Series:OSW Commentary

Far behind Riga: Latvia’s problems with uneven development

Far behind Riga: Latvia’s problems with uneven development

Author(s): Bartosz Chmielewski / Language(s): English

Keywords: Latvia; Economic growth; Latvia's GDP; Riga; depopulation; migration;

Latvia’s economic situation is gradually deteriorating due to its uneven development. One of the main reasons for this is that the metropolis of Riga accounts for as much as two-thirds of the country’s economic growth. Economic and social indicators for Latvia’s regions are sometimes several times lower than those for its capital. The non-metropolitan areas are struggling with numerous problems: high unemployment, an aging population, deteriorating living standards, insufficient medical care, or a shrinking network of educational institutions. Another important fact is that local governments often function like ‘appanage principalities’. If the current trends continue, the state will continue to fall behind its neighbours Estonia and Lithuania.

The undeclared war. A new phase of the Azerbaijani-Armenian conflict

The undeclared war. A new phase of the Azerbaijani-Armenian conflict

Author(s): Wojciech Górecki,Krzysztof Strachota / Language(s): English

Keywords: Second Karabakh War; Azerbaijani-Armenian conflict; Nagorno-Karabakh conflict;

More than two years after the end of the Second Karabakh War in November 2020, the situation in the conflict area remains highly unstable. Despite declarations of a de facto solution to the problem, intensive peace talks and Armenia signalling significant concessions on the Nagorno-Karabakh issue, the region is once again becoming a flashpoint, as manifested by Azerbaijan’s blockade of it since December. In the process, the conflict has escalated to an open dispute between the two states. Azerbaijan has been provoking Armenia with military attacks along the line of the non-delimited state border (along which there was fierce fighting last September), and suggesting it might forcibly take over transportation routes (the so-called Zangezur corridor) on its neighbour’s territory.

German dilemma: Debt Pooling or ECB Interventions?

Niemiecki dylemat: uwspólnotowienie długów czy interwencje EBC?

Author(s): Konrad Popławski / Language(s): Polish

Keywords: public devts; economic crisis;

The financial crisis forced the European Central Bank (ECB) to move away from the three most important paradigms of German monetary policy accepted in the Euro area: the financing ban by the central bank of sovereign debts, an order to exercise by it in the first place to control inflation, and also to demand political independence in decision-making. This situation has been temporarily accepted by the government of Chancellor Angela Merkel, but not by German public opinion, which fears negative consequences ECB policy, primarily a possible increase in inflation. This is why future actions by the federal government will be aimed at restoring and consolidating the role of the ECB – the watchdog originally set out in the treaties low inflation. To achieve this, Germany must take responsibility at least part of the debt of the Eurozone, which the ECB will allow refocus on the conduct of monetary policy.

Nationalism in Russia: a dormant threat?

Nacjonalizm w Rosji: uśpione zagrożenie?

Author(s): Katarzyna Jarzyńska / Language(s): Polish

Keywords: multi-ethnicity in Russia; rassism in Russia; xenophobia in Russia;

Most Russians associate the term nationalism primarily with criminal ethnic background and riots involving radical nationalists. This is largely due to the message of the Russian media. Nationalist activity as dangerous for internal stability. Multi-ethnic Russia is subject to severe criticism and control by the Kremlin. The authorities are afraid that the rise of ethnic nationalisms among the peoples of Russia could lead to the escalation of conflicts based on nationality and even to the dissolution of the Russian Federation. Therefore, the Kremlin is trying to combat manifestations of xenophobia in Russia and impose its own vision of nationalism on society - so-called state nationalism, which is based on the multinational idea of Russia united by Russian culture and language. It is to become the foundamental Russian state identity. The actions of the authorities are positive consequences – the number of ethnic crimes in Russia has been declining for several years, and regular sociological research shows that support for radical nationalist slogans among Russians in the perspective of a few years does not increase. This does not mean, however, that the problems are ethnic in nature in Russia have been dissolved. We are dealing more and more with "hidden nationalism", the basis of which is a veiled aversion and the fear of Russians towards representatives of other nationalities resulting from dealing with strangers in everyday life. Social support for such views is difficult to measure in sociological research, but reveals itself violently in conflict situations.

