerov, or some other sinister Kremlin spin-doctor, aiming to damage Ukraine in the eyes of the world. For a start, it is not a card. It is printed on the cheapest possible paper—so grey, rough, flimsy and absorbent that it almost has curiosity value. The instructions are incomprehensible. The print is tiny. The applicant must fill in details, letter by letter, in tiny boxes seemingly designed to produce illegibility. If you get it wrong, you are shouted at by a man in uniform.

What is so odd is that this ghastly effort is not some bureaucratic fossil from the Soviet days, but something fairly new. A committee of officials must have debated its design, wording and production, and solemnly decided that this was the best possible option. Given the way that Ukraine works, their decision was probably signed off at quite a high level. I don’t exclude the possibility of corruption—perhaps the contract was given to a design bureau and printing house that skimmed off the contract, and then did the cheapest possible job. But it would be nice to know. I would suggest a public competition for Ukraine’s best designers to produce a rival version, which would have typography, clarity and quality to lift spirits rather than sink them.

The existing dismal document is worth contrasting with the similar form used by foreigners entering the United States. This is printed on high-quality white card. The instructions are exemplary. And a small line of print at the bottom, citing the “Paperwork reduction act” passed by Congress, even tells you how many minutes it should take to fill the form in. That sends a powerful message about America: it is a country where lawmakers bestir themselves to save their constituents time, and where public agencies pride themselves (at least sometimes) on doing a good professional job.

These two ideas won’t change Ukraine overnight. But they will foster two important kinds of confidence. One is the confidence to complain when badly treated. The other is confidence innovate when something is not working well. Both are the hallmarks of a society where the state is a partner, not a parasite. That change is long overdue in Ukraine.

Budapest energy summit

I spent a happy few days in Budapest last week, watching the central European countries (belatedly) getting their act together on energy. Today they followed up with a new push on the eastern Partnership. I will be writing about that in the Economist tomorrow. Vlad Socor from the Jamestown Foundation highlights some of the key points.

Russian military

Amid all the worries about the Mistral sale (now four, and with a gas deal thrown in) it is worth bearing in mind how weak the Russian military actually is. This presentation of the impending collapse of the "wpk" (military-industrial complex) by Julian Cooper is well worth reading. So is this NATO war college analysis by Keir Giles of Russia's new military doctrine.

Therapeutic historiography, (Europe view 173)

The end of history, revisited
Feb 25th 2010
From Economist.com


The ex-communist states of eastern Europe are leaving their pasts behind
WHERE would they be without their past, the ex-captive nations? (Or "ex-communist countries", "former Soviet satellite states", "the old Eastern block": so much history even in the category). The region between the Baltic and the Black Sea is so shaped by history that at first sight the question seems absurd. Trianon, Yalta, Molotov-Ribbentrop, Munich—the gloomy echoes of past betrayals and atrocities are inescapable.

For the past 20 years, the countries of this region have been involved in what might be called "therapeutic historiography": tearing up old communist propaganda versions of history, and writing new ones. That has been an exhilarating, messy and sometimes disconcerting process. For Estonians and Latvians, for example, it meant the chance to honour those (heroes or victims, but not villains) who fought against the impending Soviet occupation in 1944-45. Yet many outsiders see these men as no more than Nazi collaborators: they wore uniforms of the SS, the epitome of wartime evil, and served alongside some war criminals. Context and comparison (far more Russians than Balts fought on Hitler's side) become irrelevant.


Slovaks and Croats want to de-demonise their wartime republics (Nazi puppet states from one viewpoint, a snatched breath of national regeneration from another). Germans and Jews, once seemingly vanished from the region, have emerged from the shadows (and from abroad), with their own unhappy memories that undermine the self-righteousness of both Communist and ethno-nationalist versions of history.


Yet re-examining taboos is a self-limiting process: you run out of them after a bit. And historical inquiry inevitably bogs down in complexity. The communist version of history may have been mostly lies, but the western version has holes in it too. If you like closely reasoned historical monographs, you may spend your evenings examining the interplay between the Munich agreement (when Britain and France betrayed Czechoslovakia) and the Molotov-Ribbentrop pact (when Hitler and Stalin carved up Europe). For most people, it is enough that the latter deal is no longer secret or glorified.


