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№166 China on Central-Eastern Europe: ‘16+1’ as seen from Beijing

Author(s): Marcin Kaczmarski,Jakub Jakóbowski / Language(s): English

In 2012, China approached the countries of Central-Eastern Europe (CEE) with a proposal concerning regional cooperation in the ‘16+1’ formula. According to Chinese analysts, the rationale behind this breakthrough decision was Beijing’s acknowledgment of the growing importance of the region’s states within the European Union as well as a partial elimination of the ideological differences which had hamstrung cooperation in previous years. It seems that the eurozone crisis may be perceived as the reason for the CEE states’ increased interest in developing their cooperation with China.

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№168 A captured state? Moldova’s uncertain prospects for modernisation

Author(s): Kamil Całus / Language(s): English

There have been several significant changes on Moldova’s domestic political scene in the wake of the November 2014 parliamentary elections there. Negotiations lasted nearly two months and resulted in the formation of a minority coalition composed of two groupings: the Liberal-Democratic Party (PLDM) and the Democratic Party (PDM). New coalition received unofficial support from the Communist Party (PCRM), which had previously been considered an opposition party. Contrary to their initial announcements, PDLM and PDM did not admit the Liberal Party led by Mihai Ghimpu to power. Moreover, they blocked the nomination for prime minister of the incumbent, Iurie Leancă. Leancă has been perceived by many as an honest politician and a guarantor of reforms. This situation resulted in the political model present in Moldova since 2009 being preserved. In this model the state’s institutions are subordinated to two main oligarch politicians: Vlad Filat (the leader of PLDM) and Vlad Plahotniuc (a billionaire who de facto controls PDM).

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№173 A ship run aground. Deepening problems in the Ukrainian economy

Author(s): Tadeusz Iwański / Language(s): English

The drop in Ukraine’s GDP by nearly 18% in the first three months of 2015 (versus the corresponding period in 2014) has confirmed the decline of the country’s economy. Over the last 14 months, the Ukrainian currency was subject to an almost threefold devaluation against the US dollar, and in April 2015 the inflation rate was 61% (year-on-year), which exacerbated the impoverishment of the general public and weakened domestic demand. The main reason behind the crisis has been the destruction of heavy industry and infrastructure in the war-torn Donbas region, over which Kyiv no longer has control, as well as a sharp decline in foreign trade (by 24% in 2014 and by 34% in the first quarter of 2015), recorded primarily in trading volume with Ukraine’s major trade partner, i.e. Russia (a drop of 43%). The conflict has also had a negative impact on the production figures for the two key sectors of the Ukrainian economy: agriculture and metallurgy, which account for approximately 50% of Ukrainian exports.

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№178 Ukraine on the financial front – the problem of Ukraine’s foreign public debt

Author(s): Rafał Sadowski / Language(s): English

One of the key challenges that Ukraine is facing is the scale of its foreign debt (both public and private). As of 1st April it stood at US$ 126 billion, which is 109.8% of the country’s GDP. Approximately 45% of these financial obligations are short-term, meaning that they must be paid off within a year. Although the value of the debt has fallen by nearly US$ 10 billion since the end of 2014 (due to the private sector paying a part of the liabilities), the debt to GDP ratio has increased due to the recession and the depreciation of the hryvnia. The value of Ukraine’s foreign public debt is also on the rise (including state guarantees); since the beginning of 2015 it has risen from US$ 37.6 billion to US$ 43.6 billion. Ukraine does not currently have the resources to pay off its debt. In this situation a debt restructuring is necessary and this is one of the top priorities for the Ukrainian government as well as for the International Monetary Fund (IMF) and its assistance programme. Without this it will be much more difficult for Ukraine to overcome the economic crisis.

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№179 Ukraine’s wartime nationalism

