Friday, November 30, 2012

Defining ‘Europe’

 During the keynote speech at the Kyiv Post Tiger Conference held on November 27th, Georgian President Mikheil Saakashvili labeled identity as the most important component to promote the democratic process in Ukraine.  He defends this statement by declaring the Ukrainian, Georgian, and Moldovan identity as European. 

Although identity does influence behavior, Saakashvili places a stronger power in the European root rather than the national identity.  Society needs to focus on the inherent European values to encourage and enable a more democratic system.   This attention to a European identity can manipulate a nation into becoming more European.   However, the creation and use of identity has its limits. 

In her book The Politics of Becoming European, Maria Mälksoo discusses the ideological gap between Eastern European nations and their Western neighbors.  Mälksoo asserts that the East is conceptualized as inferior – as ‘Europe, but not quite Europe’.  History has created a distinct division in the middle of Europe that countries such as Poland, Czechoslovakia, and the Baltic states have attempted to bridge.  But, overcoming the past means reconstructing their identities.  In order to gain accession into the EU, the symbol of achieving ‘Europeanness’, one must embark in identity or security politics.  Reorienting Europe has less to do with geography as it does with civil liberties, economics, and education.  Aligning ideology within the Western framework has been the standard for the past decade to ‘become’ European.

Although Saakashvili is accurate in advocating the development of a more European identity, unfortunately Ukraine is ‘feeling’ less European.  Surveys conducted by the Kyiv International Institute of Sociology and Russian Research from 2000 throughout 2010 show that a European self-identity is declining.  Significantly, the media has also noted the shift in democratic values.  Former US Ambassador to Ukraine, Steven Pifer, warned in an interview that Ukraine was moving backwards and branded recent movements in the government as undemocratic.   The compelling correlation highlights the relationship between identity and democracy.

These conclusions lead me to wonder if Ukraine can become more democratic by building a European identity.


“Saakashvili Talks Up EU Integration Path.”  KyivPost.  29 Nov. 2012. 

“We Have to Be in the European Family.”  KyivPost.  29 Nov. 2012.

Maria Mälksoo.  The Politics of Becoming European: A Study of Polish and Baltic Post-Cold War Security Imaginations.  Routledge: New York.  2010.

Stephen White and Julia Korosteleva.  “‘Feeling European’: the View from Belarus, Russia and Ukraine.”  Contemporary Politics.  Volume 12(2).  2006.  193-205

Stephen White, Ian McAllister, and Valentina Feklyunina.  “Belarus, Ukraine and Russia: East or West?”  The British Journal of Politics and International Relations.   Volume 12.  2010.   344-367.

Natalya Humenjk.  “Стівен Пайфер: «На Заході є загальне бачення, що сьогодні Україна вже не демократична держава»”  (Steven Pifer: “In the West there is a general view that today Ukraine is already not a democratic government”).  Тиждень.  19 November 2012.

Monday, November 19, 2012

Overview of the Russian Auto Market

                During the soviet era, the only cars available to Russian consumers were domestically produced soviet mark vehicles. These cars we released by series, as opposed to years, and were only able to fulfill 40% of domestic demand. Today the streets of Moscow have radically transformed and the Russian consumer now has the luxury of choosing from a wide range of vehicles from all over the world. This presents foreign producers with a tremendous opportunity as Russia is poised to surpass Germany as Europe’s larger auto market by 2014, with sales projected to rise to 3.4. Million vehicles sold annually. Moreover, Russia accession to the WTO has provided foreign producer’s cheaper entry into the market as the price of tariffs for imported goods has fallen and will continue to fall. Whether this will actually have the effect of reducing the cost of entry is undetermined, but what is certain is that total revenues for automakers doing business in Russia has surged to $75 billion and growing.    
                The heavy hitters in the market are increasingly foreign marks, with Chevrolet, Renault, Kia and Volkswagen leading the way. Russia’s booming market is great news for Detroit and auto manufactures around the world as it provides some reassurance if profit to compensate for the flailing European market. Even with the surge in imported vehicles, AutoVaz produced “Lada” still holds a commanding lead in sales, accounting for 18% of the market place. While this number is substantially higher than the number two competition, General Motors, AutoVaz’s share has been rapidly declining in recent years, falling from 24% a year ago. To give a picture of how much the Russian market has change in a few short years, Russian domestic producers had a 93% market share in 2000. 
                Projections estimate that much of the growth will benefit foreign manufactures and while the Russian Lada will still be somewhat competitive, most consumers in favor of an import will overlook it. Recently, in a sign of life from AutoVaz, the company agreed to let Renault and Nissan raise its stake in the company, to 75%, giving them a controlling stake and allow them to dictate the future of the brand. This will allow the Lada to become more competitive and efficient in its production by utilizing the technology of the foreign manufactures in its production line. One of the main complaints Russian consumers have with the Lada is it is cheaply made and lacks the quality of the foreign competition. The Russian government has for a long time attempted to protect the industry but that no longer seems possible with the rise in Russian consumer capital and increasingly strong Russian auto market. has recently released a report the Lada will receive a makeover in the next year, potently making it more attractive to consumers. The future of the Russian automotive market seems very lucrative but Lada’s place in the market seems less secure. They must improve the quality of its product to become more competitive, something AutoVaz seems willing to do.

