The Power and the Money

Dictatorship rising

In 2011, John Quiggin hypothesized that we were on the verge of eliminating old fashioned tyranny, “in the historical sense of absolute rule by an individual who has seized power, rather than acquiring it by inheritance or election.” 

I can understand his optimism. In the below photo, I am standing atop an abandoned monument to the absolute dictatorship of Enver Hoxha in Albania. There are a lot of former dictatorships in the world.  

But ...

In 2011, in response to a post by John Quiggin, Doug Muir pointed out that there were still quite a few dictatorships left. We defined dictators as (1) a solitary leader, who (2) wields tremendous personal power, and (3) rules in a generally illiberal manner, and (4) will not leave office or surrender power unless compelled by force majeure, and (5) is not a traditional monarch. So we do not include Arab monarchies (like Saudi Arabia), collective one-party states (like Vietnam), illiberal democracies (like Hungary), elected governments formally limited by unelected bodies (like Iran), or military juntas (of which there seem to be none at this moment.) 

Still, back in 2011, you could see a pattern. The New World was free of dictators outside Cuba. Every other dictatorship other than Syria was either in post-colonial Africa or the post-imperial Soviet space. And the Syrian dictatorship, many thought, was not going to be with us for much longer. 

Another but ...

Today that pattern no long exists. Dictatorship is everywhere. Consider the countries that were dictatorships in 2011 and are still dictatorships in 2018: Angola, Azerbaijan, Belarus, Cambodia, Cameroon, Chad, Congo Republic, D.R. Congo, Cuba, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Kazakhstan, North Korea, Rwanda, Sudan, Syria, Tajikistan, Turkmenistan, Uganda, and Uzbekistan.

The only two three countries to leave are Gambia, Zimbabwe and South Sudan ... the latter by dint of falling into prolonged civil war. (In comments, J.H. pointed out that Gambia is no longer a dictatorship.)

What about newcomers? Well, we have Fiji, Maldives, Nicaragua and Tanzania, and Togo ... plus Egypt, Russia, Turkey and Venezuela. It seems as though China has joined them and Honduras is making a play after the incumbent got the Supreme Court to nonsensically overrule the constitution and then blatantly stole an election. 

In total we have six small newcomers and five major ones. Only two are in sub-Saharan Africa. Two have nuclear weapons.

The world is still more peaceful than ever before. But inasmuch as you believe that said peace is due to the spread of democracy, we may have some frightening years ahead.

I would like to be wrong. Please tell me that I am wrong.

Attack of the drones, updated

 New information emerged fast regarding that drone attack in Syria. From the Washington Post:

1. Nobody seems to know who was responsible. Yesterday we noted that the Islamic State controlled no more territory; experts suspect a different rebel group was responsible;
2. The Russians claim the attack involved 13 drones, 7 shot down and 6 disrupted by electronic countermeasures;
3. The drones appear to have traveled at least 50 kilometers.

In terms of the Syrian Civil War, this is a nothingburger. It does not represent a rebel resurgence. Nor is does it mean anything for the Russian presence, which was already being drawn down in the wake of Putin’s declaration of victory.

But in terms of the future of war, it’s a harbinger. I want to know more about those electronic countermeasures.

Attack of the drones

 One day we have to continue our fisking of Ghost Fleet. I don’t like panning anything, but the book was full of howlers. Fine for fiction, but it was dispiriting to see so many people take it so seriously.

But one thing the book got right was the use of drones in future conflict, including a good scene during the Chinese invasion of Hawaii (page 69).

It now seems that life is catching up with fiction, right on schedule.

The Islamic State used drones regularly as weapons. Sometimes they placed bombs on the drones themselves; other times they would drop mortar shells from the UAVs. Now, however, the remnants of the Islamic State appear to have upped their game and attacked Russian forces en masse. They claim to have destroyed an S-400 missile launcher.

Unsurprisingly, the Russians claim something rather different.

A more neutral take supports the Russian claim that their Pantsir S-2 anti-aircraft cannon was successful in shredding the attack by a small fleet of commercial quadcopters.

All this said, the Islamic State no longer controls meaningful territory and couldn’t be expected to mount much of an attack. But what happens as the drones get better? Like, say, by mounting a small kerosene jet engine on ‘em? Or, more frighteningly, by going the other way and making ‘em smaller and smaller and ever harder to detect?

I’m relatively sanguine about this development. It won’t bring down civilization. But it may revolutionize ground combat. I’m not sure what the defenses against slaughterbots will look like, but I am sure that we’re going to see some dramatic changes in military tactics over the next decade.

Thoughts?

The year 2049 in a parallel universe

President Trump fired James Comey today. Comey did engage in malpractice over the Clinton investigation and he did misrepresent what was on the Weiner laptop to Congress. But we all know that is not why he was fired. So as America slips a little further into dystopia, we can take some solace in that fact that things are better than they were in 1919. For now. 

But I come to discuss the year 2049, not 1919. Here is the new Blade Runner trailer:

There is a lot going on. But stop on second 48 and note that the holographic ballet dancers are above a rotating chyron that reads: “Soviet Happy: Product of CCCP.” Add that to the Atari logo, and it is clear that the movie is not set in our universe or our future. Kudos to the writers and producers for not trying.

Still, you gotta wonder. What would turn the suburbs of L.A. into a desert with broken freeways but leave the USSR around to make, uh, Soviet Happy?

I miss pointless discussions. Never thought that I would, but I do.

The big bear is interfering with the little one

Well. An NPR station in California reported that the head of the Calexit movement, Louis Marinelli, may be orginally from Buffalo but currently resides in, you guessed it, Russia.

Now, Marinelli says that he’s in Yekaterinburg to handle his wife’s immigration. Linking the Calexit movement with Putin on that basis would be unfair. But what would not be unfair is noting that Calexit appears to have been covered mostly by Russian outlets until November 8th. At that point, Shervin Pishevar tossed out his infamous tweet, which got journalists googling. They picked up the Calexit people, and poof, instant news of secessionist sentiment in the Far West.

Robert English (of USC) said it best: “This is what Russia is great at. Their media apparatus is so good at spreading disinformation. It makes the line between nutsos and normal people hard to draw.”

There are many ways in which the next four years could go dramatically wrong. Blue state secessionism is not one of them. But Russian attempts to weaken our tottering democratic institutions, well, that is a worry. Our immune systems are weak; consider how quickly this gobbledygook story spread.

For the curious, here is the proposed initiative. 

Escapism: A 19th-Century science fiction novel and a 21st-Century science fiction TV series

 First, this is the weirdest thing that I have ever read. It’s a science fiction novel from 1889. It’s badly-written. (I mean, it’s badly-written for 1889. For comparison, A Connecticut Yankee in King Arthur’s Court was published around the same time.) The technological extrapolations are weird and wrong and barely affect the plot, which concerns bizarre machinations around the succession to the British Empire and some weird-ass scheme where the President of the United States is trying to marry off her daughter to the Emperor. It ends with Canada beating the U.S. in a war.

Anyway. Why did I read it? Well, besides insomnia most of the major characters are women, and women who were not trying to impress a man. That is pathetically rare, even today, let alone 1889. Plus the author went out of his way to point out all the awesome people in the book who just also happened to be Jewish. For something so old-fashioned, it was also strikingly modern.

Second, I finished watching Occupied on Netflix. I recommend it! The main scenario is improbable, but slightly significantly less so than before November 8th. An energy-independent U.S. has pulled out of NATO and established a valued relationship with the Russian Federation. In the midst of a massive surge in energy prices prompted by wars in the Middle East, a Green government in Norway decides to shut down the country’s oil and gas production in order to combat climate change. Panicky Europeans green-light a Russian seizure of the Norwegian fields to restart production. The Norwegian prime minister reluctantly allows this in order to avoid a war, but his county finds itself entrapped in a slow-motion conquest as the Russians slowly assume more-and-more authority. 

It is quite well done. My only quibble? Well, whoever plays the American ambassador to Norway has a Canadian accent. You know, with that weird caught=cot sound you can hear from Justin Trudeau. Given that a pretty massive plurality of Canadians don’t have a recognizable Canadian accent, it’s an impressive bit of miscasting. (If somebody finds out that the actor who plays the ambassador is actually from Massachusetts, I will be embarrassed.)

The accent screw-up is all the more inexplicable considering how good British and Australian actors have gotten at mimicking spot-on American accents, even American regional accents.

But not Russell Crowe. See minute 1:12 in this clip from an otherwise great movie. Points to the person who guesses the word he screws up in the context of getting everything else right. The mess-up is all the more pronounced considering as he is in a scene with Denzel Washington, who has a perfect New York accent considering as that is how he naturally talks.

Actually, a television show about a Russian occupation of Norway might not be all that escapist these days, considering. 

There is no Soviet domination of Eastern Europe, redux

The title of this post is a famous line in the Ford-Carter presidential debate in 1976.

President Ford was asked a question about the Helsinki agreement, which according to the moderator, recognized that “the Russians have dominance in Eastern Europe.” Now, outside the Baltics, the moderator’s claim was false! The agreement did not admit that Moscow had the right to govern the Warsaw Pact countries. In fact, the agreement did exactly the reverse, by disavowing both armed intervention and the use of economic sanctions as means of coercion. 

President Ford started to say, “I can’t under any circumstances believe ... that by signing the agreement ... 35 nations have turned over to the Warsaw Pact nations the domination of Eastern Europe. It just isn’t true!” And that would have been a fine answer to a loaded question. Unfortunately, he went on to add, “There is no Soviet domination of Eastern Europe and there never will be under a Ford administration.” 

Man, that was a gaffe. President Ford knew exactly what he was talking about, he just said something stupid and then refused to walk it back. (If you watch the clip, you can see him beginning a good recovery, and then blowing it by saying that he did not think that the Poles considered themselves dominated by the Soviet Union.) 

Well, yesterday, Gary Johnson made a much more serious gaffe in an interview on MSNBC. The transcript:

Mike Barnicle asked Johnson: “What would you do if you were elected, about Aleppo?”

“About?” asked Johnson.

“Aleppo,” replied Barnicle.

“And what is Aleppo?” asked Johnson.

“You’re kidding,” responded Barnicle.

“No,” said Johnson.

Uh. That boggles the mind. Stunning. Ford made a gaffe, Johnson just admitted to total political malpractice and disqualifying ignorance. I stand in slack-jawed amazement ... and now I understand why Mitt Romney has refused to endorse. 

Anyone who wanted the Libertarians to become a real third party force in America should be very angry at Gary Johnson right now. As should anyone who believes that running for President of the United States is, you know, a serious thing. 

Paranoid thoughts

 The fat crybaby has whined that he won’t defend the Baltic States unless, well ...

SANGER: If Russia came over the border into Estonia or Latvia, Lithuania, places that Americans don’t think about all that often, would you come to their immediate military aid?

TRUMP: I don’t want to tell you what I’d do because I don’t want Putin to know what I’d do. I have a serious chance of becoming president and I’m not like Obama, that every time they send some troops into Iraq or anyplace else, he has a news conference to announce it.

SANGER: They are NATO members, and we are treaty-obligated ——

TRUMP: We have many NATO members that aren’t paying their bills.

SANGER: That’s true, but we are treaty-obligated under NATO, forget the bills part.

TRUMP: You can’t forget the bills. They have an obligation to make payments. Many NATO nations are not making payments, are not making what they’re supposed to make. That’s a big thing. You can’t say forget that.

SANGER: My point here is, Can the members of NATO, including the new members in the Baltics, count on the United States to come to their military aid if they were attacked by Russia? And count on us fulfilling our obligations ——

TRUMP: Have they fulfilled their obligations to us? If they fulfill their obligations to us, the answer is yes.

HABERMAN: And if not?

TRUMP: Well, I’m not saying if not. I’m saying, right now there are many countries that have not fulfilled their obligations to us.

Add to this the fact that the only part of the GOP platform that the Trumpistas really fought against was a clause calling for selling weapons to Ukraine. Now, I do not support selling weapons to Ukraine, although I could be convinced. But in light of the above pronouncement, I find it really strange that this was the part of the Republican platform that they went to the mattresses over. 

Hey, to paraphrase the Republican nominee, I’m not saying nothing. People are talking, is all. 

Two of these places are not like the others

 So the intrepid data team at the Economist collated all internet mentions of the term “51st state” and came up with the following map:

Don’t ask me to explain the references to existing states. But for most of the foreign countries, I get it. Australia, Britain, Japan, very close treaty allies. Canada and Mexico, in NAFTA. (Canada’s also a very close treaty ally.) Taiwan, special relationship. Caribbean, Philippines, Ireland, lots of emigrants to the U.S. (Bora Bora and Brunei, that’s just weird, but whatever.) 

In fact, I’m surprised that more Latin American countries didn’t crack the top ten: Colombia, El Salvador and Panama have a right to feel slighted. 

But what are Russia and North Korea doing on this list?? Who refers to them as America’s 51st state? And why?

What if the United States bordered Russia instead of Mexico?

The United Kingdom has been in the midst of a giant immigration backlash prompted by the net arrival of roughly 1.4 million Eastern Europeans since 2004. From my perspective, that was surprising. After all, the Eastern Europeans are white and Christian or post-Christian. Don’t we all know that the reason the United States — or at least Trump supporters — gets all wiggy about Mexican immigration is because most Mexicans don’t look “white”?

