Russia goes on the offensive ahead of the Eastern Partnership summit in Vilnius. OSW Commentary No. 115, 30.09.2013

In recent weeks, Russia has stepped up its efforts to prevent a group of former Soviet republics from tightening their relations with the European Union. The intensification of these efforts comes ahead of the upcoming Eastern Partnership summit, scheduled to take place in Vilnius on 28-29 November. It is expected that during the summit Kiev will sign the EU-Ukraine Association Agreement (AA) initialled in March 2012, including an agreement for a Deep and Comprehensive Free Trade Area (DCFTA). Meanwhile, Moldova, Armenia and Georgia are expected to initial similar documents, effectively accepting their terms and conditions, and paving the way for their official signing in the near future. Moscow has always viewed the relations between the EU and the post-Soviet states as a threat to its own influence in the region. Consequently, any attempts to tighten these relations have been actively opposed by Russia. The EU’s Eastern Partnership programme, launched in 2009, has posed a particular challenge to Moscow’s policies in the region.. Russia responded by rolling out a Eurasian integration project, which began in 2010 with the establishment of the Customs Union of Russia, Kazakhstan and Belarus, and is expected to culminate in the establishment of the Eurasian Economic Union by 2015. Moscow’s overarching objective has been to persuade the countries in the region, especially Ukraine, to adopt an unambiguously pro-Russian geopolitical stance and to join the integration project proposed by the Kremlin. The Russian government hopes that this would permanently place these states in Moscow’s sphere of influence and at the same time prevent them from developing closer relations with Brussels. Russia has regularly taken actions aimed at showcasing the benefits of integration with the Customs Union (particularly, by promising preferential pricing of Russian energy resources) and at the same time it has adopted measures highlighting the pitfalls of retaining a pro-European orientation (mainly by imposing occasional trade sanctions). The upcoming summit in Vilnius, during which Ukraine, Moldova, Armenia and Georgia could lock themselves on to a pro-European course, has spurred Moscow to intensify its efforts to torpedo a successful outcome of the Vilnius meeting, with a view to slowing down or even blocking the possibility of closer cooperation between the EU and the former Soviet republics.

North Caucasus: the Russian Gordian knot. The key problems and conflicts in the region and the effect thereof on the future of Russia; Putin after re-election: The Kremlin's policy in Vladimir Putin's second term. OSW Study 16/2004

North Caucasus: North Caucasus is the most instable part of the Russian Federation: since the early 90's, there has been going on the military conflict in Chechnya, which is gradually spilling over into the other republics of the region, terrorism seems to have occupied its regular position in the political life of Caucasus, organized crime is flourishing, the tension persists there and military incidents and attacks are breaking out every now and again. During the recent year, the destabilization of the region, which affects many fields of Russian political and social life, has grown to an alarming size. Putin after re-election: Vladimir Putin's first term as President was a period of submitting political, regional and economic lobbies to the Kremlin. The actions Putin has taken since being re-elected are aimed at consolidating the Kremlin's control over the political, economic and social spheres. Further liquidation of political and informational pluralism, an increase of the ruling group's control over state and private property, and an intensification of state propaganda aimed at generating social support for the Kremlin's initiatives have all proceeded apace. These processes reinforce authoritarian tendencies and strengthen the emerging monocentric political system, with the President's strong domination over political, economic and social life.

RED vs. REDD: Biofuel Policy vs. Forest Conservation. Factor Markets Working Document No. 41, May 2013

This paper assesses the complex interplay between global Renewable Energy Directives (RED) and the United Nations programme to Reduce Emissions from Deforestation and forest Degradation (REDD). We examine the interaction of the two policies using a scenario approach with a recursive-dynamic global Computable General Equilibrium model. The consequences of a global biofuel directive on worldwide land use, agricultural production, international trade flows, food prices and food security out to 2030 are evaluated with and without a strict global REDD policy. We address a key methodological challenge of how to model the supply of land in the face of restrictions over its availability, as arises under the REDD policy. The paper introduces a flexible land supply function, which allows for large changes in the total potential land availability for agriculture. Our results show that whilst both RED and REDD are designed to reduce emissions, they have opposing impacts on land use. RED policies are found to extend land use whereas the REDD policy leads to an overall reduction in land use and intensification of agriculture. Strict REDD policies to protect forest and woodland lead to higher land prices in all regions. World food prices are slightly higher overall with some significant regional increases, notably in Southern Africa and Indonesia, leading to reductions in food security in these countries. This said, real food prices in 2030 are still lower than the 2010 level, even with the RED and REDD policies in place. Overall this suggests that RED and REDD are feasible from a worldwide perspective, although the results show that there are some regional problems that need to be resolved. The results show that countries directly affected by forest and woodland protection would be the most economically vulnerable when the REDD policy is implemented. The introduction of REDD policies reduces global trade in agricultural products and moves some developing countries to a net importing position for agricultural products. This suggests that the protection of forests and woodlands in these regions reverses their comparative advantage as they move from being land-abundant to land-scarce regions. The full REDD policy setting, however, foresees providing compensation to these countries to cover their economic losses.