Friday, November 16, 2012

The Periphery

The good thing about the roundness of the Earth is that anywhere can literally be the center of the world.  But, in the everyday life of geopolitics, what happens when you are stuck in between two peripheries?  Positioned between two competing powers of influence, Ukrainian political reality is continuously being critiqued and affected by their neighbors.  Although globalization has enabled an increase of policies supporting equality and strengthening living standards, it appears that the impact on politics is loosing its charm for Ukraine.  Whereas under former president Yushenko Ukraine only looked West, today the regime is accepting critique from both sides.  However, they are rarely compatible. 

While most Western sources expressed disappointment with Ukrainian election procedure, sources in the East, including Russian and Chinese mass media, complimented the fairness and success of the October parliamentary elections.  Additionally, the East interferes less with Ukrainian autonomy allowing Ukrainian officials to identify and interpret their own needs.  As Ukraine has found acceptance within the East, the expectations that are supported by the EU are neglected.  This inconsistency complicates the future of Ukrainian progress as the lack of reception by the West results in a lack of productivity in EU objectives.

Although it appears that this lack of efficiency is caused by internal problems, the EU also has some responsibility.  For example, the ambivalence of EU demands results in a struggle of interpretation and idealization of Western values by Ukraine.  As they proceed to attain these vague desires, the expectations evolve and are altered.  Thus, the results are never achieved or are simply manipulated by the ruling party.  (This is evident in the language law passed this summer that created conflict as the regime attempted to warrant this as meeting the Western requirement to meet the needs of minorities.) Currently, disparity has developed between the wants of the EU and the needs of Ukraine. 

This ambiguity also highlights doubt in the EU interest to promote ascension and shift their boundaries further East.  The EU has had a vital responsibility in promoting state building and reaching out to post-Soviet states.  Implementing programs and funding initiatives such as women’s rights, election monitoring, and educational programs all require observation and submissiveness by Ukrainian policy makers.  In the end, international efforts perform many functions for the state.  Although the intentions are to create a foundation for the state to build upon, how should the state sustain these programs independently?

EU membership has been dangled in front of many Post-Soviet countries like a reward on a stick, but the temptation for the honor of membership is not enough to instill lasting changes in the Ukrainian society.  As the EU has become more reluctant to negotiate integration, Ukraine will not be excluded in the East.  Europe existed before the EU, and Ukraine may determine its contribution to Europe independently of the EU.

Oleksandr Horyn.  “Legitimizing the Regime”  The Ukrainian Week.  November 5, 2012.

 “Washington Post: Україна скотилася до псевдодемократії”  (Washington Post: Ukraine falls to psudodemocracy.). BBC Ukraine.    November, 9, 2012.

Nicholas Wheeler.  “Protecting Fortress Europe: International Approaches to Strengthening Institutinal Capacity in Mew EU States.”  Conference Paper.

Marc P. Berenson.  “‘Europe’ and the European Union in East-Central and Southeastern Europe.”

Nadia Shapkina.  "Between the State and Global Feminism: Post-Soviet Women's NGOs Navigating Local and Global Politics."

Monday, November 5, 2012

Democratic Society

Although I may be underestimating my peers, the majority of KU undergraduate students have no idea where Ukraine is geographically.  However, the student newspaper recently reported on the Ukrainian parliamentary elections as destroying democratic potential within the government.  It summarized the lack of transparency, misuse of finances, and “abuse of power” that took place in these elections.  Many Western observers, including Hilary Clinton, labeled these elections as a “step-backwards” and a digression of progress.

Western NGO’s have trained internal monitors for the elections and reported live of voting fraud or violations.  Live surveillance was broadcast at major voting stations.  In fact, the majority of financial aid from the West is directed specifically for programs and events to promote democratic principles.  Yet, rumors of stuffing ballot boxes, bribes, and magic pens persisted throughout these elections.  Even with precautions and financial support, parliamentary elections evaded translucency and democracy. 