Well, do we really know that?

There is evidence that racial phenotypes have had a strong impact on Mexican-Americans. Before 1945, many southwestern states (well, Texas) treated Mexican-Americans as black for the purposes of segregation. The historic impact of that has been under-studied. There is evidence, however, that once the legal barriers fell away in the late 1940s and 1950s, Mexican-Americans began moving into the “white” category, both de jure and de facto ... until the 1970s and the advent of mass immigration from Mexico.

At that point, native-born whites began to react against the arrival of Spanish-speaking immigrants. But because those immigrants were (in most but not all cases) phenotypically different, native-born Anglos began to discriminate against anyone who looked like the new immigrants. That in turn made race more salient in the lives of native-born Mexican-Americans and impeded assimilation. This is the finding advanced by Tomás Jiménez in his book. (Discussed here in the context of Reihan Salam’s misinterpretation of Jiménez’s results.)

So there is evidence that prejudice against immigrants hits most second, some third, and a few fourth-generation Mexican-Americans.* 

But imagine for a moment that the United States bordered Russia to the south, instead of Mexico. Is there any evidence that Americans would have reacted better to the net arrival of 12 million Russian-speakers between 1970 and 2015? Russia is a violent and corrupt country. Assuming (reasonably) that a Russia right next to the United States would have neither nuclear weapons nor imperial ambitions, it is not at all clear to me that the anti-immigration reaction right now would be any less were most of the immigrants pale-skinned, blond-haired Russians.**

Rather, the difference would be that native-born Russian-Americans would be far less likely to be bothered by anti-immigrant sentiments than native-born Mexican-Americans. Not because the Russian-Americans would be any different than the Mexican-Americans in their underlying attitude. Rather, native-born Russian-Americans, being clearly white and indistinguishable from other white people, would not face day-to-day prejudice imposed upon them by the reaction of non-Russians to the presence of their newly-arrived cousins. 

In short, in that world, Trumpism might be stronger. 

In Soviet Russia, wars train for you

 From Putin’s annual Q&A, a question about the cost of Russia’s military operation in Syria, where its warplanes began a campaign of air strikes in support of President Bashar al-Assad’s forces on September 30:

“It does not impose additional pressure on the budget. We just used a portion of the finances we had allocated for training and military maneuvers to conduct our Military-Space Forces’ operations in Syria. It’s hard to imagine any better training ... We can train for quite a long time there.”

[Credit: Will Baird Doug Muir for news and Doug Muir Will Baird for title.]

Vox likes peace, we get it, but they need to think harder about war

 Vox has not covered itself in glory when it comes to issues of war and peace. The reason, I think, is that they really want to believe that war is generally pointless. That leads them to seize on evidence that state violence is failing to achieve its goals even when such evidence is weak. 

For example, they seized on an opinion poll stating that most Ukrainians did not want to have a civil war as evidence that there would not be a civil war. 

Now they have seized on  “evidence” to argue that Russia’s intervention is failing. (That sound is my head hitting my desk.) Their evidence? In one week of ground action with Russian air support, the SAA has only advanced a few miles on one northern front.

Do they know the Russo-Syrian operational concept? No. Do they recognize that the Syrian government is fighting on multiple fronts? No. Do they recognize that the Syrian government is worried about rebel enclaves inside its territory? No. Do they know anything other than unsourced claims from the Institute for the Study of War? No. (The ISW is not terrible, and ironically it holds the exact opposite opinion to Vox on most war-related issues, but it is not an unbiased source.) 

Since they call the offensive a “fail,” I think it is fair to call the post a fail for a site that aims at explaining the news in a thorough, rigorous and wonky way. 

Russia’s intervention may yet fail to stabilize the front lines and give the Syrian government a defensible frontier. But the evidence from Vox tells us nothing about that. For opposing evidence, read today’s New York Times. 

Russia in Syria

 It is not easy to make sense of the Russian buildup in Syria, but here is what we think needs to be watched.

If the buildup stops soon, then this was some weird propaganda play on the not-so-cheap. But if it does not, then it would seem that the Russians have decided one of three things:

1. Assad’s regime is about to collapse. Since the Russians are not willing to see Assad fall, they are starting to throw Hail Marys.

2. Russian planners have convinced themselves that with a little bit of backing the front lines can be stabilized, after which they can go back to their barracks and broker a peace agreement. The Vietnam analogy here is with McNamara’s March 1964 memorandum. Obviously, there is no direct Syrian analogy for what McNamara proposed in Vietnam, but a rough parallel would involve a Russian buildup of a 10,700+ man intervention force and increasing direct involvement in SAA and NDF operations. (The SAA is the Syrian Arab Army; the NDF is an acronym used for state-financed defense forces.) 

3. Russia believes that the Islamic State poses a serious ideological threat inside the Russian Federation. The government has decided that the best way to deal with such a threat is to inflict a short sharp defeat on the ground, liberating territory from the Islamic State and breaking its preferred narrative. 

How to distinguish? Options (1) and (3) should show a sharper logistical ramp-up than option (2). And option (1) would, in the words of one analyst, “include militia units and a bunch of other high stakes risks that the others wouldn’t. A Berlin Airlift of crazy.” How would the armed forces of the Russian Federation sustain a Berlin Airlift of crazy? Not a lot of countries can do that at such distance; maybe only one these days. So a very large-scale intervention on the scale of the 1965 entry of U.S. combat forces in Vietnam seems unlikely. 

Right now, then, it looks like the Russians are going with option (2). Which assumes, of course, that they believe that public opinion at home will accept some small level of casualties and that the lines can be stabilized with relatively little effort. 

The problem, as pointed out by that same analyst, is that Americans are already deep in the field. If the Russians aren’t careful, they could wind up killing a bunch of American special forces. But that same analyst thinks they will be careful. 

Shades of 1964. But not 1965.

Reports of Russian losses in the Donbass looking fake

 Courtesy of J.H. in comments, it looks like the Russian casualty data is probably fake. They were surprisingly high, but as Will Baird pointed out, quite plausible considering what we know about the number of high-intensity engagements so far.

The problem is that even if 2,000 combat deaths so far is plausible, a rather lower number is more probable. That is why I was surprised when the report first surfaced. 

Best to assume for the time being that the report is fake. That said, Forbes has not yet retracted the report. But Forbes may never retract it: the story showed up in one of their blogs and was sourced to a Russian news aggregator. Until they do, some doubt about the report will remain ... but as of now, the evidence is that Russia did not inadvertently (or advertently) publish an estimate of its casualties in Ukraine.

Did Russia cause the decline in oil prices?

 No.

But some Russian observers believe that it did. (Hat tip: Randy McDonald.) Short version: the Russians did not offer to cut production enough back in October 2014. This sent the Saudis into a fit of pique and crashed oil prices.

Oh gosh. First, Russia is not a swing producer. It is hard for the Russians to cut production, especially in winter. Only the Saudis and Emiratis have the capability to shut down millions of barrels per day of production simply by turning a bunch of valves. 

Second, the Saudis really do not act out of pique. Not with billions of dollars at stake. We know exactly what they are trying to do, because they have told us. In June, Saudi Arabia increased production by 500,000 barrels per day. They did not do that because they were worried that the Russians might free ride on a production cut. They did that because they wanted oil prices to stay low for a while. 

Sure, in October the Russians might have tried to counteract the Saudi production hike. (Operative word: tried. Moscow is not lying when it says that such a cut would be technically impossible unless you were willing to risk permanent damage to the fields.) But why in the name of God would they have bothered? Just a few months before, the Saudis had jacked up production. The Saudis could have taken production down by 2½ million barrels per day (the 2010 level); five times what Russian critics think Moscow should have done. 

And the Saudi and Russian oil ministers talk to each other. The Russians would have known Saudi intentions. The Saudis would have known Russian technical capabilities. This is not the Vietnam War; the two sides do not have to communicate via the energy market equivalent of strategic bombing. 

Russia is a big important country. But the oil price decline, that one was caused by the dynamic duo of the United States (hooah!) and Saudi Arabia. The world’s weirdest superhero and sidekick. But there nonetheless.

Sorry, Russia. You are not that important. 

The barber of Kiev

 UPDATE: What a difference a year makes! At 14%, yes, yes it does. I started my analysis in 2014, which if you think about it, makes no sense since it is already 2015. The following has been rewritten to take that basic error into account. It has a big impact, as you will see.

So I get asked a question about the recent debt relief granted the Ukrainian republic. Is it a lot? A little? Since I was just in California enjoying the weather (or not, it is beautiful back east right now) I will attach a photo to set the mood. I hope I look properly contemplative.

So after about an hour of contemplation, the short answer is ... it is a fairly good restructuring, but it is not great. Kudos to the Ukrainians! Although they need more.

The Ukrainian finance ministry says that the value of the debt will be cut by 20% with no prinicipal payments until 2019. The coupon on the new bonds is increased from 7.25% to 7.75%. There is no break in interest payments. 

The right way to calculate the full amount of the “haircut” taken to creditors is to compute the change in the net present value of the debt. That depends, of course, on how long payments are extended for and at what interest rate. Without that, we can’t calculate the correct value of debt relief.

I got a rough idea of the principal payment schedule from Barclay’s. (You can find the key data in graphical form here.) I then calculated the country’s total payments through 2027 under the old deal and the new deal, assuming average coupon payments of 7.25% under the old deal and 7.75% under the new one. Total mickey-mouse, but enough to get some idea of the payment stream under the two deals.

The upshot? Ukrainian sovereign debt is currently yielding around 11.4%. It was yielding around 14% before the deal. If you use 14% as a benchmark, then the new deal is the equivalent of a 33% 44% haircut. 

How much is that? Christoph Trebesch of the University of Munich has put together an amazing database of every sovereign debt restructuring since 1970. The average haircut is 38%. The median is 33%. In 2004, Serbia got 71%. Greece recently got (an insufficient) 65%. The Russians got 51% back in 2000. Mexico got 31% back in 1990, at the end of the Latin American debt crisis. 

In short, this is about average pretty good! Ukraine does not look to be coming out much ahead. 

The deal looks a little even better if we restrict ourselves to the 17 restructurings that involved $18 billion or more. The average haircut on those was 30% with a median of 25%. Ukraine comes out between Venezuela in 1990 and Argentina in 1993. Ukraine does better than all the Latin American restructurings that came out of the 1982 debt crisis. It is bested only by Russia in 2000, Greece in 2012, Argentina in 2005, and Iraq in 2006. (The latter is not really comparable, since it involved odious debt.) 

Unless I am using bum data (entirely possible!) the point is made: Bloomberg is probably wrong when it calls the restructuring a wash for creditors, but no extraordinary concessions have been made given the scale of Ukraine’s problems. This deal looks pretty good. 

I should add here that creditors will have the option to exchange their debt for receive GDP-linked warrants! (The link goes an earlier discussion of similar instruments on this blog.) The warrants, it seems, will be granted to all creditors in addition to the restructured notes. Or at least that is my current understanding! 

The warrants essentially give investors an equity stake in Ukrainian economic performance. On the surface, they look incredibly attractive. As long as Ukraine has a nominal GDP over $125.4 billion, investors will get 15% of all real economic growth between 3 and 4% and 40% of all growth above 4%.

But who would take that deal? First, the payments will not start until 2021. Second, the World Bank estimates that Ukraine’s nominal GDP this year will come to about $94 billion at current exchange rates. Who knows when (or if) its economy will get back above $125 billion? Ukraine may come to regret including the warrants, but I doubt it ... and they are a nice sweetener for the creditors. After all, who knows? Maybe Ukraine will boom beyond dreams of avarice in the 2020s.

In short, this deal looks about average for debt restructurings. this is a good deal, but considering the problems Ukraine is facing, it strikes me as small beans. 

Finally, for those who want it, here are my guesstimates of the annual payments in billions of USD that Ukraine faces under the two deals. If anyone can correct them, I would be delighted! 

	New deal				Old deal
	Debt	Principal	Interest	Total	Debt	Principal	Interest	Total
2015	$ 14.4		$ 1.1	$ 1.1	$ 18.0	$ 1.5	$ 1.3	$ 2.8
2016	$ 14.4		$ 1.1	$ 1.1	$ 15.8	$ 2.3	$ 1.2	$ 3.5
2017	$ 14.4		$ 1.1	$ 1.1	$ 12.3	$ 3.5	$ 1.0	$ 4.5
2018	$ 14.4		$ 1.1	$ 1.1	$ 12.3	$ 0.0	$ 0.9	$ 0.9
2019	$ 12.8	$ 1.6	$ 1.1	$ 2.7	$ 12.3	$ 0.0	$ 0.9	$ 0.9
2020	$ 11.2	$ 1.6	$ 0.9	$ 2.5	$ 10.8	$ 1.5	$ 0.8	$ 2.3
2021	$ 9.6	$ 1.6	$ 0.8	$ 2.4	$ 9.3	$ 1.5	$ 0.7	$ 2.2
2022	$ 8.0	$ 1.6	$ 0.7	$ 2.3	$ 6.8	$ 2.5	$ 0.6	$ 3.1
2023	$ 6.4	$ 1.6	$ 0.6	$ 2.2	$ 5.8	$ 1.0	$ 0.5	$ 1.5
2024	$ 4.8	$ 1.6	$ 0.4	$ 2.0	$ 0.0	$ 5.8	$ 0.2	$ 6.0
2025	$ 3.2	$ 1.6	$ 0.3	$ 1.9
2026	$ 1.6	$ 1.6	$ 0.2	$ 1.8
2027	$ 0.0	$ 1.6	$ 0.1	$ 1.7

How bad are Russian losses in the Donbass war?