Author(s): Tadeusz A. Olszański / Language(s): English

The Euromaidan revolution and the war in Donbas that followed it have brought about deep changes in the way Ukrainian citizens think and have led to a rapid transformation of how people view the concept of national community. It began to be increasingly common for proponents of nationalism to refer to solidarity with the state instead of referring to the nation understood as an ethnic community, as they had previously done. This is due to the fact that an entire young generation has matured which takes the Ukrainian state for granted, but also because in the Russian-Ukrainian conflict most Russian-speaking citizens of Ukraine have opted for Ukraine.The war with Russia, which has now been ongoing for over a year, has led to a significant radicalisation of society’s attitudes and to attempts to seek models of military actions from the past that could serve as reference points in contemporary thinking. In Ukraine, the main, if not the only clear-cut model of this type of action, has been the story taught in schools involving fighting carried out by the Ukrainian Insurgent Army (UPA) in 1943–1952 (the narrative omits the crimes perpetrated by this formation—not only those against ethnic Poles). One consequence of this has been the currently observed wide-scale adoption of OUN-UPA symbols including by groups dominated by Russian-speaking residents of central and eastern Ukraine. This, however, is not accompanied by the adoption of the ideology of these historical organisations. Even when activists and columnists refer directly to Stepan Bandera, his actual views remain largely unknown. A new phenomenon has emerged which so far has been of marginal importance, but which has large potential to develop: neo-Nazism which refers to contemporary European neo-Nazism instead of Banderite traditions.

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№18: Shades of Grey: Poland’s Example for a Middle East in Transition

Author(s): Patrycja Sasnal / Language(s): English

It is not at all clear if or how a country’s experience in systemic transition—from authoritarian to democratic rule—can serve as a lesson to another country in transition. Positivists would claim the 20th century provides a plethora of examples about how to conduct a transition. Sceptics would point at differences in each and every case: in the character and condition of the economy, a lack of adequate political structures or different cultural and historic backgrounds. Tunisia and Egypt, however, are at this extremely precarious point where they will understandably want to make decisions on their own but will be at the same time looking carefully at the experience and competence of others because the democratization process inevitably requires many practical solutions.

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№181 Reform #1. Why Ukraine has to reform its gas sector

Author(s): Wojciech Konończuk / Language(s): English

In April 2015, the Ukrainian parliament passed a long-awaited law on the gas sector which paves the way for the extremely difficult process of reforming and de-monopolising the Ukrainian gas sector. The law will come into force on 1 October 2015 and involves the break-up of the state-owned company Naftogaz, the current monopolist, and the gradual creation of a competitive gas market in line with the so-called Third Energy Package. At the same time, a threefold increase in the price of gas paid by individual customers and the public sector was introduced. The price had been subsidised for years and no previous government had ever decided to raise it.The comprehensive reform of the gas sector is one of the most important and most difficult reforms Ukraine has to implement. Its success will be of fundamental importance for the Ukrainian state due to its impact on several major areas of the state’s functioning. Without the marketisation of gas prices and an improvement in Naftogaz’s financial standing (in 2014, the company’s deficit accounted for 7% of Ukraine’s GDP), it will be impossible to reform Ukraine’s public finances to end the long-lasting economic crisis. Without an improvement in Ukraine’s energy efficiency, which currently is one of the world’s lowest, it will be impossible to reduce the country’s dependence on the import of gas. Successful implementation of the reform will also be important in the context of the future of Ukrainian-Russian relations. The question of gas supplies has been one of the major aspects of this relationship since 1991. Another extremely important consequence of the reform will be to eliminate the main source of income from corruption in Ukraine., which has benefited the ruling elite since the 1990s. Corruption seems to be the reason behind the reluctance of all previous governments in Kyiv to reform the gas sector.

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№185 Zakarpattia – together, but separated

Author(s): Piotr Żochowski,Tadeusz Iwański / Language(s): English

Ukraine’s ongoing conflict with Russia has diverted the central government’s attention away from the deterioration of the security situation in regions which are not threatened by direct aggression from Russia. Zakarpattia is one of these. It is one of the poorest and most ethnically diverse regions of Ukraine and also its westernmost region, bordering Slovakia, Hungary, Romania and Poland. Kyiv neglected to launch measures to weaken the position of the region’s unquestioned leader, Viktor Baloha and his family, who have been in de facto control of Zakarpattia for years now. Moreover, it seems that, after the Euromaidan, Kyiv decided to give the Baloha family a ‘free hand’ in the region in exchange for maintaining stability. This further strengthened their position. As a consequence, no measures were taken to limit negative phenomena present in the region such as smuggling and organised crime. It was only the armed confrontation between the police and representatives of Right Sector in July 2015 in Mukacheve that strikingly revealed the extent of these problems. This was a criminal incident and a blot on the image of Kyiv which assured the public that the reform of the public security system was making rapid progress. Furthermore, it had far-reaching political consequences—it forced the government in Kyiv to attempt to regain control of the region and to weaken Baloha’s influence, as well as Baloha himself to carry out actions focused on maintaining the status quo.

