News & Analysis

Emerging Europe this week

Central Europe

Polish Prime Minister Mateusz Morawiecki said this week that his government plans to impose a new levy on advertising revenues and use the proceeds to support the national health care system, culture and free media. “This is nothing new and something we agreed upon in the European Union some time ago,” said Mr Morawiecki. The PM said that the levy is intended to  create better conditions for the development of free media. “We are dealing with a huge imbalance. Global media corporations dominate and can do so even more through their capital power.” The new tax, which has been fiercely criticised by independent broadcasters and publishers, is expected to take effect from July 1, and could raise up to 800 million zloty (178 million euros) in 2022.

Czechia continues to have the European Union’s lowest rate of unemployment, at just 3.1 per cent in December 2020, data from Eurostat confirmed this week. Poland, where 3.3 per cent of people are unemployed, has the second lowest rate in the bloc. For the European Union as a whole, the unemployment rate was running at 7.5 per cent in December, up from 6.5 per cent a year earlier. Spain, at 16.2 per cent, has the EU’s highest level of unemployment.

The Council of Europe’s Group of States against Corruption (GRECO) has expressed disappointment at the slow progress of Slovakia in implementing measures to prevent corruption of parliamentarians, judges and prosecutors. In a new compliance report assessing the progress of the country in the implementation of 16 recommendations made more than five years ago, GRECO concludes that half of them have not been fully implemented.

Romania’s oil and gas giant OMV Petrom said on Thursday its net profit plummeted 64 per cent year-on-year to 1.291 billion lei (265 million euros) in 2020. The weak performance was mainly caused by the unfavorable market environment, as lower prices and the Covid-19 crisis had a negative impact on the group’s performance, OMV Petrom said in an unaudited consolidated financial statement filed with the Bucharest Stock Exchange. For 2021, the group expects demand for oil products and power to be above 2020, while demand for gas is expected to be broadly similar to 2020.

UiPath said on Monday it had raised 750 million US dollars in a fundraising round that valued the robotic software start-up at 35 billion US dollars, ahead of a high-profile initial public offering (IPO) later this year. The round was led by existing investors Alkeon Capital and Coatue, with Altimeter Capital, Dragoneer, IVP, Sequoia, Tiger Global and funds advised by T. Rowe Price Associates Inc also taking part in the fundraising. The New York-based, Romania-founded start-up said in December that it had filed confidentially for an IPO with the US Securities and Exchange Commission (SEC).

Hungary this week announced that SK Innovation, a Korean manufacturer of car parts, will invest around 1.9 billion euros in an electric battery factory at Inváncsa, about 30 kilometers south of Budapest. SK Innovation already produces car parts at two plants in Komárom county. The investment will be the largest ever single greenfield development in Hungarian history, and the new electric battery plant, which will rival the largest electric battery producing plant in the world at the Tesla Gigafactory in Nevada, is expected to create 2,500 new jobs.

The European Commission announced this week that it has approved under EU state aid rules five million euros in aid to compensate Fraport Slovenija, the operator of Jože Pučnik Ljubljana Airport, for the damage it suffered due to the Covid-19 pandemic. Jože Pučnik  is Slovenia’s only airport serving international scheduled passenger flights. Due to the measures that Slovenia implemented to limit the spread of the coronavirus, all airlines operating at the airport had to cease their flight operations on March 17, 2020. The flight restrictions were not fully lifted until the end of May, resulting in high operating losses.

Bulgaria has the second highest percentage of smokers among all EU member states, according to a new Eurobarometer survey, the results of which were presented by the European Commission on Wednesday, on the eve of the World Cancer Day. According to the survey, 38 per cent of Bulgarians smoke regularly. Greece is the only EU country with a higher rate of smokers than Bulgaria, at 42 per cent. Croatia, with 36 per cent, comes third.

A priest in Romania has been accused of manslaughter following the death last weekend of a six-week-old baby after a Christening service in the northeastern town of Suceava. The baby boy, who was born premature, was fully immersed in water during the ceremony, and an autopsy found that he died with 110 milliliters of water in his lungs. The death has provoked outrage in Romania, with more than 56,000 people signing a petition demanding the Orthodox church changes its baptism ritual “so that useless and absurd risks can be avoided”. A spokesperson for Romania’s patriarch said on Monday that church rules already allow for a priest to sprinkle water on an infant’s head rather than full immersion.

