The curse of Cheney

Dick Cheney in Azerbaijan 3 months ago —

And we support the people of Azerbaijan in their efforts, often in the face of great challenges, to strengthen democracy, the rule of law, and respect for human rights, and to build a prosperous, modern, independent country that can serve as a pillar of moderation and stability in this critical part of the world.

Meek US State Department statement issued on a slow news day, 30 December —

We deeply regret Azerbaijan’s decision not to renew the broadcasting licenses of Radio Liberty, Voice of America and the BBC. These media organizations play a crucial role in supporting democratic debate and the free exchange of ideas and information. This decision, if carried out, will represent a serious setback to freedom of speech, and retard democratic reform in Azerbaijan.

We remain committed to working with the government of Azerbaijan to find the proper legal framework within which these radio and TV broadcasts can continue.

This came just over a week after the USA had made Azerbaijan eligible for tariff concessions on its exports to the USA — the kind of thing that can be revoked from African countries if they are judged to have regressed on political pluralism.  It’s as if there’s something special about Azerbaijan that trumps such concerns.

Ukraine kicks to touch on gas crisis

The Wall Street Journal (subs. req’d) is reporting that Ukraine is to settle the $2 billion debt to Gazprom via loans to the public gas company Naftogaz from two state-owned banks.  As Edward explained a few days ago, the gas debt is one of the open wounds of the economic crisis in Ukraine, with many questioning whether stabilization is possible with the huge gas debt unresolved.  And this solution really does nothing to resolve it.  The debt is now just shifted from Naftogaz to the state banks, and none of the ideas to put the gas transactions on a more sustainable path (e.g. by raising transit fees for gas destined for the EU) have been pursued.  Perhaps it’s another sign of the political paralysis.  But it’s not clear that the IMF will be amused by this nine zeroes debt juggle.

UPDATE: It seems that reports that the payment would resolve the latest Russia-Ukraine dispute are premature.  Naftogaz appears to have made a transfer to Gazprom that did not include “late fees” and deducted $100 million.

The face of Russian nationalism anno 2008

One of the top three faces that define Russia. By popular vote. Fair enough, I suppose:

The Kremlin in the Putin era has often sought to maintain as much sway over the portrayal of history as over the governing of the country. In seeking to restore Russia’s standing, Mr. Putin and other officials have stoked a nationalism that glorifies Soviet triumphs while playing down or even whitewashing the system’s horrors.

As a result, across Russia, many archives detailing killings, persecution and other such acts committed by the Soviet authorities have become increasingly off limits.

Bonus link (added 29th): the whitewashing of Stalin in the West and a nice quote by a reader of this BBC article:

I cannot help to think that the fact that Stalin was mostly bad to his own people and that his policies actually weakened his own country had something to do with the fact he is mildly looked upon in the West (compare this to Hitler who brought destruction to everyone else’s doorstep). No doubt that if Hitler was an ally of Britain and had restricted his genocide to within Germany, his crimes would have been swept under the carpet by the British press for the benefit of the greater good.

5,000 Terrorist Targets = War with Pakistan

Very, very worrying news from India and Pakistan. I especially don’t like all the stuff about school textbooks.

On Friday, India warned its citizens to stay away from Pakistan, claiming that they were in danger from agencies “that operate outside the law and civilian control”. Yesterday’s newspaper reports reflected increasingly frenzied war speculation. “Pak army on the march” was the headline in the Hindustan Times, while the Times of India – which led its Christmas Day edition with the headline “Pak whips itself into war frenzy” – reported that Pakistan had stepped up its “war moves”. Claims by Pakistan that Indian nationals had been arrested in connection with a Christmas Eve car bombing in Lahore were also angrily dismissed. Anand Sharma, an Indian external affairs minister, called the reports “hogwash”.

Although some in the Indian media have urged caution, there has been a spate of anti-Pakistan stories since the Mumbai attacks. Yesterday’s Times of India carried a front-page report headlined “Pak textbooks foster hate against India” which claimed that “venom against India is officially promoted to infect young minds in Pakistani schools” and asserted that terrorism in Pakistan had its roots in a culture of hate.

Yelling about the other side’s maps and school textbooks is a telltale symptom of nationalist hysteria. Also, look what the head of the Indian Air Force Western Command is saying:

Air Marshal PK Barbora, chief of India’s western air command, said that the air force had identified 5,000 terrorist targets inside Pakistani territory.

Five thousand terrorist targets? I’d bet there aren’t five thousand actual terrorists in Pakistan, as opposed to people who might agree with them, or think the Pakistani government is just looking for an excuse to bring its tax-collectors into their valley when it talks about terrorists. Terrorism is by definition a small-team pursuit; otherwise it wouldn’t be terrorism, it would be ordinary war.

Now, let’s remember a classic post on this blog. Back in February, 2007, the National Security Archive at George Washington University got hold of the original slides from the briefing document on war with Iraq. The heaviest air bombardment the planning study included foresaw 3,000 individual aiming points from 2,100 aircraft sorties, the difference being made up by an unknown mix of multiple-target missions and Tomahawk missiles. This was designed to wreck the Iraqi military and military-industrial complex thoroughly. The Pakistani officer here is suggesting a minimum of 5,000 aiming points.

