23 September 2008

Viva la Bailout!

Some light entertainment below, courtesy of the pinstripe neosocialists in the White House and on Capitol Hill.

This is the actual draft text of the bailout plan -- a text which says all you ever needed to know about how totally these Goldman Sachs statists fail to understand the "economic freedom" they love only as long as they can rig it.

Notice, for example, how the Treasury Secretary is granted powers (no expiration date included) to spend $700,000,000,000 and to perform other astonishing feats, all in ways "non-reviewable and committed to agency discretion" and that "may not be reviewed by any court of law or any administrative agency."

Notice also that the Secretary, in executing this most exhilarating and very patriotic shopping spree, is committed to "take into consideration means for (1) providing stability or preventing disruption to the financial markets or banking system; and (2) protecting the taxpayer."

So, having taken these noble points "into consideration", I dearly hope that our beloved and tirelessly self-sacrificing Secretary will at least reward himself -- perhaps after spending the first $100,000,000,000 -- by using some of his ever-expanding "discretion" to treat his family and himself to a nice residence or two in the hills over Honolulu.

Like our dear Lenin after a hard day's work, he'll have earned it.

Text of Draft Proposal for Bailout Plan

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

21 September 2008

American myths remembered

By Eric Jansson
Published by Financial Times, 20 September 2008

To begin to understand how tenuous modern America’s grip is, physically, on the West once won, you only need to drive east from Los Angeles.

You go from the sprawling city, all asphalt and lawn sprinklers, through outlying areas dustier and more ramshackle by the mile, and before long the desolation of genuine desert. In under 90 minutes, you pass from a metropolis into a wilderness where nature’s inhospitality seems to militate against human habitation.

We left without a plan, just an outline: seven days in the desert and a rented Chrysler, our toddlers buckled into the back.

The American frontier is mythic, but it is no myth. It has been updated over the past century – horses traded for cars, gaslight for electricity, wooden planks for corrugated metal sheeting – and made more habitable by air conditioning. But it endures, not far from where people have forgotten it.

We first reached the frontier in a little roadside town just a couple of hours from Los Angeles, near the spectacular Joshua Tree National Park. Next door to the jail, a shop advertised “Bail Bonds, Open 24 Hours”. And not much else.

Such settlements look terribly precarious, as if a big wind could blow them away, and the New World would be virgin again, unknown to humankind. Yet the further we drove into the desert, eventually covering 2,500 miles in seven days, the more we discovered this impression was wrong.

The ancient, huge, weatherworn landscapes surrounded us, preaching continuity from the primeval to the present day. But vacant, unpeopled continuity this was not: 400 miles from Joshua Tree, we visited Saguaro National Park to see the iconic cacti. Striking as the cacti were, far better were the petroglyphs we found atop a rattlesnake-infested pile of boulders. Rock drawings, they were made by the Hohokam people, an agriculturally adept civilisation that flourished here 1,200 years before Columbus “discovered” America.

A sign suggested we look down from that boulder pile, to survey the giant valley below and imagine a patchwork of Hohokam farmers’ fields. If the sign is correct, humankind is less populous in the valley today than it was a millennium ago. This was the first of many startling reminders that the Old West of popular myth was never genuinely old. It was just early modern.

Frontier myths crowd the landscape, with white gunslingers and prospectors winning the hearts of some, and native nations attracting the sympathy of others, while forgotten ancients such as the Hohokam ask us to consider different narratives.

Contradictory myths do not mix neatly. We got a taste of this at Saguaro National Park’s splendid visitors’ centre. The film that welcomes visitors to the park suddenly launches into a telling of local O’odham spiritual traditions. Native religion gets spliced into a script that otherwise belongs wholly to modern America. The jarring edit, an attempt at balance, only reminds us who won the West and who lost it.

Less nuanced takes on the southwest, on whomever’s side, come off more successfully. In the old ghost town of Tombstone, for example, we found the unadulterated gunslinger myth in full commercial bloom. Tombstone tips its 10-gallon (hat) almost crassly to just one version of a deeply complex history, yet it was irresistibly fun.

South of Tucson, we came across the amazing 17th-century mission of San Xavier del Bac – a place unknown even to most devotees of the south-west.

In the joyously colourful mission church, one sees how the Tohono O’odham followers of Father Kino, a Tyrolean missionary who went to Bac in 1692, embraced the iconographic traditions of Rome as folk art. The church is crammed with visions simultaneously profound and naïve – a Baroque masterpiece in adobe and wood, set on the Arizona sand.

The church has meant much to the Tohono O’odham over the years, yet the scene around it felt strained. Next to the parking lot sat 20 or so members of the tribe. Slow-moving, speechless and bundled in blankets, they sold soft drinks and “Indian tacos”. We bought lunch and moved away, fleeing the wasps swarming around the stoves but also, frankly, the vendors who silenced us with a blank aversion to conversation.

We reached Chiricahua National Monument, deep in the wilderness, in the late afternoon. This astounding park of echoing canyons, bizarre rock formations and 60-mile vistas was the ancient home of the Chiricahua Apache nation, the people of Geronimo, whose long, bitter war against US federal troops, ending in 1886, was one of the last gasps of native American resistance. We had reached the heart of ancient Apache territory, a maze of hiding places, the guerrilla warriors’ base from which Geronimo and the Chiricahua, once defeated, were exiled.

We hiked to a lookout. Across a canyon, on a craggy ridge, we saw a natural formation resembling the profile of Cochise, a warrior chief who came before Geronimo. Our two-year-old son yelled out into the canyon. His shrieks echoed back like avian chatter.

There was no evidence of another soul in the immense park, yet I felt more exposed than alone. Dusk closed in on us. The silhouetted rocks appeared like human figures, marching purposefully out of the canyon.

Bound for some New Mexican motel, we drove into a black desert landscape devoid of man-made light. Turning out of the park, our headlights flashed over a herd of pronghorn antelope.

When we crossed a cattle grid at speed the car shuddered violently and somehow this caused the electrics to fail. The windows danced madly up and down. Cold night air blasted into the car. Alarmed, I braked sharply and turned off the engine, now spooked myself.

For a moment I felt desperately far from civilisation. I felt the size of the land, the unplumbed depth of its past and my vulnerability within it.

09 July 2008

Questions Hang Over Socialists’ Return to Power

By Eric Jansson
Published by BIRN's Balkan Insight


Even as Serbia’s parliament voted to thrust the Socialist Party of Serbia (SPS) back into the offices of government, the trial of Mihalj Kertes, a central Socialist figure in the nexus of state and criminal interests that held the SPS in power through the 1990s, continued at the Special Court for Organised Crime.