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№187 The migration of Ukrainians in times of crisis

Author(s): Marta Jaroszewicz / Language(s): English

Before the Russian annexation of Crimea and the outbreak of the conflict in eastern Ukraine, the scale of labour outward migration of Ukrainians had been characterised by a slight downward trend. Back in 2014, an increase in the number of Ukrainians who migrated to Russia was observed, although no similar increase was recorded for EU countries (excluding Poland). The year 2015 brought a more rapid surge in the number of Ukrainians migrating to the EU, again mainly to Poland. Due to the lack of current EU-wide data[1], estimates can be made based only on data compiled by national statistical offices in countries which are the most popular with Ukrainian migrants. In Poland, as of October 2015 Ukrainians held 52,000 valid residence cards. Much greater migration dynamics have been observed in the case of temporary migration – the number of declarations which enable an individual to take up a temporary job in Poland, issued in the first half of 2015, was a staggering 400,000. This means a more than twofold increase – in the whole of 2014 372,000 declarations were issued to Ukrainian citizens. No similar increase has so far been observed in other EU states, including Italy and the Czech Republic, which have always been popular destinations for Ukrainian migration. In late 2014, 233,000 Ukrainian migrants were registered in Italy (in late 2013 the figure was 191,000), whereas in the Czech Republic the number of Ukrainian migrants remains stable – 104,000 in June 2015.

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№202 The consequences of the Western financial sanctions on the Russian economy

Author(s): Maria Domańska,Szymon Kardaś / Language(s): English

Although they are not the deciding factor, the Western financial sanctions are nevertheless an important factor affecting the deteriorating economic situation in Russia. They have significantly undermined the opportunities which Russian companies have to attract foreign capital, thus contributing to the deterioration of their financial condition (which is particularly prominent in the case of energy firms subject to sanctions). Therefore, Russian businesses need more support from the state. However, this support is becoming more difficult due to the dramatic fall in oil prices – revenues from oil exports are the main source of budget revenue.

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№207 Russia’s ‘Middle East’: the escalation of religious conflicts in the Northern Caucasus

Author(s): Maciej Falkowski / Language(s): English

The eastern part of the Northern Caucasus (Dagestan, Chechnya and Ingushetia) is becoming an increasingly distinct region in cultural, civilisational and social terms when compared to the rest of the Russian Federation. The situation on the ground there bears greater resemblance to the Middle East than to Russia: Islam is the key factor organising socio-political life, and conflicts inside the Muslim community, often involving bloodshed, are the driving power of developments in the region. The conflict is between the two main branches of Islam in the Northern Caucasus: Sufism linked to the official clergy and government, and Salafism which is gaining more and more supporters among young people in the Caucasus. Tension, including clashes over mosques, attacks, mass detentions, etc. has been observed mainly in Dagestan and Ingushetia.

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№208 Moldova: from oligarchic pluralism to Plahotniuc’s hegemony

Author(s): Kamil Całus / Language(s): English

Moldova’s political system took shape due to the six-year rule of the Alliance for European Integration coalition but it has undergone a major transformation over the past six months. Resorting to skilful political manoeuvring and capitalising on his control over the Moldovan judiciary system, Vlad Plahotniuc, one of the leaders of the nominally pro-European Democratic Party and the richest person in the country, was able to bring about the arrest of his main political competitor, the former prime minister Vlad Filat, in October 2015. Then he pushed through the nomination of his trusted aide, Pavel Filip, for prime minister. In effect, Plahotniuc has concentrated political and business influence in his own hands on a scale unseen so far in Moldova’s history since 1991. All this indicates that he already not only controls the judiciary, the anti-corruption institutions, the Constitutional Court and the economic structures, but has also subordinated the greater part of parliament and is rapidly tightening his grip on the section of the state apparatus which until recently was influenced by Filat.

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№210 The shadow of Chornobyl. Ukraine thirty years after the disaster

Author(s): Tadeusz A. Olszański / Language(s): English

Thirty years after the Chornobyl nuclear power plant disaster, its aftermath and consequences are still a permanent element of the economic, environmental and social situation of Ukraine, Belarus and some regions of Russia. Ukraine, to which the scope of this text is limited, experienced the most severe shock because, among other factors, the plant where the accident took place was located just 100 km away from Kyiv. Its consequences have affected the course of political developments in the country, and have become part of the newly-shaped national identity of independent Ukraine. The country bore the huge cost of the clean-up effort but did not give up on nuclear energy, and today nuclear power plants generate more than half of its electricity. The system of social benefits for people recognised as disaster survivors, which was put in place by the Soviet government, has become a huge burden on the country’s budget; if implemented fully, it would account for more than 10% of total public spending, and is therefore being implemented to only a partial extent. This system has reinforced the Ukrainian people’s sense of helplessness and dependence on the state. The disaster has also become part of the ‘victim nation’ blueprint of the Ukrainian national myth, which it has further solidified. The technological and environmental consequences of the disaster, and hence also its economic costs, will persist for centuries, while the social consequences will dissipate as the affected generation passes away. In any case, Chornobyl will remain an important part of the life of the Ukrainian state and society.