 The Russian authorities mistakenly released an estimate of the number of Russian soldiers killed in action in Ukraine, as of February 1, 2015. It came to roughly 2,000. That is a larger number than I would have expected.

How intense is the fighting? In part, that depends on when the bulk of the troops arrived. If we date the start of the fighting from the first armed clashes on April 7, 2014, then the Russian armed forces have suffered a casualty rate around 7 per day. If, on the other, we date involvement from the first known large-scale Russian troop movements on August 22, 2014, then Russian soldiers have been dying at a rate around 12 soldiers per day.

How intense is that compared to other wars? Well, it depends on our point of reference. The Correlates of War database classifies war into three types: interstate, intrastate, and extra-state. Interstate wars are wars between states. Intrastate wars are (basically) civil wars. Civil wars in which foreign governments send forces become internationalized intrastate wars. Extrastate wars are wars between a state and a non-state actor fought outside the metropolitan territory of the state.

Wars can and do shift categories. For example, a civil war can start off as an internationalized intrastate war. But if a foreign government takes over the bulk of the fighting from local forces, it switches to an extrastate war. The Soviet intervention in Afghanistan provides an example. Similarly, if a foreign government takes over the bulk of the fighting from an insurgency, an intrastate war will switch to an interstate war. 

So far so good? The Donbass War, then, looks like an interstate war. (Is there is a political component to the choice of the number of “s’s” to put at the end of Donbass?)

How does it stack up to other post-1945 interstate wars in terms of Russian battle deaths? 

Short answer: A battle-death rate between 7 and 12 per day is surprisingly intense.

Longer answer: Israel lost 3 soldiers per day during the 146 days of the First Lebanon War (1982); their Syrian opponents suffered around 8. The United States lost 4 soldiers per day in Gulf War 1 (considering all 86 days, not just the 100 hours of intense combat) and 3 per day in Gulf War 2 (over the 44 days of the 2003 invasion). Vietnam took 6 losses per day over 471 days of fighting during the 1977-79 pacification of Cambodia. The Second Ogaden War of 1977-78 may be almost forgotten outside Cuba and the Horn of Africa, but it was not low-intensity by any measure: Ethiopia lost 8 soldiers per day and their Cuban allies lost 6. India lost 7 soldiers per day over 70 days of fighting in the 1999 Kargil War; Pakistan lost 10. Argentina suffered 9 battle deaths per day over the 81 days of the Falklands War. Ecuador took 11 deaths per day over the short 48-day Cenepa War in ‘95; Armenia suffered 12 per day during the (rather longer) 463-day Azeri-Armenian War of 1993. 

Putin can take some solace that the fighting is less intense than the 20 battle-deaths per day inflicted on American soldiers during the 2,912 days of the Vietnam War. (Which was an interstate war, by the way.) But it is in the range of the 12 per day suffered by Soviet forces during the 3,280 days of its fighting in Afghanistan. (Which was a classic extrastate war.) And it is at least as bad as  the 7 deaths per day that France suffered over the 2,695 days of the Algerian War of independence. 

As bad as the French in Algeria! 

On the other hand, France fought for a long time in Algeria, and an annual average conceals a lot: by 1960 its battle-deaths were almost nil. And we need not mention the Russians in Afghanistan or America in Vietnam. These casualty levels can be tolerated for a long time with enough political will. 

Does the relative intensity of the fighting say anything about the ultimate result in Ukraine? Probably not. Considering only the three wars listed in the above paragraph, the foreign government only lost one of the three. 

By 1959, France had pacified Algeria to a level of violence below that which many nations have endured for decades and then (wisely) decided over the next three years that the game was not worth the candle. The context for that decision does not apply to the Donbass, where continuing inter-ethnic violence after the end of the war appears unlikely.

In Afghanistan, the Soviets turned the fighting over to a client state which was capable of staying in power as long as it received continuing financial and logistical assistance. I do not know if the People’s Republics of Donetsk and Luhansk will ever reach that point, but it is not inconceivable. That would be a victory unless the Russian Federation suffers a USSR-like collapse. 

Only the United States can be clearly said to have lost its war against North Vietnam. The U.S. could no longer politically sustain a troop presence after 1973, but had no credible local force over to which to turn the effort. SVN forces started to crumble almost immediately after 1973. By the time Congress pulled the plug, South Vietnam was doomed.

Perhaps that could happen in Ukraine ... but consider how long the United States tried to win a war fought thousands of miles away amid a people to which we had no historical ties. The Donbass is right next door and populated by Russian speakers. No comparison.

To sum up: the Russians are surprisingly taking it on the chin in Ukraine, but that says very little about the ultimate outcome of the war. Even if the Ukrainians keep up the good fight, success is not guaranteed. If I had to bet, I would say the Donbass is lost ... and it is a tragedy that Ukrainian internal politics makes that outcome impossible to accept. 

The Russians are coming?

 No probably not. But this is funny:

The graffiti says, “Alaska, ask Crimea the way home!” 

(Hat tip: Will Baird.)

Actually, I’m reminded of this NBC miniseries from 1982. We all watched it. I remember it being pretty good, which is why I remain sure not to re-watch it as an adult.

We also all watched this other miniseries a few years later, which I would love to see again if I could find it in a modern format. I don’t remember it being good at all, which is why I think seeing it again would be a hoot.

Wolverines! 

Dictators, revisited

 Four years ago this week, I had a debate with John Quiggin over at Crooked Timber. Briefly, he said that dictatorship was on the way out as a form of government. I sharply disagreed. Four years seems like a reasonable amount of time to circle back and ground-truth.

Here is the original post. Take a moment to click through, so that we’re all agreed on definitions. Good? Okay, then: Who are the world’s remaining dictators, and have their numbers changed since 2011? The 2011 list is below, with original comments in italics and 2015 updates in parentheses.

Angola: Dos Santos has been the President nonstop since 1979. There are significant limits on his power, but IMO he qualifies. (Dos Santos celebrated 35 years in power last year. NO CHANGE.)

Azerbaijan (NO CHANGE)

Belarus (NO CHANGE)

Cambodia: Hun Sen, a bland and retiring little man, has ruled unchallenged since the middle 1980s. (He rules still. NO CHANGE.)

Cameroon: Paul Biya since 1982. The country has kept the trappings of a democratic republic, including opposition parties, but Biya is in charge and he’s not going anywhere. (He hasn’t gone anywhere. NO CHANGE.)

Chad (It’s still Idriss Déby. NO CHANGE.)

Congo Republic (NO CHANGE)

Congo, Democratic Republic: President Kabila, son of the late President Kabila, is likely to stay in power for the foreseeable future. He’s in a tie with Aliyev of Azerbaijan for youngest dictator — they’re both just 40. (And now they’re both 44. But otherwise, NO CHANGE.)

Cuba: Raúl, not Fidel. It’s surprising how many people think it’s still Fidel. (NO CHANGE.)

Djibouti (NO CHANGE.)

Equatorial Guinea: This is a nasty one. Doesn’t get much attention, of course. (It’s still nasty. NO CHANGE.)

Eritrea: Afewerki is another nasty one. A shame, since his rule started with really high hopes. (NO CHANGE.)

Ethiopia (Ethiopia’s long-term dictator Meles Zenawa died in 2012. However, his successor, Hailemariam Desalegn, has been governing in much the same manner — centralized one-party rule with no public opposition or criticism. In May 2015 Ethiopia held parliamentary “elections”; the ruling party won 90% of the seats and its allies took the rest.  Ethiopia’s human rights record continues to be dire, and it looks like Desalegn has settled in for the long run. NO CHANGE.) 

Kazakhstan (NO CHANGE.)

North Korea (Supreme Leader Kim died in late 2011, and was replaced by his son, Supreme Leader Kim. NO CHANGE.)

Rwanda (NO CHANGE.)

South Sudan: I’m jumping the gun here, because the country of South Sudan is just a few months old. But President Kiir has already made it pretty clear that he’s not going anywhere. (And he hasn’t. Four years later, Kiir is a post-colonial African dictator in the classic style. But the country is in the middle of a civil war, and therefore by definition not stable. So ... CHANGE.)

Sudan (NO CHANGE.)

Syria: At least for the nonce — I think Assad has a decent chance of sticking around. (And four years later he is still around. You can argue whether he’s a proper dictator, though, as he has now lost control of about half his country’s population and ¾ of its territory. I’ll give this CHANGE.)

Tajikistan (NO CHANGE.)

Turkmenistan (NO CHANGE.)

Uganda: To nobody’s surprise, President Museveni won a fourth term a few months ago. (And he’ll likely win a fifth next year. NO CHANGE.)

Uzbekistan (NO CHANGE.)

Zimbabwe: Robert Mugabe, still hanging in there at age 87, has been the world’s oldest dictator for a while now. (And, good grief, he’s STILL hanging in there at age 91. NO CHANGE.)

So, of 24 clear dictatorships in 2011, two have perhaps slipped out of that category — South Sudan is in the middle of a civil war, and Syria’s Assad has lost control over much of his country.

Did we overlook anything in our original list? Gambia has a good case: Yahya Jammeh came to power in a 1994 and shows no sign of leaving soon. So did Burkina Faso, but Blaise Compaoré fled at the end of 2014. Acting retroactively, that would make Burkina the third country to have left dictatorship since the original post. 

Have any new dictatorships been added? We would say yes, three. Two of these are pretty minor and one is not minor at all. The minor ones are Fiji and Togo, both of which I listed as borderline cases back in 2011. In Fiji, the Prime Minister operates within what looks like a British-style constitutional framework, but a permanent legislative supermajority, a hand-picked judiciary and an unfree press means he can basically rule at will. In Togo, President Gnassingbe has just won another “election” and looks good to stay in power indefinitely.

The not so minor one is Russia. Back in 2011 I said that Russia was authoritarian, but not a dictatorship. But in the last four years, Russia has become dramatically more illiberal, power has been ever more centralized, multiple critics and opponents of the regime have been prosecuted, imprisoned, or murdered outright, and the cult of personality around Putin has grown extreme. All of these things were just getting started in 2011, but they’ve moved very rapidly since. At this point we think it’s reasonable to call Russia a dictatorship.

We also have two new borderline cases. The small one is Burundi, where President Pierre Nkurunziza plunged his country into unrest after what looks to have been a power grab. He hasn’t established full control, however, so it’s not a dictatorship and looks unlikely to become one. The big one is Venezuela. A while back, we argued that the Polity IV database had jumped the gun by classifying the country a dictatorship. It still isn’t there yet — President Maduro does not rule by decree and he is facing contested legislative elections in December. But the trend since Chavez’s death has been sharply authoritarian. The government has banned opposition candidates, refused to permit foreign observers, and arrested opposition leaders. We hesitate to call it a dictatorship yet, however — partly because this trend is fairly recent, and partly because it is not clear how much power is really consolidated in President Maduro’s hands. The December elections should provide strong evidence one way or another.

In summary: two medium-size countries have fallen out thanks to ongoing civil wars. One small one has ousted its dictator. Meanwhile two small countries and one large important country have joined the club.

In other words, dictatorship does not seem to be on its way out as a form of government.

If it quacks, then it’s a Russian invasion

 Minsk II is on the edge of outright collapse. There has been no progress on almost any of the provisions since our last post. Fighting continues in and around Shyrokyne and Donetsk. The Donetsk fighting remains a distraction, with sides doing just enough to prevent the other from withdrawing. The main theater is in Shyrokyne, down by the coastal city of Mariupol.

The fighting in Shyrokyne has intensified. Reports that the Ukrainians had been pushed out of Shyrokyne proper seem to have been correct; Ukrainian forces are holding the high ground above the village. In the last 24 hours, the Donetsk People’s Republic (DNR) has started using multiple rocket launcher systems, a clear violation of Minsk II. This has been verified by the OSCE. The Ukrainians have claimed the DNR is also using big gun artillery, but that remains unverified. The Ukrainians supposedly are retaliating.

The OSCE spotted over 25 tanks on the DNR side of Shyrokyne. I would bet that this is actually a full battalion. The OSCE has only a handful of observers; moving the tanks out of view would not be terribly hard. There are reports that another 22 tanks have crossed the border at Novoazovsk in the last few days.

Additionally, General Lentsov has moved down to Mariupol. Lentsov appeared at the Donetsk Airport before it was overrun and outside Debaltseve: he took command in both and pushed out the Ukrainians. Take note here. The tone Lentsov takes is not very aggressive for a Russian. At one point he states the Ukrainians are the problem, not his people and he will take care of the problem.

