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February 2012 Country Archive

PUBLISHERS OVERVIEW FEBRUARY '12
 

This issue surveys February updated country reports on Syria Iraq, Libya, Afghanistan, Pakistan, Bangladesh, Egypt, Iran, Turkey, Russia, Belarus, India, Kazakhstan, Saudi Arabia, Morocco, Taiwan, Ukraine, Tajikistan, Romania, Bulgaria, North Korea, Vietnam, Philippines, Bosnia.

THE GLOBAL MISERY OF BANKING FAILURES

The depths of economic misery which started with the banking failures, reflected in so many national reports below, will not quickly go away, but surely the main thing that those affected (nearly everyone) want to see, is that the lessons are learned – and that it won’t happen again.

Since nothing much seems to have changed – the news about annual squabbles as we witness the banks continue to pay their executives astronomic rewards, keep recurring. It is possible at this distance since the collapse took place – let’s date it from the 2008 terminal crisis at Lehman Brothers, which being a straightforward investment bank without main street depositors, was the only major financial institution not rescued by federal funds.

The US government saw no compelling reason to recapitalise a speculative investment bank, where there were no citizen depositors, just professional speculators…and they were right!

As all the dirty washing came out on display after that, with bank chairmen and chief executives taking luxurious early retirement. It became ever more clear that banking as now practiced, not only had failed, but since irresponsible greed was at its core, and memories are short, it would probably happen again.

Witnessing the effect of the recession which has resulted, it has surely become obvious that Banking is so crucial to the world economy and that as a sector it has failed so spectacularly, that it is too important to be in the hands of private stockholders.

The key to any nation’s defence lies in its military –and its alliances. No one so far has made a serious case to privatise the military, because that’s just unthinkable, at this time at least!

The part that defence plays in the life of any nation is unique, but these arguments apply also to banking, the foundation of any nation’s businesses and economy. There is no good reason after the recent and current experience, that licensed deposit receiving banks, should continue to be privately held.

In the UK broadly the bailing out of the industry took the form of equity, equivalent to the new investment of taxpayer’s money. So already the state controls sufficient shares that they probably can insist on any particular action. The intention, we are told is that the banks will refund that money some time ahead and become privately held once again.

But why?

This not a blast against investment, even when pursuing some kind of ‘can’t fail system,’ that long has been the dream of gamblers. We have long maintained that banks have no business to be in casino-type gambling, simply because they are not using their own money. Gambling is a legitimate form of business, but not when it’s using taxpayers-as-depositors leveraged deposits, for what the bankers call their ‘bets’.

If the distinction that the Glass Steagall act made to banking in the US up until the year 2000 were to continue, then there would be less of a problem. This act ensured that licensed deposit-taking banks – that’s High St retail banking, could not combine that with the business of an investment company, which properly belongs in the area of risk, and therefore of specialist investors. From 1933 in the US where the lesson was first learned, until this decade, it made it very difficult for a bank to combine deposit-taking with casino-type gambling – in itself a perfectly proper risk activity when using your own money or collateral. The US banks however campaigned for many years for Glass Steagal’s repeal, spending vast sums in what is euphemistically called ‘lobbying,’ and would surely do so again, if it were reintroduced.

In November 2000 when GW Bush had just been elected, in the dying days of the old administration before the new people had taken up the reins of government, President Clinton signed the repeal into law. So it was party-time for Wall St from then on, with the results that we are now living through. The bankers of last resort were always going to be to be the taxpayer, but the fundamental principle of being in business, any business, are to live with both ‘risk and reward’.

Where is the ‘reward’ for the taxpayer in the present circumstances?


This is not a cautionary note about gambling, or an attack on free enterprise, but gambling with the nest-eggs of the proverbial widows and orphans, is of course why governments are bankers of last resort. We want to see Banks choose whether they are going to hold deposits in retail banking, lending to their customers against collateral; or to be financial investment companies funded privately, or through the stock exchanges, the distinctions to be regulated. The separation must be made, soon after which the investment companies will operate as their shareholders wish, - which of course is where the stupefying annual bonuses are made.

High risk financial investment companies raise their money from the market, and have their good, bad, and indifferent, trading years. Like any other business concern they know that if they fail, like any other business, taxpayers will not bale them out.

******

Country Reports Overview
We start our country reports – numbering 24 in this issue, with this note:
Anybody can handle good news, but our readers necessarily are made of sterner stuff, so instead of as previously, grouping reports in geographical sections, in this Overview we look at the most ‘serious problem countries’ first, tapering off to something approaching normality, even towards the far end, thin optimism - if you can stay the course. Whatever else, singly or collectively, these reports show that the world in 2012 remains a dangerous place.


