Archive for January, 2015

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Balcerowicz invited to join Ukrainian reform effort

January 31, 2015

In an effort to further fill the Ukrainian reform effort with international stars with relevant experience, President Poroshenko has invited the Polish politician and economist Leszek Balcerowicz, the man who was instrumental in devising the Polish reformation plan of 1989, to join the Ukrainian effort.

The Balcerowicz Plan, also known as “Shock Therapy”, has been referred to numerous time throughout the years at this blog – almost every time previous governments have made hollow calls for Ukrainian reform in fact.  (Search within the archives and you will find, should you feel the need).

One of the most notable and wise features about the Balcerowicz Plan, was that is was presented to the public prior to its introduction on 31st December 1989 – on 6th October 1989, on television, to be precise.  Thus the public was mentally prepared for what was to come, some months in advance – albeit, the plan hit far harder than society was perhaps prepared for.  Nonetheless, the “Shock Therapy” was still far less of a shock to the people, than it was to the Polish economy, when introduced.

The plan consisted of:

Act on Financial Economy Within State-owned Companies, which allowed for state-owned businesses to declare bankruptcy and ended the fiction by which companies were able to exist even if their effectiveness and accountability was close to none.
Act on Banking Law, which forbade financing the state budget deficit by the national central bank and forbade the issue of new currency.
Act on Credits, which abolished the preferential laws on credits for state-owned companies and tied interest rates to inflation.
Act on Taxation of Excessive Wage Rise, introducing the so-called “Popiwek Tax” limiting the wage increase in state-owned companies in order to limit hyperinflation.
Act on New Rules of Taxation, introducing common taxation for all companies and abolishing special taxes that could previously have been applied to private companies through means of administrative decision.
Act on Economic Activity of Foreign Investors, allowing foreign companies and private people to invest in Poland and export their profits abroad.
Act on Foreign Currencies, introducing internal exchangeability of the Złoty and abolishing the state monopoly in international trade.
Act on Customs Law, creating a uniform customs rate for all companies.
Act on Employment, regulating the duties of unemployment agencies.
Act on Special Circumstances Under Which a Worker Could be Laid Off – protecting the workers of state firms from being fired in large numbers and guaranteeing unemployment grants and severance pay.

By 1992 the positive effects of the plan were being felt -although the intervening years were undoubtedly a “populist politician’s” dream when it came to saying just how badly the effects of the plan were being felt during that time.  There is no shortage of populist Ukrainian politicians that would boohoo any such plan for Ukraine.  The Kremlin too, would no doubt exploit it.

As written a few days ago, Ukraine already has numerous reformation plans.  Indeed Ukraine has far more plans, from numerous authors, than could be found at an annual gathering of architects “best design” ceremony.  Thus the vast majority, if not all, of the Balcerowicz Plan will already appear in one, or several, existing plans.

What Ukraine hasn’t done (thus far), that Poland did, is explain the plan(s) to the Ukrainian constituency “adult to adult” – perhaps because it doesn’t know what to do with so many plans, or perhaps nobody wants to accept personal responsibility and accountability for implementing them.

Implementation teams, if they exist, are completely unknown to the public – ergo, personal responsibility and accountability is zero in the eyes of an expectant society when it comes to implementation.  As Ukrainian history ably displays, “the team” is always happy to produce plans, but nobody in “the team” is ever held individually accountable for failure of implementation once any such plan has been announced – and subsequently fails to tangibly manifest.

However, Ukraine is not Poland – and successful reform within Poland still continues to this day.  It is an on-going process.

Indeed Ukraine (and Georgia, Moldova and some Balkan nations) suffer an additional and significant problem that Poland never faced – that of a meaningful, cancerous, overt and covert, insidious Kremlin intervention.  Poland was blessed by a weak (and distant compared to Ukraine and Georgia) Russia when it began to reform.  Upon joining NATO its continuing reforms then enjoyed the protection of significant security.  Poland is now strong enough to cope with the current Kremlin shenanigans within its borders, preventing any reform derailing.

It goes without saying that in the current circumstances, such things matter, for security removes the excuse that war (in whatever form it takes) slows or prevents reform.  War (in whatever form) presents a universal excuse to a weak and/or infiltrated political class for not, or failing at, reform.  It is, at the very least, a distraction with a significant impact upon the national treasury and society alike – perhaps with catastrophic consequences to the orientation of the victim nation’s direction.