Eastern Europe

Ukraine this week shut down three domestic television channels linked to a politician close to Vladimir Putin, alleging that they pose a national security risk by spreading Kremlin disinformation at a time when the country is in its eighth year of an undeclared war with Russia. In a presidential order announced late on Tuesday, Volodymyr Zelensky imposed the sanctions on channels 112, NewsOne and ZIK and their legal owner Taras Kozak for five years. The TV channels were blacked out overnight. Mr Zelensky said on Wednesday: “Ukraine strongly supports freedom of speech . . . not propaganda financed by the aggressor country that undermines Ukraine on its way to EU and Euro-Atlantic integration.” In a joint statement, the broadcasters said Mr Zelensky aimed to “destroy three opposition TV channels”.

Russia meanwhile confirmed on Wednesday that it would supply the rebel-controlled regions of eastern Ukraine with its Sputnik V vaccine against Covid-19 despite Kyiv’s ban on using the Russian shots. Ukraine expects to receive shipments of Western-made vaccines soon and has prohibited the use of Russian vaccines against Covid-19, with its relations with Moscow essentially severed by the annexation of Crimea in 2014.

Viktor Babaryko, a former Belarusian banker whose bid to challenge Alyaksandr Lukashenka in last year’s disputed presidential election was halted by his arrest, is due to go on trial on February 17. An announcement on Babaryko’s Telegram channel on February 4 came shortly after a preliminary hearing at a district court in Minsk earlier in the day at which Babaryko was not present. Several co-defendants were in court, including six men, who made deals with investigators in hopes of facing lesser charges. The case is due to be heard by the Belarusian Supreme Court, a move that was criticised last week by Babaryko’s lawyer, who said it would deny them any chance of appeal in the event of a guilty verdict.

The United Nations has called for the “prompt” release of POWs captured during and after the last year’s hostilities between Armenia and Azerbaijan in Nagorno-Karabakh. “Everyone deprived of their liberty for reasons related to the conflict should be returned to their homes, and relatives of those killed must be able to receive the mortal remains of their loved ones, in line with the ceasefire agreement signed on November 9, 2020,” the UN said. “Failure to disclose information on the fate and whereabouts of missing persons and refusal to hand over the remains of the deceased may amount to enforced disappearance, which both Azerbaijan and Armenia have committed to preventing.”

Small and medium-sized enterprises (SMEs) in Georgia will benefit from enhanced advisory services offered by the European Bank for Reconstruction and Development (EBRD) to advance their digitalisation and access to capital markets against the backdrop of the coronavirus pandemic. Backed by 1.8 million euros in EU funding, the EBRD will help local firms with their digital transformation to avoid interruptions to their operations because of the pandemic and rebuild their businesses with a focus on sustainable and green practices. In parallel, the EBRD will assist the National Bank of Georgia with the design and implementation of support mechanisms facilitating access to capital markets – both debt and equity – for local corporates, including SMEs. Targeted support will enhance Georgian companies’ preparedness for capital markets, broaden their funding sources and help attract financing from domestic and international investors.

North East Europe

The gas grids of Lithuania and Poland have now been directly linked after a cross-border section of an interconnector between the two countries was completed, Lithuanian transmission system operator Amber Grid said February 2. The Lithuania-Poland interconnector will run for a total length of 508 kilometres and will link the Baltic states with the rest of the EU market for the first time. The pipeline – which is expected to be fully completed by the end of 2021 and begin flows in 2022 – will be able to supply gas in both directions, with a capacity of up to 2.4 Bcm/year for delivery to Lithuania and 1.9 Bcm/year to Poland.

Latvia will stage the 2021 World Ice Hockey Championships alone, the sport’s governing body the IIHF said on Tuesday. The announcement comes after Belarus was removed as co-host last month amid the violent repression of peaceful protests against the country’s dictator, Alexander Lukashenko. The tournament, which begins in May will be played at two venues in the Latvian capital Riga, with all 16 teams staying in the same hotel. “With teams housed in one location and the Arena Riga and Olympic Sports Centre competition venues located approximately 150 meters away from each other, we would be able to implement a bubble concept if needed,” the IIHF said. It has yet to be decided if spectators will be allowed into the venues.

Having appeared to suffer a sudden death in 2020 due to concerns over Chinese finance, the world’s longest undersea rail tunnel planned to link Helsinki, Finland, with Tallinn, Estonia might be back on track. Revival of the project by the new Estonian government would eventually see the Baltic states linked to the rest of the European high-speed rail network, reported Bloomberg this week. China’s Touchstone Capita Partners has pledged around 17 billion US dollars toward the project, although some in both Finland and Estonia view Chinese finance of such a critical infrastructure project with suspicion. Construction of the tunnel, which at 100 kilometres would be twice the length of the Channel Tunnel between the UK and France, will require the creation of at least one artificial island.