WOE, WOE – AND MORE WOE

First Iraq and now Syria: Disaster Looms!
Our first reports of 2012 tell a fearful story. We have been covering IRAQ monthly since the US invasion of 2003. Only weeks ago the remaining US troops moved out and in no time at all the country has become even more of a disaster. Our prediction is that this President will, on his present course, either succumb to revolution, or become the first new tyrant in the Arab world since the Arab Spring. That’s what Bush and the neocon’s war to bring democracy to the middle-east would have achieved - full circle, but with a lot of dead bodies!

Meanwhile our SYRIA report - the country is after all next door neighbour to IRAQ, tells what the mainstream media is not telling. That President Asad is on a recent poll (commissioned by an adversary, the ruler of Qatar), running with 55% approval from the poll. In fact the uprising is not as usually depicted, a downtrodden people yearning to be free, but of a large Sunni bloc of Moslem Brothers and their cohorts up against a undemocratic government formed of several minorities including Allawites, Christians, Druses, Kurds and more. As that poll suggests, the Sunni business class is not backing this insurrection, they are or were the prospering backbone of the economy. Just as the government is not democratic, neither is the Moslem Brotherhood who unquestionably seek vengeance from the Asad clan, as they have done for thirty years and more. Short of condoning massacres, change must come gradually and Asad has had sufficient of a shock that he will bring about change - if that can be done at all without blood and steel. The civil war route can be seen in LIBYA.

Our SYRIA report gives much more detail, but the reason we ask readers to read it in parallel with the IRAQ report, is that whilst no one has solutions for IRAQ (we argued, unsuccessfully, years ago that with its mix of Shia, Sunni, and Kurds, it should become a federated state). The SYRIA situation with just a bit more interference from outside could so quickly produce a second basket-case, (or perhaps a third, if liberated LIBYA goes on as it is doing), with a baying Sunni government replacing the non-religious government of Asad, this time linking the landmass from IRAQ and connecting the Persian Gulf to the Mediterranean shores of Syria, so right up to the borders of ISRAEL. Although Obama may understandably want out of a region where another administration put him, and where they never should have been in the first place, if this were to be the outcome, (look at a map), the US’s client Israel, is not going to like it at all. (Go to IRAQ) & (Go to SYRIA).


..and then there’s Libya, close to anarchy!
The problems here are extremely serious, three months after the downfall of the Qadafi clan, the central problem being that power is now in the hands of a multitude of armed militias operating outside any legal framework. These successful groups of fighters from around the country enjoy the power they have now got, and won’t surrender their weapons. They feel entitled to torture and abuse their thousands of prisoners exactly as Qadafi did, which then aroused the disgust of the outside world.

The weak authorities have urged them to join the new national army. Some have done, but many, who have never before tasted raw power, don’t want to give it up.

The group that captured Saif ul Islam Qadafi have kept him to themselves. The International Court who had issued a warrant for his arrest, had to accept that the revolutionaries insist on his trial being in Libya. It seems that no lawyer has been allowed to see him and no articles of indictment issued. Apart from being his Father’s son, it is unclear what the crimes are that he has to answer to? The chances of a fair trial are consequently slim.

In the worst days of his fathers rule Saif was the Go-To man that the west approached to mediate, and he did just that, quite often (as in the case of the Bulgarian contract nurses, and Palestinian doctor, whom the Colonel had long imprisoned, accusing them of deliberately spreading AIDS around the children of Libya - in reality due to deplorable hospital hygiene). If Saif is still alive and ever gets to go for trial, it will be educational to see if western powers will speak up on his behalf, or drop him as just too embarrassing. (Go to LIBYA)

….but there’s always Afghanistan....
As a further example of the current outcomes of western intervention, take a look at AFGHANISTAN. To end the war, negotiations or the lack of them, are exercising the minds of the main players. The US have set a withdrawal date of 2014, clearly that is when they expect to go, probably having already reduced their force inside the country. They now want to negotiate a scenario as to how their protégée Karzai will be left, although his term as president runs out then under the constitution. Karzai probably will be content to go –Mediterranean villas have previously proved attractive for former Afghan rulers, and of course he must by now be a multi-billionaire. But Karzai, or whoever else is to represent the leavings of western democracy, will obviously have to face up to the Taliban to whom the departure of the westerners will take that as meaning that their ‘war of liberation’ has been won. The Afghan army is supposed to be a player and may become so, but if the Taleban revert to their old ways the Northern Alliance will be reborn –which is where America first came in. Our report explains the Taliban thinking in so far as that is possible, but PAKISTAN is also a player and a very determined one. They would say that the west let them down after the Russian withdrawal in 1989 by ‘going home’, leaving Pakistan alone to deal with this well armed Islamic-inspired army of arabs and others, that formed al Qaida out of the mujahaddin on their territory. The Pakistan military’s position appears to be that they will find their own solutions in respect of today’s Taliban; they are certainly a third force in peace negotiations and always, ALWAYS are wary of INDIA. AS our contributor points out, the road to a negotiated settlement is a tortuous one. (Go to AFGHANISTAN)

....and Pakistan
As becomes apparent from our report, this a significant country where the politicians are almost all despised as venal, the President more than anyone. The government are despised by the military and the relationship of the elected government to its military cannot be described as control. The military that used to be the only efficient organisation in the country has lost a lot of public support. The opposition and alternative government are run by a Salafist politician, deeply beholden to his friends in Saudi Arabia. The economy is in ruins. The lawcourts are political players. They are of course a nuclear armed state. We point to BANGLADESH, formerly East Pakistan below, to illustrate the justifiable fears in the west about the custody of the Pakistani nuclear weapons.

