By Taras Kuzio of the University of Alberta
This week, St Petersburg hosted a bizarre gathering organized by the Rodina (Motherland) party of 150 European fascist and nationalist-populist political parties united in their opposition to the EU and US and in support of Russia’s annexation of Crimea and invasion of eastern Ukraine. Rodina is the loyal nationalist ally of President Vladimir Putin’s United Russia party and consequently plays a similar role to the Radical Party’s alliance with the Serbian Socialist party. Read more
By Arturo Porzecanski of American University
Recent moves, countermoves and judicial decisions have brought the government of Argentina perilously close to a checkmate situation. As a result, the endgame in the litigation saga pitting holdout investors against a “uniquely recalcitrant debtor” is now within sight. If the authorities in Buenos Aires were to set aside their confrontational rhetoric and do what is best for their own political survival, they would agree to a negotiated settlement sooner rather than later. Read more
By David Clark of the Russia Foundation
Natalie Jaresko, Ukraine’s finance minister, is in London this week to drum up support for her country’s ailing economy. It is badly needed. The physical destruction of property, the loss of production and the disruption to trade and finance caused by Russia’s military intervention mean that Ukraine has lost around a fifth of its economy in the last year. Forecasts that it will contract by a further 5.5 per cent this year are widely seen as optimistic. With the value of the hryvnia down by 70 per cent, inflation at around 35 per cent and foreign currency reserves running low, the IMF’s recently agreed $17.5bn support package already looks like a sticking plaster solution for an economy that needs a blood transfusion. Read more
By Matthew Duhan, Global Counsel
Despite the economic and currency crisis engulfing Ukraine, by 7 o’clock in the evening the National Bank of Ukraine (NBU) is virtually empty. But as the majority of its 12,000 employees head home, lights remain on in a few offices and footsteps echo through dark hallways as a small group of reform-minded individuals arrive for their unofficial night shift. To paraphrase the old line about the Indian economy, at the National Bank of Ukraine reform happens in the night while the government sleeps. Read more
By Andrew Foxall of The Henry Jackson Society
Unwilling to go to war with Russia, the west’s main levers for persuading Vladimir Putin to back down over Ukraine are economic sanctions. Their importance was underscored last week, when the US announced new measures against 14 individuals and two entities. While the attention-grabbing name on the US list was Aleksandr Dugin, the academic-turned-policymaker whose musings on ‘Eurasianism’ has led some to refer to him as “Putin’s Brain”, another entity was the little-known Russian National Commercial Bank (RNCB). Read more
By Simon Saradzhyan
To hear Vladimir Putin say it, Russia is not at war with Ukraine. “I think that this apocalyptic scenario is highly unlikely, and I hope it never comes to that,” Putin said when asked on Russia’s Defender of the Fatherland Day whether his fellow citizens may “wake up one day to learn we are at war” with Ukraine. It can be inferred that the commander-in-chief of the Russian armed force believes (or wants us to believe) that there will be no war between Russia and Ukraine for as long as Moscow refuses to admit to its involvement in the conflict. But is there such a thing as a declared war any more? And how should other European nations respond if they become the target of an undeclared war? What can be done to prevent repetition of the Ukraine scenario elsewhere in Europe?
By Anders Heede of BDO
Many emerging markets, especially in sub-Saharan Africa, have seen solid GDP growth in the past decade driven mainly by natural resources. But with falling commodity prices and Chinese demand dwindling, those with overly resource-dependent economies are being caught. Companies seeking to invest in emerging markets should be on the lookout for those countries that have invested in diversifying their economies. That will often mean having Ethiopia on their shortlist. Read more
By Paul Shortell
Mexico’s electricity industry appears poised to outperform oil and gas in 2015. Ambitious plans to boost investment and increase production in the hydrocarbons sector, widely consider the poster child for President Enrique Peña Nieto’s wide-ranging economic reforms, have been complicated by the collapse of crude oil prices. State oil company Pemex recently reduced its estimate of investment this year by the oil and gas sector from $35bn to $25bn and may be forced to delay licensing of certain unconventional and offshore blocks. In January, more than 10,000 workers contracted by Pemex lost their jobs as the indebted company undertook new austerity measures.
Though not without its own challenges, the power sector shines by comparison. Read more
By Olly Buston and Peter Nicholls
Many people think that slavery ended with the demise of the barbaric trans-Atlantic trade 150 years ago. But modern forms of slavery still exist. According to the Global Slavery Index, an estimated 35.8m people are victims of forced labour, human trafficking or debt bondage, more than at any other moment in history. That’s 35.8m people who are more or less completely controlled by another for their use or profit. An astonishing two thirds of these people live in the Brics economies of Brazil, Russia, India and China, with 14m people living in slavery in India alone.
The International Labour Organisation estimates that $150bn of illegal profits are generated each year by the use of modern slavery worldwide. One third is made through forced labour. The reality is that slavery exists in the supply chains of many of the products that we consume. This means consumer pressure has a major role to play in defeating this terrible crime. Read more
By Dr Abdul Halim
The last decade has been transformative for Islamic banking. While the practices involved in Sharia-compliant finance have been around for over a thousand years, it is only recently that the wider world has opened up and Islamic finance has ‘gone global’.
Last year, non-Muslim majority countries as diverse as South Africa, the UK, Hong Kong and Luxembourg issued debut Islamic bonds, or ‘sukuks’, while Goldman Sachs issued $500m worth of shariah-compliant bonds. Already a $2.1tn industry, it is estimated that the Islamic economy has further potential to reach a value of $6.7tn, with Islamic banking and the sukuk market accounting for 95 per cent of the industry’s assets worldwide.
