Wu Wei

Blogroll Georgia

I'm in the process of redoing my blogroll. It's been a long time since I updated it and it seems to be several countries behind. I tend to read blogs as feeds in netvibes , with a separate tab for each country, plus one I read everyday. Although I searched for some easy way to transfer the links to display (without the feed), or some widget to do it, I couldn't find one. Anyway here is my Blogroll for Georgia. Eventually there will be a link in the sidebar.

Hubris or other worldliness?

Today's Economist (that's today in Tbilisi, I suppose for everyone else it's last week's) has an advert from the Church of England offering a six figure salary to a new Director of Investments.

The Church Commissioners say "investment performance has been very strong and the Director of Investments is a new role".

Well, they must be the only ones with a strong investment performance at the moment.   I wonder why they need to pay a six figure salary, when there must be plenty of people wanting this job. 

And how did they do so well before?   Perhaps they have a hot line not available to the rest of us.  If not and they really have a strong performance, they should stick to what they did before and not risk hiring someone responsible for the current mess that the rest of us have been landed in.

Economics and its discontents?

Seen on a website today for a firm doing research and consultancy in economics:

If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!
(J.M. Keynes, Economic Possibilities for our Grandchildren, 1930)

Now why would anyone want to choose dentists for comparison? They are only known for the fear and pain they cause, not to mention being expensive.  Or was that part intentional? 

The Depression is repeating, but perhaps now it's the turn of bankers.

A good sales pitch from Ukraine

Kyivpost today recommends in its editorial:

Investing in Ukraine's gas pipeline is the best and cheapest option for Europe to secure Russian gas supplies

The January natural gas war between Ukraine and Russia was a badly needed wake-up call for European Union bureaucrats who have dragged their feet on energy diversification and who have long been wimpy with Russia.

The cutoff of natural gas supplies revealed how deeply dependent both Ukraine and Europe have become on a nation whose leaders are keen to use energy as a geopolitical tool of influence and blackmail. One of Russia's aims was to smear Ukraine, undermining its reputation in Europe as a functioning democracy and as a reliable transit route for Russian gas to Europe.

The Russians also hoped to build support for costly alternative pipeline projects bypassing Ukraine. But that's a tough sell.

Kremlin leaders are finding it hard to finance the $20 billion Nord Stream project across the Baltic Sea, and for good reason. It's a very expensive way to pump 30-55 billion cubic meters of gas.

Another Kremlin favorite is the $20 billion South Stream, which would go through the Black Sea into Bulgaria, also an expensive way to move 30 billion cubic meters of gas.

A third option to bypass Ukraine, touted mainly in the West, is the $13 billion Nabucco gas pipeline. But that's a stiff price tag to move 30 billion cubic meters.

But the better and cheaper option would be to invest up to $3 billion or so in strengthening Ukraine's pipeline system, which already pumps a whopping 120 billion cubic meters of gas each year. The nation's network could pump more, and do so more efficiently, with needed upgrades.

While Russian bad behavior has shown that Europe and everyone else should explore other energy options, Europeans should also back a consortium that would invest into Ukraine's state-owned pipeline. Ukrainian leaders should embrace this option as well. It would bolter the nation's free-market credentials and its economic importance. Europeans would then be deeply involved in the gas issue all the way to the Russian border. Ukraine's gas pipeline might also be a key to opening the door to future membership in the European Union.
In the next five to seven years, Ukraine's vast pipelines will remain dominant, yet vulnerable. Still, the existing network remains the best and cheapest way to pump Russian gas to Europe.

I can't vouch for the numbers, but the argument seems clear.  Though it's only a newspaper that is talking, not the government. 

But on what terms will this be offered? Will the EU (or the corporation it says it will set up for pipelines) enter into  a bidding war with Gazprom for use (and modernisation) of the Ukrainian network, or will it be outright privatisation? If so, given the current legislation in Ukraine preventing the gas transmission system's  privatisation or use through concessions (or other ways) we can predict some tough battles ahead, on the usual lines in the government.

And a bidding war under the current financial crisis will be interesting.  Does anyone have any money to bid?  And can Russia afford to lose?

Still Ukraine stands to gain if it can get the network modernised free and still retain ownership.  We live in interesting times. 

   

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The EU Neighbour "Reality" Problem (with afterthought)

Much has been written  about the "Eastern European Mentality" and its problems.  As I made clear  here, it's not a phrase I like, and mentality problems exist elsewhere as well.  It's a rather dated phrase now, since 2004 when the new Member States joined the EU.

