Larry Summers, not my favorite public persona but a savvy economist to be sure, offers sage advice on aid for Ukraine. But he fails to consider how we are likely to measure up to his “lessons for the design of support programs,” so here are my guesstimates (the proposals in bold are his, the rest is mine):
1. Immediate impact is essential. While Congress has acted quickly to approve $1 billion in loan guarantees and the European Union has in principle approved $15 billion, the International Monetary Fund has not yet acted. Odds are it will take time, not only for the IMF to extract reform promises from Ukraine but also for the bureaucratic arrangements to be made by the EU and US. And the total amount is likely to fall far short of the $35 billion Ukraine says it needs.
2. Avoid “Potemkin money.” I wonder if loan guarantees fall in the category of Potemkin money, as I imagine it is difficult to know how much new money they make available. Perhaps a reader or two who are expert can enlighten me. EU money is rarely quick in my experience. IMF money is real but takes time to get approved. Months rather than weeks before they write a check. Potemkin-like in the meanwhile.
3. Be realistic about debts. Summers wants us to consider rescheduling or restructuring, which is something often done after a revolution (but never quick–it often takes years). Relief from official and private sector debt is often in the 35-60% range. Uniquely Iraq got 80% off its official debt at the Paris Club. Post-Communist Poland got 40% off. But of course much of Ukraine’s debt is owed to Russia, which is unlikely to be cooperative in any effort to reduce, reschedule or restructure. The usual consensus is not likely to be available, unless we strike a deal with Moscow that is likely to be inimical to Ukraine’s interest in Crimea.
4. Honest management is as important as prudent policy. We don’t want the Ukrainians stealing the money we send them, and we should want to recover as much as possible from past abuse. Lots of luck on the latter. Yanukovich and his cronies will have squirreled away a lot of money in difficult to trace places. Some of Ukraine’s wealthy tycoons are prominent supporters of the post-Yanukovich regime. It will not be easy to prevent problems in the future either, as Ukraine clearly lacks the mechanisms required for serious transparency and accountability. Sure we should insist, but it will take legislation and courage to put them in place. Recovery of ill-gotten gains takes years, as does establishment of institutions designed to prevent theft.
5. Countries need to pursue broad polices in a way that benefits Ukraine. There is a pretty good chance the Obama administration will do the right things on the IMF and on energy policy by building the Keystone pipeline and approving natural gas exports. Europe is also likely to do at least some of the right things: continue to pay for the gas it receives through Ukraine, so long as the Russians continue to send it, and help Ukraine develop alternative energy sources for its own use, reducing its dependency on Russia.
The big problems are with immediacy and impact. Ukraine needs a lot of money quickly, much faster than it will get honest management or debt reduction. Washington and Brussels look likely to have won the tug of war for Kiev and any other parts of Ukraine that remain attached to it. They need to do everything they can to avoid financial implosion of their prize.
The Council on Foreign Relations’ Charlie Kupchan, author of How Enemies Become Friends: The Sources of Stable Peace, and American Enterprise Institute’s Michael Rubin, author of Dancing with the Devil: The Perils of Engaging Rogue Regimes, crossed swords the week before last in a good discussion of costs and benefits of engagement. The result was more light than heat, so if you want to hear the whole event here it is:
If you prefer to save 88 minutes, I’ll try to summarize. Read more…
After less than two years, Serbia is about to hold new parliamentary elections March 16. Even though the voting is just a week away, most people show little interest in the campaign, but turnout is still expected to be relatively high. The upcoming election is unique in that it is not about who will win, as the winner is already known. It is the Serbian Progressive Party (SNS) of Aleksandar Vučić, the incumbent first deputy prime minister.
The election race is rather for Vučić’s junior coalition partner in the government. It won’t necessarily be the winner of the second place. It can be any party that will manage to meet the threshold (5% of all voters who participate in voting, including invalid ballots) and thus enter the parliament.
Prime Minister Dačić’s Socialist Party of Serbia (SPS) is currently the second in terms of popular support according to most relevant opinion polls. The former ruling Democratic Party (DS), now led by former Belgrade Mayor Đilas, and former President Tadić’s new party are struggling for the third place. The contest seems to be extremely tight (in some polls Tadić has a little more votes, in others Đilas). And in addition to Dačić, Tadić and Đilas’ parties, it is only the Liberal-democratic Party and Vojislav Koštunica’s nationalist Democratic Party of Serbia that are expected to win some seats in parliament, though barely exceeding the threshold.
According to opinion polls, Vučić’s popularity is so high that his party might even win an absolute majority, so he might not need a partner at all. Unless Vučić intends to change the constitution, which will require approval by two thirds of MPs.
While there is no doubt as to who will lead the government, everything else is uncertain.The campaign is full of populist messages and unrealistic promises. Interestingly, Kosovo and other “big national topics” have been rarely mentioned, except by minor nationalist and Russophile parties. The focus is almost entirely on the economy. All candidates agree on the need for deep structural reform, but differ on the type of measures and methodology of implementation. Some, including Vučić, are proposing a shift toward a more liberal, market-oriented model. Others, like Prime minister Dačić, are calling for even more state intervention.