The West funds Ukraine to enable and encourage more democratic principles.  Therefore, these agencies have the ability to rate the outcomes of these projects.  However, Ukraine is failing to meet their expectations.   Despite the financial contributions and commitment to democracy, these institutions will not facilitate change from a top down approach. 

The fact that this problem persists in Ukraine is not because of it politics or parties.  Ukrainian corruption is found throughout society.  From traffic law violators, to marshytka drivers, hotel owners, and the man who reads the water meter, each can and many do enable profiteering. Repetitive variations of stories persist of traffic violations where the innocent party is threatened by the police to plead guilty because the marshytka driver has bribed (and can afford to) the reporting officer.  In the professional world, an employer of the water company assigned to read the meter proposed to the owner of a laundro-mat to be paid personally for the first few months before he began reading the meter.

Sociologist Oleg Demkiv stated that the problem with Ukrainian corruption is not a political problem but rather a societal problem.  The political behavior is a microcosm of society itself.  Condemning the leaders of parties is not enough; an innate change in society is required to bring to pass a more democratic society.

If students are willing to sell their votes on social networking sites, bribes by politicians will persist.  Solzhenitsyn explains that it is a historical component of society and becomes part of the character of a nation.  However, it is misunderstood by outsiders and cannot be assessed adequately.  Incomprehensible to Western observers, selling democracy is a sociological issue that cannot be condemned or critiqued fairly by other cultures.  Only understanding society can enable change. “Democracy - is primarily the responsibility of all citizens in the state of affairs in the country.”  Exercising individual will is the only way to instill lasting democratic principles.

Obviously there are Ukrainians who are ready for change.  Consider Ydar’s canididate Klychko whose campaign advocates ending corruption.  Promoting these leaders and integrity in society will have much more influence than installing programs or video cameras.  A bottom-up approach may be the best and only option for a more democratic Ukraine.  


Associated Press. “Democratic Potential Halted By Election Results.” University Daily Kansan. October 30, 2012.

Держдепартамент США вважає, що вибори в Україні стали кроком назад на шляху до демократії
30 жовтня 2012, 07:32

Парламент, який обереться у жовтні, не буде потрібним суспільству
Костянтин Матвієнко _ Вівторок, 10 липня 2012, 15:10

Oksana Pachlovska.  “Не-європейська Україна”  (“Un-European Ukraine”)

“США та Євросоюз стурбовані ходом виборчої кампанії в Україні.”  (“U.S. and EU concerned about the course of the election campaign in Ukraine”)
24 жовтня 2012, 20:35

Анатолій ОРЕЛ.  “Iнтеграційні проекти: де майбутнє України?”

Oleg Demkiv.  “Permissiveness in Ukrainian Society.”  University of Ivan Franko.  June 2012. 

Solzhentsyn, Alekandr.  “A World Split Apart.”  Commencement Address, Harvard.  June 8, 1978.

Friday, November 2, 2012

Cooperation in Research and Development

            General Motors and the Government of St. Petersburg have signed a memorandum to promote the principles of cooperation of field research to promote the successful development of the Russian automotive industry. Such cooperation is a sign of progression and partnership between Russia and foreign corporations. Currently, inefficient production and substandard products holds the Russian automotive industry in shackles. The government has long protected this industry by imposing astronomical tariffs of 30% on imported vehicles. Such protectionist policy has allowed the automotive sector to become complacent in its production. Currently a resident of Russia can purchase a X for a fraction of the price it would cost to purchase an imported vehicle, such as a Ford or Chevrolet. However, this is all about to change as Russia has joined the WTO which mandates a scheduled of concession which includes a gradual reduction in the tariffs of automobiles. Consequently, the Russian automotive sector must make itself competitive if they intend to remain relevant. Cooperation with automotive giants, such as GM will allow this to happen because they can utilize they can implement foreign production method into their own factories.
            The Russian auto market has previously been overlooked, but now forecasts project that the Russian markets offer huge potential for foreign investors. As I have discussed in previous posts, with the falling price of oil Russia is desperate for a new source of revenue, one of those being foreign direct investment. Foreign manufactures, such as GM and Ford see huge potential in the nation’s automotive markets as projections suggest that demand will grow at a 6-8% rate over the next fifteen years. While this is exciting news for automakers outside of Russia, domestic automaker and their employees are justifiably trembling at the reduction of tariff rates. Much of Russia’s hesitation in joining the WTO stemmed from specifically that reason. Russia was only ready to join the organization when a deal to allow for the gradual reduction of automotive tariff’s was put in place. Russia’s trepidation stems from fears of lost jobs and a loss of sovereignty. Issues that is present in many counties. However, Russia and its citizens must face the realties that WTO accession will present and either become competitive in the auto industry or specialize in other sectors.
            The Russian government has attempted to circumvent its WTO obligations by past discriminatory legislation. On July 13th the Russian Duma passed a law imposing a utilization fee cars which has an effect of discriminating against imported vehicles. The utilization fee is purported to address environment concerns regarding the disposal of vehicles but it provides exceptions to domestic manufactures. Under the WTO GATT article, III a country must provide national treatment to all imports. In effect, this is an equal protection clause, requiring all imports to be taxed equally to domestic “like products”. Taxes of this nature are a violation of the principle of the WTO and will not help the Russian auto-manufacturing sector in the long run. What the industry must do is just what St. Petersburg covenant with GM seeks to accomplish. That is cooperation and advancement of the industry so that it may compete of imports without any sort of protectionist laws.

