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Baltic Report: August 6, 2003


6 August 2003, Volume 4, Number 25

NOTE TO READERS:
This issue covers events in the Baltic states from 26 July to 3 August 2003.
ESTONIA
IMF FINDS ESTONIA'S SITUATION GOOD, BUT CURRENT-ACCOUNT DEFICIT A DANGER.
Richard Haas, head of the International Monetary Fund's (IMF) Baltic division, said on 1 August at the end of a 10-day mission to Estonia that the fund is satisfied with Estonia's economic development and fiscal policies, but has recommended reducing the country's current-accounts deficit, BNS reported. Haas noted that the good state of the Estonian economy reflects the success of conservative fiscal policies, and suggested that the danger of the economy's overheating could be resolved by having a balanced budget or even one with a slight surplus. He was critical of Estonian government plans to reduce the personal income-tax level from 26 percent to 20 percent over the next three years.

CENTER PARTY TO CHOOSE FROM AMONG THREE EU PLATFORMS.
The board of the Center Party decided that the party's congress scheduled to be held in Tartu on 9 August will vote for one of three platforms regarding membership in the EU, BNS reported on 31 July. Delegates will be able to choose between platforms favoring, or opposing Estonia's membership of the EU, and one merely urging voters to participate in the country's 14 September referendum on EU membership. Party Deputy Chairman Peeter Kreitzberg, parliament deputy Heimar Lenk, and West Tallinn Central Hospital board Chairman Peep Podder will present the three platforms at the congress. Kreitzberg also announced his candidacy for the party's chairmanship. Incumbent Edgar Savisaar and parliament deputy Harry Raudvere, who has said that accession to the EU would be tantamount to prostitution, will also vie for the post.

CONFIDENTIAL INFORMATION PROTECTION AGREEMENT WITH CZECH REPUBLIC SIGNED.
Herman Simm, head of the Defense Ministry's Department of State Secrets Protection, and Czech Ambassador to Estonia Vladislav Labudek signed an agreement on the mutual protection of classified information in Tallinn on 29 July, BNS reported. The agreement lays down the conditions for the exchange and protection of information between the two countries and should enable more effective defense cooperation. Estonia has signed similar agreements with a number of countries, including the United States, Germany, and Israel.