There is some evidence that the Ukrainian chain of command is breaking down. The volunteer Donbas Battalion refused an order to withdraw. The Ukrainian army claims they need to be rotated out for a bit. The Donbas Battalion is claiming that someone is attempting to weaken the Shyrokyne’s defenses. This is a worrying development, considering that three other territorial defense battalions (Aidar, Dnpro and Azov) are defending Shyrokyne alongside the regular army.

The Russians appear to be waiting for two things: the end of the spring rains and more political and economic deterioration on the Ukrainian side. At that point, Lentsov is going to try to take Mariupol some time in the next four weeks. My guess is no sooner than the Orthodox Easter (April 12) and no later than May 10.

As we pointed out here, Russian forces were at the forefront of taking Debaltseve. They have now stopped pretending that they they don’t have regular troops in Ukraine. The linked interview would not have been allowed unless the Russians were testing to see how the West reacts. A damning quote from a Russian volunteer soldier: “If the E.U. and the USA wanted to prove that Russia’s forces are located here, I think it would be easy to do. They would just go and photograph the armor and everything. But they’re not doing that, they’re closing their eyes.”

Russia followed the same pattern with Crimea: denying the presence of soldiers while sending up small test balloons to see how the West would react. They are a step away from confirming the Russian forces are fighting in the Donbas.

It’s pretty much time to call a duck a duck: Russia invaded Ukraine.

The calm before the storm

 We have now passed a month since the Minsk II ceasefire was supposed to go into effect. The agreement was supposed to end the war in the Donbas.  On the plus side, the fighting has died away save for two long-standing sores and one new nonviolent provocation. On the minus side, there are also indications that the Russo-rebels are preparing a bigger push thanwe thought before, but like everything the tea leaves are hardly definitive: after all, Russians invented the game of Maskirovka.

As noted before the fighting has been reduced to the outskirts of Donetsk and the town Shyrokyne. Depending on who you believe, the Ukrainians are being pushed back or the Ukrainians have repulsed attack after attack. The shooting involves mostly 120mm mortars (not popguns despite being “only” mortars), RPGs and small arms fire. Neither side seems be using long range artillery or rockets.

The provocation, which did not turn into a fire fight was up north in the Lugansk Oblast. Rebels crossed the Seversky Donets River and set up defensive positions. The Ukrainian army told them to evacuate. They ended up screaming at each other. Neither side fired a shot; the Ukrainians did not have authorization to engage. The rebels appear to have kept their position though. Not a good precedent that.

In Gorlovka, the rebels have been massing heavy combat equipment. For what purpose? Is this the signal they are going to start an offensive from Gorlovka? Or is it a distraction? We don’t know.

An unfortunate tragedy took place in Konstantinovka: a Ukrainian APC ran over some kids. There was a near riot over the incident, but the soldiers were arrested and their commander dismissed. The situation has calmed down, but it was really touch and go there for a while.

The Ukrainians have been trying to honor the terms of Minsk II. Much to my surprise, they even voted to grant autonomy to the Donbas. The new law stipulated the elections must be overseen by international monitors and follow Ukrainian law. It also allowed the east to use Russian as an official language. However, the rebels and Moscow have reacted badly to the legislation, stating it breaks the Minsk II agreement. Their reasons are unclear, to say the least.

Worryingly, Russia just signed an “association agreement” (annexation in all but name) with South Ossetia. NATO has reacted badly. The Ukrainian and Russian-speaking internet is lit up with speculation that this is what Putin has planned for rebel-controlled Ukraine.

The Europeans sure like their saucepan.

(A quick run down on the Minsk II implementation below the fold.)

A month after Minsk II

 It has been more than three weeks since the Minsk II ceasefire was supposed to go into effect.* The agreement was supposed to create a 100 km wide corridor where no heavy weapons — artillery, tanks, etcetera — would be allowed. The corridor ran from the Russian border through Lugansk all the way along the long of contact down to the Black Sea. The OSCE is supposed to to verify the ceasefire.

Most artillery has been pulled back and fighting along the line of contact has ceased, other than small sporadic clashes along the line. There are, however, two notable exceptions.

The first is the city of Donetsk. Fighting continues, albeit at a lower level than before. Both sides have used tanks and artillery despite the ostensible pullback. In theory, Donetsk is the primary prize in the fighting. In practice, it’s a distraction. The Ukrainians are trying to keep the Donetsk People’s Republic (DNR) and the Russians tied down, since the Russians know that the town could fall if they shift forces elsewhere. Meanwhile, the Russians want to keep the Ukrainians tied up in the north should they decide to focus elsewhere. (Spoiler alert: the Russians want to focus elsewhere.) The result is a relatively intense level of conflict about which neither side is serious.

Which brings us to the other, more serious fight: Shyrokyne, on the road to Mariupol. The squicky Azov Battalion and Ukrainian army has been trying to hold back the DNR and Russians. The road to Mariupol has seen battles back and forth since January, some involving heavy weapons. Right now, the fighting could best be characterized as probing or scouting. However, that is probably about to change.

After capturing Debaltseve and taking a moment to organize, the DNR and the Russians are massing in the south, near Novoazovsk. Their intent appears to be to push on to Mariupol and possibly beyond. But why?

The somewhat infamous Stratfor wargamed out Russia’s different military options in Ukraine. Their point was not to state what Russia would do, but rather examne what it could do and at what cost. They laid out three different goals. In the first, the Russians try to carve out a land bridge to Crimea. In the second, they try to take all of southern Ukraine to the Romanian border, including Odessa. In the third, they occupy eastern Ukraine to the river Dniepr.

Right now the DNR is getting ready for scenario 1. The question is whether they will move before the rains stop. It’s pretty crappy between now and mid May as Ukraine gets all the rain that California wishes it had. The rain turns everything into sticky mud. This gets overplayed a lot by wargamers and whatnot, because of WW2, but it does favor the defender. That said, the muck can be overcome. The real reason that the Russians probably want to wait is to let Ukraine melt down a little more economically. It isn’t that Ukraine’s economic slide will materially affect its ability to mobilize men and machines. It is that it will help show that the West isn’t interested in helping. Hearts and minds: fscking Poroshenko! damn America! Left us to rot! Russia /has/ to be better than this.

Unless the DNR et al is really lucky, the land bridge scenario will be where they stop. Crossing the Dnieper is not trivial. The DNR would need to capture bridges and bring up engineering battalions — the retreating Ukrainians would pound with artillery the bridges they didn’t blow. This is, of course, assuming the Russians do not overtly intervene. Odessa has a “place in their hearts” too.

Why would Putin want to let the separatists push south? For one, Crimea has been suffering. By taking the land bridge, Russia would gain control of the utilities. Additionally, supplying day-to-day necessities becomes a lot easier: right now, food must come across the Kerch Straits. A bridge is years away.

But more importantly, I don’t think Putin currently wants a frozen conflict. I think his ideal goal is to sheer off the South and East to add to Crimea and leave the rest: it’ll make for a convenient dumping ground for those who oppose Russian rule and a buffer zone which the Europeans will never let into NATO or the E.U. Even without the east, he’ll have secured that goal by taking the land bridge. It would take a much more rigorous response, stronger sanctions and more military aid for Ukraine, to stop him.

Putin is boiling a frog here: ever increasing the heat and seeing if Europe hops out. So far, the rate of the rising temperature has not made the Europeans willing to leave the sauce pan.

The Minsk accord, two weeks on

 It has been a week since the ceasefire in the Donbas was supposed to take place. How are things working out?

1. Immediate and total ceasefire in the Donetsk and Lugansk regions from February 15.

This did not happen.

The most dramatic evidence of this is the dramatic loss of Debaltseve. The Ukrainians were pummeled and were forced to withdraw. In fact, it was a rout. This should not be a surprise: Putin argued in Minsk that Debaltseve should be exempt from the ceasefire. On paper, Putin lost that argument.

In practice, not so much. Debaltseve sits on the road and rail junction between the rebel territories in Lugansk and Donetsk. Without it, the rebels are logistically divided. Additionally, Debaltseve is a knife pointed at both halves of “Novorossiya” from which the Ukrainians could, if rearmed and reorganized, launch an offensive. The rebels could not leave the town in Ukrainian hands.

Attacking Debaltseve, however, ran the risk that it could become the next battle of Donetsk airport. As folks who have been following the conflict know, the Ukrainians held the airport until very recently. It took the rebels four months to dislodge them. In fact, the fighting grew so fierce that the a young rebel soldier said in an interview that the only way the Ukrainians could hold out for so long is because they were “cyborgs like Schwarzenegger.” The “cyborg” monicker stuck and the Ukrainian defenders became national heroes. The rebel victory ultimately turned pyrrhic: by the time the Ukrainians withdrew there was nothing left to defend.

In short, the last thing the rebels and the Russians wanted was another fight which would boost enemy morale, turn into a bleeding humiliating sore, and end with the complete destruction of the local infrastructure.

The Russians appear to have intervened directly in order to avoid such a debacle. There is credible evidence large formations of the Russian army participated: the 136th Motor Rifle Brigade from the North Caucasus was identified based on vehicle markings. (In general, the source of the second link should be approached with some caution.) In addition, the Russian Spetznaz appear to have made little effort to hide. Weapons not operated by the Ukrainians (frex, SA-22s) continue to appear in rebel territory. Moreover, Russian opsec is pretty lax: Russian soldiers’ posts from eastern Ukraine continue to show up on social media.

Fighting continues outside of Donetsk and, especially, Mariupol.

2. Withdrawal of all heavy weapons to create a buffer zone at least 50 kilometers (30 miles) for artillery with a caliber of 100 mm or more, 70 kilometers for multiple rocket launch systems, or 140 kilometers for Tornado multiple rocket launch systems and others. The withdrawal of heavy weapons must begin on the second day after the ceasefire, i.e. February 17, and take no more than 14 days.

This also did not happen.

3. The OSCE will check the ceasefire and heavy weaponry withdrawal from day one, and can use satellites and drones.

The Ukrainians have impeded the OSCE at least once and the rebels have done so repeatedly.

4. On the first day after withdrawal of heavy weapons, dialogue must start on holding local elections in Lugansk and Donetsk as well as the future “regime” in the rebel-held areas, based on Ukrainian legislation giving them temporary self-rule. Ukraine’s parliament must within 30 days pass a decree defining the geographical area that will have self-rule, based on the September agreement. The separatist regions have the right to decide which language they use.

Well. We were skeptical, but now the leader of the DNR has stated the no pro-Ukrainian parties will be allowed to take part.

5. A law must enter force ensuring pardons and amnesty for those involved in the conflict in Donetsk and Lugansk, who will have immunity from prosecution and punishment.

No word yet. Pretty sure this is DOA.

6. Release and exchange all hostages and illegally detained prisoners on an “all-for-all” basis, starting five days after withdrawal of heavy weapons.

Exchanges in or near Debaltseve have taken place. Note: the Russians hold an Ukrainian soldier (Nadya Savchenko), captured earlier in the war. She is accused of having killed two Russian journalists and is currently on trial. The Russians have made it plain that she is not covered by the ceasefire and will not be returned.

7. Ensure distribution and access to humanitarian aid.

More Donbas factories have been stripped down and moved east. After the Soviet Union broke up, most Russian weapon system continued to require components built in Ukraine. Torpedoes, the gas turbine engines for Russia’s new frigates, the Dnepr rocket, etcetera. Thus the Russians have sent in aid in very large but lightly loaded convoys which return with the contents of the Donbas factories.

Points 8 through 13 of the Minsk II plan have made no progress, so we will not dwell on them.

The only possible way this can be spun as a victory for Europe is if the point of the exercise was to demonstrate Russia was never going to give peace a chance, even when Russia gets almost all of its public demands. We shall see. The test will be whether European governments, particularly Germany’s, reverse their stand against arming the Ukrainian forces.

Guest post: On the incredible futility of the Minsk accord

 Will Baird here, from The Dragon’s Tales. Today I awoke to find that an accord had been struck between the various parties involved in the negotiations to try to bring about a ceasefire in Ukraine and, hopefully, bring an end to the war going on in the Donbass. Apparently, there was a marathon negotiating session. The end result appears to have been a colossal waste of paper. I am very unclear as to what it is the Europeans think they are doing.

Let’s take it point by point.

(1) Immediate and total ceasefire in the Donetsk and Lugansk regions from February 15.

Remember, this is not the first attempt at a ceasefire. The first attempt was in September. That ceasefire was simpler to implement. It failed almost immediately because the separatists did not find respecting it to be in their interest. The “rebels” have stated they want all of the Donbass, not just the territory they currently occupy. In fact, they’ve made noises that they want to drive all the way to Odessa and Kharkov, but they have made it clear that the Donbass proper is a non-negotiable. So why with no change in the correlation of forces would they negotiate it away now?

(2) Withdrawal of all heavy weapons to create a buffer zone at least 50 kilometres (30 miles) for artillery with a calibre of 100 mm or more, 70 kilometres for most multiple rocket launch systems, and140 kilometres for Tornado multiple rocket launch systems and others.

The zone for Ukrainian troops has to start, by definition, from the de facto frontline. But for rebel forces it starts from the September 19 frontline according to last year’s Minsk pact. The separatists have however since pushed deeper into government held areas. So this is in effect requires the separatists to pull back their forces. The withdrawal of heavy weapons must begin on the second day after the ceasefire, i.e., February 17, and take no more than 14 days.