Even compared to the Iraqi military-industrial complex at its hubristic height immediately after the Iran-Iraq war, with its nuclear programme, satellite-launch programme, T-72 tanks and indigenous airborne early-warning aircraft, it would be fair to say that the Pakistani one is a much more complex complex, with the benefit of years more investment and both US and Chinese support, to say nothing of the nuclear system and the secret AQ Khan procurement-network. So the first thing we have to conclude that Air Marshal P.K. Barbora is floating not just an operation directed at Lashkar-e-Toiba, or even ISI facilities, but a conventional blitz intended to wreck the Pakistani Air Force, the nuclear system, and as much of the ISI, the Army, the Navy and the defence industries and strategic infrastructure as he has aircraft left for.

Air Marshals always want this, of course. It goes without saying that he couldn’t launch something like this without an epic air battle and a ferocious Pakistani counterattack of some sort. Barbora’s command has a mixture of MiG-21, MiG-23/27, MiG-29, and SEPECAT Jaguar aircraft; the -21s, -23s and -29s are mostly assigned to air defence roles, the -27s to close support of the army, and the Jaguars are India’s premier strike aircraft. Among other things, their role includes carrying part of the nuclear deterrent. There are 108 of these; 6 are assigned to a maritime role in the Southern command. It is fair to say the rest will be facing Pakistan. An operation of this size would also involve the South-Western command and the Central command; the Central command controls most of the 110 Sukhoi 30 fighters and the 39 Dassault Mirage 2000-5 aircraft, some of which would be assigned a strike/attack role. The Sukhoi 30s are officially there as a pure fighter, but it’s unrealistic to imagine that given a latest-generation aircraft they won’t take any opportunity to get into the fray.

Therefore we can say there are about 150 serious strike aircraft available. There are also the four Tu-22M3 bombers, theoretically reserved for operations at sea. However, the fact the Russians lost one over Georgia may well dissuade them from looking for trouble. A big variable is the percentage of the MiG-27 fleet which will be held back for the Army – the Western command has many of them, but also has Kashmir and the critical Route 1 into Kashmir on its plate. Just using the Jaguars, Mirages, and any Sukhois assigned to the job, 5,000 aiming points would be attacked in 17 days at 2 sorties/aircraft/day. It’s fair to rule out many missions covering more than one target – this won’t be Afghanistan or even Iraq or even Iran. Pakistan has a lot of rather old but much-upgraded Mirage IIIs, Chinese-made MiG-21s, 44 F-16s (which are pre-1984 -A and -B models), and some very new Chinese JF-17s that really, nobody knows much about. Assuming 75% serviceability, it would be a theoretical 23 day campaign, but this doesn’t count the major commitment of fighters and defence suppression aircraft.

Clearly, however, there is no quick and relatively safe option. If Indian planning is anything like Barbora’s remarks, this means major war, with the certainty of the biggest air battle in living memory, the near certainty of a major mountain battle in Kashmir, a significant risk of the armies fighting out a battle of manoeuvre further south, and some risk of nuclear war.

I finished that post by saying that there would probably be no war with Iran. I can’t say that about India and Pakistan.


Cool, Europeana, the EU cultural online library, is back up again, albeit still in a test phase. On its launch in November the site was swamped with hits and crashed. Great tool if you are feeling a little escapist.

Update (hat tip Brusselsblogger): Please check out Kosmopolito’s post on Europeana.

Europeana could have developed into a true cultural European project that fosters cooperation between citizens that are willing to contribute to it, either integrated into wikipedia or as some sort of wikipedia clone! At the moment, it is only a cultural search engine with millions of external and not integrated content “items”, basically a traditional library catalogue with some nice thumbnails!

For Those of You Who Like Charts

Well, one good turn deserves another. So if, like Paul Krugman (and me, I think, though I hadn’t gotten as far as thinking through all the implications of what was happening when I posted the original piece) you take the view the Ukraine industrial output chart I put up yesterday is the smoking gun (or starter’s pistol, or line judge flag, or whichever metaphor works for you) that tells us that what we could come to call the second great depression may now have begun, then here are some more of those tell-tale charts to put in you pipe and smoke – or if , like Huck Finn that is your preference, to chew on.