Visaginas Nuclear Power Plant – still a high-risk investment

Wisagińska EIektrownia Jądrowa – inwestycja wciąż wysokiego ryzyka

Author(s): Joanna Hyndle-Hussein / Language(s): Polish

On June 21, the Lithuanian Parliament approved the construction project of a new nuclear power plant in Visaginas, Lithuania. The deputies agreed that the government would sign the initialed on 30 March 2012, a concession agreement with the Japanese company Hitachi Ltd., which took the position of a strategic investor and will deliver a modern reactor with a capacity of 1350 MW. The Lithuanian authorities did not succeed in their original intention to attract a Western investor to the project, willing to take over in it 51% of shares. Pursuant to the agreement, Hitachi is to hold only 20% of the future shares power plant, the initial cost of which is estimated at EUR 5 billion. Despite Hitachi's lower-than-announced financial commitment, its share as an investor and supplier of a modern reactor is to constitute a guarantee that the implementation of the project is economically viable. Most of the financial risk, however, will be borne by Lithuania itself will take up 38% of the power plant's shares. Participation negotiations are currently underway in the project of power companies from the Baltic region. Estonia would like to cover 22% and Latvia 20%. Approval of the Lithuanian Seimas for the government's plans to build a power plant and the agreement with Hitachi does not yet determine the implementation of the investment. final the decision to start construction is to be made in 2015 and that's it time, one should expect intensified actions by opponents of the project. On July 14, opposition deputies managed to push through the holding together with the parliamentary elections in Lithuania, scheduled for October 14, consultative referendum on the construction of Visaginas. NO it will have binding force, but it may have, together with the following ones initiatives of opponents of the nuclear power plant, impact on opportunities project implementation.

Reform of the Armed Forces of the Russian Federation under new leadership. There will be no counter-revolution

Reforma Sił Zbrojnych FR pod nowym kierownictwem. Kontrrewolucji nie będzie

Author(s): Andrzej Wilk / Language(s): Polish

Keywords: Russian Military; Russian Army;

The change in the position of the Russian Defense Minister in November 2012, carried out amidst a corruption scandal, aroused expectations among some of the Russian elite that a reform as initiated during Anatoly Serdyukov's term of office will take place, which would eliminate the remnants of the Soviet army and make the Armed Forces of the Russian Federation similar to the modern armies of Western countries,. Contrary to expectations, the new head of the ministry, Sergei Shoigu, did not carry out a personnel purge and maintained civilian control over the ministry's finances. The actions of the new management and the announced corrections, although they concern various areas - mainly the reform of military education and military health service - refer to issues related to the current course of privatization of the property of the Ministry of Defence. They are in the nature of cleaning up after the corruption scandals that directly contributed to Serdyukov's dismissal. This is despite numerous voices calling on Shoigu to suspend or even reverse the changes, especially those concerning the command structure and manning system. However, the actions undertaken by the newly appointed Chief of the General Staff, General Valery Gerasimov, and the First Deputy Minister, General Arkady Bachin, allow us to assume that the reform of the Russian army in the strictly military sphere will continue in accordance with its current assumptions. The pace of reforming the Armed Forces of the Russian Federation will be determined solely by the organizational and financial capabilities of the Russian state, above all by solving the problems between the defense ministry and the armaments industry, directly affecting the implementation of a large-scale, costly technical modernization.

Climate Protection – a specialty of German exports and diplomacy

Ochrona klimatu – specjalność niemieckiego eksportu i dyplomacji

Author(s): Rafał Bajczuk / Language(s): Polish

Keywords: climat policy;

Germany is one of the biggest promoters of climate protection policy and the development of green technologies, which initiated the next wave of innovation in the German economy and the emergence of a new branch of export industry (after the revolution related to the development of electronics in the 1950s and 1960s and information technology in the 80s and 90s). Government reports and independent research in Germany show that German entrepreneurs today have a 15% share in the global market green technologies, and in the following years this share will be maintained. However, the image of Germany the "prime" in the field of climate policy is disturbed by disputes over ambitious reduction targets emissions proposed by the European Commission. German industrial lobby represented in the government by the Ministry of Economy calls for a slower rate of emission reduction as well reducing the costs associated with this process so that the competitiveness of the traditional ones does not suffer German industries on the global market.

More state in the Russian pension system

Więcej państwa w rosyjskim systemie emerytur

Author(s): Katarzyna Jarzyńska / Language(s): Polish

Keywords: pension system in Russia;

Russians are the youngest and among the poorest pensioners in Europe. Although, according to the assumptions of the social state, all Russian citizens can count on a state pension, it is low and often insufficient to meet basic needs. Currently, the Russian pension system is facing new challenges. The most serious of them are the unfavorable prospects for the development of the demographic situation and the labor market: first of all, the aging of the population, the dynamic decrease in the number of economically active people and the fact that a significant proportion of Russians and economic immigrants work in the gray economy. With the current model of the pension system, based on the principle of solidarity between generations, these negative trends lead to an increase in the deficit of the Pension Fund of the Russian Federation and a tightening of the dependence of the pension system on injections from the state budget.