PRESIDENT TO CHOOSE TEXT OF NATIONAL ACCORD.
Arnold Ruutel will in the near future decide whether to base the final text of what has become known as the Memorandum of National Accord on a document compiled by nearly 30 experts or on a more concise text drawn up by rectors of three Estonian universities, BNS reported on 30 July. Both versions emphasize raising living standards and reducing social inequality. The first version, which was compiled by the National Accord Foundation under the leadership of Andra Veidemann and Agu Laius, deals with spheres including children and families, education, science and development, economy, rural life, and social cohesion. The text written by the rectors of Tallinn Technical University, Tartu University, and Tallinn Pedagogical University is more compact and, in the opinion of its authors, more feasible. Veidemann criticized the rectors' document for leaving out the topics of "social dialogue, civic society, and rural life."
* Defense Ministry spokesman Madis Mikko said that, unlike Poland which will receive considerable financial aid from the U.S. for sending peacekeeping forces to Iraq, Estonia will pay the costs of the Iraq mission itself, BNS reported on 31 July. "The United States has to date paid for transportation [of Estonian troops to the Gulf region] and that's all they've done," he said. Mikko noted that Estonia has 43 peacekeepers in Iraq; the mission costs approximately 24 million kroons ($1.76 million), which is from Defense Ministry funds.
* The Parnu local government and World War II veterans' organizations agreed on 30 July to erect in the Parnu Memorial Park by 1 November a monument to those who fought for Estonia's independence, BNS reported. The monument will have a plaque with the inscription: "To fighters for the restoration of Estonia's independent statehood in World War II." The meeting also decided that the controversial monument erected last year with a bas-relief depicting a soldier in a German Waffen-SS uniform (see "RFE/RL Newsline," 24 July 2002) would not be displayed in a public place in Parnu.
* U.S. Consul in Tallinn Paul Mayer told reporters on 29 July that the percentage of applicants granted U.S. visas in Estonia has been increasing, BNS reported. While in 2000, 78 percent of applicants received visas, in the first half of 2003 the percentage rose to more than 89 percent. Mayer also mentioned that from 1 August U.S. visa regulations will change and all people seeking a non-immigrant visa will be required to have a personal interview with a consular officer.
* An extraordinary session of parliament on 31 July approved the first reading of the government-sponsored student allowances and study loans bill by defeating on a vote of 57 to 30 the proposal of the opposition parties to reject the bill, BNS reported. The bill calls for paying a 1,000 kroon ($73) allowance to the top 30 percent of full-time students based on their academic ranking. The opposition opposed the selection process as increasing educational stratification and called for giving more weight to financial need. Former Education and Science Minister Mailis Rand noted that in the first year students who attended the elite high schools of large cities are better prepared than students from rural high schools and will thus win the assistance.
* Social Affairs Minister Marko Pomerants responded indirectly to the statement in the Center Party weekly paper "Kesknadal" of 30 July by Pensioners' Association Managing Director Hilja Kukk that the association would urge pensioners to vote "no" in the EU membership referendum in September if the government does not raise monthly pensions by 300 kroons ($22), LETA reported on 31 July. Pomerants said that there will be an economic recession if Estonia does not join the EU and the resulting lower amount of taxes collected would make any increase in pensions impossible.
* Finance Ministry Deputy Chancellor Renaldo Mandmets charged on 1 August that the lukewarm attitudes of both the National Road Administration and the Economy and Communications Ministry are responsible for Estonia not being able to use EU funds for the Via Baltica highway project this year, BNS reported. He specifically mentioned the 32 kilometer section of the highway from the border of the Rapla County to Parnu and part of the Tallinn-Narva highway, both of which were to have been improved this year, but due to delays in preparing projects, work has not yet begun and it is already too late to launch any more major road construction this summer.
* Former Tax Board General Director Aivar Soerd has decided to challenge the decision of Finance Minister Toni Palts to suspend him from his post, BNS reported on 28 July. Soerd said that the order suspending him for the length of an investigation or two months (see "RFE/RL Newsline," 21 July 2003) was not reason enough for his suspension.
* The Tallinn City Court found former Defense Ministry Deputy Chancellor Margus Kolga guilty of misusing his official position, disclosing state secrets, and punished him with a fine of 48,600 kroons ($3,570) on 29 July, BNS reported the next day. Kolga resigned in May after the Security Police charged him with abusing his office by ordering translation work worth almost 1 million kroons between 1996 and 2002 from a firm owned by his mother (see "Baltic States Report," 5 June 2003).
* The Board of the Estonian Art Museum Construction Foundation (KES) announced on 30 July that it had chosen the construction company AS Merko Ehitus (Merko Builder) as the winner of the tender to build the Estonian Art Museum in Tallinn, BNS reported. Its offer of almost 520 million kroons ($38 million) was the lowest of five bids. The construction of the museum should begin in the second half of August and must be completed by 1 July 2005.


LATVIA
GOVERNMENT APPROVES 2004 NATIONAL BUDGET EXPENSES.
The cabinet agreed to reduce the planned national budget expenditures for 2004 to 2.02 billion lats ($3.54 billion), 50.78 million lats less than in the previous proposal, LETA reported on 29 July. Welfare Minister Dagnija Stake voted against the measure and Interior Minister Maris Gulbis abstained. Prime Minister Einars Repse was the main backer of the reductions, arguing that the budget deficit in 2004 should not exceed 2 percent of GDP. The budgets of the Health and Welfare ministries were cut the most, by 14.9 million lats and 6.2 million lats, respectively. The only state institutions whose expenses were not cut were the Defense and Culture ministries, the parliament, and the courts. The government also raised planned revenues by 18.7 million lats, taking into account the effects of raising the minimum monthly wage from 70 to 80 lats next year.

STILL NO PIPELINE OIL FOR VENTSPILS...
Russian Deputy Prime Minister Viktor Khristenko announced on 31 July that Russia's crude oil pipeline export schedule for the third quarter of 2003 does not include any shipments of oil to the port of Ventspils, BNS reported on 31 July. He said "Russia lacks the possibility to load the [Ventspils] pipeline," but plans to further expand its Baltic Pipeline System leading to the Russian port of Primorsk. Khristenko's statement reinforced the announcement one day earlier by Janis Adamsons, the president of Ventspils Nafta, the company that owns the port's oil terminal, that efforts to resume oil deliveries to Ventspils by pipeline were unsuccessful and that there would probably not be any oil shipments to Ventspils by pipeline this year.

