The Russian economy under Putin: Growth factors and impediments to economic development. OSW Study 20/2005

After a dramatic economic decline after the collapse of the Soviet Union and the financial breakdown of 1998, the Russian economy has begun to emerge from its deep crisis. The years 1999-2004 were a period of dynamic development in all sectors of Russian economy, and saw a rapid growth in GDP of over 7 per cent per year. Russia owed the excellent macroeconomic results of that period to a combination of favourable factors. The key factors were: high hydrocarbon prices on the global markets; an increase in Russia's international competitiveness thanks to the "rouble devaluation effect" (following the 1998 financial crash); and the market reforms carried out within that period. In 2004, despite very high oil and gas prices on world markets, a slowdown of the GDP growth took place. Even though the economy is still developing fairly rapidly, we are able to say that Russia is exhausting those traditional mechanisms (apart from oil and gas prices) which have hitherto stimulated GDP growth. Moreover, there are no new mechanisms which could replace the old ones. In the longer term, these unsolved structural problems may seriously impede Russia's economic growth.

Trade policy issues in the Wider Europe – that led to war and not yet to peace. CEPS Working Document No. 398, July 2014

This paper looks at the trade policy landscape of the EU and the wider Europe, with a focus on issues arising from the signature on 27 June 2014 of Deep and Comprehensive Free Trade Agreements (DCFTAs) between the EU and three East European countries (Georgia, Moldova and Ukraine), and actual or prospective issues relating to the customs union of Belarus, Russia and Kazakhstan (BRK), and the Eurasian Economic Union whose founding treaty was signed on 29 May 2014. The huge expansion of intercontinental free trade area negotiations currently underway, in which the EU is an active participant alongside much of the Americas and Asia, stands in contrast with Russia’s choice to restrict itself to the Eurasian Economic Union, which is only a marginal extension of its own economy. Alone among the major economies in the world, Russia does not seek to integrate economically with any major economic bloc, which should be a matter of serious concern for Moscow. Within the wider Europe, the EU’s DCFTAs with Ukraine, Moldova and Georgia are a major new development, but Russia now threatens trade sanctions against Ukraine in particular, the economic case for which seems unfounded and whose unilateral application would also impair the customs union. The Belarus-Russia-Kazakhstan customs union itself poses several issues of compatibility with the rules of the WTO, which in turn are viewed by the EU as an impediment to discussing possible free trade scenarios with the customs union, although currently there are far more fundamental political impediments to any consideration of such ideas. Nonetheless, this paper looks at various long-term scenarios, if only as a reminder that there could be much better alternatives to the present context of conflict around Ukraine.

No other choice but co-operation. The background of Lithuania's and Latvia's relations with Belarus. OSW Commentary No. 99, 2013-01-04

For years now Belarus has been a key economic partner for Lithuania and Latvia. These two Baltic states have well-developed port infrastructure and thus provide what are the geographically closest and also the cheapest exit to international outlets for Belarusia’s petrochemical and chemical industries, both of which are export-oriented. As a result, the transit of Belarusian goods is one of the major sources of income for the state budgets of the two countries. This economic interdependence has affected the stance Riga and Vilnius take on Minsk at the EU forum. When in February and March 2012 the Council of the European Union was resolving the issue of imposing economic sanction on selected Belarusian companies which backed Alyaksandr Lukashenka’s regime, this triggered a discussion on what the point of such measures is and on possible economic losses in Lithuania and Latvia. As a result of firm resistance from Latvia (which was backed by Slovenia), the Council removed those companies which were most strongly engaged in co-operation with Latvian partners from the list of those to be covered with economic sanctions. Lithuania, which is more critical of the political situation in Belarus, did not express its official opposition to the sanctions. Despite some differences in the policies adopted by Riga and Vilnius, it turned out that Minsk could count on strong support from local business groups in both of these countries, as these groups fear impediments in this highly profitable co-operation and also retaliation from the Belarusian government. The existing economic bonds mean that neither Vilnius nor Riga have any other choice but to co-operate with Belarus. They must therefore adopt a carefully balanced policy towards Minsk. At the same time, being EU member states, they do not officially deny that a problem exists with the violation of human rights by Alyaksandr Lukashenka’s regime. It is for this reason that the governments of Latvia and Lithuania will be interested in maintaining the status quo in relations with Minsk. On the other hand, Belarus in a way also has no other choice but to use the ports in Lithuania and Latvia, and this will prevent it from excessively escalating tension in relations with these two countries.

