Crimean Tatars after Russia's annexation of the Crimean Peninsula. OSW Commentary No. 141, 30.06.2014

After Russia’s annexation of Crimea, Crimean Tatars face the necessity of working out a modus vivendi to cope with the difficult situation which now confronts them. On the one hand, the desire to remain in their homeland, which they regained after exile in Soviet times, is an imperative encouraging them to accept the status quo, while on the other, the fear of Russia and the strong relations of Crimean Tatar elites with Kyiv would favour opposing the present state of affairs. Another fact pointing in favour of an agreement with Moscow is that Kyiv has not attempted to defend Crimea and has not been active in demanding its return to Ukraine, which has undermined Kyiv’s authority in the eyes of the Tatars. Therefore, the leaders of the Mejlis of Crimean Tatars (the national self-government) act carefully, trying to avoid actions which could be seen as provocative and thus liable to incite retribution. It could be expected that this course of action will continue, although it faces ever greater difficulties in the context of the Russian authorities’ adoption of a strongly anti-Tatar policy, which is likely to evoke more radical attitudes among the Crimean Tatars.

Russia in Crisis: Year One. OSW Report, January 2010

Economic conditions which had favoured Russia’s development suddenly changed in mid-2008. The Russian economy was hit, on the one hand, by a drastic slump in oil prices (which fell from nearly US$150 to US$50 between July 2008 and January 2009), and on the other by the outflow of investors (a net of US$130 billion of capital left Russia in the fourth quarter of 2008). Within several months, the financial crisis became an economic crisis affecting the entire economy. The financial reserves accumulated in times of prosperity (more than US$162 billion in the stabilisation funds and nearly US$598 billion in the currency and gold reserve) alleviated the negative impact of the crisis, although this failed to prevent the deep declines in macroeconomic indicators. Russia is one of the states most severely affected by the crisis. In the first half of 2009, its GDP fell by 10.4% compared to the same period in the previous year, while industrial production dropped by nearly 15%, and a decrease in investments of over 18% was reported. The poor economic performance has strongly affected the Russian budget, which reported a deficit for the first time in ten years in 2009. During the first year of the crisis (August 2008 – September 2009), Russia’s financial reserves were seriously reduced as a result of the government’s anti-crisis policy and interventions from the central bank: the reserve fund decreased by nearly 45% to US$76 billion, and the central bank’s reserves shrunk by nearly US$200 billion to US$409 billion. Meanwhile, however, the money in the National Welfare Fund, which had been intended almost entirely to subsidise the Pensions Fund between 2010 and 2015, rose almost three-fold (to US$90 billion). According to government forecasts, the money from the reserve fund is also supposed to be spent fully in 2010. The financial crisis has triggered a dynamic outflow of capital from the Russian market. So-called speculative capital was the first to demonstrate the lack of confidence in the Russian market. In the first half of 2009, the growth rate of long-term investments also decreased noticeably, although no spectacular withdrawal of direct investments from Russia has been observed. The economic crisis has also halted the foreign expansion of Russian private capital, while state-owned capital strengthened its position as an investor. Russia’s raw materials companies continue to be the main category of foreign investors; however, new technologies are gaining prominence as the second main direction of Russian investments.

Standard-setting abuse: the case for antitrust control. Bruegel Policy Brief 2013/01, February 2013

Standards reduce production costs and increase the value of products to consumers; ultimately they significantly contribute to economic development. Standards however entail risks of anti-competitive abuse. After the adoption of a standard, the elimination of competition between technologies can lead to consumer harm. Fair, reasonable, nondiscriminatory (FRAND) commitments made by patent holders have been used to mitigate that risk. The European Commission recognises the importance of standards, but European Union competition policy is still seeking to identify well-targeted and efficient enforcement rules.

Do European Union fines deter price-fixing? Bruegel Policy Brief 2013/04, May 2013

The issue: Anti-cartel enforcement is the least controversial of competition policy themes. Agreements to restrict competition such as price fixing or market sharing have obvious negative effects on welfare. Within the European Union, however, industry representatives have increasingly voiced concern that the European Commission applies a too-strict fining policy to enforce anti-cartel law, particularly since the introduction of new guidelines on fines in 2006. Fines are said to be too high, disproportionate and liable to introduce distortions into the market, ultimately leading to higher prices for consumers. It is often argued that more lenient approaches should be followed in crisis times. Policy challenge: High fines for cartel activity could entail costs for society and might be difficult to implement. Nevertheless, there is no case for reducing current levels of EU anti-cartel fines. Fine levels already take the economic crisis into account, and the net present value of fines might prove to be too low to discourage collusion. We estimate that fines might even be not high enough to offset the additional profits yielded by collusion. Fines should be complemented with other measures to increase deterrence, in particular personal sanctions targeting company officers who are responsible for leading the company to commit infringements. In the short term, pressure on decision makers could be increased by reducing the expected duration of investigations.