Nevertheless I noticed that a new phrase is creeping into discussions in countries now designated as the European Neighbourhood, a phrase trying hard to compete with Russia's "the Near Abroad", though it extends rather further.

This lunchtime I had an interesting discussion with a colleague working in the Ministry of Finance in Georgia.  Since in my project I have nothing to do with ministries (the first time in 15 years) I was interested to see how Georgia compares.  Badly, they said, "all this talk about how measures which are absolutely standard in the EU will not work at all in the "Georgian reality"".  And no progress in concrete work to join the EU.  Just like Ukraine, I said, in 1994-7 and I found no better in 2007. 

Just what is this "reality".  First of all, it is not an objective analysis of the country, its problems and  what needs to change.  If it were, discussions on how to implement EU measures could continue.  After all, EU Directives are implemented in 27 different ways, so at least one of them should be suitable for Ukraine and maybe another for Georgia.  There are plenty to choose from, after all, and all the new Member States managed to find one suitable to their reality.

What it is, is a set of values and perceptions about "reality" in the country.  These values and perceptions are deemed to be shared by everyone, (or at least those without any political power) and the belief exists that these values and perceptions keep everyone in a straightjacket, making change impossible and thus avoiding any personal responsibility for change.

Secondly, it assumes that foreigners must "adapt to the Ukrainian (or Georgian) reality". In practice, this means they should recognise that nothing in Ukraine or Georgia can change, or at the very least, the EU must change itself to recognise what little can be done.  At this point (especially after working for 15 years on this sort of thing) one tends to ask "hello, who was it wanted to join the EU?  This is what you have to do, this is what everyone else has done, now get on with it. You don't want to join the EU after all?  It's your choice."

The EU does not always send this message clearly enough.  I speak from experience in working on oil stocks in Ukraine, where the Ukrainian "reality" apparently required to set up an agency for oil stocks first,  then worry about what it would do later (legislation, finance, ownership of the stocks even, don't they come in somewhere first? No, that's too difficult, let's just pretend it is in place and do it later, when people understand that). 

So it was interesting to see the phrase appearing in an excellent article entitled "Where East Meets West: European Gas and Ukrainian Reality" by Edward Chow and Jonathan Elkind, published by the Center for Strategic and International Studies in the The Washington Quarterly, hat tip to the EU Energy Policy Blog, a new blog for me. 

In this article, you can find what seems to me, a fair description of the Ukrainian reality, without any quotation marks, and what needs to be done in the energy sector.  It needed to be done 15 years ago, not much has changed.  And EU entry has got more complex and more demanding in the meantime.  There is no way it will get simplified to meet the Ukrainian or the Georgian "realities". 

More discussion in the next post.

Afterthought:

There must be countries where officials are so fed up with the current mess, that they could just say "we really want to join the EU, now tell us what to do and help us do it".  But this approach always founders when it comes to confronting the quite difficult decisions about change management at the political level.  Change management isn't something that ex-communist countries had any experience of, in the past.  And change is painful and difficult at the time, witness the Thatcher years in the UK. Change can't start till it's agreed there are problems and they must be solved not hidden.  That consensus doesn't seem to have evolved yet in some countries, more's the pity.

Failure of gas to Europe due to "Act of God" according to Gazprom

It seems that Russia does not accept any responsibility for its failure to supply gas  to Europe.

Mr Makis Papageorgiou CEO  said that DEPA (the Greek Gas Company) had received a letter from Gazprom which described the current situation as an Act of God, which gave the impression that Russia was not intending to compensate the company for the gas shortages.  Calling it an Act of God enables Russia claim that it is necessary to deal with the problem under the provisions of "Force Majeure" in the contract, and which mean it is harder to extract penalties for failure to deliver.  Force Majeure includes floods and other natural disasters as Acts of God but also covers outbreaks of war, riots etc. 

Of course it might be dangerous to identify this as an outbreak of war when it comes to legal niceties (though both sides in the dispute are happy to use this term as far as publicity is concerned).  Hence the resort to calling on God for someone to blame.

Despite the fact the Greeks and Russians share an Orthodox God, they also share a belief in capitalism, as shown by DEPA's  intention,  to sue in line with their contract with Gazprom.  It seems according to the contract, the Russian company should pay for its failure to supply the required volumes of natural gas, adding that DEPA could take legal action once supplies resume. He said that the compensation could amount to some EUR 1 billion.