In the luckier half of the continent, history has a much shorter half-life. Who worries about the Schleswig-Holstein question when looking at Danish-German relations? Who cares that Norway was once part of Sweden, or that Finland used to be a Grand Duchy of tsarist Russia?


Now central and eastern Europe may be joining the club of the ahistorical and apathetic. Historical rows are already the exception, not the rule. Poland is the signal example. In recent years it has successfully pursued reconciliation with Ukraine, the Czech Republic, Germany and even (albeit in limited terms) with Russia. The picture is marred only by a recent flare-up with Belarus, and a tiresome squabble with Lithuania about spelling. The recent ripple of protest in Poland when Ukraine's outgoing president, Viktor Yushchenko, made the wartime nationalist leader Stepan Bandera a "Hero of Ukraine" was interesting not because it exemplified the two countries' rows over history, but because it came after years in which they had sorted out so much.


Hungary's neighbourhood is transformed too. Relations with Slovakia are tense, thanks to a badly drafted language law there and some silly politicking. But Hungarians' real animosity is directed towards the Austrians, who have (they feel) betrayed them by selling shares in MOL, the Hungarian energy company, to Russians against their will. The historically difficult relationships with Serbia, Romania and Ukraine, all home to Magyar minorities, look chummy in comparison.

That reflects a big shift. As western Europe flounders, the old patronising and unfair treatment of the "east Europeans" is no longer sustainable. Change is in the wind. Power is up for grabs. And it is more fun than history.

Latvia and Greece

Latvia and Greece

Baltic thaw, Aegean freeze

Feb 25th 2010 | RIGA
From The Economist print edition

Latvia’s economic free fall has halted, and it may now do better than Greece

DOOM-MONGERS are licking their wounds. For two years bankers have said that a Latvian devaluation was inevitable. The struggle to save the lat’s peg to the euro was bound to end in tears. And a panic in Latvia could topple the wobbly economies of Estonia and Lithuania, which have similar exchange-rate regimes, with repercussions extending across eastern Europe and to Scandinavian banks that lent recklessly in the Baltics.

Yet despite a fall in GDP last year of 17.5%, Latvia seems to have achieved something many thought impossible: an internal devaluation. This meant regaining competitiveness not by currency depreciation but by deep cuts in wages and public spending. In a recent discussion of Greece, Jörg Asmussen, a German minister, praised Latvia for its self-discipline.

Standard & Poor’s, a rating agency, has raised its outlook on Latvia’s debt from negative to stable (ie, it no longer expects further downgrades). The current account, in deficit to the tune of 27% of GDP in late 2006, is in surplus. Exports are recovering. Interest rates have plunged and debt spreads over German bonds have narrowed (see chart). Fraught negotiations with the IMF and the European Union have kept a €7.5 billion ($10 billion) bail-out on track, in return for spending cuts and tax rises worth a tenth of GDP.

At the centre of Latvia’s crisis was its biggest locally owned bank, Parex. Until it went bust, Parex was a byword for high living and murky dealings. Its new American-born boss, Nils Melngailis, has refinanced its debts, divided its assets into good and bad, and aims soon to unfreeze depositors’ cash. He found plenty of savings. Selling a fleet of sports cars and ending the use of private jets cut travel costs by 90%. Overall, he cut the bank’s costs by 40% in 2009, with 30% more to come.

Even if a catastrophe has been averted for the moment, Latvia’s economy remains troubled. Unemployment, at 22.8%, is the highest in the EU. Growth is unlikely to resume until late 2011. After a decade of prosperity based on a construction boom, cheap manufacturing and transit from Russia, Latvia needs new sources of income. The biggest task is to harness local brainpower. Emigration has been a safety valve for jobless Latvians, but the country loses if fraying public services, high taxes and low pay drive its more productive workers abroad. And nobody seems to be trying to stop them. Even his fans would hesitate to call the prime minister, Valdis Dombrovskis, charismatic or visionary.

