An upbeat analysis

Here's an optimistic analysis I would pretty much agree with--Viktor Gets His Groove Back. (Subscription req'd.--the pdf is available here. )

Automated comment idiocies

We have been hit pretty hard by automated comments around here. Some of them are pretty idiotic.

"Nice post! I address the same thing at my blog!" There follows a link to a site called Business Lawyer. I guess they got the lawyer right but missed pretty much everything else.

Or the one from an adult site asking for tips on blogging--finger to mouth and demure look, no doubt--that then says, "I have bookmarked you!" It just sends chills up my spine thinking about it.

Give me a break.

Busy, busy, busy

I have been very busy over the past week and have not had time to post much here. The good news though is that there has not been much to post about. But there is some.

The government finally seems to be talking with a single voice for one. There has been none of the old back and forth in the press between ministers and the president that I have heard like there used to be. That is a good thing.

And the Kryvorizstahl mill sale went off without a hitch. Some analysts seem to be saying that the sale is a victory for Yuschenko that should help him in the elections this spring. I don't know how a sale of the steel mill will increase his attractiveness to the people in the face of what has gone on, but it can be one piece to be added to other pieces--like economic and political stability, two others-- that might all add up to victory then. Steady, consistent effort to get things done might just pay off. And it would be new.

So I don't know how much of a victory the sale represents. But what it does do is to begin to demonstrate seriousness on the part of the government in making the climate here more investment friendly. This sale goes a long way towards making that case. And that is a good thing.

I will say it again: It is much better to have the power to make things happen than to sit around waiting for something to go wrong in order to make political hay out of it.

In other news, Yuschenko's Our Ukraine is forming a youth organization. Tymoshenko is following suit. "I'll see your youth organization and raise you, what?" Nothing. Yuschenko signs an agreement with Yanukovych which he says recognizes the east as having legitimate interests in the government, an east that is pro Russia, and Tymoshenko responds by visiting Putin in Russia and bringing back a glowing report on Putin as president. She seems to be on the back end of the wave.

More of the same, but different--Russia

This doesn't look good--UNIAN-News from Ukraine.

Russia's Foreign Minister Sergei Lavrov said on Wednesday, Oct. 12, that the main diplomatic resources of Russia are natural gas, oil and electric power and promised to use “all of the means of economic pressure” on disloyal CIS neighbors. According to Nezavisimaya Gazeta (Independent Gazette) daily, Lavrov made these statements at a closed meeting of Federation Council, upper house of the Russian parliament, according to MosNews.

There was some talk a few months back about what the appropriate Russian response should be to the recent government dismissals in Ukraine. There were three possibilities. The first one was that Russia should go for the jugular while Ukraine is weak by upping the price of natural gas to world levels. That would create economic chaos and lead the fall of the government and disenchantment with the revolution. Russia would then sweep in and pick up the pieces.

Otheeh other end was the idea that Ukrainshoulddl be dealt with diplomatically just as other states deal with other states diplomatically. That requires thinking of Ukraine as an equal. For some Russians. especially those in the Kremlin, that seems impossible to do.

The tird apporach was somewhere in between these two.

The first would be devastating to the economy. The price paid by Ukraine right now for natural gas is less than a third the world price. It is partly due to the low cost of energy that Ukraine's export success has depended. Raising the price of natural gas would make a lot of export commodities like steel uncompetitive.

And it would raise the cost of living for Ukrainians as well. Right now the cost to heat an apartment is pretty low by American standards but the people here are living on a lot smaller incomes. They might be able to pay the price right now but if it were tripled or quadrupled, what would they do? It gets pretty cold here in the winter. And a lot of people use gas for cooking. Could they afford to if the price hit world levels? I doubt it. Heating a home and cooking might become unaffordable.

But does this statement by Lavrov mean the Russians intend to do it? They have been threatening this for a number of months, so the threat of it is nothing new. But that threat has always been in the context of price negotiations on the natural gas. Now that threat is coming from the Foreign Office. That might mean the Kremlin has settled on the policy. Looks like it's door number one.