(Update: someone in comments has made the perfectly legitimate point that Paul Krugman may only be saying that a Great Depression has broken out in Ukraine, and obviously only he can say what he really thinks, but as far as I am concerned, since one of the hallmarks of the original Great Depression was a sudden sharp drop in output, sustained over a number of years, and in a large group of countries, accompanied in several cases by outright price deflation, then I do think that what we now have on our hands is something that looks more like a depression than a recession (or slowdown) is what we now have on our hands, and what makes me more or less sure about that is looking not only at what is happening in Ukraine, but at neighbouring Russia, and China, and so on and so on. The point is that Ukraine is not an isolated case – if it were then we would simply be able to say that a large depression had broken out in Ukraine, and that would be that. But since part of the explanation for this sudden drop in output in Ukraine is a lack of working credit, and since this credit drought has now spread across most of Central and Eastern Europe (see Russia here, Poland here, and Romania here), and since the by-product of the Ukraine situation is likely to be a whole cycle of debt defaults, which will certainly spread well beyond Ukraine’s frontiers, and since in the wake of those defaults banks will become even less enthusiastic to lend, well then it does seem to me that what is happening in Ukraine has some more general significance. I also certainly think all of this was not far from Krugman’s mind when he made the post, since what he wasn’t doing was simply (in true bloggie fashion) saying ha ha, look what’s going on over there. What he was saying is “watch out, this can come back and give us all a kick” – which again is what he was doing with his Japan work in the late 1990s, and it did. My feeling, and it is only a feeling, is that what he wanted to do was move the debate on, and up a level. We can’t address the kind of problems we are facing if we fail to recognise we are facing them, and one of our problems in responding to this crisis (and especially here in Europe), has been a consistent failure to recognise the importance of what was happening, and to take measures which were up to the challenge. What was it they used to say: Ninja mortgages, ha, ha, ha. I don’t see these people laughing now.

Evidently, since history never exactly repeats itself, I am certainly not saying that the current crisis is going to last an entire decade, or end in a big war, or anything like that. What I am saying is that it has already made a place for itself in the history books, and already belongs to the class of large and unusual economic phenomena, and that we can learn a lot about how to handle our present problems by looking at the experience of 1930s. Of all of this I am absolutely convinced, and I have a pretty good idea that both Bernanke and Krugman are too, if you look at the constant references to those years in almost everything they say and do these days). Continue reading

As The Politicians Battle It Out Ukraine’s Economy Tunnels South In Search Of Australia

“In Ukraine, the evidence is still that policymakers do not quite understand the seriousness of the challenges they face,”. Timothy Ash, analyst at the Royal Bank of Scotland.

“There is a burgeoning economic crisis in the European periphery,” Krugman said on the ABC network Dec. 14. “The money has dried up. That’s the new center, the center of this crisis has moved from the U.S. housing market to the European periphery.”

Make no mistake about it. What is taking place right now in Ukraine is extraordinarily serious. The IMF have recently agreed a support loan to the country, but the politicians themselves still can’t agree on whether or not they are actually going to abide by the conditions attached to it. Meantime, as we can all see on our TV screens, tensions with Russia continue to escalate, fuelled by the conflict-ridden negotiations over Ukraine’s gas debt.

And just to add to the nighmare, Ukrain’s economy made a dramatic entry into recession in Q4 2008. In fact, so severe has been the slowdown that nobody at this point can even muster enthusiasm for opening up one of those interminable discussions about whether or not what the country is going through really counts as a “technical recession” (in terms of two successive quarters of GDP contraction) or not, since the drop in national output has been enormous, and it it fairly obvious that isn’t about to come bouncing back up again. At least not for the next several quarters it isn’t, and – to give us an early glimpse of the terrain onto which we are now entering – the World Bank have just forecast a 4% contraction in GDP for 2009. Continue reading

Travelling Through Latvia In Good Company (Ultra-Wonkish)

Well, it seems I’m not the only one who thinks that the IMF have made a bad decision over Latvia, since this year’s economics Nobel Prize winner Paul Krugman seems to agree. From his New York Times blog:

I’ve been saying this for a couple of weeks, but Edward Hugh has the goods.

Hugh puts his finger, in particular, on one gaping hole in the logic of the opponents of devaluation. We can’t devalue, they say, because the Latvian private sector has a lot of debts in euros, and a devaluation would make it very hard for borrowers to service those debts. As Hugh points out, the proposed alternative — sharp wage cuts, and basically a major domestic deflation — will also make it hard to service those debts. In fact, I’d be a bit more specific than Hugh: other things equal, a nominal devaluation and a real depreciation achieved through deflation should have exactly the same effect on debt service (unless some of the debt is in lats rather than euros, in which case devaluation would do less damage.)

This looks like events repeating themselves, the first time as tragedy, the second time as another tragedy.

Continue reading

What Is The Level Of Deflation Risk In Germany?

Only one thing is really clear about the Germany economy at the present time, and that is that it is shrinking rapidly. In fact it contracted far more than most analysts and observers expected in the third quarter (although I, for one, was not especially surprised), entering what now appears to be its worst recession in at least 12 years as both exports and domestic spending continue to fall. German gross domestic product in Q3 dropped by a seasonally adjusted 0.5 percent from the second quarter, when it fell by a quarterly 0.4 percent, according to revised data from the Federal Statistics Office. The Germany economy last had a two quarter contraction of this magnitude back in 1996.

And all the signs are that the fourth quarter will be worse than the third one, so the situation may even surpass the 1996 recession.

And bad as 2008 has been the 2009 outlook promises to be even worse. The International Monetary Fund are now forecasting outright GDP contractions for the U.S., Japan and the eurozone next year, with Germany’s economy expected to shrink by at least 0.8 percent (this as we will see is one of the most optimistic forecasts currently on the table for German GDP next year). The European Commission declared the 15-nation eurozone to be in recession in November, and just over 40 percent of the exports from this highly export dependent economy go to other eurozone nations. Continue reading