IET Manufacturing Engenerr August/September, The Russian invasion by Mark Venables

20 марта 2012 Материалы о вступлении России в ВТО

В России снижены импортные пошлины на автомобили

Sunday, October 21, 2012

Time for a second transformation

           This article emphasizes Russia’s need to create a better business climate in order to grow its economy and to bolster its credit ranking. Currently Russia ranks the 120th easiest country to do business in according to the World Bank. Furthermore, Russia is the world’s largest exporter of energy, a resource that is falling in demand. Recently, President Putin has proclaimed that he intends to reduce Russia’s reliance on its oil and gas revenue and boost investment to 25% of the gross domestic product by 2015. Additionally, he intends to improve the countries ranking ease of doing business ranking to 20th. A paradox to this ambitious goal is that it requires a reducing state interference in private enterprises, while government spending and regulations have typically been a source of providing votes. Most economists advocate that it is imperative for Russia to move away from its reliance on natural resources because a further drop in the price of oil would drop Russia’s credit ranking and have a significant impact on its economy.
            The impact of further decline in the price of oil may potentially have a catastrophic impact on Russia as well as many nations that are heavily reliant on oil. How catastrophic the impact will be depends on the foresight of leaders and their ability to take preventive steps to protect their people and economy. Russia’s current economic stability is almost entirely a product of high oil prices around the world. Putin was able to utilize “petro dollars” to bring some sense of order to the nation and provide much-needed public service. The president was also able to seize an almost authoritarian power through this stability. His general rhetoric seemed to be I have provided prosperity and thus I will hold the power. This sentiment has begun to stir up some resentment and public protests throughout the nation as was evidenced during the past election. The popularity rating of Putin’s United Russia party has continued to slide. Valdimir Milov, an opposition leader, has suggested the party in in need of a “physiological rehabilitation” for it to continue to thrive. While there may be sentiment against Putin, his greatest advantage is that that no single candidate that can legitimately challenge his power.
            Putin takes much of the praise for Russia’s economic revitalization post Yelstin, but increased criticism will ensue if he cannot figure out a way to reduce reliance on oil. The occasional public protests that we see today will potentially turn into hordes of angry mobs if the economic situation worsens. There are signs that Russia is making small steps towards improving its fiscal outlook buy minimal reductions in its budget. However, just as in any democracy, leaders focus on short term benefits that will help them to be reelected. Today’s Russia is a radical transformation from fifteen years ago but it is time for a second transformation if the nation intends to be a competitive global player.       

Friday, October 19, 2012

The Status of Human Rights in Ukraine

Ghandi believed that “a nation’s greatness is measured by how it treats its weakest members.”  If this gauge is correct, then priorities to ameliorate the conditions of the vulnerable including children, the elderly, the sick, and the needy should be the forefront of state policy.  Fortunately, Ukraine has implemented many reforms in the past 20 years to spread equality to each citizen. However, the problems faced by Ukrainians with special needs can be quite enigmatic.  Despite the progress made to public policy guidelines, there are still problems with implementation and services to avail all Ukrainian citizens with equal access and opportunities.  One of the biggest challenges in Ukraine is the pervasive negative perception of people with disabilities.
The success of the 155 Ukrainian athletes sent to the Paralympic games in London this year showed hope for the public attitude towards the special needs population.  Ranking fourth in national metals, the athletes returned home honored as heroes to a military guard and orchestra.  Aspiring to “inspire and motivate people with special needs in search of work and to convince employers of their potential,” these athletes outperformed all other previous Ukrainian teams.  Their victory provides optimism as they prove that people, with physical limitations are active; “they don’t simply sit at home, but can succeed at something in this life.”   Cvitlana, a woman with special needs from Kyiv, is convinced that the success of these athletes will change the attitude of Ukrainian society and affect the movements advocating for their rights as individuals.

