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Baltic Report: March 21, 2002


21 March 2002, Volume 3, Number 8

NOTE TO READERS:
This issue covers events in the Baltic states from 8-14 March 2002.
REGIONAL
BALTIC PRIME MINISTERS GAUGE BRITISH SUPPORT.
In talks with his Baltic counterparts in London on 14 March, British Prime Minister Tony Blair discussed the NATO and EU candidacy of the three Baltic states, as well as relations with Russia, BNS reported. Blair praised the three countries' progress in defense reforms, and told the three prime ministers that their states should not have any problems being invited to join NATO at the Prague summit in November if they continue military reforms. The Baltic premiers expressed dissatisfaction with the low agricultural quotas and subsidies the European Commission has proposed for new EU member states. Blair said the next few years will determine whether the EU will opt for liberal reforms, which Britain supports, or retain the current system of generous aid and state subsidies.

BALTIC DEFENSE MINISTERS COMPLIMENTED IN WASHINGTON ON NATO PREPARATIONS...
Deputy U.S. Secretary of State Richard Armitage told defense ministers Sven Mikser (Estonia), Girts Valdis Kristovskis (Latvia), and Linas Linkevicius (Lithuania) in Washington on 13 March that the Baltic states have made great progress in military reforms and have implemented their NATO Membership Action Plans well, BNS reported. He praised the Baltic states for allocating 2 percent of their GDP for defense needs, and thanked them for agreeing to send troops to Kyrgyzstan as part of the U.S.-led antiterrorist campaign. They also discussed NATO's relations with Russia. Armitage said he plans to participate in the meeting of the prime ministers of the "Vilnius-10" group who are NATO candidate countries in Bucharest on 25-26 March.

...MEET WITH RUMSFELD.
U.S. Defense Secretary Donald Rumsfeld unexpectedly joined the meeting of his deputy Paul Wolfowitz with the Baltic defense ministers on 14 March, BNS reported. His earlier planned meeting with the ministers had been canceled due to his busy schedule. The talks focused on NATO enlargement with Rumsfeld thanking the Baltic states for their countries' contribution to the fight against terrorism and stressing the need to continue developing their defense forces. He praised Lithuania's decision to be the first European state to purchase the U.S.-made Javelin antitank system. During their visit to Washington on 12-15 March, the ministers also attended a panel discussion at the U.S. Senate, "Are the Baltic States Ready for NATO Membership or Vice Versa?" and met with Deputy National Security Adviser Stephen Hadley and several senators.

NATO CANDIDATES MEET IN MACEDONIA.
The foreign ministers of the "Vilnius-10" group of NATO candidate countries (Albania, Bulgaria, Croatia, Estonia, Latvia, Lithuania, Macedonia, Romania, Slovakia, and Slovenia) discussed strategies in Skopje on 8 March. They signed a joint declaration reaffirming their firm commitment to play an active role in the antiterrorist coalition and expressing their determination that the perpetrators and supporters of terrorist acts be brought to justice. They called on NATO to continue its open-door policy after its Prague summit in November. Estonian Foreign Minister Kristiina Ojuland stressed the importance of information exchange in achieving international security, but noted that "the fight against terrorism should not change NATO's true essence [of being] a commonwealth of peoples granting common democratic values and security in the Euro-Atlantic region," BNS reported. Latvian Foreign Minister Indulis Berzins mentioned that cooperation is needed between NATO and third countries, such as Russia, but the cooperation must not weaken the alliance. Lithuanian Foreign Minister Antanas Valionis affirmed that the candidate countries should maintain their spirit of solidarity after the Prague summit.

