This is one in a series of post cards from Reuters reporters across Europe, Middle East and Africa

Ukraine’s famous instability, verbose politicians and haphazard legislation present the investor – and the journalist – many red herrings. While talk of impeachment of President Viktor Yushchenko ring alarm bells, constitutionally it is nonsense. As CDSs go off the rails, Ukraine’s sovereign debt repayments are small and manageable. As Prime Minister Yulia Tymoshenko calls for the central bank governor’s blood, he is still at the helm. And while Yushchenko and Tymoshenko fight like Itchy and Scratchy, the country – to the amazement of some – has yet to collapse. 

Investors inside Ukraine have long known this and with good lawyers have managed to get on with business as the economy driven by steel and grain exports boomed at 7 percent annually since 2000. They follow political events constantly but are less quick to judge, because often their significance appears later or in fact does not exist. Those outside Ukraine overestimate the consistency of its politics. None of the three major parties – Tymoshenko’s, Yushchenko’s or opposition leader Yanukovich’s can be branded liberal, conservative, socialist, pro or anti Russian. Populism and pragmatism – usually at the last minute — are the key policies.

Now a deep economic recession is upon the former Soviet republic and presidential and parliamentary elections will decide the fate of the country. So what to expect? Not revolutions certainly, but as the country gears up to the polls, expect patience to wear thin amongst the population. Expect a dirty campaign allowing for new faces to appear that will get nowhere in the elections but be included in top jobs because of their fresh credentials. Expect continual constitutional change that may settle the question of who has real power — the president or prime minister.  Expect Tymoshenko to put up a fierce fight and Yushchenko to wither away. And expect Russia’s heavy gaze on this all.  

Police officers rest in a central park in Kiev April 23, 2009. REUTERS/Konstantin Chernichkin (UKRAINE SOCIETY IMAGE OF THE DAY TOP PICTURE)

Russia has reversed its decision to station missiles in the Western outpost of Kaliningrad, next door to the European Union, according to Interfax.

The move would be the clearest signal so far of the start of a thaw in U.S.-Russia relations, which could be one of the major changes in U.S. President Barack Obama’s first year in office. We don’t know what commitment, if any, Obama may have given to Russian President Dmitry Medvedev on the missile shield (the two spoke by telephone earlier this week).

Obama’s scepticism about the effectiveness and utility of missile defence was clearly stated during the campaign. But since the Russians unilaterally made the Kaliningrad threat on the day of his election, the suspension of the deployment plan is a clear goodwill gesture. It follows NATO’s announcement, slipped out without fanfare earlier this week, that political relations with Moscow, frozen after the Georgia war, would resume within a few weeks.

Expect Georgian President Mikheil Saakashvili to foam about appeasement.

The Obama administration has already made clear it will pursue bilateral and multilateral nuclear arms control treaties which Bush eschewed. At the very least, they will try to negotiate a new strategic arms reduction treaty to replace START 1, which expires at the end of this year. This is important because it treats Russia as a nuclear power on an equal footing with the United States, which the status-conscious Kremlin craves and the Bush administration always dismissed.

Obama realises he needs Russian cooperation for the two biggest foreign policy items on his agenda this year: trying to defang Iran’s nuclear ambitions and turn the tide in Afghanistan.

The Russians have made clear what some of the trade-offs could be: safe supply routes for U.S. and NATO forces to Afghanistan across Russia and its central Asian friends in exchange for a halt to NATO expansion along Russia’s southern border. There is no consensus in NATO to take in Ukraine and Georgia. Germany and France blocked giving them a roadmap to membership last year and the U.S. agreed reluctantly in December to put the issue on the back-burner for now.

The question is whether Obama will go further in reassuring Moscow that membership is off the table for the foreseeable future. Expect howls of betrayal from neo-cons, the Baltic states and Poland if he does. Another potential trade-off involves the U.S. postponing missile shield deployment in Poland and the Czech Republic as long as diplomatic efforts are under way to persuade Iran to stop its nuclear enrichment programme, in return for Russian agreement to tougher U.N. sanctions against Iran and postponement of delivery of high-grade S300 air defence missiles which Moscow has reportedly sold to Tehran, and which could make any U.S. air strike on Iran more difficult.