And that's only Greece.  A few other countries might be queuing up to sue..... once the gas is flowing again. 

Information from Energy Tribune here

Is anyone keeping a list of the European countries who are seeking compensation from Gazprom? Current liabilities should be a large item in the accounts, if they are ever published.

Crisis time in Lithuania

The airline flyLAL has gone bankrupt and there are riots outside the Parliament, with tear gas, eggs and molotov cocktails.  Not big enough riots to make the international press though it seems.  You can see a report here.

Luckily Kubilius is not Saako

German/Russian Consortium in charge of Ukraine's gas transmission system?

Why would anyone buy that idea, with Gazprom involved, especially with them holding a majority stake? How would German part involvement help? They are hardly those most affected.

Putin seems to be pushing this idea quite hard, (www.premier.gov.ru, January 8; Interfax, January 7, 8, 11; German ARD TV, January 11; Nezavisimaya Gazeta, January 13) but what do Europeans gain?  It's not Ukraine that is unreliable, but Russia and its political manipulation of Gazprom in a commercial dispute.

In fact the only reliable thing about Gazprom and Russia at the moment is their ability to predict a cold winter and engineer a gas dispute with Ukraine to coincide.

The answer may be to change the operation (but not necessarily the ownership) of Ukraine's gas transmission system, to make it more transparent and subject to European gas legislation, but that would only happen without the involvement of Gazprom.

Humanitarian gas deliveries from Russia?

Jonathan Stern has proposed the resumption of Russian gas deliveries to Central and Eastern European countries on humanitarian grounds.  You can find his proposal here.

He also makes it clear what the technical problems are at the moment.  The Ukrainians have to have gas to repressurise the network and the fuel to run the compressor stations.  Gazprom is unwilling to release this gas without immediate payment and without assurances that it will not be used for Ukrainian consumers.  Clearly this is where Putin thinks that Ukraine is "stealing" gas.  In fact, Gazprom pays a transit fee so that the gas gets moved on its way to Europe. 

You would think that proper agreements for operating the network would be included in the transit fee (which is not just a cash payment for opening the taps), and thus not a subject of the current dispute.  Yet more arguments for transparent and regulated agreements for gas in Ukrainian.

Recently I was offered a job in the Ukrainian energy regulator working on advising about gas tariffs.  Would have been interesting, but in the current climate of weak government, constant gas disputes with Russia and non-transparent energy sector, it seemed like a task for Sisyphus.

Gazprom continues to shoot itself in the foot:

Ukraine imports in 2008                              48bcm (billion cubic meters)
Ukraine paid in 2008                                  $8.6 billion
Increase in gas price demanded by Gazprom  $3.4 billion
Ukraine offers                                            from $1 billion to $2.7 billion more

EU imports                                                130 bcm
EU pays                                                    $60 billion

Gazprom's loss in 9 days non-supply             $1.1billion

Figures from Wall Street Journal here.

How can anyone pretend this is a commercial dispute?  They would have settled long ago if that were the case.
 

Georgia in Vilnius (now with update)

Technorati tags: Lithuania, Georgia, Pirosmani, lavash, Big Mac, MacDonalds

European Capital of Culture 2009 in Vilnius started with a bang, even though not as planned. Austerity measures planned by the government proposed to cut the budget for the activities. Then artists complained too much money was going up in smoke with the New Year fireworks, which could have been spent on art (meaning them, the artists).  I missed the fireworks so I can't say. 

However, I did catch the excellent exhibition of 30 pictures by Pirosmani, the famous  Georgian painter.  Most I had seen before, either in Tbilisi or in Washington once, or in the film of his life.

True, they are paintings in the naive style (before it was "discovered") but they are full of life, especially the animals.  It was good to see places I recognised like the painting of Batumi.  And of course they are very evocative of Georgian life, though the ladies are generally thinner now.

The exhibition is on till May at the  Vilnius Picture Gallery-Lithuanian Art Museum which has a slideshow of the Pirosmani paintings.  I particularly like the painting of the bear by moonlight, even if it looks more like a fox: it is naive painting after all.

As if to celebrate this, we have just discovered Pas Ramazi, a new (to us) Georgian restaurant in Vilnius, but haven't yet tried it. Here's a review (in Lithuanian but with pictures). 

And God knows what fantasies the Lithuanians have about the women of the Caucasus with this McDonalds poster of a "Big Lavash".  I've never seen any woman with a veil, though perhaps there are some in Azerbaijan.