Ukraine, Nuclear Weapons And Japan

A little over a month ago, I posted a reflection on the danger of failing to live up to the international security guarantee the nuclear powers gave to Ukraine in return for Ukraine giving up its nuclear arsenal.

Today's New York Times article reporting Japanese concerns over the U.S. reaction to Russian takeover of the Crimea should, therefore, come as no surprise. The article makes it clear that failure to carry out the security guarantee to Ukraine not only complicates efforts at nuclear non-proliferation, it also complicates conventional diplomacy.

It is a bit reminiscent of the inter war diplomacy of France. After World War I, France signed a guarantee to defend the independence and territorial integrity of Czechoslovakia. But France lacked a common border with Czechoslovakia and besides that, had built a vast fixed fortress (the Maginot Line) and a military designed to operate behind that line. How were they to come to the aid of Czechoslovakia if necessary?

It created a mismatch between miltary planning and diplomatic efforts. In the end, it didn't work.

I would hope we have learned something useful in the intervening eighty years.

Что Делать? What To Do?

Что Делать? Is the title of one of Lenin's books. "What is to be done?" is one way to translate the phrase. I like the simpler and more direct "what to do?"

I offer the following list of things to do:

I: Military

1. What Russia has done in Ukraine is an act of war. Recognize Russia's belligerent status. Ask Turkey to close the Turkish Straits to transit by Russian warships under the Montreux Convention. [By the way, we have to ask politely, since we never adhered to the convention and therefore do not have the rights of a signatory. Why not initiate discussion with Turkey to seek status as a signatory?]

2. While Ukraine is not a member of NATO, she has been granted membership in the Euro-Atlantic Partnership Council. Let's send an allied mission to Ukraine to assess their defense needs.

3. Reactivate discussions with Ukraine concerning transfer of warships from our reserve fleet to Ukraine. Include mine warfare vessels in the discussion.

4. Investigate modernizing Ukraine's Air Force and Air Defense.

5. Schedule friendly warship visits to NATO allies in the Black Sea: Bulgaria and Romania, and possibly Ukraine.

II. Economics

1. Don't threaten to withdraw from the G-8 conference in Sochi - withdraw! Now! Withdrawing from a conference may sound like a weak sanction. Not nearly as weak as threatening someday to think about doing it. Just do it!

2. Freeze Russian assets! Now! We can always unfreeze them later;

Getting Ukraine's economic house in order is probably the most urgent task. But it must be done in a way that improves the lives of ordinary citizens and builds Ukraine's productive capacity for the future. Here are some ideas set forth by economists Gorodnichenko and Roland:

"Although it is only a few days after the successful February revolution and the country is still in a state of flux, a new government is needed to deal with emergency economic measures.

• The country is days away from facing a $2bln payment to international bondholders.

• The provisional Ukrainian government does not have the necessary legitimacy to make all the changes demanded by the Maidan protesters.

The new government is inheriting a political system and a government administration that are in need of fundamental change. Because of this weakness, the new government needs to focus on a set of emergency measures that are both urgent and immediately feasible. In the long run, establishing a well-functioning democracy necessitates a new constitution and a popular referendum on a constitution, but that takes time. What must be done now? What needs to be changed in the long run?

• First, the Ukrainian currency Hryvnya should be switched to a float and it should depreciate significantly.

The current-account deficit (about 10% of GDP) is clearly unsustainable. This should stimulate the economy and preserve precious foreign currency reserves. Barriers to export should be removed.

• Second, the banking system badly needs liquidity and capital.

Raising these in the international financial market has become nearly impossible. The government should inject capital (for example, use a program similar to the TARP in the US). The Central bank should provide liquidity. Some form of temporary capital controls and temporary limits on withdraws of deposits appear unavoidable given the current ongoing bank run (deposits fell by a third in the last few weeks and are falling further on a daily basis). Banks should “reopen” after the infusions of capital and liquidity.

Third, the government must immediately present a plan to address fiscal imbalances over a period of several years.

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Given the deeply depressed state of the economy, now is not the time to implement deep budget cuts. But fiscal authorities can still lay out a budget plan for a gradual decline in deficits to restore confidence in the long-run solvency of the Ukrainian government. Stricter monitoring of spending to minimize corruption and waste of public functions must be implemented immediately to make the eventual fiscal consolidation less painful and restore confidence.

• Fourth, external payments are a heavy burden on the collapsing Ukrainian economy.

One step is to bring in the IMF as well as other donors (EU, USA, etc.) to bridge the short-term gap in foreign currency reserves.

These funds are essential to avoid a drastic immediate fiscal contraction in the immediate future. They are necessary to enable authorities to inject capital into Ukrainian banks. The amount of required support is likely to be in tens of billions of dollars. Moreover, a restructuring of some of Ukrainian debt is necessary to avoid outright default.