One bright star is that of the former national cricket captain, international society figure and household name, Imran Khan, who entered politics with a new party, and is beginning to rally serious support. Cricket is close to religion for many Pakistanis- their national team has just comprehensively defeated England, and they can hold their own even against ‘the old enemy’ INDIA, where the game is also deeply embedded in the culture. It is hoped that Imran Khan can be successful enough to be a partner in a future government. (Go to PAKISTAN)

Bangladesh: Failed Islamic Coup
The army disclosed that they had arrested 16 serving officers, alleged to have held extreme Islamist religious views connected to the banned Hizbut-Tahrir. It is a sobering fact that there have been 19 coup attempts in the past and just one year ago, a bloody mutiny by the Bangladesh Rifles, who slaughtered many of their officers.

Bangladesh was formerly East Pakistan and both the military and the political parties have much in common with their former western half! This kind of Islamic presence in the military is what so terrifies the world’s nuclear planners, in case it could succeed in a coup in today’s nuclear-armed Pakistan. (Go to BANGLADESH).

Egypt
The situation here might be described as: ‘Game Set and Match to the Islamics,’ except that the military remain in a strong position and still could ‘ruin it all’. They have been warned however by Obama, that the large annual subvention paid by the US to the army will in future depend on whether Egypt does become a real democracy.

The Moslem Brotherhood are looking good with 47% of the seats in the lower house.

The Salafist ‘Nour’ party which combines three radical Islamic groups including Gamaa Islamiya (considered an terrorist organisation in the United States), secured 25% of the seats whilst the two secular parties, the Wafd, and the new ‘Liberal Egyptian Block’ each scored only about 9% , so Islamists of one stripe or another have an overwhelming majority. If they can square the military then they will be running the show.

This parliament will now vote for the 100 people who will write the new constitution.

Inevitably it will be strongly Islamist and the question now is to what extent will secular law still obtain, as opposed to that dispensed by Sharia courts; and to what extent will the media remain free? No doubt future historians will note that the revolution was carried out by the nation’s youth, particularly unemployed, well educated youngsters who took the casualties, (yet politically they have exchanged an army monopoly of power for Islamic politicians), whilst the Moslem Brotherhood kept off the streets, But it was the MB that were organised and had been organised for years, earning public goodwill by public good works. Now their day has come (Go to EGYPT).


Iran
One literally does not know on any night, if tomorrow we will wake up to learn that Israel has attacked IRAN. They might be irresponsible enough to do that just before an American election, where this would then become THE issue. It seems to have been generally assumed that the recent street assassination of a 32 year-old Iranian nuclear scientist, was down to the Israelis, not least because who else would do such a thing? Also the infamous ‘stuxnet’ cyber attack which damaged Iranian equipment has been assumed to have been Israeli, intended obviously to slow down Iran’s capacity to make a nuclear weapon. ‘At the end of the day,’ IRAN has several reasons to want a nuclear weapon, not least because they have seen neighbouring PAKISTAN and INDIA both became nuclear powers, despite the ‘West’s’ wishes, and NORTH KOREA has been safe from attack, no matter how outrageously provocative, ultimately because they have their own nuclear weapon. It is the one certain guarantee against invasion. But IRAN is an ancient and a large nation and as in the days of the Shah, they seek to be the regional superpower. Since Israel is already the regional military power with it’s own nuclear arsenal, even having a nuclear weapon could not give IRAN military superiority.

There is more here on the topic of the falling out of the elected (fraudulently, as many observers believe) government, with the true masters of the country - the unelected priests who answer only to each other - and presumably to God.

Turkey
This large middle-eastern nation has won its admirers with a robust position re its neighbours and the major powers. In particular it is proud to demonstrate what a soft Islamic government can do, being compared by many with the Christian Democrat parties in Europe. During the Arab Spring it has sought to impress on these emerging polities the need to keep their religion separate from their statecraft. However Turkey’s friends are more and more concerned that behind the rhetoric of Prime Minister Tayyip Erdogan, lies a harsh reality. The media here is certainly muzzled. There are 72 journalists currently in jail. That is not what democratic countries do!

There is a continuing counter-terrorism activity which has been used to great effect to defang the military, who had long behaved as though they were above the law.

