How to Take Down a Government, Part Two

How to Take Down a Government, Part Two
Financial Coercion and Other Forms of Intervention
by Christopher Deliso in Skopje
August 27, 2002

Interviews with Macedonian Finance Minister Nikola Gruevski and Dr. Sam Vaknin.

Nikola Gruevski, Macedonia's young and energetic Minister of Finance, is regarded as one of the bright spots in a government long accused of incompetence and corruption. His efforts to put Macedonia on track for economic reform have met with considerable success. The ruling VMRO-DPMNE party is banking on his popularity to deliver them the crucial electoral district of Skopje, where he is the party's listed candidate.

Dr. Sam Vaknin is a Skopje-based economist from Israel. A long-time observer of Balkans politics, Dr. Vaknin has also served on and off as advisor to the Ministry of Finance, and is a UPI Senior Business Correspondent. Few other foreigners, if any, can speak with such authority on Macedonia's relations with Western financial institutions.

Minister Gruevski and Dr. Vaknin recently participated in the latest grueling round of Macedonia's negotiations with the IMF. The talks left little resolved. Macedonia was unable to get a standby agreement with the Fund, meaning that the vital aid money is not available. Since there is no reason for this – Macedonia has dutifully complied with the IMF's stipulations – Minister Gruevski and Dr. Vaknin believe that the Fund's reticence has something to do with the upcoming elections.

Also, the International Crisis Group released (on 14 August) a major report damning the government for corruption and financial mismanagement. The report cites specific examples and goes into elaborate details, but does not present the other side of the story.

I recently spoke with both men in Skopje on these subjects, and the phenomenon of Western intervention in general. Their answers are both eye-opening and disturbing.

Minister Nikola Gruevski:

On privatization

CD: Most criticism of the government's economics is in regard to privatization projects – like the sale of OKTA oil refinery to the Greeks, Stopanska Bank and also the Macedonian Telecom. Many allege that government figures made special deals, or must have just been stupid to settle for a price lower than they could have gotten. What is your view on privatization and these criticisms?

NG: In the past, everything was created for the old Communist managers to succeed in privatizing by shaking down the small shareholders. Before we came in 1998, remember that 90 percent of the privatization had already been done. And the majority of companies privatized in SDSM times went down or stagnated.

…the attitude of this government is that we have to speed up the privatization, finish it as soon as possible, and then forget about it. Except, that is, for the big loss-makers. Those cannot be so easily closed, because they have many workers. For these, we need to find strategic investors.

But we did agree with the World Bank to solve the 40 biggest loss-makers. OKTA was first on the list, and we had a deadline… (we sold to the Greeks) after several other companies came and expressed an interest – but never came again.

Remember, to get rid of the loss-makers, we are forced to sell at huge discounts. Sure, the agreement with OKTA could be better. But generally, it helped us – we saved the company and 1200 workers. And we have an investment of $110 million in the pipeline Thessaloniki-Skopje. Now, they are starting to expand it northwards to Pristina, and after to Nis.

On the intervention of the ICG: the corruption report

CD: You are referred to as a source several times in the ICG's report. Do you feel that Edward Joseph gave you adequate opportunity for defense?

NG: There was some discussion between us, but he basically wanted a confession – about the government being corrupt. He insisted on this. I told him, "I don't know, and I don't have any proof."

Joseph replied, "I know that you yourself were not corrupt, but I want you to recognize now, in front of me, that some of the others were corrupt."

Again, I told him that I had not witnessed any specific corrupt dealings.

In regards to the privatization affairs, I know that some parts of the negotiations could have been better – but I also know how difficult negotiating with the IMF can be. Some ministers who criticized me for not getting a better deal came to the negotiations – and never came back. To Mr. Joseph I said, "it is very easy to criticize a deal when you weren't there." He agreed – but still wanted me to make some confession.

CD: The report states (on p. 15) that investment fell 60-70 percent in 2001, and "remains off in 2002." Any response?

NG: This is not true. Our figures for investment are very close to those for 2000. Because of the war, there was a 20 percent fall in foreign investment.

CD: The majority of scandals Joseph discusses relate to the VMRO-DPMNE party. Do you detect a bias?

NG: I said to Joseph, "OK, it is good that you are talking about the important topic of corruption. But why, when you are interviewed in the papers or on TV, do you never mention some corruption from the past?" And he replied, "I am fighting with these people who are in the government now – not those from before."