The removal of the artillery seems like a fine thing to do and it is. The problem is these can all be moved back within an hour or two. In fact, I expect what you will see is the OSCE will sweep an area and then the artillery will come back, albeit hidden. It is perfectly possible to hide from satellites and aerial reconnaissance.

In short, this is cosmetic. At best it could be taken as a sign of rebel goodwill. For which, see point (1) above: September ceasefire, collapse of.

(3) The OSCE will check the ceasefire and heavy weaponry withdrawal from day one, with satellites and drones.

First, see point (2) above: aerial reconnaissance, camouflage from. 

Second, the OSCE has been useless. The constant reports of “we see nothing crossing the border” and then the Russians moving their troops in ... gah. Past performance may not predict future results for mutual funds, but I think it does here. 

(4) On the first day after withdrawal of heavy weapons, the two sides must start talking about holding local elections in Lugansk and Donetsk as well as the future “regime” in the rebel-held areas. Ukraine’s parliament must within 30 days pass legislation defining the geographical area that be granted temporary self-rule, based on the September agreement. The separatist regions have the right to decide which language they use.

One only needs to look at the last set of “elections” held in the Donbass . They absolutely did NOT meet any criteria as being free and fair. They were a farce.

Moreover, at this point a combination of population movements, sustained propaganda, and the anger that comes from being in the middle of a shooting war means that pro-Ukrainian candidates would likely have little chance even in a fair election. All the rebels will need to do is steal the vote from slightly-less-crazy separatists. 

As for the language, there’s been more stupidity on both sides than I know what to do with. Bavarian German is more different from High German than Ukrainian is from Russian. Hell, I have more trouble understanding the Scots or the Trinis than my Ukrainian-speaking in-laws do understanding Russian.

(5) A law must enter force ensuring pardons and amnesty for those involved in the conflict in Donetsk and Lugansk, who will have immunity from prosecution and punishment.

You could get away with the amnesty. However, its likely to cause bad blood in other ways. It is going to be tough to get the national guard and volunteer battalions to comply with this. In fact, I am almost 100% sure this will fail on the Ukrainian side. Remember the member of the Rada who ran around arresting folks for being traitors?

(6) Release and exchange all hostages and illegally detained prisoners on an “all-for-all” basis, starting five days after withdrawal of heavy weapons.

This could actually happen without too many hiccups.

(7) Ensure distribution and access to humanitarian aid.

Ack. The Russians have been using aid convoys to bring supplies and weapons then stripping factories in the east and shipping the equipment back to Russia in the trucks. Good work there.

(8) Both sides must work towards the restoration of social and economic links including payment of pensions, taxes. Ukraine will restore the banking system in the conflict zones, with the possibility of an international mechanism to facilitate money transfers. Kiev will be expected to restore pensions and salaries to the rebel areas.

Oh, give me a break. And the rebels will not pay taxes to Kiev.

(9) Ukraine must be given full control of its state border across the conflict zone. The process should start the day after local elections and must be completed by the end of 2015, on condition that constitutional reforms under point 11 have been implemented.

The rebels will not allow Kiev to have the border back. Period.

(10) Withdrawal of all foreign armed groups, military equipment and mercenaries from Ukraine, observed by the OSCE. Disarmament of all illegal groups.

Hahahahahahah! Ahem. If you have been listening to the russophonic internet at all, there are numerous reports from Russian soldiers stating the only thing holding up the military forces of the Donetsk and Luhansk People’s Republics has been the presence of foreign fighters and Russian soldiers. The few Ukrainians who were involved on their side are largely dead. Since allowing Russian forces to withdraw from rebel territory is the equivalent of an unconditional surrender, then there is there no way that those foreign fighters and the Russian troops will be allowed to withdraw. 

See point (9): border return, unacceptability of.

(11) A new Ukraine constitution, agreed with Donetsk and Lugansk representatives, must enter force by end-2015 allowing for decentralisation. Legislation on the separatist regions’ special status must also be adopted also by the end of 2015.

This is a dead letter for the rest of Ukraine. Autonomy is part of the reason Crimea could be snatched away. There is no way the rest open that box up for the Donbass. And don’t bother with logical explanations of how this could be made to work in the interest of both Ukraine and Ukraine’s ruling coalition. This is an emotional issue. Think letting the Mexican tricolor fly over San Antonio or giving the gringos special rights in Baja California. Not gonna happen. 

(12) Local elections in separatist regions to be held, monitored by the OSCE, but no date specified.

See point (4) above: local elections, fairness of. 

(13) Intensify activity of the trilateral contact group including creation of working groups to implement the peace plan.

Oh my, yes, how reassuring.

There are a number of points that are problematic at best and batshit crazy at worst. The plan is so full of nonsense I have trouble believing that Merkel and Hollande pushed for it ... the agreement is DOA for both sides. The rebels have not kept their word on anything. The Ukrainians are calling up their reserves. The Russians don’t see any additional risk to staying the course. 

This isn’t over and the Minsk meeting was a waste of time. 

If you impose capital controls, you need to take some risks

 Capital controls are state-imposed restrictions on moving money in or out of a country. If you have money inside a state with capital controls, then it is legally-difficult to lend that money to foreigners or use that money to buy foreign assets. In fact, to be binding, it even has to be difficult to use that money to freely import stuff. Otherwise you could move money out simply by buying something overseas on credit, importing it, and selling it to yourself at an inflated price.

Why might a government want to impose them?

1. Governments sometimes impose capital controls during economic crises. They might do this to stem a panic. Say that people have started dumping assets and taking the money out of the country. (If they are not doing that, then they are likely using the money to buy other assets, which is less of a problem.) The fire sale is driving down asset prices and pushing otherwise healthy companies towards insolvency. In that situation, capital controls basically stop the foreigners from being able to dump their assets. It’s a way of forcing everyone to calm down, the way a bank facing a run might stop withdrawals for a little while.  
2. Capital controls can also be used to give central banks the ability to fight a crisis without worrying about the exchange rate. They can prints lots of money and do other unorthodox things without the fear that people will start dumping the currency. In countries where lots of companies have foreign-denominated debt, that is a good thing.
3. Finally, governments can shift the pain of external adjustment by using controls. A collapse in the exchange rate has all sorts of distributional effects. If a government doesn’t like those effects, then it can use capital controls to shift them around. (Venezuela is doing this ... for so long that it long became massively counterproductive. But that is a different issue.) 

Kris James Mitchener and Kirsten Wandschneider have a good working paper on capital controls during the Great Depression. What did they find?

1. Controls worked on the most basic level, as in governments succeeded in making it hard to take money out of the country;
2. Controls abetted recovery from the Depression ... but no more so than in the countries that just let their currencies depreciate;
3. One of the reasons for (3) is that central banks seemed very reluctant to take advantage of the manuevering space that the controls provided. In short, they stuck with basically the same policies as the countries that let their currencies float, even though they no longer needed to. 

What are the implications for the current Russian predicament? I see two. If the crisis really is a panic-driven flight, then the controls may work well. The Russian government has been informally imposing such controls for several weeks, mostly by ordering state-owned businesses to refrain from taking money out of the country.  

On the other hand, if the crisis is more systemic, then the Russian government could use controls to keep the ruble from plunging further while it uses its foreign reserves to bail out various companies. That might be useful! It would keep import prices from spiking and keep various exporters solvent. But it is not clear that it would really produce less overall pain than just letting the ruble fall.

The problem does not seem to be driven by a short-term panic, so it seems that the Russia government has a difficult choice. But the lesson seems to be that capital controls do not do much good unless you have a plan for using the breathing room. Does anyone in Moscow?

How Putin wields Russia’s energy weapon

 We don’t mean lasers. Rather, we mean Russia’s shut-off of gas to Ukraine. 

At first glance, it looks like the Russian Federation is trying to muscle the Ukrainian State by letting the latter freeze in the dark as winter sets in.

At second glance, however, it looks like a commercial dispute between Gazprom (the Russian gas producer) and Naftogaz (the Ukrainian gas distributor). The two companies are locked into a bilateral monopsony-monopoly, where Gazprom needs Naftogaz to supply its product to Europe, and Naftogaz needs Gazprom to provide its product, but neither can depend on a settled and impartially-enforced body of contract law the way they could if both were located inside, say, the European Union or the United States. 

In the second view, the problem is a bilateral monopoly where Naftogaz keeps trying to use its geographic position to extort benefits from Gazprom. Naftogaz did enjoy a discount off Gazprom’s usual export price until mid-2009. (See below chart.) 

Even before losing the discount, however, Naftogaz resorted to simple nonpayment of its debts to Gazprom, or what laymen might call theft. Consider:

2006:

• Jan 1, 2006:   Naftogaz-Gazprom negotiations break down; Gazprom cuts shipments;
• Jan 4, 2006:   Agreement to increase Ukrainian transit rate, gas prices to Ukraine also raised.

2008-09:

• Dec 01, 2008:   Naftogaz pays $268 million on arrears of $2.4 billion;
• Dec 19, 2008:   Naftogaz pays another $800 million on arrears of $2.15 billion,;
• Dec 30, 2008:  Naftogaz pays $1.52 billion, rejects $614m in penalties;
• Jan 01, 2009:   Gazprom cuts taps, pressure drops 6% in Poland and 35% in Romania;
• Jan 07, 2009:   Gazprom cuts all gas to Ukraine;
• Jan 19, 2009:    Naftogaz agrees to $1.5 bn in back payments, rejects late fees, agreement on $230, changing to 80% of the “market” price, starting in 2010;
• Nov 20, 2009:  Russia waives fines for Ukraine from violating take-or-pay provisions.

2010:

• Feb 8, 2010:     Yanukovich beats Timoshenko;
• Apr 21, 2010:   Yanukovich signs deal to extend Russian lease on Sevastopol until 2017 in return for a 30% discount on gas prices, to a max of $100 per mcm;
• Jun 08, 2010:  International arbitration orders Ukraine to return $5 bn in gas to RosUkrEnergo;
• Sep 07, 2010:   Russia calls to merge Naftogaz and Gazprom;
• Sep 22, 2010:   Putin: “Let’s form a unified economic space, unify our economic legislation ... and then we can extend our internal prices to our partners.”

2014:

• Feb 22, 2014:  Yanukovich flees to Russia in the face of massive protests;
• Feb 27, 2014:  Russian troops appear in Crimea;
• Mar 17, 2014:  Russia annexes Crimea;
• Apr 1, 2014:     Gazprom cancels Ukraine’s gas discount because Sevastopol is no longer part of Ukraine, price retroactively jumps to $485;
• May 30, 2014: Ukraine pays $786m to Gazprom, Gazprom claims $4.5 bn owed;
• June 15, 2014:  Supplies to Ukraine cut off

Some of the incidents in the above list look political. See April 1, 2014, and no it is not a joke that Gazprom stated that it was cancelling the discount due Ukraine for hosting a Russian naval base because Russia had just annexed that territory. But more look like straight-up business disputes. And if Russia seems to be gaining the upper hand in those disputes, well, consider the following:

 

In 2013, Russia exported about 139 bcm to Europe. As of right now, cutting Ukraine off will only allow Gazprom to export about 120 bcm. But by 2017 the South Stream pipeline across the Black Sea will be opened, and it will be rapidly joined by expansions in the North Stream pipeline through the Baltic Sea. At that point, Gazprom won’t need Ukraine anymore in order to export to Europe. 

OK, so there are two interpretations. (1) Russia is using gas as a weapon; and (2) Ukraine is just a bad customer. Which is correct?

Both ... but the first is what matters. Consider the context. If Putin believed it was in the strategic interest of the Russian Federation, then he could and would order Gazprom to offer Ukraine discounts galore. Gazprom may be a commercial operation ... but it is not independent. So while it is true that a wholly-commerical Gazprom would be playing hardball with Naftogaz, it is also true that Putin would order it to stop if he got something from the Ukrainian government in return. Like, I dunno, the transformation of the Ukrainian state into the “Ukrainian Federation” and an effective guarantee that the country would remain a Russian satellite forever. 

The nice thing for Mr. Putin, however, is that there really is a commercial dispute and Ukraine really is a terrible customer, which gives him cover to let as many Ukrainians as he wants freeze in the dark with no fear of consequences. The troubles with the recent deal to supply Ukraine at $10.48 per MMBTU in return for $3.1 billion in back payments should be seen in that light.

NOTE: Typo in title fixed. I would have used strikethroughs, but they do not seem to work in the title field. 

MH17 has given Kiev an opportunity, but it needs to seize it

 The evidence is mounting both that the rebels were responsible. Said rebels almost certainly needed to have Russian training. The only exception to the latter is if the rebels turn out to have personnel who previously obtained the requisite training in the Russian or Ukrainian armies. That is possible but not terribly likely.  

The tragedy is bad for the Russians, obviously. The trap has not closed around the Ukrainians. In fact, by making the insurgency seem like a danger to more than the Kiev government, it has offered a way out of the trap.

But the way out is not clear. One of three audiences will need to palpably react to the news.

