Baltic Report: September 23, 2003

NOTE TO READERS:
This issue covers events in the Baltic states from 6 to 14 September 2003.
ESTONIA APPROVES EU MEMBERSHIP IN REFERENDUM.
Slightly more than two-thirds of participating voters, 66.9 percent, voted "yes" in the EU membership referendum on 14 September, BNS reported. The voter turnout of 63.4 percent of the 865,000 eligible voters was higher than the 58.2 percent in the March parliamentary elections or the 52.7 percent in the local government elections of October 2002. The State Election Committee had announced on 11 September that 173,590 people, or 20 percent of all eligible voters, had cast ballots in the EU membership referendum in the preliminary voting on 8-10 September -- the highest level in any previous election cycle, LETA reported. Latvian President Vaira Vike-Freiberga, whose country will hold its EU membership referendum on 20 September, was the first foreign head of state to telephone President Arnold Ruutel to congratulate Estonia on its positive vote. Ruutel, with Prime Minister Juhan Parts and parliament speaker Ene Ergma, issued a joint statement declaring that the Estonian people have chosen a "steady path of development" and a "safe future" by voting to join the EU.

PLAN ON PROTECTING EASTERN BORDER PRESENTED.
The Interior Ministry has sent to the European Commission a plan on how it will spend the 1.07 billion kroons ($77 million) the EU will provide Estonia to help meet Schengen requirements for its border with Russia, BNS reported on 11 September. The funds will be transferred once Estonia officially joins the EU, which is expected to happen in May 2004. "With the money, we want to renovate and build up the border guard infrastructure, acquire means of transport, and create a joint radio-communication system for the border guard, the police, and other related services," Interior Ministry Chancellor Mart Kraft said. The major expenditures include 320 million kroons to create a professional mobile radio- and data-communication system, 265 million kroons to buy ships and up-to-date maritime-surveillance equipment, and 128 million kroons in three years to build the infrastructure necessary to guard the maritime border. The commission will give the ministry its comments on the plan in the second week of October.

DEFENSE-COOPERATION AGREEMENT SIGNED WITH UKRAINE.
Estonian Defense Minister Margus Hanson and his Ukrainian counterpart, Yevhen Marchuk, signed an eight-article agreement on defense cooperation between their ministries in Tallinn on 8 September, BNS reported. The cooperation will focus primarily on legal counseling and the exchange of experience in defense-force reform, NATO membership, and international peacekeeping missions. Marchuk said that Ukraine wants to join NATO and is planning to reduce its armed forces and bring their structure in-line with NATO standards. Marchuk also met with the parliament's National Defense Committee chairman, Sven Mikser, and President Arnold Ruutel, and visited the Estonian-Ukrainian Society. He visited the Baltic Defense College in Tartu on 9 September.

VISIT BY FINNISH PRESIDENT.
Tarja Halonen began a two-day official visit to Estonia on 9 September with talks with her Estonian counterpart, Arnold Ruutel, BNS reported. In a speech at the National Library, Halonen noted that it is easier for Finland to cope with globalization within the EU than outside it. Although careful not to give any direct recommendation to Estonian voters in the upcoming referendum on EU membership, Halonen said, "We would like Estonia to become a member of the European Union." She also met with parliament speaker Ene Ergma and with Prime Minister Juhan Parts. Halonen gave a lecture on Finnish-Estonian relations at Tartu University on 10 September. She delivered it in Estonian, as she has been studying the language for the past two years.

RES PUBLICA HOLDS CONGRESS IN TARTU.
Almost 1,000 delegates participated in the third Congress of Res Publica in Tartu on 6 September, BNS reported. By a vote of 899 to 57 it re-elected Juhan Parts as the party's chairman, elected Toivo Maimets as education and science minister, elected Taavi Veskimagi as the party's parliament faction chairman, and Jaanus Rahumagi as parliamentary deputy. The congress adopted a statement in favor of Estonia joining the EU, but said that each country in the EU should still be entitled to have one commissioner and matters of taxation should be left in the jurisdiction of individual EU members. It also approved, with only one abstention, the party joining the center-right European People's Party of which it is now an associate member. The congress did not dismiss any current party ministers with no-confidence votes, but Justice Minister Ken-Marti Vaher and Finance Minister Toni Palts received the greatest number of no-confidence votes, 160 and 105, respectively.