The contrasting fates of the SPS and Mihalj Kertes – the party restored to power, the individual on trial – says much about the state of Serbia less than eight years after the fall of Slobodan Milosevic and his SPS from power in the October 5 putsch of 2000.

The message is not necessarily a coherent one.

On one hand, Serbian President Boris Tadic and his coalition of liberalisers, populists and technocrats, “For a European Serbia”, claim the SPS, a party they condemned in the starkest terms until recently, now has changed in ways that make it a suitable partner in government.

On the other hand, the trial of Kertes and senior gangland personalities for their roles in an alleged cigarette smuggling ring, in which the Milosevic-era customs chief has pled innocent, is predicated upon a very different view of the SPS and the 1990s. Essential to the political success of Tadic and his anti-Milosevic partners since 2000, this view holds that the SPS’s record is characterised by gross abuses of state power and criminal usurpation of state institutions.

The thread linking Tadic’s newly positive view of the SPS to his pro-European movement’s long-damning view of the party’s record in government – and indeed the continued advancement of that view through state institutions such as the Special Court – is not easy to see.

But the question of whether these two views can be reconciled seems certain to hang heavily over Serbia and, in particular, its next governing coalition – at least during its initial period in office.

Since 2000, the SPS has spent eight years in the political wilderness. Following Milosevic’s death in 2006, the party’s new leader, Ivica Dacic, now elected first deputy prime minister and interior minister, started moving the party’s public image out of Milosevic’s shadow.

Although as the party’s spokesman during the Milosevic era he is closely tied to the SPS of the old regime, Dacic’s makeover has basically succeeded.

For instance, association in the popular imagination between the SPS and criminal figures linked personally with Milosevic has arguably faded, although public knowledge of their roles within the party has actually grown. Kertes, for instance, in a separate trial last year, told the Special Court that, as customs chief, he had authorised payments from Customs Administration accounts directly to the SPS.

The party’s ambiguous transition has triggered a public debate over its new nature, even within institutions of government.

Verica Barac, president of Serbia’s Anti-Corruption Council, a state institution founded in 2001 at the behest of Zoran Djindjic, Tadic’s predecessor at the helm of the Democratic Party, told the daily Blic that the SPS remains “unreformed”.

The election of a government pairing Tadic’s pro-European bloc with the SPS represents “the defeat of what we expected would happen after October 5”, Barac said.

Yet even some of Serbia’s most pro-Western, liberal voices acknowledge that the SPS has changed in some ways. “The question is how much,” says Dejan Anastasijevic, a Belgrade journalist whose pro-Western views consistently challenge the prevailing wisdom in Serbia.

“Dacic and most of his crew are pragmatic young apparatchiks rather than war criminals or ideologues. Most of the hard-core gang dropped off with Milorad Vucelic [the party’s vice president under Milosevic], who is now trying to start his own ‘Real SPS’. On the minus side, they never formally condemned anything that Milosevic did, and there are still some pretty nasty characters lurking in the shadows,” says Anastasijevic

For such individuals, whose powerful backstage influence within the SPS has long been essential to the party’s success, the alliance with Tadic may be as uncomfortable as it is for liberal Serbs who remain sceptical of Milosevic’s former party. Both groups suffered the political equivalent of whiplash when learning of the planned marriage of these old rivals.

Borka Vucic, a long-time Milosevic associate and SPS supporter who ran Serbian offshore banking operations in Cyprus during the 1990s, when international sanctions acutely complicated the country’s finances and trade, is among those deeply frustrated by the composition of the new government.

“I remember that Dacic never had any idea for collaboration with Mr Tadic, never. How it has happened in a very short period of time I really cannot understand… It is not natural to have such integration,” she says.

Vucic’s apparent bewilderment at the SPS’s new choice of allies is informed by a unique take on the institutional transitions initiated in Serbia after Milosevic’s political downfall.

Long a senior figure in the state-dominated Yugoslav banking community, Vucic saw her position undercut after the October 5 putsch, when the young economist Mladjan Dinkic stormed into the central bank as a reform-minded governor.

Dinkic accused the evicted regime of systemic, criminal abuses of power. He spoke of “missing billions” in state funds he alleged had been channelled through Cyprus, some of it by Kertes.

At the height of the dispute over missing money, Dinkic spoke openly of the Milosevic regime as a criminal enterprise. Vucic likewise used the word “criminal” to describe Dinkic’s governance of the banking system.

Since then, little satisfaction has been felt on either side of the dispute, which gradually fell quiet with the exception of related revelations in trials like those involving Kertes.

Yet Vucic has not fundamentally changed her view. “No evidence” exists of sanctions busting or state plunder during the 1990s, she says, adding that Dinkic stopped looking for such evidence when he left the central bank in 2003 and “became a politician”.

“We have some evidence about criminality during the war, but we have much more evidence of criminality on the so-called democratic side. The volume is very big,” Vucic says.

The new alliance between Tadic’s bloc and the SPS, and Vucic’s reaction to it, is a reminder of how deep the disputes between these rivals, now allies, remain.

Having submerged such sharp disputes in order to form a government together, can the SPS and its former foes actually make common cause together?

“You would be amazed the differences that can be ignored if a person's lust for political and financial power are strong enough,” says James Lyon, Belgrade-based senior advisor for the International Crisis Group.

05 July 2008

An independent spirit

By Eric Jansson
Published by Financial Times,
28 June 2008


What made the Soviet Union fall apart? Some say guns, others butter. Others credit Ronald Reagan, Mikhail Gorbachev or Pope John Paul II. No doubt these all played their parts. But a more rewarding case can be made that it was the little-known Republic of Uzupis that did it in the end.

Like most epic historical claims, the case for Uzupis's role in defeating the Soviet empire is a circuitous one. One should avoid noting, for instance, that this leafy 168-acre neighbourhood in Vilnius possessed neither statehood nor the accoutrements of it in that fateful year, 1991. Likewise, disregard the fact that Uzupis' independence, declared in 1997, remains a source of laughter in the Lithuanian capital today.

Facts do not matter here. The real power of this colourful neighbourhood - which does in fact refer to itself as a republic, Uzupio Respublika - is not rooted in the mock independence it celebrates every year on "Uzupis Day", April 1. Its power derives from a certain spirit of life.