1. The Russian public. I do not have much hope of this.
2. European publics ... and the governments they elect. The problem here is that the only way for European governments to show their displeasure is via economic sanctions. On balance, I think such sanctions would be good, but I am far from certain that they will affect Russian behavior. In fact, unless the sanctions allow President Putin a face-saving way out, they almost certainly will not affect his behavior. (I do not think that he plans to save the rebels guns-blazing, although he has and likely will continue to send them materiel.)
3. The eastern Ukrainian public. Here the Ukrainians need to be very skilled. The goal is to convince the public that the rebels are bandits and incompetent and thus not to be supported. The good thing is that they do in fact seem to be bandits and incompetent. (The Little Green Men of Crimean fame they are not.) The bad thing is that local populations have often thrown their support behind incompetent bandits when oppressive foreign governments were the alternative. Luckily, this is a continuum ... the worse the rebels make themselves out to be, the less saintly the Ukrainian government has to be to gain local trust.

In other words, this shoot-down has given Kiev a huge boost in the internal propaganda war that it must win if it wants to permanently deprive Moscow of leverage. But a huge boost is still just a boost. It is the Ukrainian government’s battle to lose. 

Thoughts?

The downing of MH17

 We know little, but indications point to the rebels, using equipment captured from Ukrainian forces. We know they captured anti-aircraft weapons. We also know they tweeted about shooting down a plane, retracted it, and then put up a ridiculous story about a Ukrainian fighter jet shooting down the 777 at which point the rebels shot down the fighter.

Breaking news can be found here. 

ADDENDUM: Be warned; the above link began to become useless around page 7.

An empire trap

 Vladimir Putin has laid a trap for President Poroshenko, who until the day before yesterday was walking right in.

The Ukrainian government had two choices in the face of the rebellion in eastern Ukraine. (1) negotiate; and (2) fight.

Negotiation was a bad idea for several reasons. (Others, particularly Will Baird, have convinced me of this.) First, it was unpopular in western Ukraine. Really unpopular, and understandably so. Second, the rebels were not negotiating in good faith. Third, it gave the Russians time to build up the rebellion. So doing nothing would not end well. 

The problem? Fighting was also a bad idea. A half-hearted assault would likely fail: the Ukrainian military is not in good shape and the rebels are not a paper tiger. (In the worst case, the Ukrainian army could have melted down like the Cuban Army of 1959 or the Iraqi Army of 2014.)

So an assault would have to use all the power available to the government. Half-measures would be dangerous.

The problem now? A lot of civilians would die. And the survivors would be angry. Half-hearted pro-Russian sentiment would turn into bitter abiding anti-Ukrainian nationalist hate. (Franco accomplished this in Catalonia and Basque Country.) Such hate can be used to create a bitter ETA or IRA-like organization under Russian control but extremely hard to stamp out even should the Ukrainians develop a strong state in the future. An underground terrorist movement with popular support (swimming in what Mao called the sea) will be much easier to control than a lawless insurgency.

Thus, the trap. Do nothing, fail. Half-measures, fail in a different way. Scorch the earth, and fail in a third way ... possibly the best outcome for Moscow. 

Is there a way out of the trap, Admiral Akbar?*

The best option would be a careful and calibrated limited incursion. Slow and steady, designed to minimize collateral damage. (Although not, likely, the number of Ukrainian military casualties.) It might fail, but it also might succeed without creating worse problems down the line. It would also forestall overt Russian intervention. And it could be used to force the Europeans into much stronger targeted economic sanctions.

Sadly, until recently it looked like Poroshenko had been seduced by the sirens of all-out war. Now, however, there are some signs that he is changing his tactics and operational concept.

Hopefully, it is not too late. It is riskier in the short-term than trying to flatten eastern Ukraine. But it at least holds out the possibility of making Ukraine into a better place. 

What is Putin trying to do?

 We do not know what Vladimir Putin is thinking. We do know that from what we know of his goals, his strategy thus far makes some sense. By stoking rebellion in eastern Ukraine, the collective wisdom of the TPTM bloggers conclude that he has accomplished three goals.

First, he found out that Ukraine is a relatively cohesive state. After all, a less vigorous Ukrainian response would have indicated that a military incursion could work. Ditto more widespread popular support for the insurgency. He would have been crazy to invade without getting information about the strength of the potential resistance. Now he knows: too high to make an invasion worthwhile.

Second, he distracted everyone around the world from Crimea. Should he beat a strategic retreat from eastern Ukraine, then it is unlikely that any sanctions will remain over Crimea. All that oil and gas for nothing!

Third, NATO membership is pretty much off the table forever. Kiev is moving in the direction of the E.U., but that would have happened had Putin done nothing. 

There is fourth possible gain, but we think it chimerical. Putin may believe that he can turn the opposition up and down like a rheostat, in order to pressure Kiev. If he believes that, he is almost certainly wrong. 

But he may have lured Poroshenko into a trap.

P.S. In a reversal, Doug is in Washington and Noel is in the Balkans! Go figure.

The rebel flag in Ukraine?

 A rebel flag, yes, but not the rebel flag.

Will Baird spotted this image in a clip of rebel forces in eastern Ukraine:

It looks like the flag of the American slaveowners’ revolt. It is not. Rather, it is the flag of the putative union of the Donetsk and Luhansk rebel administrations. (I saw putative because there is no evidence that there is much administrative meat on the declarative bones of the “Federal State of Novorossiya.”) Here is a screenshot (from Vice News) of a rebel spokesman wearing it as an shoulder patch, along with on his colleage the red-blue-and-black tricolor of the Donetsk People’s Republic.

But where did the flag come from? Are they imitating the Confederacy?

Probably not. Early on, the rebels used two flags: the aforementioned red-blue-and-black tricolor and (for reasons unclear) the Russian naval ensign. You can see it in this early picture from the rebellion; it is the reverse-Scotland banner.

When the Luhansk and Donetsk rebels decided to formally link up, they stuck with the naval ensign design, but deliberately harkened back to the old Tsarist naval jack. (Which is, actually, still in use by the Russian navy.) It had the advantage of sticking with Russia’s color pattern, I suppose. Here is another picture, from Reuters: 

It is possible that the eastern rebels are trying to tweak America’s eye. Filipino insurgents did just that very effectively back in 1898. But the Filipinos had a much more sophisticated leadership ... and they were fighting the United States directly. Absent direct evidence, I greatly doubt that the Ukrainian rebels are trying to anger or bother or send a message to Americans.

Moreover, I know from sad experience that few people outside the United States even realize the emotional import of the Confederate battle flag. If they think of it at all, they consider it some little bit of kitschy Americana, somehow connected to motorcycle gangs. In my younger and angrier days, I had words with strangers over the inappropriate display of the slaveowning banner in Mexico and (of all places) Germany. 

That said, even if coincidental, it is nonetheless somewhat fitting that one lost cause that should never have been attempted has picked a banner similar to another.

Please stop claiming that the economy is stopping Putin when there is no proof of that proposition

 Clearly the pithiness of my post titles is on the decline. Apologies.

Vox is arguing that international investors are keeping Vladimir Putin from invading Ukraine. The logic is that investors have pulled back from Russia over the past months. This pullback has damaged the Russian economy. Therefore, to protect his economy, Putin is also pulling back from his attempts to cleave off parts of Ukraine.

Well, consider these two hypotheses:

1. Putin has chosen to pull back because of the economic costs (recession caused by changing investor sentiment);
2. Putin has chosen to pull back because of the strategic costs (the risk of involvement in a brutal counterinsurgency against fellow white orthodox Slavs).

In other words, the Vox author has proposed an hypothesis without evaluating the counterhypotheses. And in this case, the counterhypothesis is much more compelling.

To be fair, it does appear to be true that capital is leaving Russia at an accelerated pace. This was not clear in March, when the markets appeared to care little about Crimea. As we predicted here, however, the prospect of war in eastern Ukraine has been another story. Capital flight has raised interest rates and in turn damaged the Russian economy. 

The problem is that it is clear that Putin has incentives to pull back even if his economy was booming. It is clear that there is no popular support for secession in the east. (See also these poll results by province.) The Ukrainian government and some large minority of Ukrainians are prepared to fight. The referenda have no legitimacy. An invasion (even one invited in by the Donetsk People’s Republic) could easily spark a war that would blow apart the nascent Eurasian Union and possibly cause Putin to lose power.

This is not to say that all big wars would have negative strategic consequences for the Russian president; it is to say that a war with Ukraine right now over this would.

So Putin is playing it smart. Even if he wants to annex Novorossiya for its own sake, he is playing it smart, because you can’t always get what you want. But if you try sometime, you just might find, you get what you need ... which is, for the Russian Federation, a federalized Ukraine that grants Russia access to the arms factories located there. 

In short, the Vox author wants to believe that big interstate wars are now impossible, and so he looks for evidence that globalization or postmodern pacifism or some other thing will force Moscow to pull back while completely ignoring the counterhypotheses. 

I should add here that absent deliberate sanctions or a large-scale prolonged war (both of which are strategic problems) the economic damage has already been done. If more market reactions were Putin’s only concern, then he might as well ignore the sunk costs and keep going. That is not what he is doing.

Finally, Meghan O’Sullivan has a good piece about why sanctions won’t stop Putin. Her arguments also apply to un-orchestrated economic damage. 

Vox appears to be caught in a Norman Angell moment. Angell famously wrote before WW1 that interstate war had become unprofitable. Angell, however, did not believe that fact made war impossible, just that it made war stupid. That was a mistake made by others. Vox appears to be resurrecting that mistake for the 21st century.

Will Ukraine have a civil war?

 I do not know. But it looks likely. At the current rate of violence, the country will be in a civil war by December 11th.

The Corre­lates of War data set defines civil war as more than 1,000 battle-deaths per year between at least two organized factions, with the ratio of casualties between the different sides limited to no more than 20:1. (That latter is to differentiate civil wars from massacres and genocides.)  

So far, roughly 96 people appear to have died in violent clashes since April 16. Ten of the dead have been Ukrainian soldiers and police, versus 82 militants and at least four bystanders. (My sources are here, here, here, here and here.) That comes to rate of roughly four people per day ... and if the current level of violence sustains itself, the thousand-casualty mark will be passed on December 11th of this year.

That said, it does not seem like the current level of violence is sustainable. There are three outcomes. The first is that the Ukrainian government could de facto acquiesce to the militants’ demands. That seems unlikely at this point, although a good case can be made that this would be Kiev’s wisest course of action. 

That leaves two possibilities. First, the militants could lose morale and cohesion and disintegrate. Second, the militants could be emboldened (perhaps by their fake referendum, perhaps by the Russian Federation, perhaps by Ukrainian missteps). In that case the Ukrainian government will have to choose between de facto acquiescence to their demands or more violence. 

Either way, the level of violence will not remain at the current level. It will either drop to zero quickly or escalate to something rather worse. 

Vladimir Putin appears to be playing this very smart. He knows that invading the east could set off a very nasty insurgency, against which he would not be able to engage in scorched-earth Chechnya-style operations. (Ukrainians are too much like Russians.) He also knows that the referenda in the east will have no legitimacy and provide no cover for Russian intervention. So why not pretend to be the voice of sweet reason? His only mistake here seems to have been mobilizing too few troops on the border. After all, it would have been helpful for him to be able to demobilize significant numbers while still keeping enough to intervene should the situation devolve into civil war. 

Analysts say U.S. should not do against Russia what nobody was contemplating

 The Offshore Technology Conference in Houston is about exactly what you think it is about. At it, the Douglas-Westwood energy consultancy released a note warning that it would be a bad idea to release oil from the Strategic Petroleum Reserve in order to punish Russia. If successful, lower oil prices would sucker-punch many American producers. Moreover, the attempt would fail if it prompted OPEC to cut production.

OK. I would agree with all of that. But who was talking about trying to use the Strategic Petroleum Reserve as a weapon in the first place?

This chart does not reassure me that Ukraine won’t have a civil war

Vox published a chart purporting to argue that Ukraine won’t have a civil war because most Ukrainians don’t want to fight.

It is great that most Ukrainians don’t want to fight unless they are directly threatened! But there’s a problem with the claim that this polling result means that a civil war won’t happen. Simply put, we don’t have a control. Without similar data from countries that did then go to have a civil war we have no idea how to interpret these results. For all we know, a poll of Yugoslavians in 1991 or Syrians in 2011 would have had the same result.

In addition, the data do not in theory support the hypothesis that Ukrainians will not fight a civil war. It is true that 53.2% of respondents said they would fight if only there was an immediate threat to them and their family. The thing is, the 4.4% who said they would fight against threats from Kiev (or the 15.8% who said they would fight secessionists or Russians) would not have to do very much in order to generate threats to everyone else and their family. At that point you have a civil war.

In fact, there is a second logical chain which points to civil war: most people are noncombatants in most wars. It looks to me from the above that almost a fifth of Ukrainian population said that they would fight even absent a direct threat. That is more than enough to sustain a conflict.

Once these things get rolling, the only way to stop ‘em fast is either a quick win or mass pacifism. And those poll results don’t show mass pacifism.

The argument for peace in the Vox post is, well, silly.

Odessa and a negative-sum game in Ukraine

Odessa is worth far more to Ukraine than it is to Russia.