* European Parliament President Patrick Cox began a two-day visit to Estonia on 10 September in Parnu where, after being welcomed by parliament Deputy Chairman Toomas Savi, he delivered a lecture on the EU at Parnu College and later spoke with citizens in front of the Viljandi Town Hall, BNS reported. On 11 September, Cox gave a speech at the Estonian parliament and held talks with President Arnold Ruutel during which he expressed the hope that the EU referendum would be approved.

* Environment Minister Villu Reiljan and Dutch Ambassador to Estonia Joanna M. van Vliet signed on 9 September a memorandum of reciprocal understanding, based on the Kyoto protocol, for cooperation in reducing greenhouse-gas emissions, BNS reported. The Netherlands agreed to finance the building of a 50.6 megawatt wind-generator park at Paldiski in northwest Estonia in return for receiving part of Estonia's carbon dioxide emission allowance. Estonia is able to do this since its emission of greenhouse gases in 2000 was only 44 percent of the amount it issued in 1990.

* President Arnold Ruutel discussed the harmonization of legislation of EU member and acceding states with Finnish Legal Chancellor Paavo Nikula on 8 September in Tallinn, LETA reported. Nikula noted that Estonia's problems are similar to those Finland had experienced in its EU accession process. The officials also discussed environmental protection and sustainable production activities in the EU.

* The Finance Ministry announced the results of a study about the effects of a negative vote in the EU membership referendum on 9 September, BNS reported. It indicated that this would result in a decrease of 1.4 billion kroons ($101 million) in the balance of the 2003 budget, a reduction in the economic growth rate in 2004 from 5.6 percent to 3.7 percent, and a loss of 2.8 billion kroons in EU assistance.

* President Arnold Ruutel and parliament speaker Ene Ergma focused on the upcoming EU membership referendum in their speeches opening the parliament's fall session on 8 September, BNS reported. Ruutel warned that a "no" vote in the referendum would bring Estonia's development to a dead end and cost more than EU membership. Ergma said that the referendum would be among Estonia's most important decisions in the 21st century determining whether it will be among free, democratic European countries or remain between two borders.

* Foreign Minister Kristiina Ojuland outlined the priorities and activities which Estonia will pursue during its presidency of the Council of Baltic Sea States (CBSS) at a CBSS parliamentary conference in Oulu, Finland on 8 September, BNS reported. She said that the environmental protection of the Baltic Sea was very important and it should be classified as a Particularly Sensitive Sea Area. Ojuland also stressed that the projects on improving the health of citizens, fighting organized crime, and increased cooperation between NGOs would be continued. Estonia's CBSS presidency will end at the CBSS's fifth summit on 28-29 June in Tallinn.

* Defense Ministry spokesman Madis Mikko said on 8 September that the ministry's reform plans, which have been approved by NATO headquarters, call for doubling the number of volunteer military staff in two years, BNS reported. The number of youths drafted into the armed services would decline, but conscription would not be abandoned. The reform will result in an increase in the number of mobile combat units also capable of serving in international missions.

* Defense Minister Margus Hanson told the daily "Eesti Paevaleht" that although no official decision had been made yet, it appears that the Estonian peacekeeping mission in Iraq would continue for four or five more years, BNS reported on 10 September. Parliament Defense Committee Deputy Chairman Trivimi Velliste said that Estonia must take into consideration the wishes of its allies noting, "We must take sensible risks and keep in mind that some day we might also need help."

* Finance Minister Tonis Palts and John Kjaer, the head of the European Commission delegation in Estonia, signed the second part of the 2003 Phare financing memorandum for 368 million kroons ($26.5 million) on 9 September, LETA reported. It will be used for 20 projects to facilitate better implementation of EU legislation in Estonia.

* Eesti Gaas (Estonian Gas) signed an agreement on 10 September with Russia's Gazprom extending its long-term gas supply agreement for 10 years until 2015, BNS reported. Eesti Gaas is a joint holding of Gazprom (37 percent), Germany's Ruhrgas (33.4 percent), Fortum Oil & Gas of Finland (17.7 percent), Itera Latvija (9.75 percent), and small shareholders (2.15 percent). The company had a profit of 82.6 million kroons ($6 million) in the first half of the year or slightly more than it earned in 2002.