Both trade-offs would require the Obamistas to eat ideologically unpalatable craw and take flak in Washington, but that’s the prerogative of new administrations.

The implications for Europe of closer U.S. ties with Russia are mixed. The Obamistas have promised their first move in relations with Russia will be to consult European allies. But unless deftly handled diplomatically, a strategic opening to Russia could heighten fears of being bypassed in the Baltic and central European states, and cause frustration in Brussels at being out of the loop.

(Russia’s President Dmitry Medvedev speaks during a show commemorating the 65th anniversary of the lifting of the Leningrad siege in World War Two in St.Petersburg, January 27, 2009. During the war, Leningrad suffered an 872-day siege by invading German armies where starvation killed 640,000 people and bombs killed 17,000. REUTERS/RIA Novosti/Kremlin/Vladimir Rodionov/Handout (RUSSIA). )

The difference between Europe having Russian gas as normal and not having it came down, in the end, to three words. They were hand-written next to what looks like the signature of Ukraine’s Deputy Prime Minister Hryhory Nemyrya and they were: “With declaration attached”.

That was enough to undercut a deal hammered out by Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU Presidency, to deploy monitors along the gas pipeline route — Russia’s condition for turning the taps back on.

The declaration that Nemyrya referred to set out Ukraine’s position in a dispute with Moscow over gas prices. It said, among other things, that Ukraine has no outstanding debts to Russia, an assertion with which Moscow strongly disagrees. Russia said the addition of the three words made the monitoring agreement null and void. Deal off.

Which was a shame, because the two sides came tantalisingly close to turning the gas back on.
A few hours earlier, a team of European Union monitors had arrived by bus at the Sudzha gas compressor station in western Russia. They were all set to supervise the resumption of gas flows. They even had a party of journalists in tow to witness the big moment.

In the event, the monitors ate some food, had a tour of the site, and then left for the nearby town of Kursk, presumably to find a hotel for the night. The journalists were loaded onto a bus and driven back to the Ukrainian border where they had come from. For the EU officials trying to get the gas turned back on, it was back to the drawing board. And for people in the worst affected countries in Europe, it meant more days worrying about an energy crisis in mid-winter. 

So whose fault was it? Maybe Topolanek should have stopped Nemyrya inserting those three little words. It’s worth asking if these problems would have arisen if the row happened two weeks earlier, when Nicolas Sarkozy still held the EU presidency on behalf of France. Maybe Ukraine should not have tried to amend the agreement by the back door. Maybe Russia should have held its nose and found a way to work around those three words if that was what it took to restore gas flows quickly. Whatever the answer, the episode makes one thing clear: there is total mistrust between the governments of Russia and Ukraine.

The deal could still be resurrected. Russian gas export monopoly Gazprom said early on Monday Ukraine had signed a new version of the agreement, without the conditions. A Russian delegation was on its way to Brussels, possibly to add their signatures to the new version. But even once the deal is done and the gas is flowing again to Europe, the row at the centre of all this, over how much Ukraine should pay for its gas, will still be there. And with so little trust between Moscow and Kiev, as illustrated by the saga of the three little words, that leaves vast potential for new flare-ups.

He was a suave central banker and she a “gas princess”, a young politician desperate to make her mark. In 1998 Yulia  Tymoshenko, now Ukraine’s prime minister, said she knew her destiny lay with Viktor Yushchenko, who went on to become president.

“We understood that we are a team,” she said at that time.

It’s an assertion Yushchenko disputes — a clash of views that has defined this partnership since they overturned a Soviet-style leadership in the 2004 “Orange Revolution” and vowed a modern, Western future for Ukraine’s 47 million people.

Then they stood shoulder-to-shoulder — her revolutionary speeches firing up crowd after crowd, his more academic approach comforting those who feared she was reckless in her pursuit of power.

Now barely on speaking terms, their bickering over policy and outlook could force the former Soviet republic into the third parliamentary election in as many years.

But was their partnership only ever a marriage of convenience?

In 1999, the tough former businesswoman, dubbed the gas princess because of her success in the cut-throat world of post-Soviet energy dealings, became deputy prime minister for energy in Yushchenko’s government. She was dropped in 2001 and former President Leonid Kuchma launched a corruption case against her.

