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Central European Economies Rebound; A Russia-Ukraine Trade War?

Plus, Israel extradites a Bosnian Serb to face Srebrenica charges and a Russian business files a crushing lawsuit against Montenegro’s government. by S. Adam Cardais, Ioana Caloianu, and Vladimir Matan 16 August 2013

1. Key Central European economies recover after long slump


The Czech Republic, Hungary, and Poland have finally emerged from a stretch of recession and slowdown, The Wall Street Journal reports, citing second-quarter economic data.


The Czech economy ended a six-quarter recession – its longest period of contraction since the early 1990s – with 0.7 percent growth from April to June. Hungary also returned to modest growth for the first time since the fourth quarter of 2011. While Poland, which as the region’s largest economy barely skirted recession early this year, saw GDP rise 0.4 percent from the first quarter.


The Czech and Polish economies can thank increased trade with Germany, arguably the European Union’s healthiest economy today, while agricultural output and construction buoyed Hungary, analysts said.


Businesses were optimistic.


“Generally, we can say that exporters are now much more optimistic and see some recovery,” Zbynek Frolik, chief executive of Czech hospital bed maker Linet, told EurActiv.


“This year our company will post the highest sales in our 17-year history,” said Zbigniew Wlodarczak, chief financial officer at Solaris, a Polish company that supplies buses to Germany.


Still, Central Europe continues to struggle with weak domestic consumption and investment, as well as political instability. The Czech Republic, for instance, is mired in a lengthy political crisis after a corruption scandal toppled the government in June.


“It is also a question of restoring political stability,” the bed-maker Frolik told EurActiv. “In an unstable situation it is hard to make any long-term strategic decisions, and business stagnates.”


The post-2008 global downturn hit Central and Eastern Europe particularly hard as foreign credit and investment dried up just as demand plunged from the region’s key trading partners in Western Europe.


2. Bosnian Serb to face trial in Sarajevo over Srebrenica farm massacre


In the country’s first extradition in a genocide case, Israel sent a Bosnian Serb to Sarajevo 15 August to face war crimes charges, Reuters reports.


Israeli authorities arrested Aleksandar Cvetkovic, 43, in 2011 on a Bosnian extradition request after witnesses testified that he participated in the slaughter of more than 7,000 Bosnian Muslim men and boys at Srebrenica in 1995. Specifically, Bosnian prosecutors say, Cvetkovic took part in a shooting massacre at the Branjevo farm after Bosnian Serb forces overran international peacekeepers at the so-called UN “safe area,” Balkan Insight reports.


Married to a Jewish woman, Cvetkovic had been living in Israel as a citizen of the country since 2006. He maintains innocence, insisting he was only serving as an army driver when Srebrenica fell during the 1992-1995 Bosnian conflict.


Two Israeli courts approved Bosnia’s extradition request. Cvetkovic will stand trial at a court in Sarajevo that was created to lighten the caseload at the Yugoslav war crimes tribunal at The Hague.


Cvetkovic’s lawyers say their client will not receive a fair trial because of the charged politics surrounding the accusations, The Jerusalem Post reports.


3. Kyiv sees politics in new Russian oversight of Ukrainian exports


Russian customs has imposed new checks on Ukrainian goods, leading to lengthy border queues and accusations from Kyiv of an escalating “trade war” intended to undermine Ukraine’s ties to the EU.


Ukrainian customs officials reported a major backup at a key Russia-Ukraine border crossing this week. Image from a video by RBC news.


Roughly 1,000 freight cars were stalled at a key Russia-Ukraine border crossing 15 August, RIA Novosti reports. Though the details of the new checks are murky, the Federation of Employees of Ukraine said Russian customs had begun demanding that all goods be unloaded and inspected at the border.


“We’re talking about a complete halt of Ukrainian exports for a specific time period, for a week or even a month,” the organization said in a statement, according to RIA Novosti.


The changes could cost Ukrainian companies $2.5 billion by year’s end, it added. Ukrainian opposition leaders, meanwhile, accused Moscow of trying to pressure Kyiv to join a customs union with Russia, Kazakhstan, and Belarus rather than signing new free-trade agreements with Brussels in November.


Arseniy Yatsenyuk
“This trade war has reached a threatening scale,” opposition leader Arseniy Yatsenyuk said in a statement, according to the Associated Press. “Even bad neighbors don’t do this, let alone partners.”


Ukraine’s Russia-friendly Party of Regions also spoke up. “Ukraine is being coerced into joining the Customs Union in an uncivilized manner,” party member Volodymyr Oliynyk said.


The EU is Ukraine’s singles biggest trading partner, accounting for 40 percent of its imports and 22 percent of the country’s exports last year. During the same time, Ukraine received about 19 percent of imports from and sent about 21 percent of its exports to Russia.