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№211 One year of Ukraine’s De-communisation. A change in the historical narrative

Author(s): Tadeusz A. Olszański / Language(s): English

A year ago, the Parliament of Ukraine adopted four bills on the policy of national memory: on granting access to the archives of the repressive organs of the Communist totalitarian regime in the years 1917–1991, on the legal status and commemoration of Ukrainian independence fighters in the twentieth century, on the immortalisation of the victory over Nazism in the Second World War, 1939–1945, and on the condemnation of the Communist and National Socialist (Nazi) totalitarian regimes and the forbidding of their symbolism from being promoted. The laws came into force on 21 May 2015. After a year, it can be stated that only the latter two are being observed – the official narrative regarding World War II has been changed, mainly due to the activity of the Ukrainian Institute of National Remembrance (UINR), but also as a result of public statements by President Petro Poroshenko. The process of removing from public places the names and commemorations referring to the Soviet era is underway, and the fears that this may trigger serious conflicts have not proved true. From roughly a thousand placenames subject to de-communisation some two thirds have been changed so far (parliamentary bills regarding the remaining ones are awaiting approval) and most statues of Communist leaders have been removed. However, the law concerning independence fighters, which raised the most serious controversies, did not have any practical consequences. Moreover, nothing suggests that this could change. The implementation of the de-communisation laws is associated with a significant change in Ukrainian patriotic narrative: it is no longer focused on national martyrdom and it is beginning to emphasize heroic motives, which is in line with wartime needs. The fact that some of these motives are likely to trigger problems in Ukraine’s relations with Poland seems to be viewed as a marginal ‘by-product’.

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№212 Business under supervision – pathologies serving the system of power in Russia

Author(s): Maria Domańska,Piotr Żochowski / Language(s): English

The relations between Russia’s authorities and business circles are subordinated not so much to rational economic calculations as to the interests of political elites. The key interest in this case is maintaining the current model of government. The formal and informal supervision of business by law enforcement agencies is an important element of Russia’s economic reality. Despite the rhetoric of high-ranking officials, intended to suggest that the state is taking care of businesspeople’s interests, it is evident that there is no will to devise a systemic solution to the most urgent problems, including the state institutions’ disrespect for the rights of ownership.

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№213 A constitution for Erdoğan. Consequences of the political conflict in Turkey

Author(s): Mateusz R. Chudziak / Language(s): English

Since mid-2015 Turkey has been affected by a deep internal crisis, caused by rising political polarisation, increased levels of terrorist threat (posed by the Kurds and Islamic radicals) and the revived conflict with the Kurdistan Workers’ Party (PKK). As a consequence of this crisis, over 350,000 residents of south-eastern Turkey have been forced to leave their homes. At the same time, due to the migration crisis and despite mutual distrust in relations between Turkey and the EU, cooperation between Ankara and Brussels has been intensifying. Turkey’s ongoing destabilisation does not challenge the status of the ruling Justice and Development Party (AKP), which is de facto controlled by President Recep Tayyip Erdoğan; paradoxically, it strengthens the party. The internal crisis which the authorities have been deliberately fuelling is an element of a plan to rubber-stamp political change by introducing a presidential system of government. This is happening amid a thorough reconstruction of the socio-political order which has been underway for over a decade. In the upcoming months it is expected to result in the constitution being changed and, as a consequence, the institutionalisation of Erdoğan’s autocratic rule.

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№214 Hostages to dialogue. The process of normalising Serbian-Kosovar relations

Author(s): Marta Szpala / Language(s): English

In March 2011, the governments of Kosovo and Serbia started a dialogue that was intended to lead to the normalisation of mutual relations. This process, launched under the pressure of the EU, was aimed at building up confidence between the parties and resolving the everyday problems of the Serbian and Albanian communities, and as a consequence, reducing tension in the Western Balkans. The start of talks between representatives of the antagonist countries was the breakthrough that led to the Kosovo government gaining control over the whole of its territory, the establishment of a border (or ‘administrative boundary line’, as Belgrade calls it), and the start of the process of subordinating the Kosovo Serbian institutions to the authorities in Prishtina. Serbia also lifted its trade blockade on Kosovo, and allowed Prishtina to join the regional organisations. As a result, progress has been made in the process of integration of both states with the EU: Serbia has started accession negotiations, and Kosovo has signed a Stabilisation and Association Agreement (SAA).