ESTONIA
GOVERNMENT TO FINANCE RENOVATION OF NARVA POWER PLANTS.
The cabinet decided on 12 March to retain the monopoly of Eesti Energia (Estonian Energy [EE]) and finance the renovation of its power stations in Narva from loans and EU support funds, ETA reported. Economy Minister Liina Tonisson recommended that EE take a loan of 1 billion kroons ($55.8 million) from an international organization such as the European Bank for Reconstruction and Development or the Nordic Investment Bank. The government will not provide a state guarantee for the loan, but would assist in getting the best possible terms for it. She noted that there are no plans to sell shares of EE since state ownership is a precondition for getting subsidies for environmental investments from the European Union's ISPA fund. Tonisson also said the government will suggest that EE introduce a smaller rate hike in electricity prices than those originally planned for introduction on 1 April, but that decision ultimately depends on the EE council.

PRIME MINISTER GETS FINNISH SUPPORT ON EU MILK QUOTA.
During a one-day visit to Helsinki on 8 March, Siim Kallas discussed Estonia's progress on EU membership with President Tarja Halonen and Prime Minister Paavo Lipponen, ETA reported. Kallas told them about his recent trip to Brussels and expressed his concerns about suggested EU agricultural quotas. Lipponen assured him that Finland supports just treatment for Estonia in regard to EU milk quotas. The premiers also discussed the safety of the Baltic Sea in connection with increasing oil and gas transit. Halonen noted that Estonia's EU membership negotiations are going much faster than the earlier membership talks of Finland and Sweden. She said that by paying more attention to balancing social needs the leaders of EU candidate countries will help the people better understand the EU.

NEGOTIATOR EXPECTS TO CLOSE FOUR EU CHAPTERS IN MARCH.
Estonia's chief negotiator with the European Union, Deputy Chancellor of the Foreign Ministry Alar Streimann, told a news conference on 11 March that by the end of the month he expects to close the chapters on customs union, transport policy, free movement of persons, and justice and home affairs in the ongoing EU accession talks, ETA reported. He said the chapters on energy, regional policy, and taxation will be addressed in April, so that Estonia will have completed all seven chapters during Spain's presidency of the Council of the European Union in the first half of the year. Streimann noted that the taxation chapter has only been discussed in general terms, and that Estonia's policy of exempting companies' reinvested profits from income tax, which European Commission President Romano Prodi recently mentioned as a potential sticking point, has not been brought up. Estonia has already completed 20 of the 31 chapters of its acquis communautaire.

READMISSION AGREEMENT SIGNED WITH HUNGARY.
Hungarian Foreign Minister Janos Martonyi began a two-day official visit to Tallinn on 13 March by signing a readmission agreement with his Estonian counterpart Kristiina Ojuland, ETA reported. The ministers discussed the need to conclude agreements on tourism, avoiding double taxation, protection of classified information, and on the expansion of educational cooperation. Martonyi noted that Estonia is one of the best-prepared NATO candidates, and should not have any problems in gaining admission to the alliance. He also mentioned the need to increase commercial and economic ties between the two countries, which should be helped by the upcoming appointment of an attache for economic affairs in the Hungarian Embassy in Tallinn. The ministers also stressed the advantages of working together in their efforts to join the EU, and spoke about the Convention on the Future of Europe, to which Martonyi is one of three Hungarian representatives. The next day Martonyi discussed Finno-Ugric cooperation with President Arnold Ruutel and parliament Chairman Toomas Savi.

ESTONIAN ENERGY TO RAISE ELECTRICITY PRICES IN APRIL.
Eesti Energia (Estonian Energy) announced on 13 March that the cost of a kilowatt-hour of electricity will be increased as of 1 April by 0.15 kroons to 1.05 kroons ($.058) instead of the previously planned 0.20 kroons, ETA reported. The company also introduced a monthly electricity fee, which was set at 5 kroons instead of the earlier planned 20 kroons. Economy Minister Liina Tonisson expressed disappointment and said the price increases are too high, adding that setting night-time electricity rates at 0.07 kroons per kilowatt-hour lower than day rates will not increase consumption.