But when this extends to an ancient former Chief of Staff, who is charged with ‘overseeing the funding of websites with the specific aim of discrediting the government’ when in other countries - the democratic ones, this is both a major sport and a part of the system. There is a long, long, civil war against the minority Kurds. Also Turkey has 128,000 prison inmates of whom 42% are on remand, so they have not been tried and have not been convicted – but they are still locked-up! There is more regrettably, that challenges Turkey’s democratic credentials. (Go to TURKEY).

Russia
Of course the presidential elections on 4h March have taken hold of the political element in Russian life. What has happened since Putin was last elected president, is that there are now a substantial number of citizens who loathe him. Just as the consensus used to be that he had restored Russian’s pride in themselves - and their nation, now he is blamed for what are seen as ‘third world tactics’ in Russia’s approach to the Duma elections, in early December. Russians, many of them at least, were appalled at the undisguised ballot-box stuffing by bus loads of organised youth from the United Russia party, visiting the polling stations and merrily stuffing the boxes with false votes.

This is a people who for half a century controlled about a third of the world’s population; who put the first man into space, and then the first space station; who had the largest nuclear armoury in the world. Whose eventful history includes some of the greatest names in literature, music and the arts. It was absolutely humiliating to them that their government should allow their elections to be so cynically and corruptly ‘managed,’ and so obviously manipulated, as though they were some barely emergent, central African ‘joke’ democracy. It has of course had repercussions throughout Russia, where people are not pleased at the terrible policing, continuing fraud and lack of reform in Russia’s politics. We describe some of the mass protests in Moscow and how the Putin - Medvedev nexus have responded to it. We also visit the situation in South Ossetia, the breakaway region of Georgia over which Moscow and Tibilisi fought a short war. Here too the political situation is fraught. Moldova also, formerly one of the USSR’s 15 constituent SSR’s, remains deeply unhappy at the Russian sponsorship of an artificial statelet, in a strip of land in their country called Transdneister, infamous for corrupt arms deals to third world countries. (Go to RUSSIA)

Belarus
One year after the heavily flawed presidential elections in December 2010, that saw authoritarian leader Alexander Lukashenko maintain his grip on power, Belarus is falling under harsher sanctions from the West, giving Russia the opportunity to extend its influence over European gas markets. Lukashenko won another term in a vote that was marred by fraud and criticised by international observers. The vote sparked large protests that police brutally dispersed - and seven of the nine presidential candidates were arrested alongside thousands of political activists.

On 19 December 2011 – the one year anniversary of a rally attended by 15,000 protesters that was violently crushed – around 100 people gathered in Independence Square in Minsk to leave photos of political prisoners and light candles, but the meeting was broken up by police and around 30 people were arrested.

Opposition to Lukashenko's regime is being crushed from all corners. Within the past two months, the Belarus' government has imposed harsher jail terms on politicians opposed to Lukashenko and all but eradicated freedom of information. But this hasn't stopped at silencing prominent members of the political opposition. Early last summer, a movement inspired by the Arab spring, "The Revolution via Social Networks" (RSN) helped coordinate protests online. Belarus' government banned spontaneous political rallies shortly after unrest began and so the RSN called on people to demonstrate without using slogans, flags or shouts and to voice their anger by clapping their hands or setting their mobile phone alarms to go off at a specified time. The phenomenon brought dissent to towns across Belarus usually loyal to Lukashenko, prompting the leader to crack down on internet use.

On 6 January, the government approved a law tightening official control over the web. Under the new legislation, internet cafes cannot allow their users to visit any sites hosted outside the country without being "monitored" by the owner, and Belarusians who allow their friends to use their internet connection at home will be responsible for the sites they visit. All commercial activity online is now illegal unless conducted via a Belarusian domain name and anyone caught visiting a banned site will be fined half a month's wages for a single view.

As Lukashenko continues on his authoritarian path, the West is stepping up sanctions against his aides. In January 2011, the EU imposed a travel ban against the Belarusian government. In June, the bloc extended sanctions. On January 4, President Barack Obama signed ‘The Belarus Democracy and Human Rights Act of 2011’, expanding the list of Belarus officials subject to US visa and financial sanctions to include those involved in the post-election crackdown.

Having lost any sway in the West, the Belarus government has run out of bargaining chips with Russia and is now being squeezed to toe Moscow's line. The government applied for an emergency loan of up to $8bn (£5bn) from the International Monetary Fund last June but its request was rebuffed. In an effort to inject cash into the economy and stave off economic collapse, Lukashenko has sold off one of Belarus' major assets to Moscow - pipeline operator Beltransgaz - giving Russia total control over gas exports through Belarus.

The bad news about this latest deal with Belarus is that Russia is strengthening its monopoly on gas supplies; the good news is that gas shortages seen in the past when Belarus and Russia have squabbled over transit fees are no longer likely. Lukashenko's show of strength domestically has served to reveal his weakness on the world stage. (Go to BELARUS).

India
There are attempts to at last tackle the nation-wide problem of corruption. We explain some of the complicating problems besetting a proposed government act, the ‘Jan Lokpal Bill,’ following some multi-billion dollar scams uncovered in 2010. We note that the Bill’s progress remains hanging, after four decades of debate and protest.