Confidence in institutions is feeble—support for the EU is lower than in any other member state. Politicians are uninspiring, with most parties run by tycoons who escaped blame for economic mismanagement. A sense that the rich and powerful evade justice is pervasive. At Vincents, a Riga restaurant where dinner for two can cost $400, the owner, Martins Ritins, says business is booming. On Valentine’s Day he opened on a Sunday for the first time in years and almost every table was taken.

As politicians’ credibility dwindles, Russian influence grows. A pro-Russian party won control of Riga last year. Latvia’s president, Valdis Zatlers, will go to the Soviet-tinged celebrations in Moscow on May 9th to mark the 65th anniversary of Victory Day. Hawks see this as a sell-out. A visit to Riga by Russia’s foreign minister, Sergei Lavrov, in April may be a step towards normal relations—or a sign that Russia sees Latvia as a swing state in the Baltic.

Even so, Latvia looks good when compared with Greece. It did not lie about its public finances or use accounting tricks. Strikes have been scanty. Protests are fought in the courts, not the streets. Both Greece and Latvia have had hard knocks, but Greeks became used to a good life that they are loth to give up. Latvians remain glad just to be on the map.

Libel latest

Media and the law

Publish, perish, protest

Feb 25th 2010
From The Economist print edition

Bad news for dodgy journalism—and for libel tourists

LIBEL law in England is too expensive and restricts free speech. But journalistic dirty tricks are a disgrace and self-regulation of the media isn’t working properly. So the rules need lots of tweaks and a couple of big changes. Those are the conclusions of a much-awaited parliamentary committee report on the British press.

It makes uncomfortable reading for many. But the sharpest criticism was reserved for the News of the World, a tabloid that is Britain’s best-selling Sunday newspaper; its owner, Rupert Murdoch’s News International; and its practice of stealing messages from the voice mailboxes of prominent people, including members of the royal family. A reporter, Clive Goodman, was jailed for four months for the offence, later receiving a generous pay-off from his erstwhile employer for “unfair dismissal”.

The report says the number of phones hacked must have been far bigger than the handful admitted by the company, and calls it “inconceivable” that nobody else knew what was going on. It criticises the “collective amnesia” of the company’s witnesses and their “deliberate obfuscation” (some refused to give evidence; others said things that the MPs implied were untrue). But the report makes only indirect criticism of Andy Coulson, then the paper’s editor and now a close adviser to the Conservative leader, David Cameron. In response, News International rejected the allegations, accused the MPs of bias and said they had produced nothing new. Calls for a further inquiry are growing.

The report gives other journalistic misconduct a savaging too, especially the “abysmal” standards of reporting in the frenzy surrounding Kate and Gerry McCann, the parents of a British child who went missing in Portugal in 2007. (The McCanns later won hefty libel damages from newspapers that wrongly blamed them for abducting their own daughter.) The MPs also note that the McCanns were failed by the Press Complaints Commission, a self-regulatory body which is meant to deal with such conduct.

The committee’s original aim was to focus on media misbehaviour. But its investigation has ranged more widely. The report has plenty of comfort for more serious-minded journalists, as well as for the campaigning groups, scientists and others who worry about the chilling effect of libel law on press freedom. In English libel law (Scotland’s is different), the fact that the public has an interest in knowing about something offers only a limited defence against a charge of libel. (This is not unlike the rest of Europe, but it is shockingly different for Americans used to the First Amendment’s protection of free speech.) When sued, journalists usually have to prove that what they wrote was right, fair or at least conscientiously reported. That can be costly (even a preliminary defence can easily exceed £100,000). Foreigners may sue other foreigners, as long as they can show that their reputation was damaged in England.

Many lawyers and judges have dismissed media campaigns for changes in the law as self-interested. The committee rejects sweeping proposals for reform, such as statutory caps on the size of libel damages. But it does suggest that the Ministry of Justice, which is examining the libel law, make some important changes.