Yet, the movement for people with special needs is only a small reflection of the encompassing campaign for human rights in Ukraine.  Since 2010, the U.S. State Department report concerning human rights has identified Ukraine as democratic, but fails in meeting the western expectations for human rights.  It lists cases of violence and discrimination against women, children, homosexuals, Roma, Crimean Tatars, and others.  Recently, Ukraine was ranked fifth for the number of complaints to the European Court of Human Rights.  Making headlines most recently and contradicting “the obligations of Ukraine, to take part in the European and international agreements on the protection of human rights" is the Ukrainian proposed law against Homosexuality.  Despite the prohibition against discrimination, this law would make it a criminal offense to propagate information in support of gay rights.  Although Ukraine has made many improvements in establishing democratic principles and ensuring equality, its failure to reaffirm fundamental human rights to all citizens has hindered development.  According to the Universal Declaration of Human Rights, promoting human rights facilitates “social progress and better standards of life.”   Therefore, defending human rights should be a priority of any democratic government.

In reality, the Ukrainian Paralympians return home, is a return to a “place of constant struggle” to live within the barriers of society that discriminates, according to Valeriy Sushkevych - head of the National Sports Committee for the Disabled, “in social adaptation as well as in chances for education and jobs.”  He advocates as a lawmaker in the Verkhovna Rada “to see a fair and respectful attitude of society and state towards …Paralympians and all of the other disabled people here.”   Ideology has not moved as fast as the Ukrainian Paralympic successes and stigmas still exist that impede everyday life for these citizens.  Any human rights’ violation disables the targeted population -whether special needs, homosexuals, women, or children - and impedes their opportunity for success.

By analyzing Ukrainian advancement in one sphere of the human rights initiative, it is possible to track the overall commitment and concern of ordinary citizens and government in overcoming social attitudes of apathy and neglect.  An increased awareness and desire to advocate for one population will enable the advancement of other maligned and marginalized citizens. 


Shevchenko and Grytsenko .  “Triumph of Ukraine’s strong-willed champions.”  KyivPost.  Sept. 13, 2012. 

“Форум ВВС: як Паралімпіада змінила ставлення до людей з обмеженими можливостями?”  (Forum BBC:  How Paralympics changed the attitude towards people with special needs).  Aug. 29, 2012.

Kravesh and Lacey.  “Українська паралімпійська революція”  (Ukrainian Paralympics Revolution). BBC Україна.  Aug. 23, 2012.

“Україна демократична, але має проблеми з правами людини – звіт Держдепартаменту” (Ukraine is democratic, but has problems with human rights – State Report).  RadioSvoboa.  March 11, 2010.

“Україна – п’ята за кількістю скарг до Європейського суду з прав людини”  (Ukraine – Fifth for the amount of complaints to the European Court of Human Rights). RadioSvoboa.  October 12, 2012. 

“В Украине запретили дискриминацию” (In Ukraine – discrimination is prohibited).  Donbass.  Oct. 4, 2012

“Закон про гомосексуалізм суперечить зобов’язанням України щодо захисту прав людини” (Law on homosexuality contradicts Ukraine's obligations to protect human rights).  Zerkalo Nedilya.  Oct. 3, 2012. 

Friday, October 5, 2012

2012 the year of the election; the year of Europeanization.

As elections are approaching, the media is filled with political ads of promises.  However, in Ukraine, the Party of Regions has introduced a simple idea in their campaign ads that seems natural to (and the desire of) most Ukrainians.  Found on the party website, the phrase “Ukraine – a Rich European Country of Successful People” is part of 20 slides describing the success of the past regime and is not even being contested by other parties.  By exploiting this phrase, Yanukovich is almost taking credit for “Europeanizing” Ukraine within his presidency during the past four years.

However, Ukraine is still far from meeting the expectations of their Western neighbors.  So how is this label justified and from where does it receive its inspiration? 