To its residents, Uzupis's independence is really about the independence of the soul. The neighbourhood's president, prime minister and "army" of a dozen men do exist - but only ceremonially. With humour they have succeeded in capturing the gleefully antiauthoritarian community spirit that, once mature in the hearts of millions, can render powerless even a superpower.

In many people's experience, this was the dynamic that shattered Soviet totalitarianism. Today it makes Uzupis one of the most freedom-loving urban quarters anywhere east of the Baltic and west of Vladivostok. It also makes it a magnet for new residents.

"First there were artists. Now you have members of the elite moving in. At the same time you still have junkies and drunks. And then you have the middle class - dentists and so on. Two years ago there was one dental clinic; today there are five or six," says Alistair Day-Stirrat, Lithuania director for Someplace Else, a London-based specialist in emerging property markets.

Like many Vilnius residents who keep an eye on real estate, Day-Stirrat, whose fiancée happens to be an Uzupis dentist, confesses a passion for the neighbourhood. Locals like to describe it - independent, artistic, hilly and heavily in demand - as the budding "Montmartre of Vilnius".

Because Uzupis borders Vilnius's dazzling Old Town and shares some of its architectural heritage, once Lithuania's post-Soviet property renovation and investment boom got rolling in earnest the neighbourhood was sure to change.

The early bohemian invasion of the 1990s gave the area its independence movement and proposed a graceful new aesthetic with installations such as the Uzupis Angel, a winged, horn-blowing figure perched on a plinth who has watched over the neighbourhood since 2001.

Still, vast room for improvement remains and a new wave of wealthy newcomers is moving in to make it happen. On a walk through Uzupis starting at the neighbourhood's main western entrance - a bridge crossing the Vilnele River, complete with welcome sign to "the republic" - one sees evidence of both progress and the work that remains to be done.

Just across the bridge artists' workshops and galleries project their influences on to the street. Local businesses such as the café, tattooist and hairdresser advertise their community spirit by displaying the ubiquitous "UZ" sticker along with the republican symbol; a hand with a circle in the palm that recalls the ancient talisman for warding off the "evil eye".

Up cobbled Uzupio Street renovation has reached almost all the buildings, with fresh facades slapped on to pre-modern townhouses and double-glazing almost everywhere. Yet poke into the odd courtyard or down a side street and one comes across scenes of dilapidation - crumbling facades, broken sheds and rotting boards.

In a neighbourhood that has a bit of money, as Uzupis now does, the kind of structural deterioration seen here lends it character. But eventually it needs cleaning up, too. This would be happening faster if Uzupis's history were different, says Augustas Jagusinskis, a valuer for Centro Kubas, one of Vilnius's leading estate agencies.

"In Soviet times Uzupis was a very unprestigious area. The situation had to change and the market is doing its job. The main problem with the speed of development now is old residents. Either they don't want to sell or they ask millions for a house with just three or four apartments in it. They are just sitting on barrels full of money," says Jagusinskis.

The way in for wealthy newcomers is often by purchasing flats in brand new apartment buildings rather than buying them to renovate individually. Developers seize on every opportunity to purchase several neighbouring plots at a time and then build. Strong demand ensures that although Lithuania's property boom began topping out in late 2007, in early 2008 developers were still selling flats before building them.

Most developments of this kind have sprung up lately in the eastern half of the area. A hodgepodge of wooden houses in varied states of repair interspersed by sleekly modern townhouses and garden plots, this part of the neighbourhood lies between the steep slopes of Gediminas' Grave park (Gediminas was a reputed founder of Vilnius) and the small, half-idle industrial block on Polocko Street.

At the height of Lithuania's property boom, during the past three years, people who bought houses and flats here count themselves lucky. Gerardas Jurkonis, an economist who purchased a fourth-floor open-plan flat in a new project, says that between the time he bought it for 5,000 litas (€1,400) per sq metre and the moment he was given the key, its market value had more than doubled. "I would still advise others to buy here, even though the boom is over. Prices may go down in the suburbs, especially for Soviet-built apartments, but not here or in the Old Town," he says.

He praises Uzupis as a place for families that, in spite of its appearance as a quiet community, is central and well connected to the rest of the city by transport links. The greatest of these is busy Olandu Street, which runs along the neighbourhood's eastern edge. Patches of forest prevent the traffic from disturbing the community.

The area's largest new residential development, Kriviu Namai, scheduled for completion this summer, rises near the eastern border, on Kriviu Street. Built by YIT Bustas, a Lithuanian subsidiary of the Finnish construction company YIT Group, its 23 flats are expected to be sold out before landscaping on the grounds is finished in August, says Tomas Jarasunas, site project manager.

Technically, this marks a slowdown. YIT Bustas' previous project in Uzupis, 36 flats also on Kriviu Street, sold out in just six months, well before construction work was finished. Kriviu Namai is selling well but more slowly and more expensively at prices from 8,000 litas to 1,500 litas per sq meter.

Catching the jitters in a slowing market, YIT Bustas recently halted work on several projects. But Jarasunas says it is important to keep pressing forward.

One potential risk stemming from Uzupis's emergence as upscale residential district is wholesale gentrification. It still feels a long way away from its first chain café but prices in the area of Uzupis nearest the river and Old Town are already nearing parity with Vilnius's historic centre.

"What costs 7,800 litas here might cost 8,000 litas in the Old Town; not a big difference," says Kristina Leknickaite, Lithuanian commercial director for Arco Real Estate.

Few new bohemians will be moving in under these conditions. On the other hand, moving from the area Leknickaite describes to eastern areas of Uzupis, prices typically fall by about 40 per cent.

The party is not over yet.

14 June 2008

Fabled battlefields that never saw war

By Eric Jansson
Published by Financial Times, 14 June 2008

The sign was anything but welcoming. “Explosive hazard,” it read, and a little cartoon showed shrapnel flying. “Localised quicksand.” Then, in bold font: “Former military target area. Do not touch any metallic objects. They may explode and kill you.”

Under a slate-grey sky, narrow footpaths tracked by sheep’s hooves ran around pale sand dunes, cutting here and there into patches of tall grass. I heard rustling up ahead, beyond the sign, and looked to see a startled sheep scurry between two dunes. A pause. No explosion. Had the sheep sunk into the ground?

I followed gingerly. I knew exactly where I was going, having plotted carefully in advance my walk on Cheswick Beach, on Northumbria’s North Sea coast. But one steps a bit more gently when advised to watch out for bombs and quicksand.

