Category Archives: Economic

Economic, European Union, Government, Politics, Russia, Society, Ukraine, United States

Ukraine and its future stability…

Intro: For Ukraine to have a stable future it is imperative that Russia, the European Union and the US work together in collaboration if that stability is to be assured

Despite all the tumult of recent weeks, the crisis in Ukraine is just at the beginning. Europe’s seventh most populous country will be without a fully-elected government until at least May, a situation that has arisen following its former president who was stripped of his power and who has been on the run since being forced out. It is believed Viktor Yanukovych has found safe haven in Russia, Ukraine’s closest ally in the region.

The underlying mood appears to be one of score settling. Separatism in the east is stirring, especially in Crimea, which is predominately Russian by culture and history. Ukraine is strategically important for Moscow: the Russian’s maintain a major naval base at Sevastopol, allowing the Russian navy to deploy quickly into the Black Sea as the need arises.

Ukraine is broke, precipitated by the immediate origins of the crisis which was economic. The currency, the hryvnia, has depreciated by 12 per cent since the start of the year, and the public finances are teetering on the verge of collapse. According to the interim-government in Ukraine, one which is attempting to aid transition to a newly elected government, the country needs £21 billion between now and the end of 2015 simply to pay its bills. Mr Yanukovych is widely reported as having taken bribes in accepting Russian aid and membership of the Moscow sponsored Eurasian Union, rather than entering into trade deals and agreements with the EU.

The West needs to be careful in any vainglorious attempt of portraying or by assuming it has won following the overthrow of Mr Yanukovych. The geopolitics, best seen as a tug-of-war, is fraught with difficulties. For Ukraine to have a stable future it is imperative that Russia, the European Union and the US work together in collaboration if that stability is to be assured. The danger is that any one of these superpowers treats the country as the prize in a zero-sum game.

America’s approach has been cautious. President Obama has, thus far, shown no desire for a full-scale showdown with Moscow. But this attitude is shared by his European allies, too, as they strive to put together an economic rescue package in which Russia would ideally be involved. In reality, though, the real uncertainty surrounds how Moscow will react to the fate of its southern neighbour. Where culture and history are so closely interwoven, Russia is likely to be wary of any western driven agenda.

The initial response of the Kremlin to events in Kiev was one of ferocious outrage. Dmitry Medvedev, the Prime Minister, accused Europe of turning a blind eye to the dictatorial and ‘sometimes terrorist methods’ used by the new authorities to suppress dissent in eastern Ukraine – the area of the country which is particularly sympathetic to Russian ideals. Mr Medvedev has also declared that the opposition had seized power by an ‘armed mutiny’, a belief which could still lead to direct military action by Russia in the Crimea. A request by the Crimeans for Russian protection would be the pretext for the worst possible outcome.

However, since that outburst, the tone from Moscow has been more restrained. Earlier this week, Sergei Lavrov, the Russian Foreign Minister, indicated that the policy of ‘non-intervention’ would continue. He said, rather curiously, that it was in Moscow’s interests for Ukraine to be part of a ‘broad European family’. However, the Kremlin has an array of options of how it might influence events such as how it will control vital gas exports to all parts of the Ukraine.

Gauging how the crisis will end is no easy task. A form of partition is one possibility, but that can only happen if the considered consent is given by all interested parties. Demarcation along similar lines to the 1993 ‘velvet divorce’ between the Czech Republic and Slovakia is one model that might prove helpful if negotiators are looking for historical references in bringing about an ordered and peaceful outcome in Ukraine.

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Britain, Economic, Energy, Environment, Government, Politics, Scotland

The development of hydro-electric power in the Scottish Highlands was a revolution…

A SECOND REVOLUTION?

Intro: An investment appraisal and feasibility study is currently underway between the Scottish Government and Scottish Power for a new development of hydro-electric storage at Cruachan, beside Loch Awe

The development of hydro-electric power in the Scottish Highlands was seen as a revolution. It provided for a big leap in living standards, not just because residents in northern Scotland could have a reliable and dependable supply of electricity to light and heat their homes, but also because it became an engine of growth for industry and commerce.

The First Minister in Scotland, Alex Salmond, has announced a second expansion of hydro power. In conjunction with a feasibility study being carried out by Scottish Power, a major utility company, the aims are to more than double the current generation of electricity. Some suggest this could amount to a second revolution.

The technical feasibility is investigating the costs involved in doubling the generating capacity of Scottish Power’s Cruachan pumped storage plant located beside Loch Awe.

In principle, an expansion of pumped storage would be hugely beneficial, because it is regarded as the only reliable means of storing wind energy – which gets generated at times when there is no demand for it. Increasing the storage capacity would help to make wind a far more reliable source of energy supply, and also by reducing carbon emissions.