The ‘Maoist’ guerrillas, commonly called Naxalites, are mainly tribal people who exist in certain remote jungly, parts of the nation, who have been fighting the armed police, which we report and describe the problems. We also look at the upcoming elections in India’s largest province Uttar Pradesh whose problems are a microcosm of those facing the nation as a whole.

Some good news, in that INDIA has signed a border treaty with CHINA designed to maintain peace in disputed borders, in case of intrusion along ‘The Line of Actual Control’. (Go to INDIA)

Kazakhstan
The Kazakh government is taking steps to wrest more control of its lucrative oil fields, but bloodshed over worker's rights and flawed elections could challenge the president's power. On 14 December, Kazakhstan worked out a deal to acquire 10 per cent of the Karachaganak oil and gas field, the last major field in Kazakhstan that did not have any Kazakh shareholders.

The deal is in keeping with Kazakhstan's drive to operate its own energy sector without as much need for Western expertise and the inevitable profit-sharing that comes with it.
But two days after Kazakhstan edged closer to greater control over its oil, discontent over pay and benefits for workers in the sector escalated into bloodshed, sending the nation into a frenzy that could challenge President Nursultan Nazarbayev's legacy.

On 16 December, 16 people were killed and another 100 injured when police and striking oil workers clashed in the country's western Manghystau region. The violence erupted in the town of Zhanaozen when police tried to clear the main square to erect yurts, as part of celebrations to mark the anniversary of Kazakh independence. The square had been occupied for more than six months by hundreds of disgruntled workers at an oil facility controlled by state-owned KazMunaiGaz and, when told to move on, the strikers threw rocks at police, who retaliated with live gun fire.

Foreign workers at Kazakhstan's oil fields take home much higher salaries than local staff and Kazakh KazMunaiGaz employees had been striking to demand a pay increase, equal rights with foreign workers, and the lifting of restrictions on independent labour unions in the region. With major interests in the oil industry, the West has not condemned the tragedy.

The violence on December 16 put an abrupt end to the oil worker's protest, without resolving their grievances. A State of Emergency was imposed on the region, meaning that a curfew is in place and every effort was made by the authorities to play down the incident as elections to Kazakhstan's lower house of Parliament were scheduled to be held on 15 January.

The vote went ahead and Nazarbayev's Nur Otan party won its expected landslide victory. Observers from the Organisation for Security and Cooperation in Europe said once again, that the vote did not meet fundamental principles of democratic elections.

The US State Department has urged the Kazakh government to improve the transparency of elections, and to follow through on strengthening the conditions necessary for genuine political pluralism. But without genuine pressure from the West to improve human rights and democratic processes in Kazakhstan, Nazarbayev will surely continue to follow his own path. (Go to KAZAKHSTAN).

Saudi Arabia
Higher Oil Prices on the Way : Tensions in the Persian Gulf over the Iranian nuclear program will stimulate more defense spending, requiring oil prices to remain high in order to absorb the impact. While Saudi Arabia and the Gulf States (except for Bahrain, which experienced sectarian tensions masked as the ‘Arab Spring’ in 2011), managed to avert the ‘Arab Spring’ on their soil, they merely bought their way out of it through government largesse. The governments of the region have done little to address social grievances that could translate into demands for change, just as had happened elsewhere in the Arab world.

Tensions in the Gulf over Iran are not new and they have persisted since the end of the 1970’s; in recent weeks, nevertheless, rumors of impending military action over Iran and the latter’s retaliatory threats to shut down the Strait of Hormuz have generated such tension that there will be repercussions.

Military spending will likely increase, continuing a trend that started with Saudi Arabia’s 60 billion dollars arms contract signed in 2010 throughout the region. (Go to SAUDI ARABIA)

Morocco
This westernmost state of the North African Mediterranean littoral, has weathered the ‘Arab Spring’ experienced by several further east on the coastline, and beyond and this is largely because of an enlightened monarch who rapidly effected changes in the law, when he saw trouble brewing. But as the report explains, there is continuing friction with their large neighbour Algeria.

They have a rivalry over the status of Western Sahara, an unrecognised state to the south of both of them. Algeria supports the Polisario Front who seek UN recognition, but Morocco claims the territory. Algerian support was shared with that of Qadafi’s Libya which is currently in chaos, so if and when Libya gets a viable government then it will be seen how they decide to proceed. It is not a good omen that Polisario volunteers were in the Colonel’s Libyan forces, but it is anticipated that Libya will want a good relationship with militarily powerful Algeria, virtually untouched by the Arab Spring. However our report explains that AQIM, the regional offshoot of Al Qaeda, has been busy exploiting the situation in the south and all governments in the region will have reacted to that. (Go to Morocco)

The current report is quite comprehensive but for those who want to go deeper, we recommend our recent Special Report:

“AL QAIDA, AQIM & AQAP, in the wake of the Arab Spring”

Taiwan
The big news was that the presidential election was won by the incumbent president Ma who gets another four year term. He of course favours closer links with China and is not famous for his sense of democracy, so that, since his party the KMT, also won the legislature, it can be said that the Chinese policy of embracing Taiwan economically, without the threats of the past, has succeeded and that the real victor here is Beijing. (Go to Taiwan)

Ukraine
Ukraine is refusing to buy the agreed amount of gas from Russia, jeopardising Europe's energy security. On 17 January, Ukrainian Prime Minister Mykola Azarov said that his country will not buy the amount of gas from Russia set out in a 2009 bilateral agreement.