Decline in the hinterlands

We spent a part of the previous weekend in the village at my in-law’s place. While there, my father-in-law informed me that they had had an investor interested in leasing land there and putting in a chicken farm. He would have used the cooperative buildings and equipment and depended on the cooperativistas land for his business needs. It all would have been leased and it would have been state of the art. What is perhaps more significant is that it would have employed close to 200 persons. That is an awful lot of people for a village that numbers not much more than that.

But I say “would have” because it isn’t going to happen. The cooperative that would have been “co-opted” for the purpose polled its members and a number of them came back with a “no.” They thought life was fine as it is, that they get about a metric ton of grain from the coop as it is and that having a chicken farm was not something that would add anything to their lives. And that was it as far as the investor goes. He is now off looking for some other place. And this little village languishes.

I was stunned when I heard it. It’s not a case of their entering the twentieth century; progress is good and all that. That is not why I was stunned. They do have a life. It’s not something we would consider to be a life, but it is a life to them and enjoyable to them. If it were simply a matter of progress, I wouldn’t have been so struck by it.

The problem is not progress, the problem is keeping the young people there in the village. I have written about this before but more and more of the young are leaving the villages to make their way in the larger cities. Some would see that as a good thing. But we are talking about their getting jobs that pay at the most $200 for what skills they bring and a lot will make less than that. And they are coming to the large cities to live where? With relatives? If they have them which is not certain. They end up having to find a room because renting an apartment is just out of the question. For two room apartments, and that means just two rooms--kitchen and bathroom excepted--the rent is over $250 a month in Kiev, last we looked. And it keeps going up in price. (Some think the price will be $300 by year’s end.) So goodbye to all their hard earned pay for the whole month to make their rental payment.

And don’t even think about buying a home, which here is an apartment. Mortgages can be found but they are not all that widespread and the interest rates are 17% with an inflation index to make sure the bank gets its money, all of its money, back with interest no matter the economic conditions of the country. There aren’t many who can afford that kind of thing, not coming from the village anyway. It is cheaper in some of the other cities and in some of the outlying areas of Kiev, but not enough to make a go of it at $200 a month or less.

That company was offering the same pay for people to work on the chicken farm in that village. $200 a month in that village and in any village in the Ukraine is a very good salary. (In Western Ukraine, it would be a very, very good salary.) They could afford a house there after not too many months of saving, though maybe not a new white brick home that the more affluent have built. And they would have their plot of land nearby for their vegetables and maybe some animals. Their electricity costs and gas costs would be only a few dollars a month. With all of those advantages, they would be putting quite a bit of money away, relatively speaking. So the young people who might be lured away to life in the city could stay there in the village.

That is my problem with the whole thing. It isn’t the older people that’s the issue at all. It is the younger ones. And the fact that they voted what was simply their own very narrow interests, not thinking about the fate of their own village, is beyond me. They will live to an old age, though some of them not so old because of the harshness of the life, and then die off. One by one the houses will be vacant and then there will be no village. Their children might, might, come back at times to visit the old homestead. But that is extremely doubtful-- they will be too busy trying to scratch out a life for themselves in the city to have much time for that.

Kyiv scams

Here's something to keep in mind for anyone visiting--Kyiv scams

I have been hit by numbers 3 and 4. I didn't know how some people in St. Petersburg could have gotten both my card number and PIN number. This article explained it.

Something to think about.

Yushchenko will not fight loss of own authority

This is probably the right thing to do--:: Yushchenko will not fight loss of own authority and deputy immunity :: Ukrayinska Pravda--especially for this reason:

"I gave my word that no destructive steps will be taken towards the constitutional initiatives in question. I do not want to challenge these amendments, because I do not want 47 million Ukrainians to think that Yushchenko is thinking about preserving his authority," assured the president.

I had thought earlier that it would be a good thing for him to repudiate the reforms because he was going to need all the power he could get. (I know, I know, that had the potential for making him a Ukrainian Putin and me a bit inconsistent. But if someone tells you one day to take an umbrella and on another not too, is it that his judgment is bad or does it have something to do with the weather?)

He might have been able to do it before, but clearly he can't do it now. And it might not be a bad idea anyway. Some reform is necessary and now might be as good a time as any. And to allow a president to take power to himself would not be moving in the right direction, even though it might be for good reasons and the person trustworthy.