Some Ukrainian media say it was Yushchenko, fearful for his political future, who agreed to let her go, opening the way for corruption charges she says were fabricated by Kuchma.

Since then, many think the pair’s jealousies and mistrust of each other have made them squander the chance to steady Ukraine on a path towards Western integration and reform.

She lasted less than a year as Yushchenko’s first prime minister, sacked after they fell out over policy, particularly her calls for a broad review of 1990s privatisations.

Now sporting her trademark peasant braid, she is back as prime minister. Many analysts say Yushchenko is desperate to challenge her lead in the opinion polls, which suggest she would win a presidential election and gain seats in any vote for parliament.

Accusing her of dangerous populism that threatens to wreck the economy, Yushchenko has come out fighting. His office has accused her of being a traitor for not openly supporting Georgia after its brief war with Russia over South Ossetia.

He says she has driven the economy to the brink, with inflation reaching a record 30 percent earlier this year. His office says she is selling Ukraine out to the Russians to ensure Moscow’s support for the election.

But she denies all charges and is trying to convince her doubters that she can be pragmatic.

She has called for Yushchenko’s Our Ukraine party to return to the ruling coalition after he said the government had collapsed — a departure from her usual fiery stance which is bound to antagonise Yushchenko even further.

This battle of wills looks set to run.

A poster at the entrance to the World War One exhibition at London’s Imperial War Museum depicts the heir to the Austro-Hungarian Empire, the Archduke Franz Ferdinand and his wife, minutes before they were shot dead as they toured the streets of Sarajevo in an open topped car. The two bullets triggered World War One. Alliances quickly came into play and an argument between Austria and Serbia drew in Russia, Germany, France, Belgium and Britain.

Europe was at war.

On August 8 this year Russia sent its forces into Georgia to repel Tbilisi’s attempt to wrest control of the pro-Russian, breakaway region South Ossetia. Georgia, like Ukraine, has been pressing to join NATO but has only been promised membership of the alliance at an unspecified future date. What would have happened if Georgia had already secured NATO membership, as it wished, at the alliance’s meeting in Bucharest back in April?

Would the conflict have dragged in fellow NATO members including the United States, Britain and Germany? By invoking NATO’s Article V mutual defence clause, the Georgians could have required other nations to come to their assistance.

Could this have led to another European war at a time when the West’s guard was down and the Cold War years seemed consigned to history?

In the days after the conflict began, a senior envoy from a European state opposed to Georgian NATO entry told Reuters: “Thank heavens we didn’t take them in… No one in NATO wants to be dragged into a war in the Caucasus because of (President Mikheil) Saakashvili’s miscalculations.”

What do you think? 

What’s with farming these days? The humble, even if slightly romantic vocation, is attracting a new breed of participants as investing in farmland and agriculture becomes the latest fad in the world of investments.
 
With financial markets in tumoil and commodity prices at record highs, traditional financial players such as investment banks and hedge funds, and even sovereign wealth funds of cash-rich emerging economies are increasingly looking at farm land as the next major investment avenue.

The motivations are varied — from pure financial punting to concerns about food security. Underlying all this is the belief that the rapid economic expansion of China and India could add more than a billion people between them to the ranks of consumers of meat and wheat-based products. And then there is the growing demand for land to grow crops for biofuels.

Morgan Stanley has bought some 40,000 hectares of land in Ukraine , while the New York Times reported this month that Calyx Agro, a division of the giant Louis Dreyfus Commodities, is buying tens of thousands of acres of cropland in Brazil.

Chinese firms are said to be locking up farmland and mineral reserves in Africa, while Saudi Arabia and Bahrain plan to grow strategic grains abroad to protect their countries from crises in world food supply.

According to Asia Times, Pakistan’s Prime Minister Yousaf Gillani during a visit to Saudi Arabia in early June sought $6 billion in financial and oil aid in return for hundreds of thousands of acres of agricultural land, which could be tilled by the Saudis.
 
All this could present some poor countries with both opportunities and threats. With oil prices at near record highs, they could trade their energy security with the food security needs of their investors and bring millions of acres of non-arable land into use. But contract farming could just as easily boomerang if high prices and domestic food shortages create a backlash against such barter deals.