It is becoming increasingly apparent that the Russian claim of Georgia starting the war are a stretch; it is also apparent that the Russian government was very ready.

Tom Lasseter visited the disputed South Ossetian capital of Tskhinvali on Sunday and found little evidence of a massive Georgian bombardment of the city, and not very many deaths.

Russian-backed leaders in South Ossetia have said that 2,100 people died in fighting in Tskhinvali and nearby villages. But a doctor at the city's main hospital, the only one open during the battles that began late on Aug. 7, said the facility recorded just 40 deaths.

...Col. Gen Anatoly Nogovitsyn, the deputy head of the Russian military's general staff, said last Tuesday that "Tskhinvali doesn't exist, it's like Stalingrad was after the war."

But in fact, the city still does exist. While there was extensive damage to some structures, most buildings had front doors on their hinges and standing walls. For every building charred by explosions — the Georgians are accused of using multiple rocket launcher systems — there were others on tree-lined streets that looked untouched.

One government center was hollowed out by blasts, but the one next to it teemed with workers.

The Guardian reports that the South Ossetian government has rounded up 130 Georgian nationals and is holding them in its interior ministry -- for what is unclear, though the article speculates it would be for a prisoner exchange. Interesting, in that South Ossetia is an area with only 70,000 people. How many of them could be captive of the Georgian army? And if there had been a massive bombardment of Tskhinvali, how do they organize this? Seems an odd thing for an area that had been supposedly flattened like Stalingrad to do.

Another interesting piece of evidence on reaction times comes from looking at the timing of the arrival of the Black Sea Fleet off the coast of Georgia -- both to move 4000 troops, and to engage the Georgian coastal defense forces.

The war started on Friday August 8th; the Black Sea Fleet was reported to arrive off the coast of Georgia on Saturday August 9th. That's pretty impressive, considering it is about 400 nautical miles from Sevastopol to Ochamchire. While the Moskva, Smetlivy, Muromets, and Aleksandrovets can make good speed and make the trip quickly, those ships sailed from Sevastopol with an assortment of support vessels that could only make 12-16 knots, at best. Simple math reveals that would make it a 25 hour trip, meaning the ships would have had to put to sea almost immediately after the fighting began. For any fleet to deploy that quickly is extraordinary readiness.

[An eyewitness report from Sevastopol] "We took up station guarding the opposed landing on the Abkhaz shore when all of a sudden four high speed targets were detected. We sent out an IFF signal and the targets didn't react. Receiving a command from the flagship, we got into formation and right at that moment the unidentified targets opened fire on the ship formation and flagship. The cruiser was damaged and a small fire broke out aboard. Then, fearing for seaworthiness, the flagship withdrew from the firing area."

Moskva and Smetlivy steamed into Novorossysk the next day. All this seems quite well coordinated.

Reactions in other countries have been swift. Ukraine has stepped up, following the Polish lead, by offering to coordinate its radar systems with those of the West. Because of earlier disagreements with Russia, President Yushchenko has now an opening to greater cooperation. Certainly everyone recognizes that the earlier hesitation to admit Georgia and Ukraine to NATO was an error. The interesting thing coming out of Ukraine this weekend, though was this comment by Prime Minister Yulya Tymoshenko -- considered both at odds with Yushchenko and favored by the Russians, to the point of accusations of Russian warchests for her presidential ambitions -- in an excellent interview by Christia Freeland:

For all their sparring, Tymoshenko and Yushchenko have been more united on foreign policy than many expected, with the prime minister moving towards the robust defense of Ukraine's national interest that the president has long espoused. Even before Russia's attack this week on Georgia, she has been measured but forthright in her attitude to the Kremlin.

Tymoshenko also understands that Ukraine's proudest accomplishment - its democratic revolution - makes it a particular target for its authoritarian neighbours. "They fear Ukraine as evidence that a post-Soviet country can quickly and effectively build a rule-of-law society and a democratic society," she says. "And this example is very, very uncomfortable for those who would like to keep everything undemocratic and untransparent."

There is little doubt to whom she is referring as "they". I hope this isn't just Yulka playing to the Western press. As long as those attitudes persist, there is some chance that western missteps in this conflict might not be fatal to their ambitions for the success of the Rose and Orange.

Labels: Feminists, Georgia, Ukraine

It looks as though Yuliya Tymoshenko will indeed be the new prime minister in Ukraine, after the final count today gives her and President Viktor Yushchenko a thin majority in the new parliament. It's a very thin coalition; LEvko reports that several attempts to bring a third coalition partner on board have failed. That failure may be due to the continued desire of Yushchenko to keep his erstwhile enemy Viktor Yanukovych closer by having Yanukovych's party have all the deputy ministerial posts. The most likely third partner in the coalition has warned that would be a deal breaker. But if Yushchenko has the ability to choose the speaker of the parliament, he may still have a card to play to solidify the majority.