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№215 From apathy to nationalist mobilisation: politics makes a comeback in Armenia

Author(s): Maciej Falkowski / Language(s): English

In the military dimension, the Four-Day War in Nagorno-Karabakh (2–5 April 2016) changed little in the conflict zone. It has, however, had a significant impact on the situation in Armenia. The country was shocked out of the political malaise that had been the dominant mood in the last few years, and the Karabakh question, which used to animate political life in the late 1980s and early 1990s, once again became a driving force behind developments. In the internal dimension, the renewed fighting galvanised the political scene, triggered a rise in nationalist sentiments, mobilised the public and consolidated it around the Karabakh question, overshadowing the frustrations caused by the country’s difficult economic situation. In the external dimension, the war, which was viewed as Moscow-endorsed Azerbaijani aggression, undermined people’s trust in Russia and the Armenian-Russian alliance. It also made it clear for Armenians how uncertain the Russian security guarantees were and exacerbated their feelings of vulnerability and isolation on the international stage.

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№224 A breakthrough year in relations between Turkey and the European Union – an attempt to take stock

Author(s): Mateusz R. Chudziak,Krzysztof Strachota / Language(s): English

September 2016 marks the passing of one year has passed since the outbreak of the EU migration crisis which became the basis of unprecedented co-operation between Turkey and the EU. Paradoxically, although this co-operation in containing the crisis has proven surprisingly effective, the climate of Turkish-EU relations has significantly deteriorated. This situation comes in part as a result of internal tensions in Turkey (and within the EU). However, genuine changes in the power relations between Turkey and the EU have occurred and Turkey feels that issues it attaches importance to are not being appropriately addressed by the EU—the frustration this causes has been even more instrumental in the deterioration of relations. This shift in relations between Turkey and the EU also stems from Turkey’s aspirations to emancipate itself in its relations with the West; there has been an upward trend in this regard for years. The instruments the EU has so far been employing in order to put Turkey under pressure (above all the EU integration process) are losing their effectiveness, which is in stark contrast with Turkey’s emancipation and assertiveness. However, irrespective of the present and future inevitable tensions in Turkish-EU relations, Turkey’s aim is not to break off with the EU but to develop a new model of strategic relations which better serves its own interests. Despite the recent rapprochement with Russia, Ankara seems to be aware of a lack of alternatives to strategic co-operation with the EU and, more broadly, with the West.

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№233 Illusions of power and stark realities: The second year of the economic crisis in Belarus

Author(s): Kamil Kłysiński / Language(s): English

In 2016 the basic macroeconomic indicators of the Belarusian economy clearly proved that the Belarusian government failed to reverse the negative trends which occurred in 2015. The gap in the foreign trade balance grew, industrial production dwindled, foreign debt increased and the low foreign-exchange reserves continued. GDP fell for the second consecutive year and so it can already be stated that a long-term economic recession is setting in.The crisis has been caused by the failing, outdated model of the Belarusian economy. The country’s difficult economic situation was also influenced by external factors such as a substantial fall in the amount of Russian oil supplied at preferential prices to Belarusian refineries and an economic downturn in the world’s potassium-based fertilisers, which significantly reduced the profits from sales of Belarus’s most profitable exports. The Belarusian government, probably due to pressure from the long-standing crisis, has increasingly been referring in its rhetoric to the chances of improving the situation due to the development of innovative sectors (e.g. IT) and to the expansion of the freedom of operation of small and medium-sized enterprises. However, this has not translated into real reforms, even those limited to selected economic sectors. President Alyaksandr Lukashenka still fears he will lose full control of the Belarusian economy and is trying to maintain heavy industry based on large-scale production plants and dependent on supplies of natural resources from Russia and access to the Russian market. The Belarusian government is thus blocking the development of an economy based on strong foundations of economic growth which would be independent of external factors. In autumn of 2016 there was an unprecedented escalation of tensions between Minsk and Moscow which has yet to ease off. In this context, it should be expected that the crisis will continue in 2017 and the risk of an economic recession in Belarus will increase.

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