The lurid warnings were welcome. I had not gone to the beach for unspoilt beauty; it was spoilt beauty I was after. Not many people visit this great, lonesome expanse of sand and water. A few birdwatchers go there because of its location within Lindisfarne National Nature Reserve, a mecca for migratory birds. Others make the pilgrimage to Holy Island, the offshore monastic site that played a key role in the seventh-century Christian evangelisation of the north of England.

I went there because Cheswick Beach is heavily polluted by junk left over from the second world war. I had the place to myself – miles of it, battered by the sea wind. Not just old bombs can be found on the dunes, but pillboxes and observation towers. At low tide, so I am told, one can also find the wreckage of a crashed Spitfire.

Yet the casual visitor is unlikely to recognise any of these wartime features. Zipping down a motorway, oblivious, we pass the fabled battlefield, the famous castle or the important ruin. It is hidden behind a barrier, lost in peripheral vision, or simply ignored. Demystifying such landscapes is rewarding work for a tourist.

In early 1940, the British Army, RAF and Home Guard scrambled to prepare for an imminent German air and sea invasion, Operation Seelöwe. Eventually, thanks to the summer’s Battle of Britain, Hitler and Göring called off their plan in September of that year. But tens of thousands of British anti-invasion features had already been built, and many of them remain today. They are gross physical reminders of past horror, yet in places like Cheswick Beach one finds that, over time, they have merged permanently with the pleasant English coastal landscape. These anti-invasion defences are a world to explore, hints of the past that invisibly shape our present.

My path snaked through the dunes until I reached a clearing and found my first objective, a concrete and brick pillbox topped by a two-tiered RAF tower. The pillbox was buried in sand up to its loopholes, as the gun slots are called. To enter, I would have needed to slide in on my belly. So instead I climbed the stairs up the half-shattered tower and found a platform on top, damp and crawling with snails. It offered a fine view of the scraggly dunes, immense sands, tidal pools and waves crashing in the distance. One could begin to make out the military logic of the beach.

Such exploration has never been easier. In 2002 the Council for British Archaeology completed an eight-year project, a Defence of Britain database, now searchable online, that pinpoints such sites. Add to this the satellite imagery published by Google Maps, and even an amateur like me can plan a rewarding day of discovery.

Not far from the tower I found a long row of anti-tank blocks. Had I not known what these great cubes of concrete were, I might have mistaken them for crude post-modern artwork. Dumped across a break between the dunes, like child’s building blocks, they formed a line parallel to the sea. I walked along the line until it began to disappear into the ground. The last visible block poked just an inch or two above the sand. The earth, shifting imperceptibly over time, was swallowing the blocks.

A mile or so down the shore, I found an immense crater, 31 paces across. Standing in the middle, I wondered if this was the work of an RAF test bomber or a Luftwaffe attacker, both busy in the area during the war. I struggled to suspend belief. Could this hole, which mangled one side of a grass-covered dune, really be a bomb crater?

On a different excursion, 12 miles inland at the market town of Wooler, which had been heavily fortified during the war, my search proved simpler.

The town was ringed by pillboxes, and some remain. My favourite was a little lozenge-shaped one all but hidden in the bushes above a bridle trail. From within, looking out over a narrow valley, soldiers posted there would have been well placed to pin down anyone trying to take Wooler from behind.

One pillbox, a great hexagonal structure, was now located inaccessibly in someone’s backyard. Reaching another, on a construction site, necessitated a little discreet trespassing. Yet it was worth it, partly for the challenge of getting there, partly to crouch inside and look out of the loophole, wondering who “Doris” was. Graffiti on the wall had memorialised her.

But it was back at Cheswick Beach that my explorations yielded the greatest reward. A local expert had advised that the wreck of the Spitfire was only accessible when the tide is out . But because of the quicksand warnings my steps were extremely cautious. As I searched for something other than driftwood and seaweed, an almost-full moon peaked through the clouds, shining brightly.

And I found it, or would like to believe I did – a heavily rusted metal form, mostly submerged in the sand. If it was in fact the crashed Spitfire, then it was a small part of the cockpit I saw, poking out of the sand, for fitted into it were surf-worn panes of glass, shattered.

I wondered what I would find there with more time, but left the beach as darkness deepened. A landscape, like a life, guards some secrets more closely than others.