Russia has already seized control of everything worth seizing by taking Crimea. Consider the below map of hydrocarbon deposits in the Black Sea:

Now consider this map of what is going to happen to the exclusive economic zones (EEZ) of Russia and Ukraine after the Crimean annexation:

Ukraine may keep a couple of gas fields that it will undoubtedly be unable to exploit without Russian approval or participation. But it will lose the big ones. Skifska and Forosa together will by themselves produce the oil equivalent of 142,000 barrels per day.

In other words, annexing Odessa only gets Russia access to Transnistria. And Transnistria is useful only as a lawless zone; it has no strategic value as a constituent part of the Russian Federation.

On the other hand, Ukraine needs Odessa desperately. Why? Well, it is nice to have a port, but as a general principal western Ukraine does not depend on seaborne traffic, save for one key import ... oil. Ukraine’s big remaining refinery is there and it is the logical location for any future LNG import terminals. Ukraine has already been nose-punched by Lukoil’s decision to cut off crude shipments; losing all coastal access will be bad.

In the longer run, say five years, the flow in the existing pipelines from Russia can be reversed to import gas from European LNG terminals. New refineries can be built and the country can continue to buy refined products from Lukoil. But the short-run would be bad.

The thing is, taking Odessa would not be easy. Too much effort to hurt Kiev in a way that does not help Moscow. I doubt that the Russian government is going to do it.

Absent serious internecine fighting, I would bet against a Russian invasion of the east at all, let along a drive on Odessa. Right now, it is looking that Ukraine might federalize. It is only a short step from that to a peaceful divorce for the east, likely leaving the key coastal areas in a smaller Ukraine. Even without a de jure divorce, federalization will give Russia most of what it wants. Much easier than a war.

But I am not one for pretending that I have seen into Vladimir Putin’s soul. I could be wrong. This story is a little worrisome. Fighting in the east could force Putin’s hand, given the reputational capital that he has put on the line.

I understand why the Ukrainians are doing it and I would certainly order the same were I in charge in Kiev ... but at some cold-blooded level it is not rational. Ukraine has more to lose than Russia has to gain.

The Russian energy weapon is aimed at Ukraine, not Europe, and it is about the money

I have to admit that my first thought upon reading this heading, “Putin Aims His Energy Weapon At Ukraine,” was not “lasers!” That was my second thought.

Anyway, if the article had stopped there, with that sentence, I would not be writing this. Unfortunately it went to argue that Russian gas price hikes against Ukraine might not work because winter is ending and Europe is more resilient than it used to be. Note how the author dropped any discussion of the effect of a price hike on Ukraine.

I humbly submit that the fact that Europe is relatively invulnerable to a gas cut-off right now is a feature, not a bug. It means that the Russians can extract rents from Ukraine and cut them off if they don’t pay without worrying about European public opinion. (In the short-run, Gazprom’s contracts mean that in the absence of official sanctions Western customers will pay even if they cannot take possession of the gas.)

If Ukraine pays, it will hurt. The rise is from $8.38 per MMBTU to $15.18. In 2012, Ukraine imported 1.2 billion MMBTUs ... putting the additional cost in the order of $9 billion. That will hurt. Even if Ukraine can keep reducing its gas consumption, that will hurt. And if the taps are shut off because Ukraine doesn’t pay, that will hurt more. As the above-linked article points out, E.U. countries can ship enough gas to Ukraine to meet about 25 percent of its summertime demand, but that’s it ... and we don’t know at what price. (There is more pipeline capacity to Ukraine, but Gazprom controls them. Which means that it won’t allow gas to flow eastwards unless European governments expropriate the Russian company.)

In short, I have no idea why the article was subtitled, “Moscow is jacking up gas prices to cow Kiev and scare Europe. It may not work this time.” It may not scare Europe and it may not cow Kiev, but neither is the point.

Last point: you have to love the fact that Moscow is justifying the price hike by saying that the Ukrainian rebate was compensation for the use of Sevastopol, and now that Sevastopol is Russian territory they no longer need to grant it. Wait ... what?

Was the Constantine Plan a reductio ad absurdum, with applications to Crimea

Randy McDonald, who has a blog well-worth following. In it, I discovered a post from Windows on Eurasia claiming that Russian nationalists will be upset by all the concessions that the Russian Federation has made to the Tatar minority in Crimea.

I have no doubt that President Putin intends Crimea to remain part of the Russian Federation until the fourth millenium. His concessions to the Tatars are almost certainly made in good faith, at least in the limited sense that he wants the absorption of the peninsula to go smoothly and easily.

What are the Russian nationalists so excised about? Well, Tatars appear to have received the lion’s share of the plum patronage appointments, in addition to cultural autonomy.

I am reminded of the Constantine Plan, which was the Fifth French Republic’s attempt to win over Algerian public opinion. Except it also appears to have been part of De Gaulle’s plan to convince the population of the Hexagon that the price of victory was too much. The plan committed France to spend huge amounts to develop Algeria. It also in effect put the kibosh on further European integration by employing trade restrictions to help develop Algeria. And ...

... it imposed a 10 percent requirement that all new public positions in France go to Muslim citizens. You heard that right. Not in just the three Algerian departments. In all of France.

For some idea of its extent, see page 155 here, page 18 at this contemporaneous World Bank assessment, and most clearly on page 50 of this must-read book.

The historical questions are obvious. There are two big ones. The one which is irrelevant to this post but more important to, uh, everything else is the following: what happened to the Algerians hired under the affirmative action programs?

The one which is less important but relevant to this post is: how did the metropolitan French-speaking population react ? I cannot help but think that De Gaulle intended the policy as a way to bring around the Hexagon to the need to decolonize. “Look, people,” he seemed to be saying, “keeping Algeria as part of a democratic France without violence means integrating Muslims into every part of your life. Here is what that means. I doubt you want that. So back me in letting this place go.”

I am sure that Putin is not thinking along those lines. He intends Crimea to be part of Russia until the human race is replaced. But since he seems to be a rational man, he may reduce enthusiasm for Russian imperialism nonetheless by extending to the Tatars the minimum needed to keep them a peaceful part of a greater Russian Federation.

Thoughts?

Does Russian expansion matter beyond the border regions of Russia?

Back in April 2012, we discussed the idea of the “1945 line” in comments. In October of the same year, we discussed it again in reference to the Falkland Islands. Key quote:

“Any planning for a war [with the U.K.] would need very careful diplomatic preparation these days, much more than in 1982. Back then, Argentina was following a long line of actions that held that the “1945 line” did not hold for European overseas territories. Morocco could invade the Spanish Sahara, India could fight a war with Portugal for Goa, Indonesia could march into East Timor and Dutch New Guinea. Given this history, it was not (completely) crazy for the Argentine generals to think that the world would accept their victory. (And to be honest, I suspect that they were right: if they had won, las Malvinas hubieran sido argentinas.)  But that is not the case today, even though plenty of countries support the Argentine claim [to the Malvinas].”

In short, there has been a remarkably effective taboo on unilateral annexations unless they involved European overseas territory. There is only one real exception: Israel after 1967. (Wikipedia adds Sikkim, which India annexed in 1975, but Sikkim had not been an independent state.)

How do we know that the taboo is effective? A case can be made that the taboo limited the extent of interstate wars in Latin America. For example, El Salvador and Honduras fought the Soccer War in 1969 over the status of Salvadoran settlers in Honduras. Since annexing the area settled by Salvadorans was not a possible outcome given the taboo, the OAS (and behind it, the United States) had the leverage to force Salvadoran troops to withdraw. In another example, Peru and Ecuador fought the Cenepa War in 1995. Neither side could reasonably expect to gain or lose any territory outside the disputed region, which made Peru more willing to accept a limited Ecuadorean victory even when Peru had military superiority. (See pages 2 and 3 at the link.) In short, one might believe that the taboo kept both wars from spiralling into protracted total conflicts.

OK ... but the taboo did nothing at all to stop Israel from annexing some border regions. Nor did it prevent the Eritrean-Ethiopian War from turning into a protracted total conflict. Similarly, Paul Collier made arguments that Africa might in theory be better off if governments feared that their states might be forcibly absorbed by neighboring states — but he rejected the implications of that idea by arguing that the lack of interstate conquest was overdetermined: the international taboo was just one of many obstacles to a would-be empire builder in modern Africa. (See pp. 184-85 of Wars, Guns, and Votes.) Considering those examples, perhaps other factors were at work in keeping Latin American wars from spiralling out of control.

The debate matters. If the taboo is key, then Putin’s actions matter beyond near-abroad of the Russian Federation. Successful expansion opens the door to similar actions all over the planet.

But if the taboo on conquest is just a reflection of some other deeper cause, then current Russian actions have implications only for future disputes that involve Russia. Interstate relations between other countries won’t change. David Weman is correct that this will be the only successful non-colonial annexation outside Israel, but maybe that does not matter.

So which is it? Does precedent matter? Will we see territorial aggrandizement that would not have happened absent current Russian actions?

Russia uses debt as a weapon

Here is the transcript of a meeting between Russian Prime Minister Dmitry Medvedev and Alexey Miller, the chair of Gazprom’s Management Committee Chairman Alexey Miller.

Dmitry Medvedev: What is the situation with Ukraine? Do we have any new issues or everything stands where it was?

Alexey Miller: Ukraine hasn’t settled the gas debt of the last year and today the county's outstanding debt for current gas supplies is increasing. Gazprom hasn't received any payments for the gas supplied in January, and our Ukrainian partners informed us yesterday that they would not be able to pay in full for the gas supplied in February. At the end of the last year it was agreed that Gazprom would give Ukraine a discount price for gas, provided that Ukraine would ultimately clear the debts accumulated over the last year and would pay in full for current gas supplies. Unfortunately, I have to state that Ukraine hasn't paid off for the gas supplied last year.

Dmitry Medvedev: How much in total have they managed to repay?

Alexey Miller: Speaking of the last year’s indebtedness, they have repaid USD 1.300 billion.

Dmitry Medvedev: Which means 50 per cent of the debt?

Alexey Miller: A little less than 50 per cent. The total gas indebtedness of Ukraine makes up USD 1.529 billion now. Given that Ukraine is not fulfilling its obligations or complying with the agreements reached when signing the contractual addendum providing a gas discount, Gazprom resolved to remove the discount starting from this April.

Dmitry Medvedev: I see. The one who fails to pay for the supplied goods should be aware that it is fraught with adverse consequences, including those related to the revocation of previously reached agreements on beneficial terms of supplies. Nevertheless, what is your opinion of the measures that should be taken to have this debt repaid?

Alexey Miller: Of course, the amount of Ukraine’s debt to Gazprom is considerable. The last year’s debt was reflected in Gazprom's budget for this year, and this amount is included into our investment program. Indeed, it is a big sum of money. Therefore, the easiest and efficient way for Gazprom would be to provide Ukraine with a loan in the amount of USD 2 or 3 billion so that it could settle its indebtedness accrued from the last year and pay for current gas supplies.

Dmitry Medvedev: It's no secret that those 50 per cent they paid came from the sovereign loan we had given them. Of course, this is a possible way of resolving this problem. I will entrust the Ministry of Finance to consider all the current possibilities and obstacles as well as all the contradictions related to the extremely low credit rating of Ukraine now, in addition to other aspects of the Russian-Ukrainian cooperation in this area. Firstly, Gazprom anyway should insist on the full coverage of the debt owed by the Ukrainian partner. Secondly, your decision to terminate the beneficial terms of supplies looks completely justified.

The gas price increase will be a hit. Ukraine was paying $7.60 per MMBTU under a deal negotiated in December 2013, down from $11.33 and compared to a price for delivery to Germany of $10.83.

Of course, it was the previous government what refused to pay off its debt. You know, the one under the Russian-backed president.

Problem is, the damage to Ukraine likely won’t end there. Gazprom could sue for its arrears under the Ukraine-Russia BIT. That could be a complete disaster for Ukraine; it could lead to all new funds being attached to pay off the Russians for their gas.

In fact, it gets worse. Russia loaned Ukraine $3 billion in the run-up to the crisis. Russia could transfer those bonds to private owners ... at which point the new bondholders could sue Ukraine!

In theory, the U.K. could stop that from happening since the bonds were issued under English law. Anna Gelpern suggests that the British parliament should move now to remove the enforceability of those contracts. That would be a good idea! But I don’t think it will effect the Gazprom debt. And Felix Salmon thinks that the Russians could trigger cross-default provisions in other Ukrainian bond issues. Boom boom boom and a legal nightmare for a Ukrainian government desperately in need of foreign financing to keep its economy afloat.

In short, it will be real mess for the Ukrainians, on top of all its other problems. Unless, of course, Kiev uses Western money to repay the Russians. For money advanced by them to the previous puppet government.

And as far as I know, there really is nothing that can be done via courts against the Russian Federation, despite crossing a border and forcibly annexing a region of a neighboring state.

The new legal international property rights infrastructure that we have built is pretty impressive. But man, sometimes it has perverse results.

1948 and all that

There have been suggestions that Crimea’s dependence on gas and electricity from the mainland makes it uniquely vulnerable to a Ukrainian blockade.

Well, no. It does not. The Russian military presence itself does not depend on imported anything from Ukraine.

The civilian population does depend on imports from over the border, but inflicting hardship on them would be guaranteed to increase support for Russia by a multiple. Morale in Crimea (and the Russian Federation) would go through the roof. Wartime conditions have that effect on people.