After a decade of attempting to adhere to the ambiguities of European expectations, Ukraine is establishing their own guidelines for advancement.  Since 1991, the Western world has expressed its support and desire for Ukrainian efforts of democratization.  Progress, however, eventually stagnated as the support waned to mere words from the west though still demanding difficult developments; Ukraine reciprocated with its own artificial effort and hollow promises.  Recent Ukrainian success has motivated a push for autonomy.

Ukraine has realized its own importance and is aware of the contributions it may make by untangling itself from the outside pressures imposed as it attempts to associate and align their interests to one entity.  Ukraine has uncomfortably tried to please both sides with one foot stretched West and the other East.  Ukraine may now take the best from both worlds by standing firmly for its own interests.

One source for this movement is the European ideology that accession would bring benefit only to Ukraine and failed to recognize how Ukraine could contribute.  Ukraine was literally stuck between the peripheries seen as dependent by both her neighbors.  While seeking the interests of other nations, Ukraine neglected its own national interests.  Rory Finnin explained: “Pick up an article about Ukraine, and you are likely to find reference to a Ukrainian politician or civic figure as 'pro-EU' or 'pro-Russia' - but never 'pro-Ukraine'.”  Yanukovich, whose motives are hopefully pure, is determining Ukrainian aspirations.  Desiring to increase her importance and influence, Ukraine is beginning to find her own identity.  Ukraine will attempt to discover her potential to create one of the strongest economies in the Post-Soviet countries.

Although Ukraine would gain much from adopting European standards, accepting accountability for their own growth is to a Ukrainian advantage.  Solzhenitsyn explained that a society cannot simply be molded to follow the Western way of life. “[I]t would mean an improvement in certain aspects, but also a change for the worse on some particularly significant points.”  A country in transition may find a few useful characteristics to implement during the process of progression, but will not be able to perfectly mirror the model.  In fact Solzhenitsyn boldly states “the Western way of life is less and less likely to become the leading model.”   Ukraine will have to prioritize and identify how it will move forward.  Thus, Ukraine is emerging independently from the tug-of-war between East and West.  Ukraine will be able to seek her own interests and fulfill her own identity moving forward according to an autonomous desire.

Victoria Mukha’s summarizes her hope for Ukraine: “For its part, Ukraine must do all it can to meet the challenges of transition and become a valued and constructive player. Ultimately, our fate depends on us. If we take advantage of our opportunities, we will benefit greatly – and so will others.”  Ukraine, geopolitically, is in a great position; If it chooses to act responsibly, and in the interests of its people it will surpass the bonuses of ascending into the European Union.


Donskis, Leonidas.  “Do Ukraine and the EU Need Each Other?”  The Ukrainian Week.  April 26, 2012.

“Ukraine and the West: Viktor’s Dilemma: A Country Caught Precariously Between East and West.”  The Economist.  Sep 24th 2011.  Kiev and Yalta

Finnin, Rory.  “Ukraine: Europe's Terra Malecognita.”  The Huffington Post.  June 07, 2012. Blog.

Kuzio, Taras and Moroney, Jennifer.  “Ukraine and the West: Moving From Stability to Strategic Engagement.”   European Security.  2001.  Frank Cass, London.  10 (2).  p.  111-126.

Mukha, Victoria.  “Globalization: The of Ukraine.”  Fellows Articles: The John Smith Memoial Trust.  2005. 

Solzhentsyn, Alekandr.  “A World Split Apart.”  Commencement Address, Harvard.  June 8, 1978.

Thursday, October 4, 2012

Stimulating growth and prosperity by changing perceptions and realities.