07 June 2008

Next Neighbourhood – Agenskalns

By Eric Jansson
Published by Financial Times, 8 June 2008

Akmens Tilts, Riga’s broad stone bridge, heaves a busy boulevard across the river Daugava into the heart of the Latvian capital. For morning commuters travelling by car, tram and bus, the crossing works as a gateway into the city. It lifts them up on the Daugava’s less-developed west bank and, having carried them over the water, sets them down among the gracious spires and bustling alleyways of the central area.
In the evening, the structure’s function shifts into reverse as the same commuters return to some of this Baltic hub’s best communities. Back on the west bank, traffic streams into vast parkland, where roads diverge en route to residential quarters of radically varied characters.
One way, a street leads into old neighbourhoods graced with attractive clapboard villas. Go another and one comes across pre-fabricated, Soviet-era mini-cities built of concrete slabs. Elsewhere there are newly built suburbs and even a few luxury high-rise apartments.
At this fork in the road, the quickest route to a quiet life – as Latvian townsfolk have traditionally known it – points toward Agenskalns. This district lies straight across the parkland, just five minutes’ drive from the city centre.
In recent years it has remained amazingly unchanged while immense demand for downtown properties has pushed real estate prices in the very centre of Riga toward improbable parity with major western European cities, triggering rampant renovation and development.
With an aesthetic that owes more to the early 20th century than the early 21st century, most of this mixed district of old houses and towering trees looks much as it did before the recent boom, now turned to slump. Trams rumble down leafy cobblestone streets and in the district’s centre, where streets converge, flower vendors, taxis and pedestrians jostle for room before the entrance of an old covered market.
Now in the wake of the boom, with property prices in the Baltic country down sharply from last year’s highs, the same factors that insulated the neighbourhood from change begin to look like assets.
“Agenskalns is not cool,” says Inguss Hofmanis, of estate agency Latio.
To many Latvian homeowners as well as foreign buyers, cool has meant new or flashy. Agenskalns is overwhelmingly old, and most properties found here lack the obvious allure of those in Riga’s historic centre, where medieval and art nouveau designs interweave gloriously.
Meanwhile to the developers who have rushed to meet the demand of such buyers, cool has meant big. The bigger the project, the bigger the return on investment. Here, Agenskalns also fell short during the boom. Narrow streets, small plots and complex ownership arrangements scared developers away. They found simpler opportunities elsewhere in Riga.
For developers who have attempted to work in Agenskalns, getting in has been difficult. Local factors have made the market hard to penetrate, says Karlis Streips, a prominent journalist and social commentator.
Latvia’s morally unyielding denationalisation programme, instituted after the country cast off Soviet occupation in 1991, restituted formerly private properties not just to original owners but, when original owners were deceased, to their families. Many of Agenskalns’ century-old homes passed to families who lacked the money to renovate.
“One might have expected them to sell but people from Agenskalns have a kind of independent community spirit. They want to stay,” says Streips.
That provincial feeling, available so close to the centre, is increasingly attractive to many frustrated house-hunters in a citywide market where demand still so far exceeds supply that prices soar even in crumbling, Soviet-built zones. Wealthy buyers continue to look elsewhere but first-time buyers see Agenskalns as a good place to start and, potentially, to stay.
“The district is lovely and calm but just a step away from the hurly-burly,” says Zane Sedlova, a 22-year-old university student who earlier this year bought a two-bedroom flat in the area.
Though her property is located in a 1960s-built apartment house – one of the more popular Soviet-built varieties – it stands in a characterful part of the neighbourhood, just steps away from one of Agenskalns’ distinctive landmarks, a water tower built in striking national romantic style.
For such young buyers, accommodating prices are as important as pleasant atmosphere. One year ago, just before Riga’s market turned, prices in the centre topped 3,574 lats (£4,000) per sq metre, and prices in Agenskalns still ranged from about 857 to 1,785 lats per sq metre. Most would-be first-time buyers considered the market impenetrable.
Now, Riga’s inelastic, high-end markets retain price values for the wealthy individuals who can afford to buy there, the credit crunch notwithstanding. By contrast, ­middle-class property prices are falling rapidly. Average property prices fell as much as four per cent in February alone, and other months have seen significant drops, as well, according to analyses published by Arco Real Estate.
In Agenskalns, residential space in an attractive, brick building erected before the second world war is now offered for less than 1,428 lats per sq metre, while historic wooden houses are about 350 lats per sq metre. The most expensive renovations usually cost about 500 lats per sq metes but the pay off can be substantial.
Serving Riga’s market of 1m people, existing stock comprises about 300,000 apartments, 60 per cent of which are Soviet-built. Many of these post-war dwellings are approaching or past their original intended periods of use, says Aleksandrs Kregers, Latvian marketing director for new developments at estate agency Ober-Haus. Some of them might become uninhabitable “in the next 10 years”, he adds.
Under these circumstances, demand is likely to rise dramatically. The same dynamic is already helping to fuel a fresh cycle of new building. Indeed, though Agenkalns’ proximity to the centre remains one of its defining advantages, developments on its outskirts have become a strong source of upward pressure on prices in the area.
The towers of Panorama Plaza, the country’s biggest single mixed-use development, have begun rising in outer Agenskalns. Builders last year finished work on the first of four planned blocks and a second is due for completion this summer, with the entire project by Turkish developer Misa Housing Industries, due to be in place by 2010.
From upper storeys of the first tower, which tops out at 24 floors, residents enjoy expansive views of predominantly low-rise Riga and, looking inland, to dense pine forests.
Demonstrating inelasticity at Riga’s high end, work continues at the site in spite of the slumping market. Evija Ansonska of Mediju Tilts, the developer’s marketing agent, says that price falls seen across most of the city during the past year have not touched Panorama Plaza, where the developer still asks 357,000 lats for a 22nd floor, two-bedroom penthouse of 157 sq metres.
“We have enough people with enough money to buy flats here. We look to the Russian market. One third of our buyers are Latvian, but another third are Russian, and another third are from the European Union,” she says.
This also is Agenskalns. But the 22nd floor penthouse is the fruit of Riga’s most recent growth spurt. Far below, the landscape of faded façades, green patches and tramlines looks like more fertile territory for the next one.

13 May 2008

Einstein and God

We read today that Albert Einstein wrote some unpublished views on God, and these are a little surprising.

"The word God is for me nothing more than the expression and product of human weaknesses, the Bible a collection of honourable, but still primitive legends which are nevertheless pretty childish. No interpretation no matter how subtle can (for me) change this. These subtilised interpretations are highly manifold according to their nature and have almost nothing to do with the original text. For me the Jewish religion like all other religions is an incarnation of the most childish superstitions," Einstein wrote in a 1954 letter to the philosopher Eric Gutkind, according to the Guardian newspaper.

One is a little surprised because Einstein’s best-known quotation about God indicates belief in a single, ultimate Creator. “God does not play dice” is a line widely attributed to him. He is also remembered to have said at Princeton University in 1921 that “God is subtle, but he is not malicious”.

A person’s view of life, the universe and everything will change over time. Einstein, who made no secret of the development of his thought, is obviously no exception. So what became of Einstein’s God?

We should not read too much into a single letter. But perhaps we can read a bit more into it than today’s headline writers, who have taken the letter to Gutkind as unsubtle proof that Einstein simply did not believe in God.

It may be that Einstein, an undoubted genius of subtle and non-malicious mind (apparently he even came to regret his association with the invention of the atomic bomb) “got” God but for some reason refused to accept Him. Needless to say, we cannot know.

But, strikingly, his description of “the word God” as “nothing more than the expression and product of human weaknesses” is extraordinarily near the Christian understanding. Christianity holds that God, the Word, expresses Himself within human weakness. What Einstein evidently regarded as an expression of doubt could be, with perhaps nothing altered but tone of voice, a declaration of faith.

Clearly Jesus' identity as the Christ is expressed through human weakness, since he is true man. From an orthodox Christian perspective, the Incarnation ("production" to use Einstein's secular language) came precisely from human weakness (the frail glory of a human mother). Yet the Incarnation also came precisely from eternal glory, since Jesus is also true God.

Einstein, from a Christian perspective, is likewise right to describe Biblical legend and faith incarnate as “primitive” and “childish”. The word “primitive” means first, elemental, original, and need not carry the cultural meaning of “outdated” attached to it in the modern age. As for “childish”, one hopes this is not an insult, for we should all hope, in matters of faith, to be more like children and less full of ourselves. (How wonderful and ironic that the recipient of Einstein’s letter was named “Gutkind”, meaning good child.)

Humanity has not yet pulled away from Einstein. Will we ever? He is the icon of modern scientific thought, and his shadow falls over modern philosophy and politics as well. He remains the first man for whom relativity preceded relativism, whose modern enquiries pointed early on toward the end of modernism and the obliteration of the systematic certainties which were his enquiries' very foundation.