The Dragon awakes: Is Chinese competition policy a cause for concern? Bruegel Policy Contribution 2013/14, 22 October 2013

China’s Anti-Monopoly Law, adopted in 2007, is largely compatible with antitrust law in the European Union, the United States and other jurisdictions. Enforcement activity by the Chinese authorities is also approaching the level seen in the EU. The Chinese law, however, leaves significant room for the use of competition policy to further industrial policy objectives. The data presented in this Policy Contribution indicates that Chinese merger control might have asymmetrically targeted foreign companies, while favouring domestic companies. However, there are no indications that antitrust control has been used to favour domestic players. A strategy to achieve convergence in global antitrust enforcement should include support for Chinese competition authorities to develop the institutional tools they already have, and to improve merger control by promoting the adoption of a consumer-oriented test and enforcing M&A notification rules.

Commitments or prohibition? The EU antitrust dilemma. Bruegel Policy Brief 2014/01, 31 January 2014

The issue: Excluding cartels, most investigations into suspected infringements of European Union competition law are resolved with ‘commitment decisions’. The European Commission drops the case in exchange for a commitment from the company under investigation to implement measures to stop the presumed anti-competitive behaviour. Commitment decisions are considered speedier than formal sanctions (prohibition decisions) in restoring normal competitive market conditions. They have a cost, however: commitments are voluntary and are unlikely to be subject to judicial review. This reduces the European Commission’s incentive to build a robust case. Because commitment decisions do not establish any legal precedent, they provide for little guidance on the interpretation of the law. Policy challenge: The European Commission relies increasingly on commitment decisions. More transparency on the substance of allegations, and the establishment of a higher number of legal precedents, are however necessary. This applies in particular to cases that tackle antitrust issues in new areas, such as markets for digital goods, in which companies might find it difficult to assess if a certain behaviour constitutes a violation of competition rules. To ensure greater transparency and mitigate some of the drawbacks of commitment decisions, while retaining their main benefits, the full detail of the objections addressed by the European Commission to defendants should be published.

The fragile ‘reset’. The balance sheet and the prospects for changes in Russian-US relations. OSW Point of View (Policy Brief), April 2011

The ‘reset’ policy proposed by the USA has brought Russia a number of geopolitical, prestigious and economic benefits. The most important of those are: the resumption of arms control, the USA’s withdrawal from plans to locate elements of its strategic missile defence system in Poland and the Czech Republic, and the entry into force of the so-called 123 Agreement. In response, Russia has assisted the United States in resolving the Iranian crisis, and offered help with the Afghanistan operation, covering the transit of supplies and supporting the Afghan government. Moscow has also eased up on its anti-American rhetoric. The changes which have taken place in Russian-US relations are not durable. The two parties have not resolved their major disputes (for example, regarding missile defence), and any differences are hushed up for tactical reasons.

Russia's policy in the Southern Caucasus and Central Asia. OSW Study 23/2006

The Southern Caucasus and Central Asia are priority areas for the foreign policy of the Russian Federation. Russia mainly sees its influence in both regions as an important factor determining its international stature, and as a precondition for reinforcing its position as a world power. The Caucasus and Central Asia are also important for Russia from the points of view of economy, especially because of those area's natural resource wealth, and security, as both regions generate serious potential threats to the Russian Federation, including Islamic fundamentalism, terrorism, the drugs trade and illegal migration.

The Economics of EU Railway Reform. Bruges European Economic Policy (BEEP) Briefing 8/2004