            The Lithuanian government intends to file a $1.9 billion claim against Gazprom, alleging that the gas company has unfairly been charging an inflated rate. The claim incorporates all overpaid costs since 2004, when Gazprom acquired a major interest in Lietuvos Dujos, Lithuania’s largest gas importer. Lithuania imports all its natural gas from Russia, and it has paid up to $490, per 1,000 cubic meters of gas, far greater than other European nations. The claim alleges that Gazprom uses unfair methods of calculating gas costs. Consequential, Lithuanian consumers have seen their energy bills grow exponentially. This comes a month after the European Commission launched a probe to examine similar allegations. The Permanent Court of Arbitration conducted under the 1976 UNCITRAL Arbitration Rules will decide the claim. Both nations are bound to the ruling by the Agreement Between the Government of the Russian Federation and the Government of the Republic of Lithuania on the Promotion and Reciprocal Protection of Investment of 29 June 1999.
            Claims similar to these are nothing new and perpetuate a negative perception about both the way Russian companies do business and doing business in Russia. At a time when Russia’s economy is experiencing stagnation in growth, it is imperative that its leadership work to recreate its image and invite foreign investment. A significant reason for this decline is the waning in its oil productive and reduced demand for its oil. There seem to be two paths Russia can take. One in which it continues “us against the world” mentalities and plays by its own rules, relying on its vast energy reserves. Conversely, the Federation may, and seems to be, diversifying its economy and improving the investment climate for foreigners and locals alike.     
            Russia has notoriously been regarded as a difficult place to do business, ranking 120th according to the World Bank. Corruption and lack of uniformity in the enforcement of its laws deserve much of the blame. These issues have resulted in a lack of productive in Russian labor and inefficient factories and other means of production. Accession to the WTO will likely force the door to Russia open but it is for the government to decide how much. President Putin has announced a number of initiatives that will make it easier to invest in the nation, such as fixing its tax laws and allowing direct investment in securities markets. The leadership has aspirations of transforming Moscow into a hub for financial firms. While this rhetoric is a step in the right direction what effects it may have are to be determined. It is virtually impossible to change the perceptions and behaviors of Russian people as well as potential foreign investors in a short span of time. In a country where it is widely accepted practice to slip a couple hundred rubles to a police officer to avoid a ticket, or have to pay bribes to multiple government workers before establishing a business, increasing investor confidence will be a difficult task. If Putin truly does have ambitions of increasing investment, Gazprom’s price gouging techniques will have to cease and Russia will have to play by customary international rules.

Thursday, September 20, 2012

Ukrainian Dependence: Survival without the EU

 Although Manfred Stinnes is not an Ukrainian area specialist, in a recent lecture about the current status of the EU he firmly stated that the internal struggles taking place in Ukraine prove that they are not ready to negotiate.  Meanwhile, the economic dilemmas facing the EU impede any talk of integration with a country that has failed to comply with European standards.  In recent visa facilitation arrangements, representatives of the EU did not support agreements between Ukraine and the EU.  “EU policy towards Ukraine should be firm and consistent and continue to insist on clear commitments from the Ukrainian authorities towards democratic values and the rule of law.” Ukraine has been unable to show that they would be compatible joining the 27 other western states.

Unmistakably, Ukraine has not been stagnate and has been promising and reporting repeatedly on progress.  Unfortunately the important infrastructure improvements made in preparation for the Euro soccer tournament in Ukraine this summer did not fulfill the anticipated aspirations.  Expecting to receive acceptance, Ukraine did not get closer to negotiations.  However, the ruling party, the Party of Regions, acknowledged the impact of the physical changes with a slogan “Championships pass – Achievements remain.”  Despite these improvements to roads, airports, and new stadiums, the ratings for democracy have digressed.  The shadow of corruption, accusations of unfair elections, and an increase of human rights’ violations have been ever present.  Repeatedly Ukraine is criticized for the lack of transparency, inaccuracy of reports, and control of public funds.  Even with elections looming it is clear that the priorities for “European” progress are not succeeding.

Ukraine has fallen guilty of talking the talk but not walking the walk.

Almost three months ago Yanukovich addressed the need for a new social policy in Ukraine while speaking to the members of Ukrainian parliament, the Verkhovna Rada.  Remarking that this development would be “impossible without the introduction of European standards in legislation on the social sphere”, he promised to move forward and resolve conflicts within society.  But this and other ambiguous speeches have become a classic formula for many articles that simply extol European values and the aspiration of many Ukrainians to embrace a more democratic method.  Within the same month as Yanukovish’s plea to parliament, a human rights monitoring group, Freedom-house, published in its report that Ukraine has had a “persistent decline in democratic principles and human rights” and downgraded the status of Ukraine from ‘Free’ to ‘Partly Free’ as of this year.

The EU has made it clear that Ukraine will not be accepted until it moves closer to democracy, not farther.  Therefore, if there is really “no chance”, as Mr. Stinnes remarked recently, for Ukrainian integration into the European Union why is there an almost daily discussion among the media about the potential progress and negotiations to move westward?

In Ukraine, unfortunately, the real issues are ignored and change is avoided; instead hollow and insincere articles are constantly published to distract from the impasse of maturation.  There is a dearth of movement or plans to assimilate.  If European Union integration is consistently mentioned it is assumed that it is a priority.  But little is done to convince people to get on board and be willing to make sacrifices to enable Ukrainian integration.  A more democratic, transparent, and humane Ukraine could be achieved without attachments and dependence to the EU if society and government sincerely desired to end corruption and inequality.  This desire should start internally and be a unifying movement in society.