One is reversing the burden of proof for corporate claimants: if they want to sue for libel, they would have to show that the published material actually damaged their business. That could help people such as Simon Singh, a science writer facing a lawsuit from the chiropractors’ trade body for calling their treatments “bogus”. The MPs also want to discourage “libel tourism” by requiring a claimant who is not based in Britain to produce a very solid argument as to why the case needs to be brought there.

As for the cost of libel actions, which can be ruinous to all but the biggest defendants, the MPs have few specific ideas, though they appeal to lawyers’ sense of responsibility. That is about as realistic as urging tabloid journalists to act ethically.

Poland's big chance

This is the English version of my most recent column for Wprost
Poland leads. Who will follow?

Europe’s new foreign policy is somewhere between tragedy and farce. Lady Ashton, who is meant to be in charge of it, is arousing a mixture of ridicule and astonishment. She is still commuting from London to Brussels, fails to turn up to important meetings, has yet to gain the necessary security clearance and turns her mobile phone off at eight o’clock in the evening. Meanwhile the Spanish government is pretending that the Lisbon treaty has never happened and that national governments still run the European Union on the basis of a rotating presidency. Nobody is in charge. Nothing is happening. It is not surprising that Barack Obama has found something else to do instead of turning up to the planned EU-US summit in May.

The vacuum in Brussels is a big chance for Poland. Next year, the EU presidency will be held first by Hungary and then Poland (with Denmark taking over for the first half of 2012). Given that the Spanish presidency is proving a disaster, and that low-key Belgium is in charge for the second half of this year, that means that Poland is the only big country running the EU until Italy takes over in 2014.

The first priority for Poland is to coordinate its efforts with Hungary. That is well under way. Poland is supporting the “Danube strategy” and Hungary’s plans for greater energy security. In return, Hungary will support Polish efforts to boost the EU’s defence capability. For 24 months, either Hungary or Poland or both will be in the “Troika” of countries in charge of the Union.

Poland is already becoming a diplomatic heavyweight in Europe. The Kaczynski era of grotesque stunts and blunders is receding into the past. Poland’s economic growth makes the country stand out and gives people like Donald Tusk, Jacek Rostowski and Radek Sikorski added weight in international meetings.

The best example right now comes from Moldova, the poorest country in Europe and one where we are in danger of missing a huge chance to improve things. After a messy and contested election, accompanied by plenty of official brutality, Moldovans booted out their corrupt authoritarian communist rulers and elected a pro-Western, pro-reform government under the leadership of the professorial Vlad Filat. America has leapt in, giving him a warm reception in Washington DC and unblocking hundreds of millions of dollars in development aid.

America understands that Moldova matters: the unrecognised statelet of Transdniestria creates a sump of smuggling-based corruption for crooked politicians in Ukraine and elsewhere. Romania—which shares a language and history with Moldova—is now also playing a constructive role. But the absence of interest from the rest of Europe has been shameful.


Poland is the honourable exception. It is offering a $15m immediate bridging loan to help the cash-strapped government meet its commitments. Despite the impressive bureaucracy-busting reforms of the past 100 days, the economy remains stricken. Seasoned foreign officials who visit Moldova say it reminds them of Poland on the brink of the Balcerowicz reforms, or the Baltic states in the early 1990s. The problems are huge. But so are the possibilities.

Poland has plenty more to offer too: it understands the need to engage with the nomenklatura in Belarus, with seductive offers on the lines of “do you want your children to work in Brussels as equals or Moscow as slaves?”. It understands the need for deep strategic patience in dealing with Ukraine, and the need to provide a resolute, American-backed security guarantee to the Baltic states. The recent joint initiative on tactical nuclear weapons by Radek Sikorski and Carl Bildt struck just the right note: reasonable to western ears, but deeply tricky for the nuke-loving Russian leadership.

Big western countries like France and Germany may find it tiresome that the big ideas and bold leadership is coming from the east now. But they had better get used to it. They had their chance and we ended up with Lady Ashton. Now it’s Poland’s turn.