* New Estonian Ambassador to the United States Juri Luik presented his credentials to President George W. Bush in the White House on 9 September, BNS reported. The 37-year old Luik had served as Estonia's defense minister in 1993-94 and 1999-2002, as foreign minister in 1995, and as ambassador to NATO from 1996-98. In their brief meeting Bush praised Estonia's economic success, upcoming membership in NATO and the EU, and joint service with the U.S. in peacekeeping operations in former Yugoslavia, Afghanistan, and Iraq.

EUROPEAN PARLIAMENT PRESIDENT APPROVES LATVIA'S PREPARATIONS FOR EU.
Patrick Cox began a two-day visit to Latvia on 9 September meeting with President Vaira Vike-Freiberga, during which he stressed that EU membership will not pose any threat to Latvia's sovereignty, BNS reported. He said that small countries have equal opportunities with large countries within the EU. Cox also had talks with parliamentary speaker Ingrida Udre, Foreign Minister Sandra Kalniete, and officials of the Jelgava District. On 10 September, Cox told Prime Minister Einars Repse that he is pleased by Latvia's preparations for EU membership and expects a favorable result in the EU-membership referendum on 20 September. They discussed developments in combating corruption, raising administrative capacity, reinforcing the judicial system, and improving security of the eastern border. Cox then traveled to the Rezekne District where he met with officials of local governments, representatives of nongovernmental organizations, and residents before proceeding to Estonia.

DUTCH FOREIGN MINISTER DISCUSSES EU FUTURE.
Jaap de Hoop Scheffer made a one-day official visit to Riga on 9 September to urge Latvia to join the EU, BNS reported. He assured President Vaira Vike-Freiberga that Latvia will not lose its identity in the EU and that the experience of the Netherlands shows that this identity will only grow stronger. Talks with Society Integration Affairs Minister Nils Muiznieks covered the problems of noncitizens, mixed marriages, and education reform in Latvia. Muiznieks noted that naturalization is slow due to psychological factors as well as to practical reasons, including the desire to avoid military service and the availability of cheaper visas to CIS countries. De Hoop Scheffer and Foreign Minister Sandra Kalniete discussed the Intergovernmental Conference that will be held in Rome in October. Kalniete mentioned that there are several points in the draft EU constitution that Latvia would like to keep open for further discussion.

EU NOT TO SET ANY NEW MINORITY RIGHTS REQUIREMENTS.
EU Enlargement Commissioner Guenter Verheugen confirmed in an interview in the daily "Diena" on 6 September that the EU will not set any new requirements on language and citizenship matters for Latvia after it becomes a member of the organization, LETA reported. He said that such issues are outside the area of EU authority as they are part of the so-called political criteria to which standards of the Council of Europe are applied. Verheugen also dismissed claims that Russia might become a member of the EU in the near future, saying that it had not applied for EU membership. He also said Latvia is already competitive on the European market and would not need 20 years to reach the average development level of EU countries.

MAYORS OF EU CANDIDATE COUNTRY CAPITALS HOLD CONFERENCE IN RIGA.
The mayors of Budapest, Ljubljana, Nicosia, Warsaw, Prague, Tallinn, and Vilnius, along with representatives from Vienna participated in an 11 September conference in Riga on capital cities' role in EU enlargement, LETA reported. Riga Mayor Gundars Bojars said the capitals should cooperate and exchange information and experiences in strengthening security and fighting terrorism, drug trafficking, and corruption. He said the cities have vast potential for developing cooperation in tourism, public transportation, and utilities. The conference adopted a joint statement stating that EU members and candidates should pay great attention to security problems and provide required funding and other support. They also agreed that EU integration should improve public security.

DEFLATION POSTED IN AUGUST.
The Central Statistics Committee announced on 8 September that in August the consumer price index (CPI) in Latvia declined by 1.1 percent compared to July, LETA reported. The price of goods fell by 1.5 percent while the price of services rose by 0.2 percent. Compared with August 2002, the growth in the CPI was 3.5 percent -- 3.9 percent for goods and 2 percent for services. The greatest decreases were for fruits and vegetables while the price of meat, fish, beer, and cigarettes increased. There was a corresponding 1.1 percent decline in Lithuania, and a 1.3 percent increase in Estonia during the same period.