• Most of Ukraine’s external debt was accumulated under the previous corrupt regime.
• The new leaders have little moral obligation to commit to reimburse that debt, and creditors have little moral standing to demand repayment: they knew who they lent to.

On the other hand, the amount of Ukraine’s external debt is not that high, and costs of defaulting – exclusion of Ukraine from the bond market for five years or so – are not-zero.

Ukraine badly needs immediate breathing space to introduce reforms and relieve the burden imposed by the Yanukovych government. The main risk here is that the absence of primary fiscal surplus makes an immediate fiscal consolidation or monetization of spending unavoidable in case of outright default. But Ukraine had a nearly zero inflation rate for two year. Some inflation could be a stimulating force if it can be kept under control later on. The new provisional government of Ukraine must weigh the costs and benefits of these scenarios. But right now, it should not exclude the option of default if external support is not coming. An external default would then not alienate Ukraine from the international community, despite the short run disorder it might create.

• Fifth, a possible trade war with Russia and increased energy prices are looming.

Ukraine should prepare to obtain energy from alternative sources (including reversing the gas flow to get energy from the West).

• Sixth, some people and businesses will be hit very hard.

The government should prepare short-term relief for all those likely to fall into temporary poverty: guaranteed minimum food, heating, electricity and water, all supplied on a lump-sum basis.

• Last and not least, the EU and Ukraine should sign the association agreement.

This will anchor economic and political forces toward reforms and growth as well as provide credibility to the new government.

These emergency economic  measures will not address the need for fundamental long-term change. Once there is a legitimate government, elected on the basis of a Constitution approved by referendum, fundamental long term reforms can be implemented. These include a fundamental overhaul of government administration to root out corruption, fiscal decentralization to give more power to the regions, regulatory reform to break up monopolies, opening up entry to foreign firms and small private business, and securing a stable supply of energy by exploiting Ukraine’s large reserve of shale gas.

The need to act fast now does not mean one should not also begin in the necessary process of constitutional change. The people of Ukraine demand it. Ukraine had two revolutions in the last ten years. Both expressed people’s discontent with the status quo and aspirations for democracy. It needs to build a consolidated and participatory democracy. There will likely not be a third chance."

III Political

- Hold elections soon, with credible international observers.

- Convene a constituent assembly and  draft and ratify a new constitution as soon as possible.

Lots to do and not much time to do it.

Why Not Nuclear Energy?

Chernobyl and Three Mile Island had already pretty much brought the US nuclear power industry to a halt, when Japan had a tsunami at Fukushima. These were all bad accidents.

The truth is, though, not many lives were lost. Compare lives lost in nuclear mishaps with those lost in the coal and oil industries, gas distribution explosions, much less accidents in employment of those energy products, and nuclear looks very safe by comparison.

Neither does nuclear power spew carbon dioxide, carbon monoxide and other products that will enhance global warming, sea level rise, and other expensive and destructive eventualities.

Nuclear power makes economic and public safety sense.

Still, there is vast public opposition to nuclear.

Ashutosh Jogalekar, a chemist, examines in Scientific American the five most significant reasons that liberals oppose nuclear power. He counters each reason with a rational discussion of pros and cons.

Good article, worth reading.

I mostly agree.

Jogalekar likes the liquid thorium reactor design for its improved safety. He does not mention the pebble bed reactor, which China seems to favor.

I believe the liquid thorium reactor is similar to the design used in the twin-reactor power plant of USS Triton, commanded by Captain Edward L. Beach during the first submerged circumnavigation of the globe.

Nuclear Weapons Rethink?

Later today, Global Zero, a nuclear weapons organization, will issue a report calling for another significant reduction in our nuclear deterrence. Gen. James E. Cartwright, USMC, the retired vice chairman of the Joint Chiefs of Staff and a former commander of the United States’ nuclear forces, has joined with others  calling for reduction in the number of nuclear warheads below the levels set by agreements with Russia.

Five years ago, we learned of the shocking error in our own nuclear force when six nuclear-armed missiles were inadvertently flown from Minot SD to Barksdale AFB Louisiana on a B-52 whose crew thought they were transporting dummy warheads. As I recall, the aircraft and warheads were parked in the open, unguarded, for two days before the error was found.

This incident showed a worrisome degradation in the system of administrative controls in place for nuclear weapons. If you think administrative controls are just boring minutia, you might want to watch the movie "Doctor Strangelove" again.

But the Global Zero report addresses only our strategic weapons. We still have thousands of "tactical" nuclear weapons not only in Europe but also on ships and bases around the world. The smallest of these have nuclear yields on the same order as that of the bomb we dropped on Hiroshima in August, 1945.

Tactical nuclear weapons are not covered by any international arms control agreement. Poland and Norway have asked that NATO consider extending arms control to cover tactical nuclear weapons.

Not a bad idea.

Do we know where our nuclear weapons are?