...BUT VENTSPILS NAFTA READY TO WORK WITH YUKOS.
Ventspils Nafta press secretary Gundega Varpa told BNS on 31 July that her company has sent a letter to Yukos CEO Mikhail Khodorkovskii declaring its readiness to cooperate directly with the Russian oil company. That same day, Yukos Vice President Mikhail Yelfimov met with Deputy Prime Minister Ainars Slesers to reiterate Yukos' request for help from the Latvian government--as a shareholder--in completing negotiations on a "direct service agreement" with Ventspils nafta, BNS reported. Yukos currently ships oil and oil products to the company by rail, but other parties continue to be interested in the facility. In a "Bisnes & Baltija" interview reported by BNS on 21 July, Haims Kogans, chairman of the board of the Lukoil subsidiary Lukoil Baltija R, said that the Russian oil pipeline monopoly Transneft is the leading candidate to buy Ventspils Nafta. In the interview, Kogans questioned the wisdom of buying an oil terminal if it is impossible to ship enough product to make the venture worthwhile, noting that "it [Transneft] sets the access schedules for use of major oil pipelines." When asked for his views on the future of Ventspils nafta, Kogans admitted that much depends on the policies pursued by the Latvian government and the Ventspils Mayor Aivars Lembergs--said to be pushing a rail alternative for shipping oil and petroleum products to the terminal. "But for now," Kogans added, "if oil supplies by pipeline haven't been ruled out completely, then they are at least ruled out a little."

POLL SHOWS DROP IN SUPPORT FOR EU MEMBERSHIP.
A July survey by pollster Latvijas Fakti indicated that 49.6 percent of Latvian citizens are prepared to support Latvia's membership in the EU, 7.5 percentage points less than the 57.1 percent figure in June, BNS reported on 30 July. The proportion of citizens opposed to EU membership rose from 24.5 percent to 34.4 percent, while those undecided declined from 18.4 percent to 15.9 percent. The head of Latvia's EU referendum task force, Ramona Umblija, said the decline might be due to the increased activity of Euroskeptics, but added that it is more likely influenced by domestic and international political factors that are not directly linked with the EU. Prime Minister Einars Repse predicted that support for EU membership will increase prior to the 20 September referendum.

CRIMINAL CASE LAUNCHED AGAINST FORMER HEALTH MINISTER.
Prosecutor Juris Peda launched a case against former Health Minister Aris Auders on 28 July, charging him with fraud, LETA reported. Prime Minister Einars Repse dismissed Auders in March when the Corruption Prevention Bureau announced that Auders, while serving as director of spinal surgery at the Trauma and Orthopedic Hospital in fall 2002, had demanded that a patient pay him directly for surgery he performed, even though the procedure was covered by state health insurance funds (see "RFE/RL Newsline," 21 March 2003). The pretrial investigation revealed that Auders had demanded double payment on a number of occasions.
* A planned three-day visit to Afghanistan by a delegation headed by Defense Minister Girts Valdis Kristovskis was cut to just five hours on 25 July when officials said that they would be unable to guarantee full security for such a long period, LETA reported. Kristovskis met with the eight Latvian paramedics serving in a Dutch contingent, as well as Afghanistan Defense Minister Mohammad Qasim Fahim who thanked Latvia's soldiers for providing treatment for the Afghani people, especially children.
* The government approved a request by the U.S. military for an intelligence officer and a radio instructor to work at the multinational headquarters in Iraq on 29 July, BNS reported. The additional two soldiers will bring the number of Latvian servicemen to be sent to Iraq in August to 105. They will serve in the Polish multinational division and be based in the Al-Najaf or Karbala regions.
* The shareholders' meeting of Ventspils Nafta approved changes to the makeup of its council and board on 30 July, LETA reported. It also approved the company's budget for 2003 which foresees a profit of 18,000 lats ($32,000) on a turnover of 38.4 million lats. Last year Ventspils Nafta had a profit of 2.7 million lats. The declining profit is directly due to the decision of the Russian state-owned monopoly Transneft to reduce oil shipments by pipeline in 2002 and totally halt them this year. Nonetheless Ventspils Nafta plans to continue capital improvements constructing a new railroad trestle bridge to raise its capacity to handle oil and oil products supplied by rail.
* Regional Development and Local Government Affairs Minister Ivars Gaters submitted to the cabinet on 29 July five regional development models that had been drawn up based on proposals submitted by local governments, LETA reported. The number of districts in the proposals are 33, 40, 82, 102, and 109, respectively. Gaters said that he personally prefers either the 40-district or 82-district model.
* The international credit rating agency Standard & Poor's released its annual report on Latvia on 29 July, LETA reported. The primary change from the previous rating was that the outlook for Latvia's credit rating was upgraded from "stable" to "positive." The report said that the improvement was due to Latvia's stable economic growth, structural reforms, the upcoming introduction of the euro, and stable inflow of foreign investments. The major negative development is the very high current account deficit in Latvia's balance of payments -- 8.5 percent of the country's gross domestic product.
* Interior Minister Maris Gulbis told a meeting of New Era parliament deputies on 30 July that the planned cuts of 5.4 million lats ($9.5 million) in the budget of his ministry next year might result in up to 1000 police officers losing their jobs, LETA reported the next day. He said that there are about 8,000 police officers in Latvia and that the personnel cuts would probably affect the Highway Police the most.