Thus whilst the Kremlin experiments with a hybrid and asymmetric war, the west experiments with economic warfare – Ukraine (Moldova, Georgia and some Balkan nations), experiment with reform without security whilst under Kremlin attack.

The Kremlin will ultimately fail to bring down the post 1945 European/western architecture – though it may cause considerable damage along the way if Europe/”The West” does not fully appreciate the challenge that has been presented.

Given enough time, the western economic warfare at current levels may ultimately prove to be successful.  Turning up the “pain dial” is always an option.

What is entirely unclear, and perhaps the least likely experiment to succeed, is national reformation without any form of “group security”, whilst under consistent and meaningful Kremlin attack – perhaps aggravated by the absence of clearly defined external western prizes for success.

Undoubtedly Mr Balcerowicz would bring something to the Ukrainian table should he accept the offer made to him – but when all is said and done, Ukraine is not Poland.

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Akhmetov under the Prosecutor’s gaze

January 30, 2015

A short entry today, but one which will answer a few emailed questions – at least in part – relating to Rinat Akhmetov, and rumours surrounding his sponsoring of, or aiding and abetting of, the anti-Kyiv forces in eastern Ukraine.

Current investigations are centering around coal.

Firstly, there is the question of the mines wholly owned by his companies in eastern Ukraine that fall within the territories currently occupied by Russian troops, separatists, the Orthodox jihadists, mercenaries, warlords, cossacks and assorted armed organised criminal groups.  Some of these mines are still producing, and it is no secret that at least some of the coal they have produced has made its way to Russia.  The major question relating to this is whether it has been mined and thereafter sold to Russia by Akhmetov’s mining interests, or whether it has been stolen and taken without his consent or reimbursement.

Secondly, there is the question of whether the miners that work, or worked, for Akhmetov’s companies and then sided with those that are anti-Kyiv (whatever their motivation from the list above) are still being paid – and whether paying them is directly, or indirectly, in part funding certain anti-Kyiv forces.

The situation, currently, is that the Prosecutor General’s Office has questioned Mr Akhmetov, and both he and his DTEK company that own the mines in question, deny continuing to pay miners that have sided with anti-Kyiv forces, and therefore deny directly or indirectly – and certainly knowingly – funding any such group(s).  Should any evidence be found, it would be reasonable to expect Article 258-3 of the Criminal Code (funding terrorism) to be applied.

The investigations are continuing – though whether a case is there to be made – or not – is a different matter.

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Another reformation plan for Ukraine

January 29, 2015

There seems to be an increasing number of plans to reform Ukraine.

There is the EU Association Agreement (and DCFTA) that has, since its negotiations were concluded, been widely touted as a framework reform plan for Ukraine.

There is the 66 page coalition agreement, agreeing a reform plan for Ukraine.

There is also the President’s 2020 Plan for Ukraine, outlining reform.

There are almost 30 parliamentary committees designed to reform their respective competencies.

We have the Venice Commission asked to suggest reforms to the Constitution of Ukraine.

Economic reforms will be shaped by the IMF and other global lenders, once they have rewritten the Ukrainian budget – so written as to be rewritten, thus providing the ability for the Ukrainian government to blame the IMF for what will be very unpopular (but required) actions.  A particularly spineless act by a government that knows what is required and still shies away from do what is necessary.

There is also the NATO plan for reforming the Ukrainian military.

Indeed, though it possible to continue listing reform plans, instead let us add yet another plan to the list of reformation plans.

We now have a Council of Europe plan for reforming Ukraine.

At some point, perhaps, somebody plans to read it.  Maybe there will be a plan for somebody to sit down with all the plans and collate, compare, and come up with another plan – perhaps a grand reformation plan – incorporating all the plans that already exist.

In fact, the Council of Europe’s plan is a well structured, well explained and clearly financed plan.  It is far less woolly than any plans created within Ukraine and far more transparent too.  As a plan that runs until 2017, it is also an ambitious plan if it expects to make serious inroads into the areas listed.