Under the current 10-year supply contract Ukraine wants to halve the amount of gas it is obliged to buy, arguing that the price it has to pay is exorbitant. Moscow says it will only reduce the cost if Gazprom gets a stake in the Ukrainian pipeline network which transports the bulk of Russian gas bound for Europe. Ukraine has refused (but it is interesting to note that neighbouring Belarus, confronted with the same problem has acceded to the Russians with their transnational pipeline.

Ukraine is heavily dependent on Russian gas and is preparing for the worst if the 10-year deal can't be revised. The government has announced plans to boost domestic gas output and switch to other energy sources such as coal. Ukraine also wants to import five bcm of liquefied natural gas (LNG) a year from Azerbaijan, but needs to build an LNG terminal on its Black Sea coast first, which will take at least two years.

Around 80 per cent of Russian gas exports to Europe have been transported through Ukraine and disputes between Russia and Kiev in 2007 and 2009 briefly disrupted supplies, prompting both Gazprom and the European Union to look for alternative shipping routes. Russia launched its Nord Stream pipeline down the Baltic last year, and has been given the go-ahead for its South Stream pipeline through Turkey, putting it ahead of the game. Meanwhile, Europe is lagging on its proposed Nabucco pipeline because it can't convince Turkmenistan to supply the gas needed to fill it. (Go to UKRAINE)

Tajikistan
Russia is taking steps to gain more military control over Tajikistan once US troops leave Afghanistan in 2014, while spats between the governments of Tajikistan and Uzbekistan, popular discontent caused by poverty, and the authoritarian regime of President Emomali Rahmon, look set to destabilise Central Asia further.

On 20 December, members of the CIS Collective Security Treaty Organisation (CSTO) – Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Uzbekistan and Tajikistan – reached a tentative agreement that would require the say-so of all seven member states if any foreign military forces want to be based on any of their territories.

Kyrgyzstan, Tajikistan, and Uzbekistan all currently host foreign troops as part of NATO’s military operation in Afghanistan, and the CSTO move looks set to prevent that from happening in the future. The leaders did not sign any agreement binding them to this arrangement and it was not clear when the issue would come up for formal approval. However, it’s a clear sign that Russia – which unofficially holds the reigns of the CSTO – is keen to make sure that America's 13-year presence in Central Asia isn't extended or repeated.

With NATO’s presence dwindling, the Taliban in Pakistan and Afghanistan gaining strength and extremism growing in the region, Central Asia is likely to destabilise further in the coming years. Russia's nerves appear to be tweaked by Tajikistan as more than one million Tajiks work in Russia at any given time, and increasing numbers of people in the Central Asian republic are turning to radical Islam.

On December 26, a regional court in Tajikistan handed 53 people sentences ranging from 30 years to life, for involvement in a bombing in 2010 in which a man rammed a car packed with explosives into the organised-crime fighting unit of the police directorate in the northern city of Khujand. Two policemen and two civilians died in the attack and 28 people were injured.

Discontent with Tajik President Emomali Rahmon's authoritarian regime poses a risk to stability because he refuses to concede power. Free and fair elections have never been held in Tajikistan and opposition to Rahmon is squashed. On 12 January, Tajik opposition activist Dodojon Atovulloev was stabbed twice by an unknown attacker near his home in Moscow and is currently in intensive care.

Relations between Tajikistan and its neighbours are further feeding discontent. Even though Tajikistan is one of Central Asia's largest producers of hydroelectricity it suffers from power shortages, particularly in winter. Despite the deficit back home, the Tajik government is looking to export more electricity abroad.

On 2 January, the Tajik Ambassador to Pakistan discussed exporting electricity from hydropower plants in Kyrgyzstan and Tajikistan to Afghanistan and Pakistan. The proposed project, called CASA 1000, is backed by the Asian Development Bank and the World Bank, but it still needs an estimated $950 million to come to fruition. About 25 percent of that amount ($251 million) is needed to build power transmission lines in Tajikistan.

The uncompleted massive Roghun hydropower plant in Tajikistan would need to be operational for Tajikistan to supply the prescribed volume of electricity for the CASA 1000 project. But the controversial Roghun project has run into obstacles, including a lack of funding and strong objections from neighbouring Uzbekistan, that creating a reservoir for the Roghun dam would divert water away from Uzbekistan's lucrative agriculture industry.