The Eurasian Customs Union is a pet project of Russian President Vladimir Putin, and Moscow has been applying what Radio Free Europe calls “unambiguous pressure” on Ukraine and other neighbors to join. In July, Russia banned imports of Ukrainian candy maker Roshen, citing health concerns.


For its part, Moscow said 15 August that the Russian customs service decided on its own to introduce the new checks, RFE reports. The service hadn’t commented at press time, but the Ukrainian Federation of Employers said Russian customs had placed all Ukrainian importers on a list of unreliable suppliers.


Ukrainian and Russian officials were scheduled to meet 16 August to discuss trade issues.


4. Russian lawsuit may cripple Montenegro’s economy


Montenegro is facing a lawsuit over the fate of a major employer that amounts to nearly one-fourth of its GDP, Radio Free Europe reports.


Oleg Deripaska
A Russian shareholder in the Podgorica Aluminum Plant (KAP) is suing the government for 1 billion euro ($1.3 billion) “for alleged unfulfilled promises and lost profits,” according to RFE.


KAP went bankrupt in July, owing 61 million euros in electricity bills, Bloomberg reported at the time. RFE reports that KAP’s overall debts amount to 340 million euros.


Specifically, the plaintiff, which is a company owned by Russian metals magnate Oleg Deripaska, argues that the Montenegrin government did not fulfill promises to provide discounted electricity to the plant and hid the plant’s true financial state when it sold part of its ownership in 2005, RFE reports.


In addition to the billion euros that shareholder En+ is seeking in a Frankfurt arbitration court, it is suing in a Podgorica court for 93 million euros.


Some of the plant’s 1,200 employees were laid off last month, RFE reports. Plant managers have floated the idea of cutting the work force by more than half, according to Bloomberg.


The company was originally privatized in 2005, but the government bought back 30 percent of KAP in 2009 amid a sagging global market for aluminum, RFE reports. Prime Minister Milo Djukanovic recently sought a 102 million euro bailout for KAP.


Milo Djukanovic
Members of the opposition have criticized Djukanovic’s handling of the plant and have accused him of corruption. Djukanovic has been either president or prime minister of Montenegro, with a few brief interregnums, since 1991.


“There have been so many mistakes made by the Montenegrin government and by Djukanovic … that one can only characterize them as corruption and organized crime,” said Nebojsa Medovjevic, a member of the Democratic Front party, according to RFE.


A former chief executive of the plant, Russian citizen Dmitry Potrubach, was arrested 10 July for alleged electricity theft and hiding financial information from shareholders, RFE notes.


One recent bright spot was the reported interest in the plant by Germany’s HGL group, though it, too, came with the conditions that the plant be given subsidized electricity and that the work force be cut drastically.


5. Russian schools to close amid population decline


Hundreds of schools in Russia will close due to the country’s shrinking population, Reuters reports. 


According to the country’s surgeon general, 733 schools will be closed when the new academic year starts on 1 September, a figure that the Education Ministry couldn't confirm, the news agency writes.


Russia’s population fell by 3.4 million in the first decade of the 21st century.


The demographic decline, which started in 1995 in the aftermath of the Soviet Union’s collapse, is likely to take its toll on the Russian work force, which could lose 1 million employees by 2017, Reuters writes.  


Low birth rates and life expectancies, particularly for men, are among the main causes of the current demographic decline.


Reuters notes that the 2010 census showed a stabilizing trend that could mean a return to demographic growth, but long-term studies are more pessimistic.


According to a 2008 UN study on Russia’s demographics, about every 25 years since World War II, when much of the male population was wiped out, the country has experienced a decline in births. The birth rate then recovers, only to decline again. Each decline gets steeper and each recovery gets weaker. The authors of the report predicted a recovery in 2011-2012. “After 2012, however, the number of births will again decline following the trend in 1987-1994,” they write.


“The authors of this publication do not share the optimism of government officials who claim that Russia will succeed in halting the population decline by 2015 and increase the population to 145 million by 2025,” the report notes. “Among other reasons is the distortion of the population structure in terms of gender and age that would affect reproduction in the future.”

Добрый День Барбара. Я - Розита Герман, мне дал ваш мейл Paul Rimple. Он дал мне адрес вашего сайта и сказал, что вам нужны статьи из Абхазии.
Я - журналист, работаю в телестудии "Асаркьа" (Абхазия)
и я пишу статьи тоже. Мне интересно, какие именно темы вас интересуют? Какие условия работы, которые вы предлагаете?
Извините, я пишу на русском языке. Если нужно, я переведу письмо на английский.
S. Adam Cardais is a TOL contributing editor. Ioana Caloianu is a TOL editorial assistant. Vladimir Matan is a TOL editorial intern.
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