Crimean bottomless pit: the costs of Russia's annexation of the peninsula

Krymski worek bez dna: koszty aneksji półwyspu przez Rosję

Author(s): Ewa Fischer,Jadwiga Rogoża / Language(s): Polish

Keywords: Crimea annexation;

The annexation of Crimea brought significant dividends to the Russian authorities, in particular in the domestic arena, causing unprecedented socio-political consolidation and strengthening the position of Vladimir Putin after several years of declining support. It also provided Russia with strategic advantages, giving it wide access to the Black Sea and to the military infrastructure on the peninsula, as well as natural gas and oil resources. Russia has also taken over numerous facilities (including tourist facilities) owned by the Ukrainian state. However, the very decision to annex Crimea was made by Moscow ad hoc, without calculating the costs of integrating the peninsula with the Russian legal, political and socio-economic system. // Russia has taken over the region previously subsidized from the Ukrainian budget, and the annexation has hit the most important branch of the Crimean economy - tourism. The process of Crimea's integration with Russia will be complex and will entail high financial, organizational and social costs, including multi-billion-dollar outlays for the modernization and expansion of infrastructure, covering the region's budget deficit, and the payment of social benefits. // For reasons of prestige and politics, Moscow treats the issue of Crimea's integration as a priority; is determined to prove that the annexation of the peninsula will be beneficial for the Crimean economy and will raise the standard of living of the inhabitants. However, the expenses related to the integration of Crimea will coincide with the deteriorating economic situation in Russia, aggravated by the US and EU sanctions, which may lead to the abandonment of some ambitious investment plans or their postponement. Part of the integration costs will be borne by the Russian regions, even though they are struggling with major financial problems, which force them to limit their own investment programs. The fulfillment of the hopes of the inhabitants of Crimea for an improvement in the standard of living is also questionable, including due to the problems of the tourism sector (which is one of the main sources of income for the inhabitants), the increase in the cost of living and problems with supplies, and finally due to restrictions on civil rights after the introduction of more restrictive Russian legislation.

A ‘key state’: India is gaining significance as a political and economic partner for Germany

A ‘key state’: India is gaining significance as a political and economic partner for Germany

Author(s): Lidia Gibadło,Sebastian Płóciennik / Language(s): English

Keywords: India; Germany; economic cooperation; political dialogue; Indo-German relations; low labour costs;

Chancellor Olaf Scholz’s visit to India in February this year was unlike his other foreign trips. This visit was important not only politically but also economically: the German chancellor was accompanied by managers of companies such as Siemens, ThyssenKrupp, Deutsche Post and SAP. This once again proves Germany’s growing interest in building stronger relations with India. In June 2022, Scholz invited Prime Minister Narendra Modi to a G7 meeting at Schloss Elmau. Only two months earlier, Modi had paid an official visit to Berlin during the sixth bilateral intergovernmental consultations. In February this year, in addition to the chancellor himself, Christian Lindner (FDP) and Annalena Baerbock (Greens) visited India. Their visits were part of meetings of the finance and foreign affairs ministers of the G20 group.

Russian economy in 2022. Adaptation and a growing budget gap

Russian economy in 2022. Adaptation and a growing budget gap

Author(s): Iwona Wiśniewska / Language(s): English

Keywords: Russia; Economy; 2022; Budget; Agriculture; consumer demand; natural gas output; Russian currency;

Russia’s macroeconomic performance in 2022 confounded forecasts from one year ago, a few weeks after the invasion of Ukraine. However, in wartime conditions, indicators such as GDP do not accurately reflect the real state of the economy, due to the rapidly increasing military expenditure, the scale of the ongoing changes and major differences between individual sectors. Furthermore, the credibility of the published macroeconomic data is declining and the government has been restricting access to statistical data.

Mobilisation in Russia: society’s reactions and the economic consequences

Mobilisation in Russia: society’s reactions and the economic consequences

Author(s): Iwona Wiśniewska,Katarzyna Chawryło (Jarzyńska) / Language(s): English

Keywords: Russia; mobilisation; Armed Forces of the Russian Federation; emigration; economic costs of mobilisation;

The mobilisation of 300,000 reservists into the Armed Forces of the Russian Federation, which has been ongoing since the end of September 2022, has laid bare the chaos in the administrative apparatus and has given rise to concern among citizens. It has made many Russians realise that their country is waging a genuine war, which requires direct involvement on their part. The government’s decision has provoked a visible reaction in society, involving young men emigrating from Russia in numbers which are difficult to estimate.