For people in our own, post-modern age, relativism (which asks us to switch off the brain and dim the soul) almost always precedes relativity (which requires real study to understand yet is taken for granted). The post-modernist is largely stripped of Einstein’s ability to wonder and enquire, yet finds himself stuck at the altar of the icon’s thought. Like a "bad Jew" in a post-Hebraic desert of secularism, the post-modernist is really only a dysfunctional modernist, trying to hope his way out of the darkness.

Yet, shed just a little hopeful light on the darker ruminations of the icon, and those ruminations seem to reorient towards Truth.

Rise and shine! The storm of centuries is passing, and the compass that whirled around amid the worst of it once again points north!

27 April 2008

A Baltic boom

By Eric Jansson
Published by Financial Times, 26 April 2008

For real estate developers who think big, central Tallinn has become a claustrophobic place. The property boom that energised Estonia after it joined the European Union in 2004 also made the centre of this city of 400,000 a more cramped place for developers to work.

Space was already scarce
before the boom. Now it is scarcer. In a market where most developers prefer to start from scratch rather than renovating old buildings, strong demand for plots has sent the Baltic country's capital sprawling into the surrounding carrot and potato fields, where fledging suburbs now rise from the soil.

And still there is Kopli, an expansive district situated on a peninsula that points away from the Old Town into the chilly, choppy waters of the Gulf of Finland.

The area arguably represents the last great chance for real estate development near the city centre. Though it is blessed with open space like almost no other part of the capital, the district has seen little in the way of development, yet it lies minutes away from the heart of Tallinn by car, bus or tram.

“In 10 years, this will probably be one of the most valuable areas of Tallinn,” says Endel Siff, a businessman living in the city who has made much of his wealth in Russian oil transit.

To understand why a growing number of Estonian real estate experts think he is right after steering clear of Kopli for years, consider the district’s peculiar history of isolation. It spent a half century as a restricted zone during Estonia’s occupation by the Soviet Union, when the military deemed the peninsula’s port a top-secret asset.

When the country regained independence in 1991, Russian sailors quartered there stayed on for many more years. When they finally left, they stripped many of the war boats in the harbour of copper pipes to sell as scrap, causing them to capsize. They left behind an almighty mess in the water and on the land.

Yet much of what was built here under Soviet rule, residential and commercial property, remains usable and inhabited. Many of the buildings that predate 1940 have been preserved, perversely, because underinvestment has been so severe that, until recently, people somehow kept them in working shape even as they sagged and sank.

Driving around Kopli, Siff offers an impromptu tour of a district that, by accident, has become a living museum of Estonian history and architecture.

On one street, century-old clapboard tenement houses still lacking indoor plumbing stand opposite a block of 1960s-builtKhrushchevki, apartment blocks nicknamed after the Soviet leader Nikita Khrushchev, during whose rule they were erected. Turn down an alley toward the shore, lined with interwar mansion houses, and one sees weather-warped wooden villas – built during Tsarist times – begging for restoration. Turn back inland and one enters a crumbling neighbourhood of grandiose, pillared Stalin-era apartment blocks.

In one such courtyard, where some front doors are falling out of their frames, vodka bottles lie strewn in the yards and old men slump on broken benches. The scene reeks of post-totalitarian deprivation. If the future is bright, it might be distant.

“We are probably talking about five to 10 years. You cannot build an oasis of prosperity if it is surrounded by poor areas but you can see that prosperity is finally reaching this area, too,” Siff says.

Siff, who does not like to think of himself as a developer, has nonetheless been dreaming up some of the biggest ideas about property development anywhere in Tallinn. His most ambitious dreams focus on Kopli, where one of his business interests, Bekkeri Sadam, a commercial port, is located.

His plans have, so far, encountered resistance from city officials. They are understandably cautious, knowing that the choices they make in Kopli are likely to define the peninsula’s role in new ways, affecting the city for many years to come.

So strong is public officials’ sense of need for a brainstorm that they presented a section of Kopli for the consideration of participants in last year’s Europan, a competition for young architects and urban planners across the continent. Contestants from Germany, Spain and Italy posted back competing visions of hypermodern residential tower blocks in a mixed-use harbour.

If such visions feel a long way off, that is only because real estate investment has not yet swept into Kopli on the massive scale seen in other Tallinn districts.

Marek Antoniak, one of the city’s leading developers with his company Artig Kinnisvara, agrees with Siff that such investment undoubtedly will arrive. “Kopli is a good area, near the city, near the sea, with good transport links. Sure, it lacks a good image, but it is the most undervalued place in Tallinn,” he says.

Small-scale investments are already evident, many of them vastly more impressive than a fresh lick of paint on an old Khrushchevka, though such basic renovations are extremely common where owners and tenants have found ways to co-operate, often after years of haggling. As this happens, the area’s peculiar history – including its sad legacy of isolation – is being converted into an asset and wealthy owners who like the heady atmosphere are moving in.

“Kopli has a very fresh vibe. It seems that everyone is looking forward to inevitable change, and change can only be good,” says Toomas Prangli, a young lawyer who last July moved there from the Old Town.

Prangli’s old neighbourhood of Toompea, an ancient hilltop area, is home to some of the country’s most coveted residential properties but he was happy to move out. Toompea, for those who live there, has been badly damaged by the real estate boom that recently petered out.

“So many foreigners bought Old Town properties as investments and rarely stayed there themselves that eventually I felt I was living in a ghost town,” Prangli says. His new loft apartment at Marati 4 in Kopli, in a Tsarist-era administrative building, boasts five-metre high-ceilings. Prangli says his purchase, lavishly renovated and managed by Uus Maa, a Tallinn estate agency, cost 30 per cent less than property in the Old Town.

Prices in similarly renovated Kopli properties range from €1,600 to €2,100 per sq metre, with Marati 4 near the top of the scale. Because apartments such as Prangli’s are commonly sold off-plan, mid-renovation, he managed to persuade four friends to buy in the same building, establishing a social base in the previously unfamiliar district.

Like many new residents in the area, Prangli says he was worried about crime but he now feels “more safe in Kopli than in Toompea”, contradicting the district’s stereotype as a stamping ground for homeless drunks and petty criminals. In Tallinn slang, when a man hits the bottle he is said to be elavad Kopli liinide – “living on Kopli rails”.

Another pleasant surprise awaiting newcomers is that, although many Estonians still regard Kopli as a place “for Russians” – a legacy of its time as a Soviet restricted zone – in fact the non-Slavic Estonian language is frequently heard in streets and shops, alongside Russian.