* U.S. Ambassador to Latvia Brian E. Carlson and Justice Minister Aivars Aksenoks signed an agreement providing more than 142,000 lats ($250,000) for a number of projects in Latvia in the field of justice in Riga on 10 September, BNS reported. The U.S. had earlier provided similar aid that was used for assisting the reform of the criminal process and the establishment of the Corruption Prevention Bureau.

* A delegation from Russia's Pskov region, headed by Governor Yevgenii Mikhailov, began a two-day visit to Riga on 12 September, BNS reported. Mikhailov told Foreign Minister Sandra Kalniete that the Pskov region was interested in creating a Euro-region with Latvia so that it could obtain EU funds to implement joint projects. The officials also talked about the reconstruction of Russia's Ludonka border checkpoint and plans to introduce several toll roads in the Pskov region.

* The EU-Latvian joint parliamentary committee meeting in Riga on 11 and 12 September focused on the current political and economic situation in Latvia as well as EU-Latvian relations, BNS reported. It discussed EU enlargement and cooperation with new neighbors in the context of the EU Convention on the Future of Europe and the upcoming Intergovernmental Conference.

* The government approved Latvia's NATO Membership Action Plan (MAP) for 2004 on 9 September, BNS reported. The document reflects Latvia's preparations for NATO membership and will be used to evaluate its compliance with requirements for new members. This should be Latvia's last MAP since it will become a member of the alliance with other candidates in May 2004.

* A Latvian students' association organized an improvised referendum on EU membership at 22 Latvian higher education establishments on 9 September in which 10,653 students, about 10.2 percent of all students, participated, LETA and BNS reported the next day. All students, including noncitizens, were allowed to vote and 58.3 percent voted "yes" and 41.7 percent "no." Among the 93.27 percent who are citizens, the vote was slightly more favorable, 60.15 to 39.85 percent.

* An extraordinary meeting of the Latvian Health and Social Care Employees' Union in Riga on 11 September decided not to organize any strikes or protest actions because the wages of doctors, nurses, and hospital workers were raised by 40 lats ($70) in September, BNS reported. Health Minister Ingrida Circene attended part of the meeting and expressed regret that the promise to raise wages by 50 lats could not be fulfilled.

* Five parliament deputies from For the Fatherland and Freedom/LNNK proposed on 8 September amendments to the law on meetings stipulating that the meetings of deputies with voters cannot be held outdoors, LETA reported. The proposal was probably prompted by the holding of such a meeting on the Riga Esplanade on 4 September after the Riga City Council several times refused to authorize a rally against education reforms.

* The chairwoman of the Public Services Regulatory Commission Council, Inna Steinbuka, was elected to the Committee on Budget and Finance of the International Criminal Court (ICC) on 8 September in New York, LETA reported the next day. There are only three representatives from Eastern Europe at the ICC, two of whom are Latvians, Steinbuka and Latvian Constitutional Court judge Anita Usacka, who was elected one of the 18 ICC judges last February.

* Ventspils Nafta (VN) Board Chairman and President Janis Adamsons and Deputy Chairman Ritvars Priekalns handed in letters of resignation on 10 September to go into effect on 13 September, BNS reported. Adamsons resigned for personal reasons while Priekalns will hold a high position at VN's subsidiary company, Ventspils Nafta Terminals.

* The cargo turnover of the port of Riga in the first eight months of the year was 14.5 million tons or 23.4 percent greater than in the same period last year, BNS reported on 9 September. Bulk cargo increased by 42.2 percent to 6.25 million tons, general cargo by 20.4 percent to 3.3 million tons, and liquid cargo by 2.9 percent to 3.57 million tons. The number of passengers through the port was 210,200 -- more than double the rate in 2002 when during the whole year there were only 157,000 passengers.

* The Statistics Office announced on 10 September that in the first seven months of the year Latvia's imports and exports were worth 1.64 billion lats ($2.88 billion) and 940 million lats, respectively, BNS reported. Compared to same period last year imports grew by 20.4 percent and exports by 19.2 percent, raising the current account deficit to almost 700 million lats.