LITHUANIA
RUSSIAN AMBASSADOR HAS FAREWELL MEETING WITH PRESIDENT.
Ambassador Yurii Zubakov and Lithuanian President Rolandas Paksas discussed a number of sensitive issues in Vilnius on 30 July, BNS reported. They included the plans of the Russian oil giant LUKoil to extract oil from the Baltic Sea near the Curonian Spit and the prosecution of the murderers of Lithuanian border guards at Medininkai in July 1991. Zubakov said that the oil extraction plan has become too politicized and that the Russian and Lithuanian environment ministers should meet before any decisions are made. He noted that he has not received any information that would confirm claims that the drilling will begin this year, and promised that Lithuania will be provided with the environmental studies carried out by Russian and international experts. In regard to the Medininkai massacre, Zubakov said that Russia has not fulfilled Lithuanian requests for the extradition of Riga OMON (Soviet paramilitary force) suspects because insufficient incriminating evidence was presented. Zubakov is scheduled to leave Lithuania on 20 August and will reportedly be replaced by former Russian Ambassador to Kenya Boris Tsepov.

GDP GROWS 7.7 PERCENT IN FIRST HALF OF YEAR.
The Statistics Department announced on 29 July that GDP amounted to 25.6 billion litas ($8.5 billion) in the first half of the year, a 7.7 percent increase over the same period last year, ELTA reported. While there were increases in all sectors of the national economy, the largest growth was in manufacturing, the electricity sector, gas and water supply, construction, and retail and wholesale trade. In the second quarter of 2003, per capita GDP was 3,873 litas, or 6.5 percent more than a year earlier.

NEW U.S. AMBASSADOR TO LITHUANIA SWORN IN.
Steve Mull was sworn into office as new U.S. ambassador to Lithuania on 29 July at the State Department in Washington, BNS reported. At the ceremony, Secretary of State Colin Powell spoke about President George W. Bush's visit to Lithuania last November, noting that the country deserves the best representative and "Steve Mull is such a person." Mull joined the diplomatic service in 1982 and, after serving in South Africa, Poland, and the Bahamas, worked as deputy chief of the mission in Jakarta, Indonesia, receiving the Baker-Wilkins Award for outstanding service in 2002. He is expected to arrive in Vilnius with his family in mid-August, replacing outgoing Ambassador John Tefft.