As with most things in need of reform in Ukraine, the Council of Europe’s plan centres on the law and the need to synchronise Ukrainian law within the parameters of European laws.  Insomuch as that is a necessary step for Ukraine to pursue its European integration desires, it is a good plan.  The requirement for a legal framework within the parameters of the European normative is clear.

However, writing laws is not enough on its own – even writing laws that fall comfortably within the European parameters of acceptability.  Writing new laws is not a form of magic that will instantly – or perhaps ever – cure or prevent the ills they were written to address.

Words such as “implementation”, “benchmark” and “reporting” do indeed feature frequently within the Council of Europe plan – making it far and away better than any Ukrainian plan simply by mentioning the words, for it implies a form of, and system of, measurement – a much needed way to (accurately) assess results along the way.

Yet this may still not be enough to reform Ukraine.

Ukraine has little problem in writing laws – be they good, bad or indifferent.  It can also form policy – be it effective, ineffective or counterproductive.

What Ukraine consistently fails upon is implementation, whether it genuinely tries to implement policy or law, or not.

The reason for this is a complete unwillingness to accept responsibility.

Nobody takes ownership of a policy, or a reform, or a law.  It may be argued that “the government” may occasionally be forced to recognise the failing of this or that policy or law, but nobody ever gets sacked (let alone offers to resign) because of bureaucratic/administrative/institutional failings – not government ministers, not RADA committee members, rarely regional governors or metropolitan leaders.  Personal accountability and readiness to accept that responsibility is (almost) zero.

If anybody gets sacked (as nobody ever resigns because nobody ever takes responsibility) it is somebody nobody has ever heard of, so low down the food chain, they are swimming amongst the plankton in the sea of culpability.  If those who are sacked are “connected”, then within a few months they are reappointed, even if elsewhere within the behemoth of governance in Ukraine.

There are EU missions on the ground in Ukraine to monitor reform – for example the “rule of law” monitoring mission will be in Ukraine until at least summer 2016.  But monitoring, like observing, means just that – it does not mean get involved (and if you do, stretching your mandate, your influence is generally zero).

Thus, amongst all the plans, as well meaning and necessary as they are, perhaps there is a need to generate yet another plan.  A plan to change the psyche of those in positions of leadership, authority and public service.  A plan to euthenise homo-sovieticus within all State apparatus and replace them with more advanced beings perhaps.

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A fundamental question – Where is democracy’s eastern border to be?

January 28, 2015

With the war in eastern Ukraine continuing with no end in sight – as expected by anybody with a reasonable understanding of The Kremlin, its motivation and desired outcomes – with yet more Ukrainian territory being lost almost by the day over recent weeks, a fundamental question, based upon facts on the ground, has to be asked.

The question is where, hopefully collectively with Ukraine, has “the west” decided that the eastern-most border of its shared political, economic, social, ethical and moral values will be.

The official line has to be that the territorial sovereignty and integrity of Ukraine must be respected in line with international rule of law, and thus Ukraine’s official eastern-most border would be that line, in recognition that The Kremlin has not the slightest interest in being like – or wanting to be like, the west. But that is not the current situation on the ground.

Indeed the clocks running concurrently for Ukraine and the Kremlin are not synchronised when it comes to critical time lines.  Sanctions, oil prices etc., alone may eventually beat the Kremlin given enough time – but Ukraine does not necessarily have that amount time.  Simply throwing just enough money at Ukraine to keep it afloat in the hope of synchronising those clocks will do little to prevent further loss of Ukrainian territory in the meantime.

That Ukraine has under-mobilized, chosen some dubious military defensive lines, and is suffering from questionably poor military and political leadership regarding this war simply makes matters worse.

Yet The Kremlin is not only at war with Ukraine for wanting to head west, but it is at war with the post WWII architecture – political, legal, economic, ethical, social and moral as well as being at war over the post Cold War territorial outcomes – overtly and covertly.

There are fundamental differences held by Ukraine and the west vis a vis The Kremlin at the root of this war that are simply not going to be negotiated or appeased away – particularly so as the Kremlin has now managed to get itself stuck in an aggressive posture in Ukraine, with no new ideas.  Hence it will keep doing what it is doing until eventually stopped, or it forces a bad peace on Ukraine and the Kremlin wins.