Another thing about Edward Joseph I would like to mention. It's very interesting, the coming of the ICG here. In the past, there were many corruption affairs in this country, no one bigger than TAT (a failed bank based on a pyramid scheme). But no one from the West came to make such claims. In 1999 and 2000 too, there were some corruption reports. But nobody (from the West) mentioned this.

Yet immediately after the crisis, Edward Joseph came, and pronounced that this government is the most corrupted of all the transition countries! This is untrue. He's making statements every three months in the media saying, "I am the representative of the most famous international NGO, not connected with any government." Of course, the opposition is using this very well. Don't forgot, SDSM was much more cooperative with the international community during the war. I believe they are the reason why we didn't get a better outcome from the Ohrid agreement. And their reward for this cooperation? The arrival of Edward Joseph.

On the West's support for the Socialists

CD: Wow! So you believe that the West is supporting SDSM?

NG: In the past, there were theories going around about an IMF and World Bank conspiracy. I was the last to believe this – I tried to convince the other ministers that they are here to help fight poverty and boost investment.

Before the crisis of 2001, we were the most advanced country for reforms. Prime Minister Georgievski was praised – almost like some kind of miracle! Nobody mentioned corruption.

Then, during the war, this government tried its best to defend the country. In the first months, we had support from the West – that is, when we didn't have the military equipment for defense.

But later, when we received some (helicopters and other armaments), the West shouted, "the equipment cannot be used! You have to negotiate!" The government did not accept this, and so lost the support of the West. After May 2001, the prime minister went from being a good guy to bad guy. And immediately, we began to be bad guys also for the IMF and World Bank.

It's very visible, the West's support for the opposition before the elections. I have the feeling that the international community wants to punish the prime minister's behavior. It frustrated a lot of people: "such a small prime minister, from such a small and unimportant country, to say such things about us big and important people!"

CD: So is there a conspiracy after all?

NG: At that time, still I didn't believe in any conspiracy. But in May 2002, when the IMF came, they immediately opened the issue of TAT (the failed bank). Before they came, we had some signals that they would try to postpone the standby agreement – but it was necessary to find a reason.

One week after we attempted to solve this (TAT), the IMF became much stronger on the issue. Almost every project was finished. "If you don't solve TAT," they said, "you won't have any arrangement, and the donor support will stop too." And it happened. After we failed to get an agreement, the World Bank called immediately and said they would not help us because we failed with the IMF. And then, one by one the donors from the donor's conference called and cancelled too.

Now, even the projects that cannot legally be stopped have been stopped. So I have begun to believe that there might be something to this idea.

On the future of Macedonia's reforms

CD: If you lose the elections, are you afraid that the next Minister of Finance will destroy your efforts to reform?

NG: It depends on which person will come. If the past is repeated, all reforms may well be frozen or at least slowed down. 90 percent of the people in SDSM are the same as before – especially in regards to economy.

In my period as minister, there was a 600 percent increase in progress from the previous regime. In one year we had more projects than all of SDSM's 8 years put together. In 2000, we had a 5 percent increase in GDP. The prediction then was another 6 percent for 2001, and again in 2002. At a lunch in Ohrid, the Prime Minister asked an IMF representative when the country would be free from the Fund. His answer? "In 2 years." Obviously, because of the war this hasn't happened.

Dr. Sam Vaknin:

On the West and Macedonia's elections: a history of interference

CD: You told me that you could not recall, with the exception of the last presidential elections, such a high degree of interference. Can you explain?

SV: In 1999, Europe and the West strongly supported VMRO-DPMNE's candidate, Boris Trajkovski. He has lived in the US and has good relations with the Americans. He is a liberal in the economic and social sense – in other words, he fit the profile.

However, his election was riddled with tacit intervention. In fact, the West hastened to congratulate the new president – before the second round of voting had even been held. It turned a blind eye to an abnormally huge turnout in certain Albanian villages. People voted from the grave, and others, being out of the country at the time, by telepathy.

The West knew all this, but supported him anyway. Now, I know Boris Trajkovski personally, and I happen to think he is an excellent president – certainly, a better choice than (his rival) Petkovski. Yet we are not talking about who would have been the better president. We are talking about crass and blatant interference, turning a blind eye to massive fraud, and manipulation of the national mood to fit a certain result.

On the axes of intervention: economics, edification, espionage and more

CD: And there is more intervention this time around? How can it be characterized?