Ambassador Habsburgshvili

The Habsburgs' new empire

The princess and the bear
Feb 18th 2010
From The Economist print edition


Europe’s aristocracy, alive and kicking

GEORGIA struggles to make its case in Germany, which sees trade ties with Russia as vital and the ex-Soviet Caucasian republic as troublesome. So who better to burnish Georgia’s image there than a German-educated Habsburg? Georgia’s new ambassador to Berlin, once she presents her credentials to the president next month, will be Gabriela Maria Charlotte Felicitas Elisabeth Antonia von Habsburg-Lothringen, princess Imperial and Archduchess of Austria, Princess Royal of Hungary and Bohemia. A name like that, says Georgia’s president Mikheil Saakashvili, should open doors.

The towering figure on the Berlin diplomatic scene is the Russian ambassador to Germany, Vladimir Kotenev, an indefatigable socialite who runs what is probably the biggest embassy in Europe. Ms von Habsburg (the name she prefers) will not, despite her titles, have the cash to match his efforts. But she may still help Germans think again about Georgia’s European roots and future. Born in Luxembourg, brought up in Germany and Austria, the polyglot Ms von Habsburg is an avant-garde sculptor, specialising in large steel outdoor works. She has lived in Georgia since 2001, has become a Georgian citizen and gained a command of the language (it is “improving every day”, says Mr Saakashvili).

By the standards of her family, a spot of diplomacy in Berlin is not particularly exotic. The heirs to the Habsburg emperors helped speed the downfall of the Soviet empire, particularly by arranging the cross-border exodus from Hungary to Austria in the summer of 1989 that punched the first big hole in the iron curtain. Among Ms von Habsburg’s six siblings, her younger sister Walpurga is a leading conservative politician in Sweden; her brother Georg is an ambassador-at-large for Hungary. Another used to be in the European Parliament.

Her father, Otto von Habsburg, now aged 97, is one of very few who can remember the Austro-Hungarian empire (his father, Karl, was its last emperor and it collapsed when Otto was six). He does not mourn the demise of that world: liberated from court etiquette, he says, he can call someone an “idiot” if he wants, instead of “your excellency”. His daughter may find German diplomatic protocol rather more constraining.

Missile defence: Kremlin protests backfire

Missile defence in Europe

The next salvo
Feb 18th 2010
From The Economist print edition


America’s reconfigured anti-missile shield still irks Russia

READ the small print. That would have been good advice for foes and allies alike when America announced in September last year that it would abandon its plans for anti-missile defences in Poland and the Czech Republic, in favour of a new system initially based on ships.

Some saw that as a sell-out. Russia was being appeased as part of President Barack Obama’s “reset” of relations with the Kremlin, and the ex-communist countries were being punished for supporting the Bush administration. Five months later, that reading of events looks mistaken.

The new system, the Obama administration officials said at the time, will be more flexible and will have a land component from 2015. Poland will eventually host one base. And earlier this month Romania—after the briefest of talks—announced that it would be the site for interceptors. American officials are trying to find a consolation prize for Bulgaria, the runner-up, which says it would like a base too.

This has annoyed Russia. Its foreign minister, Sergei Lavrov, said the Kremlin had complained to America about the Romanian “surprise” followed by a Bulgarian one. In fact, America itself seems to have been caught unprepared by the enthusiasm of its allies. It had expected protracted negotiations, of the kind it had pursued with Poland. This would have provided a chance to soothe Russian feelings at a time when America is seeking its help to impose sanctions against Iran.

Echoing earlier Russian threats (now rescinded) to deploy nuclear missiles in the Kaliningrad enclave, a Russian-backed separatist enclave in Moldova has offered to host Russian Iskander short-range rockets in response to the planned base in Romania. That may have more to do with wrong-footing the new pro-western, pro-Romanian government in Moldova than pleasing Russia, which declined the offer.



If American technology develops as expected, by 2018 the new shield would cover almost all of NATO’s European members against an Iranian attack—only a small part of Turkey would be exposed. That is a big change from the previous scheme, which was intended mainly to protect America from an intercontinental threat, leaving chunks of Europe unprotected. The new system poses even less of a threat to Russia’s nuclear arsenal (the Americans say neither ever did). The SM-3 interceptors now planned have a shorter range and fly less quickly than the rockets proposed by the Bush administration. Moreover, much of the system—the tracking radars and the Romania-based interceptors—will be deployed further south, unable to interfere with Russian missiles heading for America over the Arctic.