A macro-financial analysis of the euro area sovereign bond market. National Bank of Belgium Working Paper No. 259, June 2014

We estimate the 'fundamental' component of euro area sovereign bond yield spreads, i.e. the part of bond spreads that can be justified by country-specific economic factors, euro area economic fundamentals, and international influences. The yield spread decomposition is achieved using a multi-market, no-arbitrage affine term structure model with a unique pricing kernel. More specifically, we use the canonical representation proposed by Joslin, Singleton, and Zhu (2011) and introduce next to standard spanned factors a set of unspanned macro factors, as in Joslin, Priebsch, and Singleton (2013). The model is applied to yield curve data from Belgium, France, Germany, Italy, and Spain over the period 2005-2013. Overall, our results show that economic fundamentals are the dominant drivers behind sovereign bond spreads. Nevertheless, shocks unrelated to the fundamental component of the spread have played an important role in the dynamics of bond spreads since the intensification of the sovereign debt crisis in the summer of 2011

Prime Minister Fico’s Russian card. OSW COMMENTARY NUMBER NUMBER 175/01.07.2015

Since the beginning of the Ukrainian-Russian conflict, the position of Slovakia’s left-wing government towards Russia has been ambiguous. Bratislava has accepted the EU sanctions targeting Russia and the plan for strengthening NATO’s eastern flank. At the same time, however, Prime Minister Robert Fico’s government has maintained close political relations with the Kremlin. It has called for the intensification of Slovak-Russian economic relations and has repeatedly criticised the sanctions, speaking in tandem with Russian propaganda in so doing. Slovakia’s Prime Minister is hoping that by playing the role of one of the leaders in the EU and NATO who are most willing to cooperate with Russia, he will gain economic benefits and win votes in next spring’s upcoming parliamentary elections. Despite numerous pro-Russian gestures, Slovakia has been limiting the number of areas in which Moscow could exert pressure on Bratislava. As it strives to become independent of Russia, Slovakia has ensured possible alternative fuel supplies for itself. Moreover, it has been gradually replacing Russian-made military equipment with equipment made in the West. The Slovak government does intend to develop the country’s cooperation with Russia, including in strategic areas involving supplies and transit of oil and gas, as well as supplies of nuclear fuel. Nevertheless, it has been making efforts to gain easy access to an alternative source of supplies in each of these areas. Beset by crises, Russia has ever fewer economic cooperation opportunities to offer Slovakia, and Slovak businesses operating on the Russian market have to take into account the growing risk of insolvency of local contractors. To a great extent, therefore, Slovak-Russian relations have been reduced to rhetorical statements confirming the desire for closer cooperation, and to visions of joint projects accompanied by an ever shorter list of feasible cooperation initiatives.

Tajikistan: a chronic stagnation. OSW COMMENTARY NUMBER 200/15.03.2016

Since gaining its independence Tajikistan has faced severe political, economic and social problems. The last several months has seen a clear increase in their intensity. This is in part caused by the deteriorating economic situation in Russia and the significant fall of remittances from the Tajik labour migrants in Russia, as well as by President Emomali Rahmon’s rising authoritarianism. Despite this intensification, qualitatively speaking Tajikistan’s problems have been unchanged for years. Besides the state’s structural weakness, the main cause is the ongoing neo-colonial dependence on Russia, which effectively limits Dushanbe’s room for political manoeuvre and keep Tajikistan in Russia’s sphere of control. This dependence on the one hand protects the country from collapsing, but on the other it precludes the development of the state, resulting in Tajikistan’s enduring stagnation. Similar processes also take place in other countries of post-Soviet Central Asia. However, in the case of Tajikistan the dependence and stagnation it causes are the strongest and their mechanisms most easily observed.

Wage inequality in Germany – What role does global trade play? Policy Brief #2015/03

Wage inequality in Germany has increased significantly since the mid-1990s. The intensification of international trade relations is a frequently cited cause for this issue. However, an empirical study revealed that global trade can only directly explain around 15 percent of the increase in wage inequality in Germany. Primarily, the growing heterogeneity among companies in Germany plays a greater role – especially within industries. The decline in collective bargaining is the primary company-specific driver of wage inequality. Nevertheless, protectionist measures would not be effective for achieving greater wage equality.