LITHUANIANS CAPTURE FIRST EUROPEAN BASKETBALL CHAMPIONSHIP SINCE 1937.
Lithuania won the European championship in basketball on 14 September for the first time in 64 years, ELTA reported the next day, beating Spain 93-84. This was the third victory for the basketball-crazy Lithuanians whose national team had previously won the 1937 and 1939 European basketball championships. The Lithuanians started the match strong and later took control of the contest in the second quarter. They extended their advantage to 62-48 in the third quarter and increased the lead to more than 20 points in the fourth quarter. The Lithuanians credited their victory to a deep bench, which held on to the team's lead despite having some starters foul out of the game. On the way to the gold medal, the Lithuanian national team won all six games against their opponents. Spain took second place and the Italians third. All three of Lithuania's mobile phone companies reported the volume of calls was up to five times greater than normal for a Sunday night both during and after the final championship game.

PREMIER, U.S. AMBASSADOR DISCUSS RUSSIAN OIL FIELD ISSUE.
Algirdas Brazauskas and the new U.S. ambassador to Lithuania, Stephen Mull, discussed Lithuania's upcoming membership in the EU, U.S. relations with the EU, and Lithuania's relations with its neighbors on 9 September in Vilnius, BNS reported. Brazauskas noted that the issue of transit travel between Kaliningrad Oblast and the rest of Russia through Lithuania has been resolved, but concerns about LUKoil's plans to extract oil from the Baltic Sea off the Curonian Spit near the maritime border with Lithuania remain, even though he has discussed the matter with Russian Prime Minister Mikhail Kasyanov several times. He expressed regret that Kasyanov has not yet responded to a letter Brazauskas sent in June calling for an international review of the project. He said the Russian ambassador in Vilnius informed him that a reply will be sent soon. Brazauskas also said the environment ministers of the two countries should meet to discuss the oil-drilling plans.

FRENCH SENATE PRESIDENT ASSURES LITHUANIA OF SUPPORT.
In a speech at the Lithuanian parliament on 10 September, Christian Poncelet declared that Lithuania's membership will strengthen the EU and be "the necessary chain between Scandinavia and Central Europe," BNS reported. He affirmed that France will always support Lithuania and hopes to ratify Lithuania's EU and NATO accession agreements before the end of the year. Talks with President Rolandas Paksas focused on bilateral relations, implementation of strategic infrastructure projects, and the future development of Lithuania's nuclear-energy sector. On 11 September Poncelet met with former President Valdas Adamkus, Cardinal Audrys Juozas Backis, and toured Vilnius's historic Old Town before returning to France.

SWISS PARLIAMENT DELEGATION VISIT.
A delegation, headed by Swiss National Council President Yves Christen, arrived in Lithuania on 7 September for a four-day visit and met with the leading political figures the next day, ELTA reported. Christen told parliament Chairman Arturas Paulauskas that the establishment of a Swiss embassy in Vilnius would be the nearest goal in developing bilateral relationship between their countries. Prime Minister Algirdas Brazauskas called on the Swiss to support Lithuania's bid for membership in the Organization for Economic Cooperation and Development (OECD) and to increase economic investments in Lithuania. President Rolandas Paksas was informed that Switzerland planned to open its labor market to Lithuania and the other countries joining the EU only around 2007. The delegation also met with Foreign Minister Antanas Valionis. Christen made a speech at the parliament on 9 September before traveling to Kaunas.

PREMIER VISITS SWEDEN.
Algirdas Brazauskas began a three-day visit to Sweden on 10 September at the European Commission's representative office in Stockholm where he told diplomats of foreign countries residing in Sweden and EC representatives that Lithuania will be a reliable partner when it joins the EU in May 2004, BNS reported. He later attended a basketball game between Lithuania and Serbia-Montenegro in the European Basketball Championship tournament and campaigned for holding the 2007 championship in Lithuania. Brazauskas held talks on 11 September with Swedish parliament speaker Bjorn von Sydow, to whom he expressed his condolences over the death of Swedish Foreign Minister Anna Lindh. They agreed on the need for more intense political and economic cooperation. Brazauskas also met with Jan Nistad, the director for international projects under the Swedish Nuclear Energy Safety Agency. Brazauskas's scheduled meeting with Swedish Prime Minister Goran Persson on 12 September was canceled due to Lindh's death.