If the Kremlin feels it needs another Oblast to be certain of controlling Kyiv politics, it will take one unless stopped.  It is not about how much Ukrainian territory it holds – it is only about holding enough to insure the desired result – political control. +/- Mariupol, +/- Kharkiv or Kherson in the grand scheme of things are an irrelevance to the Kremlin.  It is about control of the destination of Ukraine by doing enough to accomplish that – No more and no less.

If it is necessary to portray Ukrainian troops as a NATO legion and have an entirely overt Russian military adventure into another Oblast, the Kremlin will do so.  If it is not necessary, it won’t.

Momentum and initiative remains with a Kremlin that has absolutely no intention of returning Ukraine’s border control to Ukraine, thus surrounding its “proxies” and severing supply.  To think otherwise is entirely delusional.  It also has no intention of annexation or overly financing these invaded regions. Though the “terrorists/rebels/separatists/criminals/warlords/Orthodox jihadists” may have slightly different territorial aims to the Russian troops, ultimately these territories have no future without being client mini-states of the Kremlin either way – or they face a return to Ukraine should the west and Ukraine roll back the Kremlin gains.  A return to Ukraine is not coming any time soon.

Thus continuing to message a strategy of doing just enough, is not enough – because it hasn’t been enough.  Neither has any response been timely enough.  The initiative has to be taken from The Kremlin, because the Kremlin has simply run out of ideas and thus is stuck on its current course of a zero sum, win at (almost) all costs on the Ukrainian front.

Half-hearted half-measures leave Ukraine in the worst of possible places – but if Ukraine wants more robust western assistance, it has to be more robust itself, meaning leading the international political initiatives against the Kremlin instead of waiting for others to do so.  Man up/mobilise over and above what so far is equivalent to a small football stadium of men.  Stoically reform, even if with baby steps, despite incredibly difficult circumstances.  Write budgets that are genuinely politically brave, rather than those submitted knowing the IMF will change them, but then having the option to blame the IMF rather than take responsibility for unpopular choices itself.  Explain the options and choices it faces transparently with its constituents – and why which route is to be taken.

For Ukraine, this is a war.  It should not try and pretend otherwise, regardless of what official title it may want or need to give it, for whatever legal or politically expedient reasons.

For the west, this is a crisis, if we accept that a crisis is protecting core values and interests without engaging in conventional warfare.

For the Kremlin it is a multifaceted war far exceeding the geographical limitations of Ukraine, but one with the very foundations of western democratic architecture – albeit a war it will ultimately lose.

Ukraine and the west have to present the Kremlin with a significant challenge across all the fronts upon which it is waging war – both within and without of Ukraine.  The initiative has to be seized from the Kremlin.

In order to do so, it would perhaps be beneficial to identify, even if privately behind the curtain, just where the eastern borders of western democracy and shared values – if only temporarily in the distant hope of rolling back the Kremlin held ground in Ukraine – is going to physically be.

Will it include Ukraine at all – if so, what’s in and what’s out?

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Recognising terrorism – Ukraine

January 27, 2015

For many months Ukraine has been muting to the international community that it formally recognise the “Donetsk People’s Republic” and “Luhansk People’s Republic” as terrorist organisations.  Perhaps fair enough on the premise that there will be few nations that will recognise the legitimacy of either republic – ever – and thus the war they have engaged in against Ukraine, with significant Kremlin backing and involvement – may broadly fit most definitions of terrorism.

Without doubt, incidents such as the shooting down of MH17, and Saturday’s criminal incident in Mariupol, would certainly fit the definition of terrorism held by most reasonable people when all mass casualties and deaths were civilian.

Indeed the Ukrainian leadership’s calls for the international community to recognise these “republics” as terrorist organisations have steadily been increasing in frequency and volume in the most recent months.

However, as tweeted yesterday:

Indeed, for the Ukrainian leadership to expect any other nation, regional or global institution to designate these “republics” terrorist organisations, Ukraine must surely do so itself – first.  The integrity of such requests to the political world is severely undermined when Ukraine itself has not made the political and legal decision to make such a designation domestically.