Meanwhile the Russians would be shipping in supplies to keep the Crimeans from freezing or starving, at some cost but a bearable one ... and any Ukrainian attack on those shipments would provide a perfect casus belli and deprive Kiev of the moral high ground internationally.

Consider the evidence in Bombing to Win, by Robert Pape of the University of Chicago. Strategic bombing universally failed to demoralize populations. Why would a strategic blockade succeed?

If you doubt that, consider what happened in 1948. When the Soviets blockaded Berlin, the Berliners were not demoralized and the Western Allies did not roll over. Nor did the Soviets attack the supply aircraft, despite being in a much better position to do so than the Ukrainians would be today.

An attempt to blockade Crimea would be 1948 in reverse. It would be stupid. All indications are that the people in Kiev realize that. That is why (I hope!) it will not happen.

Do the markets care about the invasion of Crimea or do they care about war in Ukraine?

Last week we asked about the market reaction to the Russian silent invasion of Crimea. The data were not yet in. Now the data are in.

Above is the RTS index for the past two weeks. The collapse on Monday, March 3rd, is hard to miss. There is a recovery over the next two days, but it is only partial. The markets did not like the Russian invasion.

That would seem to be clear-cut. The problem is that a slightly longer view muddles the issue. The vertical bars show intra-day variation, with the horizontal lines being the open and close.

On this view, the markets were terrified of an all-out war and with good reason. It would cut off most Russian gas exports through Ukraine, directly slamming the economy, and court severe Iran-style sanctions from the west ... if not outright combat. Once that fear passed, the previous downward trend reasserted itself.

If you doubt the severity of the panic, consider that the Russian central bank had to raise interest rates on Monday. That is not something that a central bank would do lightly.

In short, unlike the Russo-Georgian War of 2008, the markets did care about the appearance of Russian troops in Crimea. But it is not clear whether they are punishing Russia for the violation of international norms or whether they were panicky about the impact of an all-out interstate war right along the biggest gas export routes.

These are very different things with very different implications for international relations in the 21st century. Any ideas for how to sort it out?

And the Economist crazily says Cristina Fernández is just like Putin!

The Economist this week has an interesting essay on democracy. It ain’t bad. I recommend reading it. But it also has this insane part:

“This postmodern tsar has destroyed the substance of democracy in Russia, muzzling the press and imprisoning his opponents, while preserving the show — everyone can vote, so long as Mr Putin wins. Autocratic leaders in Venezuela, Ukraine, Argentina and elsewhere have followed suit, perpetuating a perverted simulacrum of democracy rather than doing away with it altogether, and thus discrediting it further.”

What the f--k? We have already presented the evidence that Venezuela is still democratic, albeit barely. That said, the comparison with Russia isn’t unfair.

But Argentina? Seriously? For real? Is there doubt that Argentine elections are free and fair? No. Is there doubt that the Peronistas would leave office if they lost an election? No. And if you don’t believe me, take the word of the same people who lumped Venezuela with Ethiopia. They give Argentina a polity score of 8. That is the same as Belgium and the Czech Republic, and twice Russia.

It is a headscratcher of a sentence. What was the author thinking? Or is it just cool for Economist writers to parrot Newt Gingrich?

Do the markets care about war in Ukraine?

Short answer: we don’t know! Yet. Here is the Russian RTS stock index from last week:

There has not been a whole lot of movement in the RTS index, since most of the recent events have happened over the weekend. It slid on Thursday between 8am and 11am Moscow time; I do not have easy access to a sufficiently fine-grained event chronology to know if that could be plausibly linked to the crisis. Russian 10-year bonds have been pretty stable. The ruble slid a little between Monday and Thursday, from 2.82¢ (U.S.) to 2.77¢, but it rallied on Friday back up to 2.79¢.

So far, so inconclusive. But the big events have been happening over a weekend; we will have to see on Monday whether the markets are willing to punish Russia for the Crimean intervention or whether they shrug it off.

I would watch the rest of the southeastern Ukraine.  Over the day, Russian flags were hoisted in several places: Lugansk, Donetsk, Melitopol, Mariupol, Odessa, Kharkiv. Two were pulled down again: Odessa and Kharkiv. In Donetsk, the city council appears to have called for a vote on secession. (The city council does not control the province, which is what would presumably be decided to secede.) If there is more ugliness in the east, then the Russians would have a plausible reason to intervene there ... and that is unlikely to go unchallenged by the Ukrainian military.

Still, even then, I have my doubts that there will be serious sanctions against Russia or that investors will panic. In fact, if oil prices rise on the crisis the Russian economy might even be helped.

In short, I do not think that there will be panic in the markets next week unless Russian troops march into eastern Ukraine ... and even then I predict it will be short-lived.

Soyuzneftegaz and Syrian offshore gas

Upon reflection, it is possible that Russia might gain from its involvement in Syria. But a lot of things will have to go right.

The state-owned Soyuzneftegaz has signed an exploration deal with the Syrian government. Soyuzneftegaz will spend $15 million on exploration and drill at least one well for $75 million.

The thing is, development and exploration cost Noble way more than $90 million, and Noble is one of the most efficient companies in the business! Noble hoped to drill its first exploratory well in the Tamar field for $40 million ... it cost $145 million. In the Leviathan field, planning and three exploratory wells cost $800 million. Ultimately, Tamar cost $3.25 billion to develop over four years.

And note that Noble really is best-in-class. The below chart shows depth on the vertical axis, time to production on the horizontal, and represents the amount of resources by the size of the circle. (The data come from Goldman Sachs Top 360 Projects Survey; the chart is from Noble.) Noble projects are in yellow: they take noticeably less time to complete.

A group of my students carried out a valuation exercise for the Tamar field. They calculated it as $2.51 billion, net of development costs ... but the Tamar field is aimed at the Israeli domestic market. Syria right now does not have much of a domestic market.

This sounds terrible ... but if Soyuzneftegaz finds gas it can always sell its stake. My students’ preliminary estimate of the value of the Leviathan field (assuming LNG for export) is $4.1 billion. That value, however, is contingent on being able to bring Leviathan on-line by 2016 ... the more you push it back, the lower it goes.

In other words, if Soyuzneftegaz gets serious about exploration, and if it finds gas, and if a market can be found for that gas, then the field might be sold. Maybe for $4 billion, maybe for $2 billion, likely for much less.

And right now Soyuzneftegaz does not look serious, not unless it commits a lot more than $90 million to exploration.

But when you think of the agreement to spend $90 million as an option, it does not look like a bad deal for Soyuzneftegaz’s owners, e.g., the Russian Federation. I am skeptical that Soyuzneftegaz will find gas in a reasonable amount of time, but the Assad regime is unlikely to renegotiate any deals.

Moreover, Russia is almost certainly selling arms to Syria on credit: if it gets paid (a not inconsiderable if, but so far Syria seems to be paying) then the net cost of involvement will be positive: profits + interest + the value of any gas less the opportunity cost of the loans to Syria + $90 million.

Add that to the satisfaction of seeing Russian classes in Damascus and the spiritual happiness from pretending that a bunch of piers are a real overseas naval base, and yeah, Moscow’s involvement starts to make some sense. Not much ... but some.

What Russia won in Syria

One of the strangest memes to come out of the recent near-intervention in the Syrian civil war was that somehow Russia had won. The logic was unclear: Russia had humiliated the United States by convincing Syria to give us what we wanted. Or it was somehow a stealthy plan to shore up Russian influence.

I was not convinced that Russia had won anything other than kudos at heading off a Western punitive expedition and helping to get rid of  Assad’s chemical stockpile. Consider Russia’s two big gains: keeping the naval “base” at Tartus and the Soyuzneftegaz did get an exploration license for offshore gas.

The naval “base” consists of two small piers and few buildings. (This Russian video of the base will tell you all you need to know. It makes me wish I spoke Russian: the reporter seems surprised at how Mickey Mouse it all appears.) As for Soyuzneftegaz, it will have to spend $90 million with a strong chance of finding nothing or being unable to develop what it does find for many years. For example, Noble Energy discovered the Tamar field in the Eastern Med in 2009 but just started producing last March.

But now we know what Russia wanted!

In September, Syria will begin teaching Russian as a second language in its schools from the seventh grade on!

Note that Syria began teaching English from the first grade in 2001. (The decree is mentioned at the bottom of page 14 at the link.)

Also note that Russian will compete with French.

And do consider that it will be hard to ramp up Russian-teaching what with millions of kids out of school.

But hey, it’s something. What with Russian in steep decline, every little bit helps.

In seriousness, the Russians seem to have shipped up arms shipments to the Syrian government, presumably on credit. I have no idea what they get from it, other than the eventual Syrian payments. Unless those gas fields pan out or the people in the Kremlin get great satisfaction from hearing Syrian high schoolers butcher their language ...

Time or the Onion?

Carlos Yu sends this:

Come again?

I support the revelation of the NSA programs; I do not support Edward Snowden

The Edward Snowden saga has confused me. He decided to reveal information about NSA surveillance. He revealed that information in a piecemeal and confusing way. He decided to surface in Hong Kong. Hong Kong is sovereign Chinese territory: we are supposed to believe that Chinese intelligence did not get any information from him while he was there. He then travelled to the Russian Federation. Once the U.S. began extradition proceedings in Hong Kong he might not have had any other options but Russia ... but nonetheless that is where he wound up.

Glenn Greenwald just told me on national television that Russian agents have not had any interactions with Mr. Snowden (or copied his data by other means) because they “want him gone.” I have immense trouble believing that.

The NSA surveillance programs are complicated things that deserve to be brought to light and debated. I am glad that Snowden revealed what he revealed. We now need to debate them. An American court of law seems not a bad place to have that debate. A braver man than Mr. Snowden would have risked going to court, as did Daniel Ellsberg. No?

Still, one can imagine why he would want to remain outside the American criminal justice system. But why then did he not surface in one of the Bolivarian nations in Latin America? Going to Hong Kong seems entirely mysterious unless Mr. Snowden intended to pass information to the Chinese government. And it was not hard to know that Hong Kong has an extradition agreement with the United States.

It is possible that Snowden wants to end up in Russia. It is not unreasonable to think that in Latin America he would not be safe from be vulnerable to apprehension by U.S. agents. But going to Russia, I would think, means giving Vladimir Putin all the information that he has. Am I wrong to assume that?

I am glad that Mr. Snowden revealed what he revealed. And I am gratified that the revelations have moved American public opinion despite Mr. Snowden’s odd decisions. But until new information is revealed, the man himself has not got my sympathy.

Ecuador backs away from Snowden

 It looks like Ecuador is backing away from Snowden. Their position now boils down to the following: if he can get here (or at least to one of our embassies) then we will consider his petition.

The reason does not seem to be American pressure. The first arrow in the American quiver would be Ecuador’s preferences under the Andean Trade Preference Act. Only now Ecuador has unilaterally renounced its benefits! So it ain’t that.

Rather, it seems that the diplomatic staff in London was going off the reservation and giving the impression that Julian Assange ran Ecuadorean foreign policy. So President Correa cooled things off by stating that Ecuador would do nothing unless and until Snowden got to its territory. 

If I had to guess, I think that Ecuador would grant asylum if Snowden could get there. I think it is a risk that Mr. Snowden should be willing to take. The question really is whether the Russians (and Cubans, since no Ecuadorean jet can reach Moscow directly and the only commercial flights go through Cuba) will let him. I have no doubt that Raúl Castro would be fine with letting him change planes. The Ecuadoreans might be reluctant to let him board a TAME flight in Havana without a passport (although I would bet that Correa would let him) but that would mean only the need for a flight through Venezuela. And honestly, President Maduro would not have a problem.

So it is up to President Putin. Alas for Mr. Snowden. What does Putin want?

And now Venezuela annoys Russia!

 All right, so this story is neither unpredictable nor surprising. But it seems ironic. Hugo Chávez, you see, has made a deliberate policy of attracting investment from countries like Russia and China in order to displace the evil companies from the Empire. He would be free from the Empire without losing access to foreign capital and technology. The foreign companies, meanwhile, would get good deals from the Bolivarian Republic, and be protected by diplomatic ties.

How’s that working out? Um, not so great. On September 16, 2011, the government nationalized the gold industry. (The link goes to the text of the decree, for those who are interested in the gory details.) The decree was not, it seems, expected. On April 3rd, the Venezuelan government took over Rusoro, a Russian-owned (and Canadian-listed) gold mining company.

Rusoro says that it’s invested a billion dollars in its operations, and holds title to $3 billion in gold reserves. (In 2010, it had a book value of roughly $590 million.) The market does not agree. At the end of 2010 it was worth only $182 million. Moreover, it had to sell 60% of its output to the Banco Central de Venezuela at an exchange rate of 4.30 bolívares per dollar, at a time when the black market rate was around 8.3.

But Venezuela has gone ahead and nationalized it anyway, for reasons that are beyond me. The company currently has a market cap of $34 million and loses money. The Russian connection meant nothing. So now the owners have put a limit: come to an agreement by June 15th, or go to ICSID. I have no idea what they will get; I will bet it has an NPV above $34 million.

My money is on a settlement. I wish I understood why President Chávez wants to bother, though.