* Accompanied by his wife Laima and a delegation of almost 60 officials and businessmen, President Rolandas Paksas began a three-day visit to Georgia on 11 September meeting with President Eduard Shevardnadze during which they discussed the prospects for Georgia's integration into Euro-Atlantic bodies, BNS reported. Paksas said Lithuania is ready to share with Georgia its experience in joining NATO and the EU. They also pledged to expand economic cooperation and trade. The two countries signed an agreement to avoid double taxation of income and capital as well as a memorandum between their customs boards to fight violations of customs laws. On 12 September, Paksas met with parliament speaker Nino Burdjanadze and was awarded honorary membership in the International Studies Center of Eastern-Western Relations.

* Lithuania's Army commander, Major General Jonas Kronkaitis, participated in the fall session of the NATO Military Committee in Great Britain and France from 7-10 September, BNS reported. About 200 high-ranking officers from 26 NATO member and candidate countries discussed the reorganization of NATO structures and the upcoming admission of seven new members, as well as the establishment of the NATO rapid-reaction force, the situation in Iraq, the allocation of NATO resources in all international military operations, and other matters. They also visited Britain's 16th Air Assault Brigade before traveling to Nice on 9 September where they were informed about the French army's development and were airlifted to the French Navy's assault ship "Foudre" to observe military maneuvers. The next meeting of the NATO Military Committee will take place in the Baltic states with Lithuania serving as the host country.

* After a meeting of representatives of all the parliament's factions on 8 September, parliament Chairman Arturas Paulauskas announced that only the Homeland Union (Conservatives of Lithuania) faction wanted an early renewal of the agreement to allocate at least 2 percent of GDP for defense, BNS reported. The other parties said that the agreement, which expires in May 2004, would hold for the formation of the 2004 budget and that the new parliament, which will be elected next fall, should decide whether the agreement should be extended.

* Former Lithuanian President Valdas Adamkus, who had worked for the U.S. Environmental Protection Agency for many years, said in a radio interview on 12 September that the information Russia had presented recently about the safety of the D-6 oil deposit in the Baltic Sea near Lithuania's border was only a medley of various documents, which failed to reflect real safety matters, BNS reported. He noted that he would try to use his position as an UNESCO ambassador of good will to obtain foreign support to pressure Russia to stop its plans of drilling for oil near the Curonian Spit, which is included in the UNESCO World Heritage List.

* The Conservative Party asked its counterpart organizations in Denmark, Germany, Finland, Sweden, Poland, Latvia, and Estonia on 10 September to encourage their governments to call on Russia to give up its plans to drill for oil in the Baltic Sea off the ecologically-sensitive Curonian Spit, BNS reported. Conservatives' Chairman Andrius Kubilius also urged leaders of the other major Lithuanian parties, including the Social Democrats, New Union, and Liberals, to issue similar pleas to their partner-parties abroad.

* President Rolandas Paksas told officials of the State Defense Council on 8 September that his adviser on foreign affairs, Alvydas Medalinskas, will be making a trip to Iraq to investigate the possibilities of Lithuania appointing a representative in the country, ELTA reported. Medalinskas said that he would have better access to high officials in the country than would a representative sent from the Lithuanian Embassy in Cairo.

* The International Monetary Fund (IMF) issued a report on 9 September, which praised Lithuania's great economic growth with low rate of inflation and noted that it was among the few EU candidate countries performing in line with the Maastricht criterion and capable of fast integration into the euro zone, ELTA reported the next day. The report mentioned that the unemployment rate and external current account deficit remained high and should be reduced. It also warned that there should be no increase in state expenditures prior to the parliamentary elections in 2004.

* The board of the Bank of Lithuania approved proposals on 11 September amending the law on its activities so that they would be in line with EU legislation, ELTA reported. One proposal is to change the bank's goal from "striving for price stability" to the more strict "maintaining price stability." Other changes are intended to make the bank's operations similar to those of other EU countries which have accepted the euro as its currency.

* The Statistics Department announced on 11 September that preliminary data from customs declarations indicated that in the first seven months of the year Lithuania's imports and exports were valued at 16.39 billion litas ($5.4 billion) and 12.17 billion litas, BNS reported. The trade deficit declined to 4.22 billion litas as exports increased by 7.5 percent while imports rose only 2.9 percent.

* The Statistics Department announced on 8 September that the consumer price index (CPI) in August was 0.7 percent lower than in July and 1.1 percent lower than in August 2002, BNS reported. In August the price of goods declined by 0.9 percent while services declined by 0.2 percent.