However, we should not dismiss the fact that this is a feasibility study that will take up to two years to complete. The associated costs and employment creation potential of the project are, at this early stage, a rough guesstimate. It may turn out that the Cruachan expansion plans, like Scottish Power’s schemes for carbon capture and storage at Longannet, and its proposals for the Argyll Array offshore wind farm, are too technically difficult or too costly for it to go ahead.

For it to work (effectively) as a 1,000 megawatt storage battery for wind power, there is the additional problem that the reservoir halfway up Ben Cruachan will have to be increased in size quite dramatically. The obstacles in overcoming resistance from environmental campaigners should not be overlooked, either.

The Scottish Government appears to regard the project as one that is more likely than not to come to fruition. But, notwithstanding whether the project ever goes ahead or not, this will become an investment decision that will serve a valuable political purpose. That decision is to be made after the referendum for Scottish independence in September.

In this context, energy is a problematic issue for Mr Salmond. Expansion of Scottish renewables – which, undoubtedly, the Scottish Government will see as a major source for employment as well as cutting the country’s carbon footprint – is largely dependent on a subsidy which is mostly financed by energy consumers in England and Wales.

Implicit in the First Minister’s arguments is that, such will be England’s needs, the people and businesses south of the Border will be willing to continue paying their ‘foreign’ neighbour the subsidy in maintaining continuity of supply. That’s a difficult assumption to make and certainly holds no guarantee.

History may be tempted to record that if the hydro revolution being envisaged fails to materialise, Mr Salmond has cleverly waved a diversionary red flag for political purposes. We can only hope, though, that the project investment at Cruachan gets the green light.

Under an independent Scotland, energy policy would be under the direct control of the Scottish Government.

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Britain, Economic, European Union, Government, Politics, Society

Addressing corruption in the EU is an urgent matter…

EUROPEAN UNION

Intro: Corruption throughout the EU is endemic. It needs urgent and effective attention

In southern and eastern European countries corruption is much more widespread than it is in Britain.

Cecilia Malmström, the EU’s Home Affairs commissioner, estimates that across the EU, the amount of money paid in bribes and racketeering may add up to more than a £100 billion.

This is a staggering sum of money. The estimate given is based on surveys of people who were asked whether they knew about specific cases of having to pay a bribe and what their general perceptions of the problems of corruption in their country were.

In the UK, less than 0.5 per cent of people had either experienced, or knew of, an instance of bribery, the lowest percentage in the EU’s member states. This compares extremely favourably to respondents in Croatia, the Czech Republic, Lithuania, Bulgaria, Romania and Greece, where between 6 and 29 per cent of those questioned indicated  that they were asked or had been expected to pay a bribe in the last 12 months.

Yet, the perceived rates of blackmail and extortion related activities in the UK compared to others in the EU are much closer. Even in Britain, where the actual rates are deemed low, 64 per cent of people think corruption is widespread. Across the EU, an average of 74 per cent believes this is the case. In Greece, the perceived rate rises to an astonishing 99 per cent.

The gap between actual experience of corruption and perceptions of it can be accounted for by the widespread publicity which is given to instances of political corruption and the attention which is drawn to interest and exchange-rate fixing scandals still emerging from the financial industry (such as LIBOR, the price of oil and, more worryingly, the true value of gold).

In those countries with the highest experience of financial bribery, most instances relate to healthcare. This has stemmed from the inadequacy of public health provision which has led people to bribe and blackmail doctors to secure early treatment of illness.

Ms Malmström, a Swede, asserts that stamping out corruption is not the responsibility of the European Commission. Rather, she says, that responsibility lies with national governments, on whom she is calling to do more. She is certainly right to argue that instances of bribery is not just draining resources from legal activity and feeding criminality, but that such activity is also undermining the trust that the public has in democratic institutions.

What is more, however, is that in the UK the report’s findings may well have the unintentional consequence of further eroding the fragile belief in the EU. Whilst this report makes clear that the Commission’s own anti-corruption unit is under-resourced and has a vast swathe of fraud allegations in EU spending it will never likely investigate properly, the unit has long been the subject of reports of incompetence and irregularities in the management of its own budget.

Rectifying this situation should be an EU priority. But the EU’s bribery report may well have the effect of colouring the view that many Britons already have – that it is even more corrupt than they ever thought. It is right to ask if British taxes which flow to the EU are being wasted or, worse still, whether they are being harnessed to feather criminal nests and extortion rings.

The possibility exists in the UK for an in-or-out referendum on British membership of the EU in 2017, following the pledge given by the Prime Minister since he has held office. But, this recent EU report will only confirm Eurosceptical prejudices. For Europe to be cleansed of endemic corruption, the European Commission must act with a degree of urgency and effectiveness in dealing with the issues that underpin it.

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