A year of war in Ukraine’s foreign trade

A year of war in Ukraine’s foreign trade

Author(s): Sławomir Matuszak / Language(s): English

Keywords: Russian invasion of Ukraine; Foreign trade; Rail and road transport; Ukraine's GDP;

The Russian invasion has led to a collapse in Ukraine’s trade, in particular foreign trade. It has also caused major changes in the geographical structure of its imports and exports. Due to the Russian blockade, Ukrainian ports have lost their status as the country’s main export gateway. Rail and road transport has gained in importance, as since 24 February 2022 Ukraine has used them to ship and import most of its goods via the territory of its western neighbors. As a consequence, the European Union has consolidated its role as Kyiv’s main trade partner in both exports and imports, while Poland – for the first time in history – has become the leader in Ukraine’s trade exchange.

The reluctant co-aggressor. Minsk’s complicity in the war against Ukraine

The reluctant co-aggressor. Minsk’s complicity in the war against Ukraine

Author(s): Piotr Żochowski,Kamil Kłysiński,Andrzej Wilk / Language(s): English

Keywords: War against Ukraine; Belarus; Alyaksandr Lukashenko; Belarusian power apparatus;

Since the beginning of Russia’s aggression against Ukraine, the Republic of Belarus (RB) has made its territory and its military, transport and logistical infrastructure available to the Russian army. However, the Belarusian army is not taking part in the hostilities. Alyaksandr Lukashenka’s regime is reluctant to become directly involved in the war, which results from anti-war sentiment among the country’s elite and the majority of the population, and out off ear of the domestic destabilisation which would most likely occur should the Belarusian army enter Ukraine. Therefore, Lukashenka is making attempts to avoid such a scenario: he regularly denies rumours that the Kremlin is putting pressure on him, and has stressed that the main threats to Belarus include alleged acts of provocation and aggressive behaviour from NATO. At present, there are no indications that the Kremlin intends to send Belarusian troops to take part in the war; it seems satisfied with the current format of cooperation between the two countries. Russia’s main task for Belarus, as part of the Regional Group of Forces, is to provide cover for its own forces, while the Belarusian army itself is unprepared to launch offensive actions. The most likely short-term scenario involves Minsk continuing to provide multifaceted support to the Russian army without directly dispatching its own troops to Ukraine.

Putin’s neo-totalitarian project: the current political situation in Russia

Putin’s neo-totalitarian project: the current political situation in Russia

Author(s): Maria Domańska / Language(s): English

Keywords: Vladimir Putin; Russia: neo-totalitarianism; War in Ukraine; Society in Russia and their attitude on war;

As the invasion of Ukraine began, the totalitarian ambitions of the Putin regime were revealed on a larger scale than ever before. These designs have been reflected in increased repression, the unprecedented encroachment of the state into the private lives of citizens, the growing ideologisation of the public discourse, and top-down efforts to mobilise public support for the war. The regime is dismantling the previous semblance of pluralism that had existed within the ruling elite. There is no sign of a coming split within the political establishment and business circles, while society is demonstrating great adaptability to the realities of armed conflict. Even forced deployments of citizens to the frontline have not met with any significant resistance. This situation is likely to continue unless Russia suffers a crushing military defeat in Ukraine. It should be assumed that Vladimir Putin will run in the presidential election scheduled for March 2024 and build his legitimacy on the myth of ‘defensive war’ against the West.

Czech presidential election: change on the horizon

Czech presidential election: change on the horizon

Author(s): Krzysztof Dębiec / Language(s): English

Keywords: Czech presidential election; Czech political life; Petr Pavel; Andrej Babiš; Danuše Nerudová;

Miloš Zeman will complete his second presidential term in March 2023. He will be replaced by one of eight candidates who will face off in the January elections. The first round of voting will take place on 13–14 January, with a second round on 27–28 January very likely. Among the contenders, three favourites stand out: two figures from outside politics will face ex-Prime Minister Andrej Babiš (ANO) – General Petr Pavel, the former chairman of the NATO Military Committee; and Danuše Nerudová, the former rector of the Mendel University in Brno and a professor of public finance. Recent polls rule out the possibility of any candidate winning in the first round. If Nerudová’s campaign does not regain momentum, the second round will almost certainly feature Pavel and Babiš, the latter of whom has a disciplined group of voters. However, the former prime minister has limited chances of success there due to his large negative electorate.