Uzbekistan claims it has only blocked construction materials for the disputed Roghun hydropower plant, but the head of the UN's World Food Program (WFP) office in Tajikistan said on 13 December that 23 of its aid trains were stuck in Tashkent. There are fears that the move will create severe food shortages and prices have already risen to a level where many Tajiks cannot afford basic goods. Without proper heating, food or hope for democracy, discontent in the volatile country looks set to escalate, leaving Russia with more potential problems than it is currently bargaining for. Without a Western presence, witness IRAQ, they could get a lot worse. (Go to TAJIKISTAN)

Romania
The beginning of 2012 has been highly tumultuous for Romania. Thousands have taken to the streets in protest against the austerity measures introduced under Prime Minister Emil Boc, whose centrist coalition government attempted to slow a crisis-induced economic meltdown, with a series of unpopular money-saving cuts. Citizens, whose living standards are at about 45% of the EU average, have finally had enough and the protests on the streets this month have been the most serious since President Traian Basescu was elected in 2004.

On January 10, Deputy Health Minister Raed Arafat resigned. The popular politician had voiced major criticisms about a draft healthcare reform and was confronted by President Basescu, who backed the bill. The resignation of Arafat, who has been credited as the architect of a highly-functioning emergency system, prompted a protest in the capital in his support. On January 13, faced with a swelling tide of discontent, President Traian Basescu publicly asked the Prime Minister to withdraw the healthcare reform plan due to public pressure.

Discontent has grown with the whole host of austerity measures the public has faced as a result of the 20 billion euro IMF/EU bail-out agreement of 2009. On the weekend of January 14-15, around 8,700 people attended rallies in the country's major cities. 59 people were injured in clashes with police at a rally in Bucharest's main University Square, attended by 1000 protestors. Police said they had fined or started criminal investigations against 283 demonstrators involved in the violence. On January 16, Prime Minister Emil Boc called the violence 'unacceptable'. Other government ministers have also been vocal in their criticisms of the protestors.

Romania has the EU's third highest level of corruption - a fact which continues to cause consternation in Brussels. However, there are some positive signs in terms of management of the state's coffers. At the behest of the IMF, in December the government presented a scheme to overhaul the management of a strategic selection of more than 700 state firms, by replacing political appointees with tender-selected executives at the behest of the IMF. Private managers will be appointed in a select number of companies. The IMF recently announced that Romania was making good progress under an IMF-supported economic programme, and it freed up a further $661 million in aid that can be drawn down if needed (Go to ROMANIA)

Bulgaria
Bulgaria has seen in the New Year with a new president and a new set of challenges. The country, which has suffered systemically, from problems related to corruption, cronyism and general economic fragility, is facing the shockwaves of the eurozone crisis. Evidence of an increasingly restive populace has come in the form of protests which have flared across the country in recent months, related not only to living standards, but also the nascent shale-fracking sector. The ruling party centre-right party Gerb, along with its flamboyant Prime Minister Boiko Borissov, have steered the country through a tumultuous few months.

On January 19, 2012, victorious presidential candidate for the ruling GERB party, Rossen Plevneliev, was sworn into office as the new president of Bulgaria, replacing Georgi Purvanov of the Socialist party. Whilst the role of President is largely ceremonial, Plevneliev has been praised for pushing through major projects related to infrastructure and in particular the development of Bulgaria's highways, which were in state of disrepair for decades. In his inaugural speech, the former entrepreneur vowed that as President he would do his best to ensure greater financial growth as well as investment flow into the economy.

In terms of the electoral process, reports from international observers were cautiously positive. Observers from the Parliamentary Assembly of the Council of Europe (PACE) were apparently "heartened by the overall orderly and peaceful conduct of the vote." Nonetheless the delegation did note a number of problems - namely the access of candidates to the media, which they say needs 'drastic improvement'. Meanwhile, the Organization for Security and Cooperation in Europe (OSCE) delegation observed widespread allegations of vote buying. Apparently the great majority of candidates told monitors that the electoral process was rife with this practice. Opposition members have accused the ruling GERB party in particular of seeking to undermine the democratic process and of offering citizens a 'pseudodemocracy'. (Go to BULGARIA)

North Korea
So the country has a new leader for the New Year in the footsteps of his deceased father, Kim Jong-Il. Whilst many former communist countries have moved on the hereditary principle of royalty, that is succession within the family, North Korea is so far the only self-declared communist country to do the same (for the second time). True, the aged and ailing Fidel in Cuba has passed the reins to his ageing brother, but that is not a generational change. There will long be speculation as to how much power is to be enjoyed by Kim Jong-eun and no doubt we shall be doing our share, but some time must elapse before that is a practical or useful way forward. In this issue we note that Iranians will have observed that nuclear-armed North Korea is in no danger of invasion, unlike Libya, persuaded to surrender the weapon - and see where they are now. We wonder also what will be the cost of Chinese support to North Korea and indeed, what are they seeking? (Go to NORTH KOREA)