South East Europe

Serbia will launch the construction of the first line of the Belgrade metro in November, infrastructure minister Tomislav Momirović said this week. “We have come to decisions on all open issues,” Momirović said in a video file posted on the website of Tanjug news agency on Wednesday, after  a meeting in Paris with representatives of Egis Rail, the designer of the project. The construction works of the second line of the Belgrade metro will start in 2022, Momirović added. Earlier this week, Finance Minister Siniša Mali said the first line of the metro will be completed in 2028. According to the preliminary design of the project, the Belgrade metro network will initially consist of two lines of 22 kilometres and 19.8 kilometres in length respectively and will integrate four urban railway lines.

Serbia’s government also this week launched a 10 billion euros investment plan for the electricity and mining sectors, energy minister Zorana Mihajlović said on Tuesday. The largest part of the investment plan refers to the electricity sector, Mihajlovic said in a statement. The main priority for the government is the construction of medium-sized and large hydropower plants because they will provide sustainable energy during the energy transition period, she noted. “Secondly, we want to cut electricity prices in both production and consumption, which is an issue of energy efficiency for which we have prepared a new law. The third direction is renewable energy sources that can help in energy security,” Mihajlovic said.

Albania on Wednesday signed a 90 million euros contract with Italian firm I.N.C. to upgrade the 34.2 kilometres rail link between Albania’s main port of Durres and the capital, Tirana. The company will also build a new 5.7 kilometres link with Tirana’s airport. The work is planned to be completed in summer 2023, according to Albania’s infrastructure minister, Belinda Balluku. The upgrade will be funded with a 36.6 million euros European Union grant, a 36.8 million euros loan from the European Bank for Reconstruction and Development – which is also providing a smaller grant – and the Albanian government.

Kosovo and Israel formally established diplomatic ties on Monday in a ceremony held digitally due to the pandemic lockdown. Kosovo Foreign Minister Meliza Haradinaj-Stublla and her Israeli counterpart, Gabi Ashkenazi, held a virtual ceremony to sign the documents in their respective countries. “Today we are making history. We are establishing diplomatic relations between Israel and Kosovo,” said Ashkenazi. “We mark a new chapter in the historical bond between our countries,” Haradinaj-Stublla responded in her speech. With Monday´s agreement, Kosovo is to become just the third country after the US and Guatemala to have its embassy located in Jerusalem. It also is the first European or Muslim-majority country to do so. Most countries’ embassies are in Tel Aviv.

Central Asia

Uzbekistan is continuing to make significant progress in the eradication of child and forced labour in the country’s cotton industry, according to a new report published this week by the International Labour Organisation (ILO). The findings are backed up by the country’s first national Environmental, Social and Governance (ESG) report and by independent monitors from the Uzbek Forum for Human Rights NGO. Uzbekistan last year abolished the state-ordered quota system for cotton crops, ending a decades-old arrangement that encouraged forced labour, and hopes international boycotts on its cotton will soon be lifted.

Kyrgyzstan has banned foreign companies from future large mining projects, although existing licences are unaffected, in the first major order by its new president. The economy of the Central Asian nation relies heavily on gold mining, particularly after two other sources of wealth – trade with neighbouring China and remittances from migrant labourers working in Russia – were hit by the Covid-19 pandemic. Kyrgyz President Sadyr Japarov, who was inaugurated on January 28, signed the order which only allows the development of “subsoil areas of national importance” by a state-owned company. Firms currently holding rights to develop deposits in the country are excluded from the order. Canada’s Centerra Gold Inc is the largest foreign investor in Kyrgyzstan. It mines gold at Kumtor, Kyrgyz largest gold deposit.

Religious believers in Tajikistan streamed back into mosques Monday on the back of a government order opening religious buildings and official claims that there had been no new coronavirus cases in the country for three weeks. The country’s coronavirus count has not changed since early January when it reached 13,308 infections, 90 fatalities and 13,218 recoveries.

Meanwhile, about 3,000 troops of the 201st Russian military base in Tajikistan this week took part in tactical drills involving about 250 combat and special vehicles, such as T-72 tanks, upgraded BMP-2M infantry fighting vehicles, BTR-82A and BTR-80 armoured personnel carriers, and multiple-launch rocket systems. The base in Tajikistan is Russia’s largest foreign military facility.

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