SV: The current level of interference is the highest ever, and follows several axes. First, the denial of economic aid. Cutting off the country's IMF credits – and thereby the IMF's seal of approval – affects World Bank credits, donor conference pledges, and by implication, all other forms of international credit. Such credit is a lifeline for Macedonia. The cut-offs are being done despite the fact that Macedonia has fully complied with both the IMF's staff-monitored program agreed in December 2001, and with the two outstanding arrangements with the World Bank.

The second axis is the mysterious emergence of all kinds of do-gooders, cloaked as NGO's. While there is no disputing that the issues they raise are pertinent and vital to the health of Macedonia in the long-term, the question of their timing remains. These NGO's have, for instance, suddenly become unusually interested in the dissemination of political opposition views, by purchasing their newspapers regularly and in bulk. One NGO has published a massive corruption report, and another has recently embarked on massive campaigns of human rights education. Other NGO's and academics are suddenly very interested in the distribution of wealth and taxes among the Albanians.

The third axis is micromanagement of political processes in Macedonia, and of economic processes with political implications. For instance, the West got involved in all the important negotiations held between all of Macedonia's political parties. Western advisors, strategically placed in Macedonian ministries and other state agencies, have been forwarding classified Macedonian material to American intelligence agencies. One IMF-appointed advisor in the Ministry of Finance refused to collaborate with this program, and has been fired.

CD: Was she an American?

SV: Yes, she was an American.

I should add that the intelligence passed on includes top-secret military information – about troop positions, armaments and operational plans. This intelligence has mysteriously been turning up in meetings in Washington between Macedonia and the Americans. This micromanagement is nothing other than classic espionage and intervention in the political process.

The fourth axis-

CD: Wow! Four?

SV: Well, there are many; I am mentioning only a few. Fourth is pressuring the government in the international media, and shaping world opinion through it. For instance, we find disparaging articles – especially about the prime minister and the minister of the interior – appearing simultaneously in major American news outlets, such as the New York Times, in what appears to be an orchestrated campaign.

The fifth axis is the application of indirect pressure on Macedonia, through strategic allies such as Ukraine, financial allies such as the Netherlands, would-be allies such as Israel, and potential enemies, such as the Albanians. Now we are seeing a pattern of reactions by both the Albanian political establishment and paramilitary formations, which mysteriously tend to correspond with Western agendas.

And so, the same group is described as terrorists, and then as freedom fighters, within the space of a few months. Former MPRI personnel train the NLA on one occasion, and deny responsibility on another. NATO helicopters make enigmatic cargo drops in NLA-controlled territory. Clearly there is some kind of subtle coordination, at least implicit, between the wishes of the parties. Inevitably, this has engendered a siege mentality and paranoia in the incumbent government – not surprising, since this is the land of conspiracy theories.

On the real role of the OSCE

CD: The OSCE is providing monitors to ensure fair and non-violent elections. Yet evidence from the past attests to willful disregard for violations – if the violator is America's favorite.

SV: First of all, the OSCE is not an impartial body. In 1996-98 it had a mandate in Kosovo. Although both Serbs and Albanians were committing atrocities, the OSCE has never recorded a single incident incriminating any Albanian – yet hastened to file reports of Serb massacres.

CD: Are you referring to Racak?

SV: Especially Racak.

CD: Given the West's apparent distaste for the ruling party, VMRO-DPMNE, how do you think the monitors will operate on the 15^th of September?

SV: If VMRO wins, the OSCE will report gross violations, fraud and violence – and maybe some of these will be true. However, if SDSM wins, the OSCE will provide its stamp of approval, declare everything kosher, and not report a singe incident.

The OSCE contributed mightily to the eruption of the Kosovo crisis. I am very afraid that it might contribute mightily to the re-eruption of violence in Macedonia. If they take sides, it might provoke Albanian claims for leverage – and so render them the swing vote.

On the obstruction from the IMF: insider testimony

CD: You claim that the IMF is deliberately stalling on giving funds to Macedonia, though the country has fulfilled its requirements, and that this obstruction is meant to influence the elections. How so?

SV: First of all, the IMF is not coordinated with the State Department – it takes its orders from the State Department. In the IMF, only one country has a veto power – the US. America provides 25-30 percent of the IMF's budget. It is the long arm of US policy. Of course, I would find it very difficult to imagine some night-time meeting when the US says, "OK, you go and sabotage the elections for us." But subtly, the messages go back and forth. Negotiators are told to be as stern as possible, for example.