Ukraine has to take on the political responsibility of leading such a charge.  It would be a ludicrous situation to have the “republics” designated terrorist organisations regionally and/or globally by various institutions, and yet Ukraine not have done so itself domestically.

There is also a similar argument that it need be Ukraine that cranks up the machinery at the UN to recognise the Kremlin as a party to the conflict – machinery that ultimately would effect the Kremlin position on the UNSC if successful.  Ukraine should not expect others to do this for it.

Already, at the commencement of the PACE winter session it is the UK, and not Ukraine, that tabled the motion to further suspend Kremlin voting rights for another year – a motion to be debated this week, despite what may be very ugly attempts at Kremlin blackmail PACE members if media reports are to be believed.  That the Kremlin now holds in prison a PACE delegate – Shavchenko – who now has international immunity after appointment, seems unlikely to encourage PACE members to accept Russia back amongst its ranks in return for releasing one of the organisations own delegates that should not be held.

In short, the Ukrainian political leadership has to start doing some of the heavy lifting within the international arena with regard to starting legal processes, that whilst others will certainly fall behind in support, ought to be started by Ukraine.

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This message seems to have eventually begun to sink in – no doubt after blunt and repeated statements made by Ukraine’s allies behind the curtain.

Today, the RADA successfully managed to pass amendments to several Ukrainian laws detailing the mechanisms of just how terrorist organisations are to be deemed such within Ukraine.  The Justice Ministry Bill 1840 was passed by 270 votes.  The changes stipulate that the decision to recognise a terrorist organisation rests with the Superior Administrative Court of Ukraine, on the basis of an administrative claim of the Prosecutor General of Ukraine, prosecutors of Crimea, regional prosecutors,  and cities of Kyiv and Sevastopol.   Also, the Board of the National Security and Defense Council  may  recognise an organisation as terrorist.

We shall now see whether or not Ukraine will designate “the republics” terrorist organisations, having today provided itself the mechanisms to do so.  Only having done so itself, can it reasonably expect others to seriously consider its international appeals to do the same.

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PACE and The Kremlin

January 26, 2015

As the end of 2014 approached, this entry appeared regarding the issue of currently suspended Kremlin voting rights within the Parliamentary Assembly of the Council of Europe – PACE – and whether or not those voting rights would be returned in January 2015 when the original suspension is due to expire.  As tweeted yesterday:

Thus there are questions to ask.

The first, naturally, is whether The Kremlin has done anything to alter the circumstances for which its voting rights were suspended by PACE initially.  The answer is clearly not – indeed it has done nothing but consistently undermine Ukrainian sovereignty since those rights were suspended.

The justification for returning PACE voting rights to The Kremlin is therefore somewhat problematic for those that would support such a move.

The question that then follows, is whether The Kremlin, if having its voting rights suspended for another year, will see any benefit whatsoever, of remaining within PACE as an organisation?

The skepticism with which The Kremlin generally holds PACE (and the OSCE) is not a secret – but both have been useful institutions for The Kremlin to try and test the regional waters regarding its views.  However to put matters as diplomatically as possible, The Kremlin relationship with PACE (and the OSCE) is certainly contentious at best – and more than a little obstructionist at worst.

Would PACE remain as relevant without a regional actor such as Russia, should it leave the organisation?

Would it perhaps become a far better institution without Kremlin obstructionism?

How does PACE deal with Nadiya Savchenko, a Ukrainian military pilot captured in eastern Ukraine yet currently in jail in Russia – a woman whom during her detention was elected to the new RADA and forms part of the Ukrainian delegation to PACE?  Does she (or will she) enjoy immunity, and would Russia remaining within or without PACE make any difference to her chances of being released from what is clearly unlawful imprisonment, even prior to an immunity as a PACE delegate?

We are about to find out in the very near future!

 

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Latvia calls a meeting of EU FMs

January 25, 2015

Latvia, which currently holds the rotating presidency of the Council of the European Union, has called an emergency meeting of the Member States Foreign Ministers in response to the, to quote the OSCE, “reckless, indiscriminate and disgraceful attack” on Mariupol yesterday that caused so many criminal and unnecessary deaths and injuries.

Understandable.