The Orange Revolution in Ukraine: An attempt to understand the reasons. OSW Study 18/2005

The Ukrainian society in the run-up to the 2004 presidential election was in a state which political science literature characterises as an almost "ideal" condition for an outbreak of social unrest. Growing expectations, both economic and political, seemed vain due to mounting impediments. The victory of Viktor Yanukovych was perceived by many opinion-makers as a nail in the coffin of such aspirations.

Supply and Demand Side Limitations Affecting the Structure of Agriculture and the Rural Economy. Factor Markets Working Paper No. 21, February 2012

The paper criticises the neo-classical assumptions of perfect factor markets and of complete information, which constitute central elements in labour market theory. Based on literature review and on economic reports from transition economies, as well as developing countries and more advanced economies, this deliverable focuses on the structural impediments and imperfections which often characterise rural labour markets and which may prevent an efficient allocation of labour. According to empirical studies, transactions costs and rigidities hinder the well-functioning of labour markets and constrain labour adjustments. The paper attempts to classify the various limitations of rural labour markets from both supply and demand side, although the distinction is not always clear-cut as some problems occur on both sides. The identification of these issues is extremely important as it allows us to highlight the inefficiencies and the failures in labour markets and to understand their impact on labour allocation. In this context, market intervention is desirable and the paper provides particular support for rural development policies such as investments in human capital. Lastly, labour institutions can play a key role in promoting the well functioning of labour markets, thus it is fundamental that they are well in place.

Interconnector Investment for a Well-Functioning Internal Market: What EU regime of regulatory incentives? Bruges European Economic Research (BEER) Papers 18/October 2010

Sufficient cross‐border electricity transmission infrastructure is a pre‐requisite for a functioning European internal market for electricity. Also, the achievement of the EU’s energy policy objectives – sustainability, competitiveness and security of supply – critically depends on adequate investment in physical interconnections between the member states. Mainly focusing on the “regulatory path”, this paper assesses different ways to achieve a sufficient level of interconnector investment. In a first step, economic analysis identifies numerous impediments to interconnector investment adding up to an “interconnector investment failure”. Reflecting on the proper regulatory design of an EU framework able to overcome the interconnector investment failure, a number of recommendations are put forward:  All congestion rents should be channeled into interconnector building. Unused rents should be transferred to a European interconnector fund supervised by an EU agency.  Even though inherently sub‐optimal, merchant transmission investment can be used as a means to put pressure on regulated transmission system operators (TSO) that do not deliver. An EU agency should have exclusive competence on merchant interconnector exemptions.  A European TSO organization should be entrusted with supra‐national network planning, supervised by an EU agency.  The agency should decide on investment cost reallocation for interconnector projects that yield strong externalities. Payments could be settled via a European interconnector fund.  In case of non‐compliance with the supra‐national network plan, the EU agency should have the right to organize a tender – financed by the European interconnector fund – in order to get the “missing link” built. Assessing the existing EU regulatory framework, the efforts of the 2009 “third energy package” to fill the “regulatory gap” with new EU bodies – ACER and ENTSO‐E – are acknowledged. However, striking holes in regulatory framework are spotted, notably with regard to the use of congestion rents, interconnector cost allocation, and the distribution of decision making powers on new infrastructure exemptions A discussion of the TEN‐E interconnector funding scheme shows that massive funding can be an interim solution to the problem of insufficient interconnection capacities while overcoming the political deadlock on sensible regulatory topics such as interconnector cost allocation. The paper ends with policy recommendations.