With the industry going from strength to strength, it is incumbent upon us, as Islamic financiers, to consider how the industry can evolve to provide a wider range of products and services, while remaining true to a central pillar of Islamic finance, and Islam itself: charitable giving. Read more
By Riccardo Puliti of the European Bank for Reconstruction and Development
With energy security once again a paramount geopolitical concern, the rich energy resources of the Caspian are coming into focus.
In its newly published Energy Union Package, outlining the industry’s biggest shake-up in half a century, the European Union is looking hard at the Caspian region as a diversified source to meet the bloc’s energy requirements. Read more
By Taras Kuzio of the University of Alberta
One of the most challenging tasks faced by journalists writing on international affairs is to compare and contrast language used by neo-Soviet authoritarians and western diplomats with reality on the ground.
Foremost is the Orwellian doublespeak habitually used by neo-Soviet leaders such as Russia’s Present Vladimir Putin and Ukraine’s ex-President Viktor Yanukovych. Testifying before the US Senate’s Foreign Relations Committee, for example, Secretary of State John Kerry said Russian officials had repeatedly lied to him and other western leaders over their country’s intervention in eastern Ukraine. Read more
By Vitalii Kravchuk, Institute for Economic Research and Policy Consulting
Mat O’Brien’s recent contribution to the Washington Post’s Wonkblog on hyperinflation in Ukraine has had a huge impact. Drawing on work by Johns Hopkins professor Steve Hanke, O’Brien argues that, although the official rate of inflation from the Ukrainian State Committee on Statistics (Ukrstat) is 28.5 per cent, in reality it is more like 272 per cent.
Hanke is famous for his research on Zimbabwean hyperinflation, where the government was unable to calculate inflation and an alternative method had to be used. The main argument of Hanke’s article and of O’Brien’s blog post is that when a country’s currency collapses, it pushes up the prices of imports, which spill over to other prices. In this situation, Hanke argues, the true inflation rate can be calculated using “a rather straightforward application of a standard, time-tested economic theory” in the form of purchasing power parity, based on the free-market exchange rate (often the black market rate). This formula has been bluntly used in the case of Ukraine. Read more
By Wolfgang Fengler of the World Bank
For a good part of my life I have been an expat, working and living with my family in developing countries. It’s easier than most people imagine. If you can afford it, you get good schooling and decent healthcare and Jakarta’s shopping malls, for example, are more stylish than those of Berlin or Vienna. My first posting was in Indonesia, where we stayed five years before moving to Kenya. Both are emerging economies, now considered “middle-income”; decade-long investments in education have borne fruit and created a sizeable and vibrant talent pool among the young, and the mobile revolution has progressed dramatically so that almost everyone now owns a cell phone. Not all is rosy though: poverty remains widespread and visible – especially if you venture outside of expat circles- and crime can also be a big concern.
The biggest difference, however, between the developed and developing worlds is the likelihood of being confronted with death. Read more
By David Clark of the Russia Foundation
For all the attention given to the fighting in Donetsk and Luhansk, it is clear that Ukraine cannot solve its problems by military means alone. If there is a route to national salvation it lies in the field of domestic reform and the quest to find a new model of internal development. It is only by emulating the achievement of neighbouring Poland and becoming a well-governed country with a strong, dynamic economy that Ukraine can hope to escape from its current predicament. As a ‘Slavic tiger’ it could provide a source of attraction strong enough to regain eventual control over the territories it has lost and perhaps even become a catalyst for change in Russia itself. Stuck in a post-Soviet rut of dysfunctional institutions and economic stagnation, it will remain weak and vulnerable to Putin’s policy of divide and rule. Read more
By Tassos Stassopoulos of AllianceBernstein
What’s the connection between electricity and women? Electricity is an agent of empowerment, able to transform societies and economies in emerging markets. It paves the way to buying home appliances like electric cookers, refrigerators and washing machines, freeing up women from hours of daily housework. In our view, more access to electricity in developing countries will be a catalyst for more women to join the workforce, leading to huge changes in consumer spending patterns. Read more
By Ryan Olson, The Heritage Foundation
For several years, now, Sub-Saharan Africa’s largest oil producing states have been working to create sovereign wealth funds (SWFs). But as oil prices and production decline, such funds may not be able to deliver the benefits they once promised.
Since 2007 Angola, Ghana, Nigeria and Mauritania have joined Equatorial Guinea and Gabon in the club of oil-producing countries with SWFs. Currently, four of sub-Saharan Africa’s five largest oil producers maintain some sort of SWF.
Attracted, perhaps, by the success of similar funds in the Middle East and North Africa (MENA) region, sub-Saharan governments are looking to capture oil revenues in rainy day funds in order to smooth fiscal expenditures during suppressed commodity cycles. Read more
By Chris Tucker of MBX Systems
“What do you know about shipping product into Brazil?” When I think of the conversations I have had with our appliance customers over the last several years, this question makes a regular appearance. Brazil’s rapidly growing IT market (estimated at $191bn) and developing infrastructure have been appealing to our small and large customers alike, in markets from broadcast media to security. It is easily apparent why this market is so interesting, but it can actually be more taxing than one may think due to multiple factors.
Read on if you are considering shipping product into Brazil and want to know the challenges of selling and deploying your technology there. Read more
By Krisztián Szabados and Péter Krekó of the Political Capital Institute
Last week’s guest post by Balázs Orbán on Hungary’s foreign policy and the visit of Vladmir Putin adds little to the official government line – which is surprising, given that the visit demonstrated Budapest’s support for the Russian president when his country is under European Union sanctions for backing secessionist militants in a bloody insurrection in Ukraine. Read more