Labels: Ukraine

When I worked in Ukraine it wasn't unusual for there to be problems with small change in retail transactions. Indeed, more than once I got a stick of gum for change in lieu of, say, 1000 karbovanets (would would have been $.006). I took the gum, never chewed it (I could only imagine what would be in my mouth), and never could pass it off as Krb 1000. I suspect I mostly threw them away. That's a loss.

Frank Stephenson today writes of a small currency problem in Guatemala that was due to government error. A friend of his in the country wrote:

Last year -nearing the Christmas season- the Banco de Guatemala (our central Bank) acknowledge to the embarrassment of it's authorities that it had run out of cash (due to bad planning, really). You can imagine that a large portion of Christmas sales in Guatemala are transacted in cash so the ineptitude of the central bank caused a mini-crisis specially in rural areas. The Banco de Guatemala did not acknowledge this but I know that they were purchasing Q20 bills for up to Q40 and Q50 (!!!). Somebody made a bundle out of this mess.

There was a period in Ukraine where the public phones needed coins that were worth maybe Krb 10 at a time where Krb 40,000 bought US $1. (Note: the karbovanets was Ukraine's temporary currency in the early 1990s, replaced by the hryvna in 1996.) The coins were worth far more for the metal than their exchange value, so they became scarce. But you needed them for calls, so babushkas would trade them at 15-20 times their face value. Some complained of this 'profiteering', so the government -- which owned the phone company still -- simply made public phones free. Result: babushki impoverished, and the phones soon neglected, broken and vandalized.

Tyler Cowen noted a few months ago that this phenomenon of small currency shortages is pretty common. Recommended therein is this book by Tom Sargent and Francois Velde, reviewed by Art Rolnick and Warren Weber at the Minneapolis Fed. But those stories apply mostly to token money (coins made of base metals worth much less than face value), not the paper currency Stephenson describes.

One thing I learned from gum money in Ukraine -- I used to try to buy beer on the street there (the local brand was Obolon', actually quite good in unpasteurized form if fresh), which came in both 0.33l and 0.5l bottles. I like the smaller bottles -- bring two home, one with dinner and one in the fridge for later, not too much for an evening. Alas, they are Krb 80,000 at the time and the seller didn't have change. (Gum and beer, not good.) The bigger ones? Miraculously, 100. Easier to buy those and just not finish the second ... though sometimes I did. Maybe more than sometimes...

Labels: economics, money, Ukraine

The Kiev I knew when I worked there eleven years ago was a rather drab place. Some newer Western shops dotted around the city, but many cranes stood still for months on end, roads were filled with chuckholes, and not much seemed to be happening. With the political turmoil of the past few years, you'd think things wouldn't have changed much.

Der Spiegel says you'd be wrong.

Gross domestic product powered ahead by an impressive 8% during the first half of 2007, and economists expect the strength to continue, boosted by a surprisingly diverse economy of services, manufacturing, and raw materials. Metals, mainly steel, account for 40% of exports, but most of the growth is coming from manufacturing and services. Production of heavy equipment rose 22% in 2006. And Ukraine's software houses saw their exports jump by 50% last year, to some $250 million.

Investors see promise in the growth. The Kiev stock exchange has more than doubled in size this year, and now boasts a market capitalization of $76 billion-a sixfold increase since late 2004. And a real estate boom has pushed up housing prices by 60% in 12 months. "We joke that as long as all these disputes are going on, [politicians] don't have time to interfere in business," says Taras Kutovyy, chief financial officer at XXI Century Investments, a leading developer that in May raised $175 million in Eurobonds to finance new apartments, hotels, and hypermarkets.

Countries that are seriously divided like Ukraine typically do not provide investment climates that are conducive to foreign firms. Is that what's going on? I don't know. A look at recent economic data indicates much of the influx of foreign trade has come from resurgent Russia rather than Europe or the USA. Construction has been up and down over the last few years. The Economist forecasts 6% growth for the foreseeable future, but whether the investment is productive for Ukraine's future or shop-building for imported goods -- which both the 'Orange' forces and the current parliamentary leaders of the Party of Regions would be happy to accept -- remains to be seen, particularly in the runup to next month's elections, where everyone promises everything to everybody.

Labels: economics, Ukraine