As more developers start working in the district, it seems almost certain to follow the trajectories of Kalamaja and Pelgulinn districts on the same peninsula, but closer to the Old Town.

Many Tallinners once looked askance at Kalamaja and Pelgulinn much as they look at Kopli now, but their popularity began to soar five years ago with a wave of renovation and construction. Bohemians came first, then young, upwardly mobile types. By this standard, Prangli has already jumped the queue into Kopli.

But then, he says he likes “to be first”.

22 April 2008

Estonia feels the pinch of Moscow's pique

Without Russian oil, terminal to become a shopping mall

By Eric Jansson
Published by the Wall Street Journal Europe, 22 April 2008

TALLINN, Estonia - Most of the world has long forgotten Estonia's dispute with Russia one year ago, which saw the Baltic nation's oil supplies cut and its high-tech economy hit by a massive cyberattack. Not Endel Siff.

A leading Estonian businessman, Mr. Siff made a fortune shipping Russian fuel through the Milstrand Oil Terminal, a well-maintained 14-hectare terminal on the coast of the Baltic Sea, and through other sites. With oil prices setting records world-wide, business should be good. But Milstrand, where Mr. Siff is chairman of the supervisory board, has filed papers to transform itself into an upscale shopping center. The plan is to load the terminal's equipment on a barge and ship it to the highest bidder. That is because Russian oil companies never resumed the flow of oil to the level upon which Milstrand depends.

The terminal's plight represents a practical example of what can occur when Russia's political sensitivities toward neighboring countries combine, officially or unofficially, with its might as an exporter of natural resources. It can generate fallout long after the initial dispute disappears from the headlines.

Shipment of oil in the Baltic has been increasing overall, but Russian oil companies have redirected much of their transit flows away from Estonia and toward newly built terminals such as Primorsk and Ust-Luga around St. Petersburg. In recent years, Russia has temporarily cut off natural-gas supplies to Ukraine and Belarus and ceased oil deliveries to Lithuania and Latvia; an embargo on trade with Georgia continues. Many analysts see Dmitry Medvedev's selection by Russian President Vladmir Putin as his successor as a way of entrenching what they describe as Mr. Putin's approach of using Russia's natural-resources wealth as a source of geopolitical leverage; the president-elect is chairman of Gazprom, a giant state-owned energy company. Senior Russian government officials don't publicly acknowledge using such leverage.

Mr. Siff's reaction demonstrates a built-in weakness of any strategy that would aim to punish independently minded neighbors with economic pressure. Estonia, which joined NATO and the European Union in 2004, has shifted the bulk of its trade from Russia, and increasingly bases its economy on services, high tech and other industries less dependent on its resource-rich neighbor. Georgia is still pressing hard for membership in the North Atlantic Treaty Organization, Moscow's primary gripe, and gaining strong support in the EU from countries such as Estonia that also have come under Russian pressure.

Unless the flow of Russian oil resumes -- a prospect considered unlikely in the near term -- Milstrand aims to convert its site to tap into the strength of Estonia's consumer economy. Approved unanimously by the company's board and awaiting public planners' approval, the plan foresees deconstruction of tanks and pipes, the conversion of three underground Soviet-built nuclear-bomb-proof tanks into public water storage, and the erection of a shopping area.

"If we do it, we will just dismantle everything, put it on a barge, advertise and sell to the highest bidder," said Mr. Siff, 50 years old, looking out his window at the terminal's gleaming white tanks, tidy lawns and railway link. With its 125,000-cubic-meter storage capacity, Milstrand is Estonia's seventh-largest terminal.

For Mr. Siff, such thinking represents an extraordinary about-face. The collapse of the Soviet Union in 1991 found him well-connected as a project manager in charge of exports at a Soviet trade organization. After tiny Estonia regained independence, he parlayed his position, expertise and entrepreneurial spirit into status as one of the country's top tycoons. His N-Terminal company co-owns Milstrand with Voorsterburgh Investeringen of the Netherlands.

Then came the spat that climaxed one year ago next week: a quarrel over the fate of a symbolically sensitive Soviet war memorial, the Bronze Soldier. When Estonian officials moved the memorial from downtown Tallinn to a suburban cemetery, ignoring Russian objections, ethnic Russians sparked riots here and a siege of the Estonian Embassy in Moscow and, Estonian officials allege, Russian hackers carried out a state-sanctioned "cyberwar" against the country's online infrastructure. The dispute also catalyzed an unofficial trade boycott.

While the street violence and cyberspace attacks soon subsided, "there is unfortunately no recovery" in oil-transit volumes, said Urmas Glase, a spokesman for Estonian railway company Eesti Raudtee. The railroad's data show that monthly Russian oil-transit volumes fell by roughly one-third after the Bronze Soldier incident. Cargo volumes of timber, paper, metals and chemicals fell sharply, too.

Oil transit in other parts of the Baltic is a different story. Seaside terminals around the Baltic last year handled 170 million tons of oil, mostly from Russia, bound for the Danish Straits, 13% more than in 2006 and about 113% more than in 2000, according to the Helsinki Commission, an intergovernmental maritime monitor in the region.

Estonia's trade with other EU countries far exceeds its trade with Russia, yet if Russian companies redirect trade away from Estonia, transit-linked businesses in the small country feel the pain. Estonia's finance ministry earlier this month cut the country's gross-domestic-product-growth forecast to 3.7%, the lowest level since 1999, when local businesses were hit hard by a Russian financial crisis. Domestic dynamics have led the slowdown, but international factors including the global credit crunch and the slowdown of Russian commercial traffic also count.

Few Estonian businesses have suffered as direct a hit as Milstrand. After transporting 1.7 million tons of Russian diesel in 2006, last year it handled fewer than 400,000 tons, only 24,000 of which flowed through during the second half of the year. What arrives is "brought in by independent traders," said Gaspard Boot, who sits on Milstrand's supervisory board with Mr. Siff.

"Of course, we have our connections with Russian oil companies. We can press them, but we cannot move mountains either," he said, noting that Russia has a financial interest in rerouting transit to its own oil-export facilities in the Baltic. Moscow has invested billions over the past decade, building up Primorsk and other sites, where Mr. Boot said Russian companies enjoy low costs through "positive discrimination" on fees.

Some companies are investing in Estonian oil-transit infrastructure now while the market is down. Mercuria Energy Group, a Swiss-registered oil trader, acquired a Tallinn terminal, Eurodek, shortly after the Bronze Soldier incident. "Sure, we're not making as much money as the terminal did two years ago," said David Ensor, Mercuria's vice president for communications. "We like the look of it as a long-term strategy investment."