I was involved very intimately with the latest round of IMF negotiations in Skopje. They came here with a clear plan to not conclude an arrangement – this was clear from the beginning. Their decision was allegedly based on two things: TAT (the failed bank) and the raises we gave state workers.

What the IMF and the ICG corruption report didn't say is that the government offered to retract the TAT arrangement for compensating shareholders. This compensation plan had been their major objection.

I spoke about this with Prime Minister Georgievski and Finance Minister Gruevski. They gave me the green light to make concessions. I offered to the IMF to rewrite and amend the law, to retract the compensation agreement and so satisfy their demands. And you know what? They refused immediately.

CD: Immediately?

SV: Immediately! And they gave no reason why.

About 10 days after this, on one bright Monday morning, we compared our deficit spreadsheets with theirs. They were based on the December 2001 figures we had agreed on. On that day, we came to the point where our numbers converged; the IMF would have no choice but to conclude an agreement. Yet after stipulating a deficit target of 2.4 percent, they changed their demand, and stated that we must adhere to a deficit of 1.7 percent. They simply negotiated in bad faith – when they saw that they were cornered and an arrangement was imminent, they changed the rules.

I can say that I have 20 years of experience negotiating with the IMF, on behalf of 6 different countries, and I have never seen anything like this.

Immediately after we failed to reach a standby agreement, the World Bank postponed the disbursement of funds based on its two agreements with Macedonia - because we had failed to reach a standby arrangement with the IMF. This was simply a breach of contract.

And then the donors called one by one and backed out, citing our failure to reach an agreement with the IMF. They would not give us any of the pledged money, except for what was allocated to the implementation of the Framework Agreement. Coincidentally enough, most of this money is earmarked for Albanian projects. Why this discrimination?

CD: Are there any other examples of economic coercion you have encountered here?

SV: Many nations, but chiefly the US, often cross the line between aiding and promoting their commercial interests, and brute intervention in tendering and public procurement processes. Not just once or twice did the previous US ambassador, Mike Einik, do his damndest to influence the outcome of public tenders. This involved rampant arm-twisting, and he even rumored to have threatened the prime minister a couple of times. In fact, he called me once and said, "make sure that our (American) friend gets this tender." I replied, "Mr. Ambassador, I'm not the person to talk to about that, and even if I was I would not, especially after this phone call." Einik replied, "it would be better for all involved if you do it."

On the ICG's strategy of intervention

CD: The ICG corruption report acknowledges (on p. 4) that some may suspect it of election meddling, because of its timely release, but denies the charge. What is your opinion?

SV: The report touches on a very important problem. In this sense, Edward Joseph has done a service to Macedonia, and for this I commend him. But I reject his claim that the report was not intended to affect the elections. I know it was – and I use the word "know" judiciously.

Secondly, I don't think that the international community is nearly as worried about corruption as he claims. But I do think that corruption is a superb weapon for influencing election results. Yes, VMRO-DPMNE has been corrupt – but what is the other option? SDSM has been at least as corrupt. Macedonian political life is characterized by blatant nepotism and cronyism. There is unfortunately no difference between any of the parties. The whole political class is malignant and cancerous. To single out a certain party by arbitrarily selecting a 4 year period, in order to obtain certain results, discredits the ICG and Mr. Joseph, despite their good contribution to the debate.

CD: Joseph's stated rationale is that the report's timely release would insure that the issue be discussed by all parties. Even if we give him the benefit of the doubt regarding this motive, is 30 days enough time for the parties to incorporate it?

SV: Had the report been published in June, or better still in March, I think Edward Joseph would have deserved a medal. By releasing it now, he and his organization are just meddling. The timing of this publication transforms Joseph and the ICG into a meddlesome outfit, in hoc with other motives, and utterly discredits him in my eyes and the eyes of many others.

I want to say for balance that Joseph did raise the subject in March, and collaborated with Transparency International in public debates, in which he has posed serious questions to major decision-makers like the prime minister. Yet it is one thing to be one voice among many, and another to publish an internationally recognized report with enormous resonance.

CD: So what was their other option? What could the ICG have done differently?

SV: There are two ways to go about it. The first is to release a patronizing report, telling the Macedonians what is wrong with them, their politics and society, and then to dictate a series of prescriptive measures – warning that consequences will follow if these measures aren't met. This I find illegitimate, because the ICG's authority does not emanate from any legal structure or electoral process – it's simply not democratic.

The second way could have been for the ICG to open a national dialogue, without acting like it knew all the facts in advance. It could have then summarized this grassroots dialogue, and the result would have been received a hundred times better than it was.