Stinnes, Manfred.  “The European Union: Fourth Year of a Crisis, or Birth Pangs of a New Historical Period?”  University of Kansas, Public Lecture.  Lawrence, KS. 13 Sep. 2012.

Державні витрати в Україні закриті для зовнішнього контролюСвітовий банк
(Government spending in Ukraine closed to external control – World bank) 

Президент виключив євроінтеграцію України за рахунок обмеження суверенітету
(President ruled out Euro-integration of Ukraine on grounds of  limitations of sovereignty)

 “Komorowski: Euro is Ukraine's step closer to EU”

“German MEP opposes visa liberalisation with Ukraine”

“German MEP opposes visa liberalisation with Ukraine”

“Yanukovych: Political speculation on language, culture, history, religion hamper national consolidation”

“New Report: Democratic Decline Persists in Ukraine”

Protectionism in Russia: The good the bad and the ugly

                Russia’s accession to the WTO will effectively be the final step to its introduction into the world markets. The reduction of tariffs and elimination of government subsidies will result in the extinction of certain sectors of Russia’s economy but the country will see an overall growth in its economy. In this post, I will use Ricardo’s law of comparative advantage to demonstrate why free trade is beneficial. Next, I will explain why many Russians are reasonably weary of the accession as well as the safeguards set in place to prove a smooth transition into free trade. I will conclude with an explanation of why protectionism and nationalization of economies is detrimental.
                It is fundamentally more efficient for a country to focus on its most productive industries. For example, it takes Russia the equivalent of 10 hours of labor to produce a steel beam and 15 hours to produce a car. Conversely, it takes Germany 15 hours to produce a steel beam and 10 hours to produce a vehicle. In this hypothetical Russia has a comparative advantage in steel production and Germany has the advantage in automotive manufacturing. Free trade and specialization will result in a net increase in the welfare of both nations. The gain occurs because free trade allows both nations to specialize a good and this will increase opportunities for consumption. Free trade allows a nation to consume and produce more than they would under autarky. The World Bank predicts that because of WTO accession Russia’s economy will grow at a rate of 11% annually in the long term and 3% in the medium term. This projected growth results from the improved quality and lower prices of services, which will lead to greater productivity and an increase in the competitiveness of Russian firms. The tariff reduction will also result in lower prices of goods for consumers. Another important factor for growth is improved market access for Russian exporters. Particularly for Russian firms producing steel, non-precious metals and chemical products.
                The principle argument against Russia’s WTO accession is that sectors such as machine building, light industries and agriculture will not be able to compete with foreign producers and will not have the protection of tariffs to uphold such industries. This will result in massive lay-offs in the manufacturing industries. Of particular concern is the automotive industry. Russia’s current tariffs on automobiles are at a staggering rate of 50%. Once these protections are removed manufactures such as AutoVAZ, GAZ and KAMAZ will not be able to compete. These are historically important industries in both America and Russia. Furthermore, it may become a defense risk since the infrastructure necessary to construct machines will deteriorate. These are valid concerns but a gradual reduction of tariffs provides a transition period. This will allow Russia time to specialize in certain vehicles and use foreign expertise to revitalize the industry. Renault and Daimler have already pledged to bring it’s know how to Russia. This will potentially transform the automotive sector into a world player by utilizing advanced technologies.
                The main reason that protectionism does not work is that government interference in economic matters is never the most efficient solution and often results in stagnation and corruption. There are two reasons for protecting an industry. First, to revitalize ailing domestic industries by giving it time to compete efficiently and adopt more efficient production processes.  This is also good for the gradual contraction of the ailing industry. Yet these industries do not need revitalization but rather need orderly termination. The consequence of such protection is complacency and inefficiency. Politicians are not good at picking winners; rather the market should determine the faith of such industries. Another reason for protection is to give an infant sector time to speed up in order to be competitive. Similar problems stem from such policies. Again, politicians are not in a position to pick which industries will succeed and because of political entanglements, such protections have a habit of becoming permanent. They being to depend on such protection and consequently corruption and interest groups will make it difficult to dispose of governmental support.  
                Russia’s accession to the WTO will create a more efficient and profitable economy. While some industries and individuals will suffer it is necessary that they adapt to the present situation. Those industries that can adapt and specialize will become profitable and thrive, while uncompetitive sectors will die out.  Russians should adopt an entrepreneurial outlook and realize the clear benefits of free trade. History and economics make it evident that government interference in the economy leads to inefficient results.  
International Trade Law: Interdisciplinary Theory and Practice, 3rd edition. Raj Bahala