The EU began railway reform in earnest around the turn of the century. Two ‘railway packages’ have meanwhile been adopted amounting to a series of directives and a third package has been proposed. A range of complementary initiatives has been undertaken or is underway. This BEEP Briefing inspects the main economic aspects of EU rail reform. After highlighting the dramatic loss of market share of rail since the 1960s, the case for reform is argued to rest on three arguments: the need for greater competitiveness of rail, promoting the (market driven) diversion of road haulage to rail as a step towards sustainable mobility in Europe, and an end to the disproportional claims on public budgets of Member States. The core of the paper deals respectively with market failures in rail and in the internal market for rail services; the complex economic issues underlying vertical separation (unbundling) and pricing options; and the methods, potential and problems of introducing competition in rail freight and in passenger services. Market failures in the rail sector are several (natural monopoly, economies of density, safety and asymmetries of information), exacerbated by no less than 7 technical and legal barriers precluding the practical operation of an internal rail market. The EU choice to opt for vertical unbundling (with benefits similar in nature as in other network industries e.g. preventing opaque cross-subsidisation and greater cost revelation) risks the emergence of considerable coordination costs. The adoption of marginal cost pricing is problematic on economic grounds (drawbacks include arbitrary cost allocation rules in the presence of large economies of scope and relatively large common costs; a non-optimal incentive system, holding back the growth of freight services; possibly anti-competitive effects of two-part tariffs). Without further detailed harmonisation, it may also lead to many different systems in Member States, causing even greater distortions. Insofar as freight could develop into a competitive market, a combination of Ramsey pricing (given the incentive for service providers to keep market share) and price ceilings based on stand-alone costs might be superior in terms of competition, market growth and regulatory oversight. The incipient cooperative approach for path coordination and allocation is welcome but likely to be seriously insufficient. The arguments to introduce competition, notably in freight, are valuable and many e.g. optimal cross-border services, quality differentiation as well as general quality improvement, larger scale for cost recovery and a decrease of rent seeking. Nevertheless, it is not correct to argue for the introduction of competition in rail tout court. It depends on the size of the market and on removing a host of barriers; it requires careful PSO definition and costing; also, coordination failures ought to be pre-empted. On the other hand, reform and competition cannot and should not be assessed in a static perspective. Conduct and cost structures will change with reform. Infrastructure and investment in technology are known to generate enormous potential for cost savings, especially when coupled with the EU interoperability programme. All this dynamism may well help to induce entry and further enlarge the (net) welfare gains from EU railway reform. The paper ends with a few pointers for the way forward in EU rail reform.

Russian nationalists on the Kremlin’s policy in Ukraine. OSW Commentary No. 156|24.12.2014

On the Day of National Unity, celebrated in Russia every 4 November, members of nationalist movements organise a so-called Russian March in Moscow. In 2014 the nationalists took part in three competing marches, which illustrated the divisions present in these circles. The reason for these divisions is a difference of opinions on the policy pursued by Russia towards Ukraine. The pro-Russian, Russia-inspired protests in south-eastern Ukraine organised under the slogan of ‘defending’ the Russians living there (the ‘Russian Spring’) and the annexation of Crimea were received enthusiastically by the nationalists and contributed to a consolidation of these circles around the Kremlin which lasted for several months. In spite of this, opinions on the Russian government’s current policy towards the so-called Donetsk and Lugansk People’s Republics have been varied. The most radical groups have demanded that military support be offered, and that the ‘confederation’ of these republics, the so-called ‘Novorossiya’, should be officially recognised. They consider the Kremlin’s policy to have been too soft, and see the signing of the peace agreements in Minsk as a betrayal of the interests of the Russians. For the remaining representatives of nationalist circles, who are not so numerous and are less visible in the public sphere, finding a solution for Russia’s domestic problems remains a priority. Some of them oppose the very notion of Russia’s involvement in the conflict. Since the beginning of the ‘Russian Spring’, the Kremlin has fostered active attitudes among the nationalists and solicited their support, hoping to win a valuable ally. This has boosted hopes in these circles that their political position may be strengthened. The involvement in the fighting in Ukraine has led to a radicalisation of attitudes among the nationalists, and demonstrated that this group is ideologically motivated and has considerable potential for mobilisation. Moreover, the ‘Great Russian’ and anti-Western slogans some of them have propagated are reflected in views displayed by average Russians, who have been influenced by the patriotic enthusiasm which followed the annexation of Crimea. Due to all this, from among all the actors active on the opposition side, it is the nationalists – and not the representatives of the liberal and pro-Western opposition – that have the best prospects for access to the political stage in Russia. It cannot be ruled out that a further strengthening of the radical groups might also be boosted by the possible growing social frustration caused by the economic crisis, which additionally increases the risk of political destabilisation.

The Racial Equality Directive – from law to practice. IES Policy Brief Issue 2013/07/September 2013

The transposition of the Racial Equality Directive (2000/43/EC) has immensely enhanced legal protection against discrimination on the grounds of racial and ethnic origin throughout the EU. More than 10 years after its adoption, the main challenge identified in many Member States is the enforcement of anti-discrimination laws in practice, in particular with regard to access to justice. Ultimately it is up to the domestic courts to ensure effective implementation of anti-discrimination law. Polls regularly show that the discrepancy between the levels of discrimination experienced and discrimination reported by victims must be seriously addressed. Awareness is low not only among the public but also among the members of the legal professions, leading to under-reporting of discrimination cases. In addition, data that reflect the ethnic or racial composition of the population are scarce which makes it difficult to prove discrimination before the competent authorities. Moreover, certain procedural difficulties that affect access to justice and effective enforcement also stem from the short limitation periods foreseen in legislation, lengthy procedures, evidence, high costs and failures in the provision of legal aid, ineffective sanctions, as well as barriers in the form of language and issues relating to legal standing or legitimate interest. The law remains complex and remedies often inadequate.