In such instances, Latvia, which has been a robust supporter of Ukraine throughout the Kremlin war against Ukraine, wants to be seen to be doing something.  How can it not when sitting in an elevated position, and when the statements of condemnation came thick and fast yesterday?

When even the enlightened “doves” demonstrate unambiguous outrage and assign responsibility, clearly counterproductive lines have been crossed by those responsible.  The official silence and thus refusal to condemn the act from Moscow was notable.  As is often the case with politics and diplomacy, it is not what is said – but that which isn’t said – that is equally relevant.

There can be little doubt, at the time of writing, that following this incident, the first set of EU wide sanctions up for annual review and/or renewal in March, will now be renewed.  That said most of those relate to the illegal Crimean annexation.  Whatever sanctions may yet come, or ultimately be relaxed, those specifically relating to Crimea will remain for years to come.  Europe will not accept the illegal annexation of Crimea, and thus sanctions will remain relevant to Crimea for a decade or more if necessary – regardless of any subsequent (albeit unlikely) rapid upturn in European/Kremlin relations in the years ahead.

The most urgent matter, and reason for the Latvian decision in its current role, obviously relates to the war in eastern Ukraine.  Having made such a call, such a meeting of all EU FMs at the behest of those with the presidency of the Council of European Union cannot simply produce more rhetoric, for more rhetoric can be produced without such a meeting.  A view seemingly shared by those that have previously sat at such meetings.

In short, there has to be an outcome, beyond rhetoric, worthy of convening such an enclave.  The options, however, are somewhat limited.  More sanctions?  The arming of Ukraine with advanced defensive weaponry? – An issue that remains very much a bilateral issue in the absence of EU or UN embargoes, but not an EU issue per se.  A search for agreement on the banning of Russia from SWIFT? – The economic equivalent of the “nuclear option”.  Something the UK put on the table many months ago.

There will still be Member States, either genuinely dovish (to the point of spineless considering the challenge to international and regional rule of law), or uncomfortably wiggling on a Kremlin hook, that will try and portray the Mariupol incident in isolation from the larger and increasingly aggressive picture of which the Kremlin is the artist.

In doing so they will attempt to question the proportionality of any EU response to this single incident.  “As abhorrent and criminal as it was, is it significant enough to raise further sanctions, give blessing to arms, or to consider SWIFT bans?” they will ask.  “Reduce the testosterone levels, stop beating chests with indignation,” they will say, “and consider that if we take actions now on the basis of this single incident, the next similar incident that will surely occur, will demand the same response.  Should we not at least wait until several such hideous and clearly attributable acts have been committed before making such a response – after all, we are running out of sanction room that we will all agree to.”

The hawks, however, will naturally be demanding a response to an incident that would qualify for an appearance at The Hague should any of those responsible ever face due process.   They will identify the incident as the latest and most visible and unambiguous in a rapidly deteriorating picture entirely sponsored, progressed and controlled by the Kremlin.  They will no doubt castigate those capitals that consistently accept Kremlin promises of deescalation that are then surprised when instead of getting that, they get further escalation.  “That pattern is clear to all but the willfully blind they will state, just as increased violence always precedes any talks.  Do you not learn?” they will say.   “Just how many disregarded agreements that the Kremlin is party to, must be unilaterally cast asunder by Moscow before you understand?” will be the question asked.  “Are we prepared to be recorded in history as a regional Neville Chamberlain?” they will say.

Thus, the outcome of any emergency EU FMs meeting is far from clear over and above yet another communique of condemnation – but such are the circumstances in which calling an emergency meeting, it raises the expectations that more than official rhetoric will result.

Perhaps Latvia, behind the curtain, has been hammering the telephone and is fairly certain of tangible results over and above what already exists.  Certainly it is hoped so, for holding such a high level urgent meeting that does not deliver something new, may (further) undermine the perception of credibility for the institution far more than failing to hold such a meeting at all.

Whether this will prove to be a diplomatic mis-step for the Latvian EU presidency, or not, remains to be seen.  Time will tell how any success, failure, or movement however small, from this meeting will be judged – just as all previous and future reactions to events in Ukraine will be.  Whatever the case, undoubtedly it will not be Latvia that is on the side of any inaction, although ultimately history would record that the Latvian presidency, having called the urgent meeting, failed to get results if none are forthcoming.

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