Top priorities for whoever is in power after the elections will be rationalization and reorganization of an oversized public sector and creation of a more attractive environment for direct long-term investment. The outgoing government has taken some steps in that direction, but that’s a small part of what has to be done if Serbia is to avoid financial collapse.
Vučić’s frequently repeated insistence that he will not give up on sweeping economic reforms, however painful they are, has not degraded his popularity thus far. The secret of Vučić’s success lies in his bold action against high-level corruption and organized crime. Delivering on his promises, Vučić has revived at least a portion of people’s lost hope. That’s an encouraging sign.
The problem is, however, that people tend to support changes only so long as their personal lives remain unaffected. The main challenge to the next government will be how to mitigate social consequences of reforms, especially in the early stages of implementation. This will require extraordinary effort, but it is the price that has to be paid for lack of courage and decisiveness on the part of previous administrations.
And what about the opposition? Once powerful, the DS is in steep decline and a deep crisis of identity after suffering defeat in the 2012 elections. It is no longer even the second strongest political force, pushed out of that position by Dačić’s SPS. The latest in a series of blows came when former Serbian president and DS leader Boris Tadić left the party and formed his own following a period of heavy infighting with his successor at the party’s helm, Dragan Đilas. Both DS and Tadić’s new party should be happy if each of them gets between 5 and 10 percent of votes.
DS is desperate to attract parts of the electorate that are bitterly opposed to Aleksandar Vučić. High party official Borko Stefanović recently went so far as to warn that Vučić’s victory is likely to lead to the “Ukrainian scenario” in Serbia, but his statement immediately backfired on his party’s rating. The strategy of DS in the campaign basically boils down to claiming they are the only party that is not going to form a post-election coalition with Vučić’s “Progressives.” Unfortunately for DS, Vučić obviously has no intention of calling them into a coalition, either.
Meanwhile, the Democrats and other critics of Vučić have been accusing him of establishing a “soft dictatorship.” Their fear is that Vučić’s nearly unprecedented popular support, coupled with too much power in his hands, could seriously undermine the already fragile democracy Serbia has achieved. But there is little difference between Vučić and most of his predecessors when it comes to authoritarian tendencies. Not to mention that the reforms awaiting the next government will require a firm hand on the tiller.
After all, it is not bad for a country to have a highly popular mainstream politician at a time when many countries, including a number of developed Western democracies, are experiencing a crisis of representation and democratic legitimacy, with extremist parties and fringe movements gaining ground. But that’s another story.
Vis-a-vis European integration, Belgrade will look to trade any progress in normalization of relations with Kosovo for concessions from Brussels on various chapters of accession talks. Such an approach carries a clear risk. If Brussels demonstrates too much leniency, Serbia could be allowed to proceed without satisfying all the criteria, particularly in areas such as human rights, media freedoms and the rule of law. They will demand a lot of attention in the years ahead.
1. Ukraine on the Brink: A Conversation With Yevgeny Kiselyev
Monday, March 10 | 2:15pm – 4pm
Carnegie Endowment, 1779 Massachusetts Ave NW
The situation in Ukraine remains extremely tense. Each day brings dramatic developments from the region and a marked deterioration in Russia’s relations with the United States and other Western governments.
Renowned television journalist and political analyst Yevgeny Kiselyev will discuss the ongoing crisis in Ukraine. Kiselyev has been a preeminent voice in Russian and Ukrainian media and political circles for more than two decades. Carnegie’s Andrew S. Weiss will moderate the discussion. Read more…
Pristina-based Zeri has kindly given me permission to publish in English this interview with Kosovo Deputy Foreign Minister Petrit Selimi:
Zeri: At the last Hearing of the US Helsinki Commission, Congressman Eliot Engel stated Kosovo to be the most pro-Western and pro-American. He also added that Kosovo was left unfairly isolated in the Balkans. How do you assess the continued support of US officials to Kosovo ?
Petrit Selimi: The US has remained the main pillar of support for Kosovo’s Euro-Atlantic integration. The US vision for Kosovo for several decades has been stable and unchanging. Independent, civic , secular, enjoying friendly relations with neighbors – including Serbia – a member of EU and NATO, a country with a small but dynamic economy, based on full human rights for all. Read more…
Wednesday the Aspen Institute Levant Program discussed policies for the growing Syrian refugee crisis. The second group of panelists consisted of Assistant Secretary Anne Richard, Assistant Secretary of State for the Bureau of Population, Refugees and Migration (US Department of State); François Stamm, Deputy Head of the North America Delegation, International Committee of the Red Cross and Oubai Shahbandar, Senior Consultant to the Syrian Coalition. Toni Verstandig, Chair of the Middle East Programs at the Aspen Institute, moderated.
Anne Richard‘s primary concern is the 3.3 million Syrians in hard-to-reach areas of the country. The international community has the potential to help immensely, but does not have access to those most in need. The good news is that the US has been a leading donor in response to the Syrian crisis. It has donated $1.7 billion in humanitarian aid to the UNHCR and the Red Cross. Read more…