By contrast, Mr. Siff's idea to shut Milstrand -- a plan Mr. Boot describes as having "a 90% chance," with the permitting process under way -- shows that at least some of the region's oil-transit businesses outside Russia prefer not to wait, or feel they can't afford to. Over time, such moves could deprive Russian oil companies of options in Baltic ports such as Estonia's that are more reliably ice-free than Russia's.

"Transit is not really the best industry to be in," Mr. Siff said. "My interests are really in high tech now." He said he is investing in laser technologies being developed in North Carolina and test-marketed in the EU.

02 April 2008

Decision time for NATO

For the first time since NATO’s initial eastward expansion in 1999, the alliance may be forced to say “no”. That is the bad news. In a roundabout way it might be the good news, too.

By Eric Jansson for Balkan Insight


With American power globally in crisis and European power defined as ever by ill-coordinated aspiration, Russian power ascends these days on the strength of natural resources wealth, strategic clarity and Western strategic discombobulation.

Atmospheric conditions do not look favourable for another round of NATO expansion, especially with coalition forces fighting toward an uncertain outcome in Afghanistan.

So should the alliance kick itself for putting the security of five European countries on the line at this awkward time?

Maybe, or maybe not.

As with past rounds of expansion, the choice being considered at this week’s NATO Summit in Bucharest is seen by almost everyone as a test of the alliance’s unity, strength and resolve.

The possibility of a rancorous internal dispute about expansion looks like bad news. However, such a disputatious moment may invite a welcome change in the way NATO handles European security.

The three western Balkan countries in question – Croatia, Macedonia and Albania – do not pose major problems as potential new member countries, even despite Macedonia’s never-ending “name” dispute with Greece.

By contrast giant, politically-fractious Ukraine and spunky, territorially-riven Georgia are tougher calls, their respective “Orange” and “Rose” revolutions notwithstanding. The very real challenges they face within are complicated by the strategic reality that they live in Russia’s shadow, like it or not.

Overt German opposition to the proposal that Ukraine and Georgia be given NATO membership action plans, known as “MAPs”, has created a strained dynamic. This could also impact Croatia, Macedonia and Albania’s prospects amid the diplomatic horse-trading in Bucharest.

Indeed, for the first time since NATO’s initial eastward expansion, in 1999, the alliance may be forced to say “no”.

Neither in 1999 nor in 2002, when the alliance triggered a second round of expansion it ultimately carried out in 2004, did NATO actually turn anyone down. In both these previous eastward rounds of expansion, which together brought ten new member countries in to the alliance, NATO opted against “big bang” expansions yet found ways to renew the hopes of those candidate countries it determined should wait, such as Macedonia and Albania.

This neat scenario is not guaranteed to repeat itself even if all three western Balkan candidate countries this week receive invitations to join. Ukraine and Georgia could still get turned away.

For the two former Soviet republics, denial of MAPs would feel a lot like “no”.

At that point, proclamations of NATO’s love and admiration will mean little. If Kiev and Tblisi come away disappointed, whatever the circumstances, count on Moscow to crow victory.

Kremlin officials make no effort to hide their disgust at the alliance’s consideration of further expansion into what they regard as Russia’s natural sphere of influence, its “near abroad”. The NATO membership since 2004 of Estonia, Latvia and Lithuania – countries which endured illegal Soviet occupations from the Second World War until 1991 – continues to sicken Russia’s neo-imperialists. Add Ukraine and Georgia, and their condition only gets worse.

Some observers and participants believe this is precisely why NATO must expand as rapidly as possible: Moscow must be shown again that it has “no veto”. Indeed, George W. Bush used the “no veto” language on Tuesday on a state visit to Kiev.

The argument makes some sense. But flip it over and one sees that Kremlin opposition to NATO expansion has itself become the anti-“veto” lobby’s imperative for expansion. Moscow has no veto, and to demonstrate this point NATO must expand, the thinking goes.

By logical extension, if NATO opts not to give MAPs to Ukraine and Georgia, then Russia will have been handed a veto by implication.

This is illusory. Somewhere between the veto Moscow in fact lacks and the imperative for NATO expansion driven by fear of Russian neo-imperialism exist the sober interests of the alliance in its present form – balanced internally by debate, compromise and even disagreement.

These sober interests clearly include the stabilisation of the western Balkans, a region in which the alliance has become deeply involved in its expanded post-Cold War mission. As such, an offer of membership to the western Balkan countries under consideration makes clear sense – especially when one considers the stabilising influence such a move could be expected to have in and around Kosovo.

The alliance’s interests less obviously include eventual NATO membership for Ukraine and Georgia, though they may include this, too. Deciding whether or not they do is likely to be rancorous business.

Fine. A strong case can be made for rancour as the very basis of NATO’s health.

This is meant to be an alliance of robust democracies in their collective military capacity, not a sissy circle of risk-averse technocrats. NATO is headquartered in Brussels, but it is not the European Commission. Its decisions should be the product of hard disagreements, worked out not through the watering-down of national interests but rather through the testing of national interests in the cold light of reality. Anything less generates distinctly insecure security policy.

If Germany holds its ground and NATO is seen to lack unity and resolve over issues of expansion this week, commentators will opine that the alliance’s fundamental unity and resolve have been imperilled, despite its unrivalled military strength. We should ignore such drivel.
NATO’s fundamental unity, strength and resolve are defined not by what happens in Bucharest but by Article 5 of the North Atlantic Treaty. This is the portion of the North Atlantic Treaty in which NATO members agree “an armed attack against one or more of them in Europe or North America shall be considered an attack against them all” and, consequently, will trigger “collective self-defence”.

Article 5 “makes” NATO, and were it ever to prove unviable in practice it would break NATO in a way that a poor outcome in Afghanistan could never do. It is also why NATO should expand with care.

While sorting out this week how collectively to take care of members countries’ national interests and considering also those of partners outside the alliance, if NATO cannot agree about all five countries whose security is on the line, an opportunity will have been lost. Differences of opinion in the alliance will appear, but not institutional fissures.

Indeed NATO may prove stronger in the long run if its European member countries become more effective, not less, at forcing fruitful debates rather than partnering passively with the sole superpower on the team, as has sometimes been the case.

It might not make for a happy summit. But for those, including many in Washington, who have long asserted that Europe should take greater responsibility for European security: isn’t that what this is?