Vietnam
With its export-dependent economy, it could be in for a rough ride this year, as so many of its western customers are tightening their belts against the recession. Last year the economy grew by 5.5 %, but their plan for this year is a 6.8% growth. Either they will be disappointed, or will be one of those countries where growth actually does happen. We describe how the last year 2011, was a year of pain for many as the nation started to put its house in order – more than 50,000 businesses went bankrupt or ceased production last year! Inflation which has been scary has started to come down. It is expected to be 12% or less in 2012. The Vietnamese government has for the first time given up the mantra that the state economic sector plays the key role in their country – hard for a communist government to admit. But we don’t expect much more in the way of concessions from the party line. Stability is the watchword. (Go to Vietnam)

Philippines
Good news (at last), in that the Philippines after more than a year of a new president, is a better place to be. President Aquino, true to his mandate is cleaning house. The former Chief Justice is incarcerated and is going for trial. The former president Arroyo is expected to also face trial.

The sad reality in this country is that it never really modernised. There is a landowning class who own, if not everything, then most - and that has included the police and the courts. This country has no birth control, due to the religious power of the Roman Catholic church, which has never been at its most progressive in this Pacific archipelago. The net result is that many families have numerous children, which strains the capacity in many poor families to care for them. The result is that families have to break up, with the younger and fitter and more qualified, leaving the Philippines to work overseas, returning home only occasionally, with grandparents filling the parental role in many cases. There are probably more Filipino seamen on the world’s ships, than from any other country in the world. Filipina nurses, nannies, house-servants are to be found all around the world, often exploited. They send much of their earnings home. Last year, with eight million men and women working overseas, remittances to the Philippines exceeded $18bn, the largest annual sum on record, massively helpful to the economy, but at what a human price! (Go to Philippines)

Bosnia
After more than a year of political deadlock, Bosnia, which is divided into two entities, Republika Srpska and the Muslim Croat federation, has managed to form a central government on December 28. In a nation riddled with inter-ethnic disputes, the agreement has been seen as a major breakthrough. But will it last? The six parties all have differing views of what the future should hold for Bosnia. Finding common ground is extremely difficult. Nationalist rhetoric dominates and the President of Republika Srpska, Milorad Dodik, waves the flag of secession on a regular basis.

On December 28, in a sudden and unexpected flutter of activity, leaders from the Bosniak, Serb and Croat parties formed a government. On January 12, Bosnia’s parliament voting 36-2 with 3 abstentions, to approve economist Vjekoslav Bevanda, a member of the main Croat HDZ party, as Prime Minister. It seems that the leaders were united in a sense of compromise. “We did not get what we thought we should, but no one got everything they wanted,” said Milorad Dodik. A corruption investigation into Mr Dodik was dropped, on the very same day the deal was struck.

The toll that political stalemate has taken on the state has been heavy, eroding numerous aspects of life in Bosnia. The country has been unable to pass a budget and its services and infrastructure have suffered as a result. Without a central government there has been a loss of funds from Brussels and this has been a deterrent to foreign investors. There is no agreement with Croatia on how exports of meat and dairy goods will function, once the Balkan state enters the EU in 2013. This will have a serious impact upon the livelihood of many small-scale farmers. Since agriculture represents around 10% of GDP in Bosnia, compared to an EU average of only 2%, Bosnia's farmers represent a core part of the state's economy. 16% of Bosnia's total food exports and more than half of its milk and dairy exports go to its Western neighbour, representing £84 million pounds of revenue. With no central government, there has been no Ministry of Agriculture, let alone the agencies which could certify exports and ensure harmonization with the EU's standards.

Prospects for the country's economy on the whole are worrying. The IMF has slashed Bosnia's growth forecast to a worryingly paltry 0.7%, from 3% previously. The change in forecast is apparently in part the result of the economic crisis sweeping across Europe, which imperils all of the continent's states.

The lack of budget meant that no clear policy on pensions for those who fought in the wars of the 1990s has been established. Many are now living in penury. In a heartening sign of interethnic cooperation, however, Muslim and Croat ex-soldiers from the Muslim-Croat Federation, who were granted an emergency pension, have vowed to contribute to the pensions of their former adversaries in Republika Srpska, who have been left entirely without provision. The fact that soldiers who battled against one another in the 1992-1995 war are now finding common ground is an indictment of the disjunction between the citizens of Bosnia and its ruling elite, who continually exploit potential ethnic tensions.

Whilst the formation of the new government is certainly a positive start to 2012, many would argue that a fundamental problem in Bosnia is the constitutional settlement. It was reported on January 20 that Dodik is considering a boycott of the central government over an investigation into war crimes. It seems that the era of political peace remains a long way off. (Go to BOSNIA)


                                                                             Clive Lindley
                                                                             Publisher

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