The main basis for the Kremlin’s complaint is political. Though Russia grudgingly accepted that ex-communist countries could join NATO, it sees the creation of American bases there as a breach of a promise made when the Soviet Union consented to German reunification. (American officials insist no such promise was ever given.)

Regardless, America is making other security arrangements. It is placing Patriot anti-aircraft missiles in Poland. More significantly, it has pushed NATO into agreeing to draw up military contingency plans to defend the Baltic states. It will hold drills there later this year. Russia’s growling may have brought results—but probably not the ones that Moscow wanted.

Europe view nr 172

Europe.view

Stay off the potash
Feb 18th 2010
From Economist.com


Eastern Europe-friendly boycotts are difficult to pull off

VOTING with your wallet is a tempting substitute for real politics. Time was when the British left demonstratively boycotted South African oranges. The same people usually regarded Israel as no better than the apartheid regime. They also ruled out “fascist” Spain and Portugal, and Greece under military dictatorship. Barring the odd shipment from Costa Rica or Cuba, progressive politics was bad for the fruit bowl.

Much the same dilemma now faces those who care about the security of the ex-communist region. In Tallinn last week, your columnist, wining and dining one of the country’s top foreign-policy thinkers, learned a new Estonian phrase: “Palun tooge eesti kraanivett jääga” [Estonian tap water with ice, please]. The only bottled water available at the otherwise admirable Ö restaurant was Vittel or Perrier, both French brands. Paris has just agreed to sell some formidable amphibious-warfare ships to the Russian navy, with potentially dire consequences for the security of the Baltic states. French foodstuffs are encountering a certain froideur across the region as a result.

Finding alternative brands of drinking water is easy (and tap water is better on ecological grounds anyway). Dealing with the wine list is more difficult. Most European wine-producing countries are unsound on security questions: as well as France, the list includes Italy (Berlusconi, Russia's biggest chum in the EU), Germany (the Russia-sponsored Nordstream pipeline) and Austria (almost everything). Georgian, Moldovan, Croatian or Macedonian wines would be ideal but are hard to come by, so new world vineyards have to fill the gap. Champagne creates an even bigger problem. The Crimean labels are rare and usually too sweet. Your columnist likes an English sparkling wine called “Nutty”; his friends and family are unconvinced.

The choice is hardest when it comes to cheese. It is difficult to find anywhere that produces tasty soft cheese and is not subject to unhealthy Russian influence. Even the kind of conspiracy theorist who wears a tinfoil hat to protect his brain from being zapped by Kremlin mind-rays would have to accept that this is a coincidence. But it is certainly an annoying one for Atlanticist cheese lovers.



Penalising weak-kneed European countries is hard enough. It is even more difficult when trying to put pressure on the source of the problem. If you want to boycott Belarussian goods, say, because of that government’s persecution of its Polish minority, you are unlikely to change your lifestyle much, unless you use industrial quantities of potash or need a lot of cheap tractors. Similarly, unless your consumption pattern includes weapons and vodka, giving up Russian goods is easy but pointless.

But the real problem with personalised sanctions regimes is conceptual. For a start, they risk seeming silly. Why punish a hapless French cheese-maker or Italian vineyard for the sins of their governments? The thinking is that plunging export sales might create pressure for a change in foreign policy. But this seldom happens in practice.

For countries like Belarus, a trade boycott is outright counterproductive. The more Belarus trades with the rich industrialised world, the weaker will become the ties binding it to Russia. It may be reasonable to try to take custom away from companies that owe their existence to commercial ties with sleazy politicians. But such bodies tend not to sell anything that a normal consumer in the outside world is likely to buy directly. You may not like the fact that some pennies from your fuel bills eventually trickle into the coffers of Kremlin cronies, but there is not much you can do about it.

The occasional flourish, especially with the wine list, is fine. But systematic sanctions are self-defeating. Trade opens borders and minds; protectionism closes them. That principle is worth fighting for too.