On the verge of blackout: Ukraine facing attacks on its electricity generation system

On the verge of blackout: Ukraine facing attacks on its electricity generation system

Author(s): Sławomir Matuszak / Language(s): English

Keywords: Ukraine's power plants; electricity grid; Missile attacks on energy infrastructure in Ukraine; Ukraine’s GDP; blackouts;

Ukraine’s power plants and electricity grid have been subjected to regular, massive shelling campaigns using ballistic missiles and kamikaze drones for the past three months. Although they have not so far brought about a permanent nationwide blackout, on several occasions they resulted in significant destabilisation of the grid’s operation. Increasingly frequent power outages (both planned and unplanned, usually lasting many hours) have become daily occurrences in almost all regions of Ukraine. In response to this, Kyiv has prepared measures to secure the state’s continued operation in situations of prolonged power outages. At the end of December 2022, a network of nearly 1500 banking outlets was established to provide banking services regardless of the situation. To ensure that other sectors of the economy can continue operating uninterrupted, filling station and mobile network operators have also taken similar measures. While it is impossible to predict whether Russia will attain its goal, namely to cause a complete and prolonged blackout of Ukraine, the attacks carried out so far have already had a very negative impact on the country’s economy. At the same time, there are no indications that the problems with electricity supplies will break the resistance of Ukrainian society or significantly boost migration.

Netanyahu for the sixth time: the new Israeli government

Netanyahu for the sixth time: the new Israeli government

Author(s): Marek Matusiak / Language(s): English

Keywords: Benjamin Netanyahu; Israel; Government; Knesset; Likut; government’s foreign policy;

A new Israeli government was sworn in on 29 December 2022, as Benjamin Netanyahu took the helm as prime minister for the sixth time in his career, after a year and a half in opposition. Negotiations on forming a government coalition had been ongoing since early November, when parliamentary elections were held for the fifth time in four years. The new coalition holds 64 of the 120 seats in the Knesset, and consists of six parties: two are ultra-religious, three combine religious and national radicalism, while the largest of them, Likud, is a secular nationalist party. The make-up of the coalition, the views of individual members of the government and its first moves indicate that the new cabinet is Israel’s most religiously conservative and nationalist in its history. We should expect its policies to institute significant changes in many areas of public life. This applies primarily to domestic affairs, but also to some extent to Israel’s relations with the US and Russia, as well as the war in Ukraine.

‘Europe’s engine’ seizing up. French-German relations during the polycrisis

‘Europe’s engine’ seizing up. French-German relations during the polycrisis

Author(s): Sebastian Płóciennik,Lidia Gibadło / Language(s): English

Keywords: French-German relations; EU’s economic policy; global economy; energy policies; Security;

The COVID-19 pandemic and the war in Ukraine have highlighted the differences in interests between Paris and Berlin, and caused tension to accumulate in their bilateral relations. The significance of this tension goes beyond the purely bilateral dimension: policy alignment between the EU’s two most important members has always played a key role in the integration mechanism in Europe. However, the current disputes will not necessarily bring an end to this coordination. They are deeply embedded in the patterns of the traditionally divergent approaches which Germany and France have to economic, security, and integration issues, which is why they have not come as any surprise to the ruling elites in these states. Nevertheless, both countries will benefit from overcoming them in the long-term. Efforts to define Franco--German cooperation in an enlarged and more diverse EU will pose an even greater challenge to Paris and Berlin. Flexible coalitions between states and other cooperation formats which arise ad hoc will likely compete with these two leaders.

Safe skies? Air defence on NATO’s northern, eastern and south-eastern flank

Safe skies? Air defence on NATO’s northern, eastern and south-eastern flank

Author(s): Jacek Tarociński,Justyna Gotkowska / Language(s): English

Keywords: NATO; Air defence in the Baltic states; Russia; Ukraine; Visegrad Group countries;

The Russian aggression against Ukraine has highlighted the crucial role of air and missile defence in modern full-scale conflicts. A multi-layered, adequately saturated and integrated system is necessary to provide cover for troops, and also to protect the critical infrastructure and major population centres of the countries on NATO’s northern, eastern and south-eastern flank. These countries, along with Sweden and Finland, have varying levels of air defence protection, but none of them are currently sufficient in themselves, and the ongoing efforts to build multi-layered air defences leave much to be desired. Only some of these countries are in the advanced process of modernising and building up their capabilities. There are also some whose systems provide only rudimentary protection, and which have no plans to develop them adequately or are unable to do so for financial reasons. This poses a problem more broadly for the Alliance as a whole, as the critical infrastructure in these countries – which will be used for military purposes in case of a NATO operation – is insufficiently protected.