Clean Slate?

Russia's annexation of Crimea could wipe away billions of dollars of Ukrainian debt.

Russia's appropriation of Ukrainian assets as part of its de facto takeover of Crimea could, perversely, provide some relief to the beleaguered Ukrainian economy.

It may be cold comfort when enemy tanks are still on its border, but some observers suggest that Kiev should be able to write off at least $5 billion of its debt to Russia because Moscow has effectively stolen Ukrainian territory and energy resources, as well as military hardware and bases.

"An obvious focal point for the Ukrainian government now that Russia has intervened across its border, and actually seized land/assets is debts owed to Russia," said Tim Ash, head of emerging markets research at Standard Bank Group. "No doubt the lawyers are sharpening their pencils as we speak."

There are already a few ways in which Russian takeover could end up alleviating Ukraine's debt, the most pressing of which is probably the $1.8 billion (and counting) that Kiev owes Gazprom for natural-gas shipments over the last year.

News reports suggest that Russia has already appropriated small Ukrainian energy firms operating in and near the Crimean peninsula. Russian troops in helicopters descended on a natural gas terminal just outside Crimea, the New York Times reported Saturday. And Tuesday, Crimean authorities took over a Ukrainian offshore drilling operation, which is expected to be sold to Gazprom, according to the Wall Street Journal. The operation, owned by Kiev's state-owned energy conglomerate, had just spent $800 million on new equipment, which is now lost.

Then there is the rent from the Sevastopol navy base, which under the 1997 and 2010 bilateral accords was worth $98 million a year in cash to Kiev. It is not clear now, with Crimea formally severed from the rest of Ukraine, if Russia would be under any obligation to continue paying for the base.

Another part of the 2010 Kharkiv Accords, which extended the naval base lease to 2042, was to lock-in a long-term discount on Russian gas sold to Ukraine. However, that gas-for-basing deal had already broken down by the time of last year's protests. One of the carrots Moscow had offered Kiev to pry Ukraine away from Europe, in fact, was a 33 percent discount on natural gas -- essentially, what it had already promised to deliver under the terms of the 2010 accord. That discount is revised quarterly and will come to an end this month.

Russia's military aggression is also calling into question the validity of the loan Moscow extended to the now-deposed Ukrainian President Viktor Yanukovych. Late last fall, after Yanukovych turned away from a political and trade agreement with the European Union, Russia offered to lend him $15 billion to aid the struggling Ukrainian economy. Only $3 billion of the loan -- in the form of bonds due in 2015 -- came through before Yanukovych was run out of Kiev. The question many observers are asking is whether Ukraine should have to pay back that money given Russia's subsequent annexation of Crimea.

Anna Gelpern, a Georgetown law professor, suggested a creative legal maneuver that might allow Britain, a close ally of the new Ukrainian central government, to invalidate those bonds as part of a sanctions package against Russia. Because the bonds are English law contracts, Gelpern said the U.K. could refuse to honor them in British courts, making them effectively void and worthless to private buyers.

"If you close the courts to this debt you make it worthless to the market," Gelpern said. While the plan wouldn't erase the debt, Russia would be effectively left with an unenforceable I.O.U., instead of a tradeable financial contract.

Governments are usually loathe to change the terms of bonds after they've been issued because it can undermine investor confidence, but Gelpern points out it has been done before. After the International Monetary Fund (IMF) spearheaded a global effort to forgive the debt of poor countries like Afghanistan and Rwanda, the U.K. limited private bondholders' ability to sue those countries for repayment in the British courts. After former Iraqi leader Saddam Hussein was ousted in 2003, the United Nations moved to shield the war-torn country's oil and gas proceeds from creditors and then the world's big lender countries agreed to reduce the country's debt, so that its coffers wouldn't be wiped clean by loans taken out by the previous government.

"Of all the sanctions the U.K. could impose, this is really targeted and doesn't hurt too many people," Gelpern said. She first wrote about the idea in a blog post on the Peterson Institute for International Economics website.

It's unclear whether British leaders would embrace the idea. Western officials have been threatening Russia with unspecified "costs" since troops first moved across the border in Crimea more than two weeks ago, but so far they have proceeded cautiously. The United States sanctioned seven Russian officials Monday, but it did nothing to stop, or slow, Russia's de facto takeover of Crimea.

Even if the U.K successfully scratches $4 billion of debt off the ledger, it still wouldn't solve Ukraine's financial problems. The interim Ukrainian government estimated last month that it would need $35 billion over the next two years. The IMF has a team of people on the ground in Kiev now trying to sort out the country's finances and put together a package of loans and reforms that will help the economy recover.

And Russia still holds the ultimate trump card. While lawyers can calculate the price tag for Russia's Crimean adventure, Moscow still has the power to shut off the natural gas supply that Ukraine depends on.