Is there such a person really? Doesn't absolute power corrupt absolutely? Maybe not and yes it does but not in every single case. There are a few notable exceptions, George Washington for one. (Wasn't it Napoleon who said, "They expected me to be another Washington"?) But my argument was that the risk of ending up with the kind of system they had here was outweighed by the potential benefits that could come from effective and quick reforms. In other words, to risk that Yuschenko became another Kuchma was not much of a risk in the face of what could be gained if he did what he said he would do.

So I think he is right and I think he is doing the right thing. The "probably" is a nod to what I thought might be the good thing to do. Not realistic now even if it were the thing to have done.

It's the economy stupid

At least it should be here. Yuschenko is saying the right things about it--Yushchenko Makes Plea for Growth

Ukrainian President Viktor Yushchenko urged his new government on Wednesday to create favorable conditions for business to kick-start slumping growth and bring
back reluctant foreign investors.

Chairing a meeting of the team assembled after last month's dismissal of former Orange Revolution ally Yulia Tymoshenko, he told ministers to concentrate on the economy and steer clear of politics ahead of March's parliamentary election.

"If we want to provide proper European wages and pensions we have to ensure economic growth," Yushchenko told the session.

"To ensure economic growth we must mobilize financial resources in the form of investment. And to mobilize them we need to have clear procedures for Ukrainian business."

Yushchenko said the ousted government, riven by months of infighting, had done little to improve the business climate. "Two-thirds of the measures which impeded business were in fact government orders," he said.

Some themes II

2. The dismissal of the government was a crisis. This was the tack of some articles. Others framed it in terms of ultimate doom and catastrophe. In none of the articles I read, until I got to the analyses for investors, was anything good said about it.

But the government dismissal was not a crisis; it resolved a crisis. The crisis was actually the previous 8 months or so of the government. Lots of ministers saying lots of things and all seemed to be pulling in different directions.

There were any number of problems but the one that seemed to hang around the most was the re-privatization issue. I had thought after the election that it was not politically possible for Yuschenko to avoid re-privatizing some of the enterprises sold off during the Kuchma era. It had been a centerpiece of his campaign and it also represented a reassertion of some justice after what had gone on in the previous administration and for many years in the past. But the figure out of the gate was 3,000. There was no way that was going to fly with investors and business. No one wants to put money into something where the title is suspect right off the bat. And, in the context of this area of the world, showing that the government had both the power and the will—the means, motive and opportunity--to re-privatize is not going to reassure anyone that title to anything will ever be more than suspect. If they do it once, they can do it again if the will is there. And with the kind of populism that was a part of Tymoshenko’s government, the will to do so would always hang around in the background ready to hand if needed or wanted. At least that would be the feeling.

No, the crisis was the previous government. The new government has created the sense of much more stability. They all seem to be talking with a single voice right now. And that has made financial analysts less wary.

3. Tymoshenko is the winner in all of this. The polls seem to say that. Her party seems to have 20% of the electorate while Yuschenko is currently at about 14%. This is significant and if the election were held today, she would be forming the new government.

But the election is not being held today. It will be held in March, 6 months away. Those 6 months are an eternity in democracies. Lots of things can happen in the meantime that can change those poll numbers. And the point is, a point lost on a number of people, that Yuschenko is in power and has the power to make the kinds of changes that can affect those poll numbers. Tymoshenko, on the other hand, has no power to affect anything. She can call a press conference and talk about it all, but the power is with Yuschenko and his government and that can make all the difference. Of course he actually has to do something positive but to be able to do something is better than waiting around for something to bad to happen to capitalize on it.

Isn’t it possible that Tymoshenko realized this and that is the reason for the offer to Yuschenko on the new government?

The funny thing is that some of her appeal came from the fact that she was seen as sticking it to the Russians. But now that she has made her way north and found some kind of an accomdation with Putin and with Russia, what will that do to her appeal? After this, will the activists still see her in the same light? Yuschenko may have become more pragmatic but she seems to have followed suit. What will the OR purists have to say about that?

To be continued…