FRENCH ROCKER BEING HELD IN CONNECTION WITH ACTRESS'S DEATH.
French actress Marie Trintignant, 41, died in a French hospital on 1 August, one day after being flown from Vilnius where she had been hospitalized since 27 July in a deep coma, BNS reported. Trintignant, who had been in Lithuania for two months filming a television movie called "Colette," which is being directed by her mother Nadine Trintignant, apparently suffered from injuries sustained during an altercation with her boyfriend, French rock singer Bertrand Cantat. Lithuanian doctors operated on the actress twice, but she never came out of the coma. Police initially detained Cantat for two days, but this was later extended to 15 days. Initial autopsy results in France indicate that Trintignant's coma and death were caused by several strong blows to the face. It is not clear whether Cantat will be prosecuted in Lithuania or in France.
* A Chinese delegation led by National People's Congress Vice Chairwoman Uyunqimg arrived in Lithuania from Poland on 28 July, BNS reported. The next day Uyunqimg had meetings with parliament Chairman Arturas Paulauskas, Deputy Chairman Ceslovas Jursenas, members of the Parliamentary Group for Relations with the People's Republic of China, and Deputy Foreign Minister Justas Vincas Paleckis. Paulauskas expressed satisfaction with the flow of investments from China, but disappointment with low levels of Lithuanian exports to China. Jursenas suggested that Lithuania might serve as China's springboard to Europe. On 30 July the delegation visited the second largest city, Kaunas, and the seaside town of Palanga. The following day Uyunqimg held talks with Klaipeda Mayor Rimantas Taraskevicius and with vacationing Prime Minister Algirdas Brazauskas in the town of Nida on the Curonian Spit.
* Former President Valdas Adamkus sent a letter to Marianne Lamont Horinko, acting administrator of the U.S. Environmental Protection Agency (EPA), asking for continued funding for environmental projects in Estonia, Latvia, and Lithuania, BNS reported on 1 August. He noted: "During my tenure as president of Lithuania, both the United States Agency for International Development and the Department of State have singled out the EPA programs as examples of innovative and beneficial assistance programs."
* The European Commission (EC) has adopted a decision permitting Lithuania's producers to export fresh pork and pork products to EU states, BNS reported on 30 July. The authorization of the EC decision of 17 July went into effect with its publication in the "Official Journal of the European Union" last week. Currently, 13 meat processing plants in Lithuania hold licenses to export their goods to EU countries.
* The Lithuanian State Property Fund (SPF) rejected the privatization bid by Denmark's Trident Marine for a 66 percent stake in the Lithuanian shipping company Lietuvos Juru Laivininkyste (LJL) on 28 July, BNS reported. The decision was reported to have been based on information from the Lithuanian Special Investigations Service and the State Security Department that the buyer was not reliable. Trident Marine had submitted the highest bid of 35 million litas ($11.6 million) for LJL and the property fund asked the other two bidders to improve their offers.
* President Rolandas Paksas in an address broadcast on Lithuanian Radio on 31 July, the 12th anniversary of the murder of seven Lithuanian customs and police officials at the border post of Medininkai, declared that Lithuania will take every political and legal action to bring their murderers to justice, ELTA reported. He said that "this was a cause of honor" for the Lithuanian state. Lithuanian law enforcement officials affirm that the murderers were members of the former Riga-based OMON (Soviet paramilitary force), many of whom are currently living in Russia and Belarus.
* Prime Minister Algirdas Brazauskas, Transport Minister Zigmantas Balcytis, and local officials attended the inauguration of a new cruiser and warship pier at the port of Klaipeda on 26 July, ELTA reported on 28 July. The construction of the 350-meter long pier cost 24.5 million litas ($8.1 million)
* The international rating agency Standard & Poor's raised Lithuania's foreign currency outlook from stable to positive on 29 July, BNS reported. The agency also retained the improvements given in February when it raised the long-term foreign currency credit rating from BBB to BBB+, the short-term rating from A-3 to A-2, and the local currency rating, from BBB+ to A-. The better outlook was primarily due to a low state debt, rising exports, growing competitiveness of the national economy, a better investment climate and controlled level of the current account deficit. The previous day the agency increased the long-term credit rating of the state-owned electricity transmission company Lithuanian Energy from BB+ to BBB-, the short-term rating from B to A-3, and the outlook from stable to positive.
* The oil concern Mazeikiu Nafta, of which Russia's Yukos and the Lithuanian state own 53.7 percent and 40.66 percent shares, respectively, announced on 31 July that in the first half of the year it had a profit of 74 million litas ($24.5 million) according to the U.S. Generally Accepted Accounting Principles (GAAP), ELTA reported. In the first half of 2002, the company had losses of 136 million litas. Director General Paul Nelson English said that the company refined 2.8 million tons of oil, 300,000 tons less than last year because the refinery was shut down for a month for an overhaul. The Butinge oil terminal exported 5.86 million tons of oil, more than three times last year's amount. The volume of the Birzai oil pipeline decreased by 12 percent from 12.17 million tons to 10.72 million tons. The company also paid more than 1 billion litas in taxes, compared to 887 million litas last year.
* An ad hoc commission formed by Agriculture Minister Jeronimas Kraujelis recommended on 31 July that the head of the National Payment Agency Evaldas Cijauskas be given a severe reprimand for failing to ensure effective control over SAPARD funds, ELTA reported. However, both President Rolandas Paksas and parliament Chairman Arturas Paulauskas called for Cijauskas to resign from his post.


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