Filippo Monteforte / AFP / Getty Images



From FIFA to Magnum ice cream to Nairobi’s traffic, a glimpse at what Africans talk about on Twitter.

The last quarter of 2013 was a turbulent period in Africa. Nelson Mandela died, plunging South Africa into mourning and robbing the world of a secular saint. Hopes of peace in South Sudan were dashed when a new civil war broke out. Militias fighting sent thousands fleeing the Central African Republic. Uganda's parliament passed a draconian anti-gay law.

Of all these gripping political events, only one -- the death of Mandela -- proved of intense interest to Africa's increasingly active Twitterati. The others were noticeable by their absence in a survey of top tweets from African cities in the last three months of 2013, dwarfed into comparative insignificance by an overriding passion: football.

The survey, "How Africa Tweets," was the second such study by the public relations company Portland, with offices in London, New York, and Nairobi. It tapped into the same demographic on which economists pin their upbeat "Africa rising" narrative: aspirational, urban, youthful. Its findings also echo Kenyan writer Binyavanga Wainaina's argument that a wide raft of daily African experience is bypassed by standard news reporting.

Portland, which released what it claims was the first-ever survey of Twitter in Africa in 2012, acknowledges that the study only picks up tweets from users who have enabled smartphones or laptops -- the former are by far the biggest source of African tweets -- to be "geo-located," a mere one in five of those devices. So this report offers just a glimpse into African tweeting habits, but a fascinating one nonetheless.

Perhaps the most striking statistic is simply the number of tweets: more than 9 million from Africa's most chatter-prone cities. Sudanese cell phone entrepreneur Mo Ibrahim once told me the industry assumption in the late 1990s was that Africans did not have the wherewithal for cell phone ownership. Around 253 million Africans now own cell phones, although the models tend to be the cheapest on the market, and Ibrahim is a retired billionaire.

This makes the continent a prime site for Twitter. "Social media may well end up having an outsize impact on Africa, because of the huge penetration of the mobile phone," says Allan Kamau, head of Portland Nairobi. "Africans have got used to doing everything on their mobiles: sending money, chatting, campaigning, complaining."

Hashtags offer a glimpse of recent preoccupations. Mandela's death on Dec. 5 gripped the continent by the emotional throat. But football was the most-discussed topic, with the fortunes of Johannesburg's Orlando Pirates getting particular attention. Corporate promotions by FIFA World Cup sponsor Adidas, Magnum ice cream, and Samsung -- the latter ran a competition for its new Galaxy S4 phone, encouraging people to tweet about its product -- also won ready audiences among tweeters.

That said, Twitter was also an outlet for citizen anger with the establishment and for political activism. The hashtag #Numsa tracked the National Union of Metalworkers of South Africa's growing disillusionment with the ruling African National Congress, while #KenyaAt50 and #Sickat50 (triggered by a health workers' strike) challenged the official triumphalism of Kenyan independence celebrations.

The popularity of the hashtag #NairobiSC could be seen as a thermometer of both a country's growing prosperity and increasing public dissatisfaction: Kenyan motorists stuck in city traffic use it to warn others of roundabouts, junctions, and highways to avoid.

It's no surprise that Johannesburg, with 344,215 geo-located tweets, is the most Twitter-active city in Africa, followed by the nearby municipality of Ekurhuleni. This may also account for a new survey ingredient: tweets in Zulu. It was to be expected, too, that Nairobi, where residents have been using cell phones to transfer money via the M-Pesa service for years, would rank as the most active city in East Africa.

What does come as a surprise, though, for anyone who has spent time in the ebullient chaos of Nigeria, is the comparative quietness of Lagos, which comes in 12th on the list of cities active on Twitter, trailing Abidjan and Accra on the West African coast. "What we're gathering is that Facebook is very big in West Africa," says Kamau. "It lends itself better to contained, private conversation, whereas Twitter is public." Francophone Africa, curiously, has yet to fully embrace Twitter.

Another intriguing detail is timing. The peak tweeting time was between 9 and 10 p.m., while Tuesday and Friday were the busiest days of the week. Tweeting fell away during the weekends, when, perhaps, activities like church attendance or golf take over. Ugandan columnist Charles Onyango-Obbo, who lives in gridlocked Nairobi, put his own spin on this phenomenon, guessing that users exasperated by a day at the office and hours stuck in traffic get home, heave a sigh, and vent their frustrations on Twitter. "That is the Grand Africa Misery Index," he concludes.

Or perhaps it's just that, irrespective of geographical location, the third beer kicks in between 9 and 10 p.m. on Friday nights, loosening both inhibitions and fingers.

Dan Kitwood/Getty Images