Do Macedonia's examiners set a good example?

CD: So, the problem is with the high moral ground the ICG took?

SV: The ICG relies too much on the international community's example. As a corrective and regulatory force, there are two problems with this. First, the European Commission itself has been consistently implicated in major corruption scandals. In fact the whole commission resigned in 1998, when all of them were implicated. There is an ongoing investigation of the EC's Albania mission, and a new investigation of the Kosovo mission. There is rampant EC corruption in Bulgaria.

The EU is not a disinterested party. It has its own agenda, motives and preferences. It is clearly not an objective arbitrator. Edward Joseph is fully aware of these scandals. But his view is that at least the West does something about it, while in Macedonia there is no action. It is a pertinent point but not a relevant one – you can't have corrupt people regulating other corrupt people!

CD: Well put. They are aware, yet continue to bully. How much does this attitude affect Macedonian public opinion toward the West?

SV: The West has contributed to this (bad image), by being extremely insensitive culturally and historically. Unfortunately, the first efforts at ethnic reconciliation, building a civil society, and enhancing institutions and reform were carried out by Americans. It left a bitter taste. Americans have a way of prescribing: "everything you've done is idiotic or inefficient," they usually say. "But here's the prescription – just follow it and all will be fine." They then imply that if you don't want to follow it, you're backwards or retarded. This is a patronizing attitude which leaves very little opportunity for self-development.

The relationship between Macedonia and the international community is damaged beyond repair. No matter who is in power, the people are disenchanted, disillusioned and extremely suspicious… it will be very difficult to re-establish trust. With money and bullying you can achieve a lot, but what the West fails to realize is that this is reversible. Sure, you can force other countries into strict reforms and constitutional change – but then you have to continually be there to make sure they don't go back. The West must realize that what is achieved instead through inner insight and conviction is irreversible.

On the destruction of state sovereignty, and the limits of intervention

CD: On a similar topic, why do international organizations think they have the right to influence a foreign election?

SV: International law has undergone a major revision since the beginning of the 1980's. Until then, the doctrine of sovereignty was very important. Starting in the 80's international law was transformed – mainly by the Americans, who are, ironically, now trying to stem the tide.

In the 90's, the doctrine of sovereignty was replaced by that of humanitarian intervention. In other words, "you as a sovereign state have the right to do whatever you want, as long as you do not impinge on certain basic human rights." As an interventionist, Edward Joseph is right – according to this current interpretation of international law. However, even if one follows this doctrine, it does not apply to violations of civil rights. It does not apply to violation of civil rights, or corruption, or bad governance in general.

What the NGO's are doing now is not grounded in any tenet of international law. They are trying to expand this limited sovereignty doctrine – "if we can intervene in a case of genocide, we can also intervene to protect the environment, fight corruption, etc."

CD: So this is becoming a trend?

SV: The problem is that these NGO's are not elected, and are not affiliated with any international political institution. They have no mandate and no accountability, are self-empowered, and are, basically, the least democratic option possible. The NGO's are dictatorial in nature; they and only they make pronouncements, without being subject to any democratic process. The ICG is a law unto itself.

And this is where a very thin line between social responsibility and authoritative behavior is crossed. What if some Wahabi NGO from Saudi Arabia sprung up tomorrow, and decided to propagate Islamic values throughout the world? What authority should decide which cultural values are superior to others? Why should an NGO that propagates Islamic values be lesser than something like the ICG, which represents a very thin slice of Western liberal values?

However, this won't last. There will come a backlash. These NGO's are breaking the very thin ice on which they are walking, and they will drown – I am sure of that.

Previous articles by Christopher Deliso on Antiwar.com

How to Take Down the Government, Part One
8/26/02

Seducing Intervention:
The Dangers of Diaspora
8/13/02

Nobody's Fault But Their Own?
7/12/02

In Macedonia, Transforming the Media Through Technology
7/9/02

European Intelligence: The US Betrayed Us In Macedonia
6/22/02

A Georgian Gaffe
and the War on Terror
6/18/02

Heavy Fighting Erupts in Aracinovo on First Anniversary of NLA's 'Free Zone'
6/8/02

Kodra Fura and Macedonia's Emerging War
6/6/02

Kosovar Terrorists Renew Attacks on Macedonia
5/25/02

Macedonia On War Footing Over Kosovo Border Provocations
4/19/02

Macedonian Tortured In Tetovo Village, As Gang War Rages
4/18/02