TRADE ROUTE WITH NORTHWEST RUSSIA TO BE REOPENED.
Estonia and Russia are expected to sign an agreement at the end of March restoring a transportation route across the Peipsi/Chudoskoe Lake, which borders Tartu, Estonia, and Pskov Oblast, Interfax reported on 8 March, citing the Baltic News Service. According to the agency, the route is navigable from April to September -- weather permitting.
* Prime Minister Siim Kallas told a conference, organized by the European Bank for Reconstruction and Development and the European Economics and Financial Center, in London on 14 March that Estonia expects the EU to assign it a fair agricultural quota, BNS reported. He said that his country's agriculture is capable of competing with other European countries.
* U.S. Ambassador Joseph M. De Thomas told Justice Minister Mart Rask on 8 March that due to the current fight against terrorism, the U.S. wants to update the agreement on the extradition of criminals signed with Estonia in 1923, BNS reported.
* Interior Minister Ain Seppik Talks said that the talks about the registration of the Estonian Orthodox Church subordinate to the Moscow Patriarchy failed on 12 March because the Interior Ministry refused to accept the church's demand that it be recognized as an orthodox church that has been operating in Estonia since 1920, ETA reported. Such recognition would allow the church to claim all Orthodox church property in Estonia.
* The Foreign Ministry sent the Russian government a note on 11 March concerning the vandalization of its general consulate in St. Petersburg the previous night, BNS reported. An unidentified hooligan broke a second-floor window and painted the slogan "NBP (National Bolshevik Party) -- Tallinn -- Russian city" on the front of the building.
* The parliament on 13 March amended the gambling law by increasing the monthly taxes that casinos will pay starting from April, ETA reported. The taxes on every card table will be increased by 5,000 kroons to 15,000 kroons and those on slot machines by 2,000 kroons to 5,000 kroons. Finance Minister Harri Ounapuu noted that the taxes had not been increased for six years even though the number of visitors in the casinos had increased significantly. Most of the additional funds will be used to build a new art museum.
* The Statistical Office announced on 8 March that in 2001 exports totaled 57.9 billion and imports 75.1 billion kroons, resulting in a trade deficit of 17.2 billion kroons, BNS reported. In 2000, exports totaled 53.9 billion and imports 72.2 billion kroons, the trade gap being 18.3 billion kroons.
* Economy Minister Liina Tonisson, who also is the transportation and communications minister, approved on 14 March the appointment of a commission to prepare for the merger of the two ministries, BNS reported. The resulting ministry should start work in November.
* Former Defense Minister Juri Luik began working for the Foreign Ministry as an adviser on NATO-related matters, BNS reported on 12 March.


LATVIA
FARMERS QUESTION EU AG PROPOSALS EU.
Andrew Rasbash, the head of the European Commission delegation in Latvia, told the conference "Latvian Agriculture in the European Union: Threats and Opportunities" in Jelgava on 9 March that the current stance of the EC on farm policy is a compromise between EU member and candidate countries, LETA reported. He said the EC proposals should be evaluated in their entirety and not in regard to specific measures. Andris Miglavs, the director of the State Agrarian Economy Institute, noted that although agricultural financial support from the EU in 2004 will be more than 1.5 times greater than the current financing provided by the Latvian government, it will not ensure production growth but rather promote stagnation. The conference was organized by Farmers' Saeima, an organization of some 400 farmers.

NETHERLANDS SUPPORTS BALTIC MEMBERSHIP IN NATO.
Latvian Foreign Ministry State Secretary Maris Riekstins began a two-day visit to the Netherlands on 11 March by meeting with Dutch Foreign Ministry Secretary-General Frank Majoor, BNS reported. They discussed bilateral relations, EU and NATO enlargement, as well as international policy developments of interest to both states. Majoor emphasized that the Netherlands fully supports the admission of the three Baltic states to NATO at the Prague summit in November. The next day, Riekstins held talks with European Affairs Minister Dick Benschop that focused on the financial framework of EU enlargement and the work of the EU Future of Europe Convention.

BRITISH AMBASSADOR FORESEES STRONGER SUPPORT FOR LATVIA'S NATO MEMBERSHIP.
At his 11 March farewell meeting marking three years of service as the British ambassador to Latvia, Stephen Nash told Prime Minister Andris Berzins that Latvia has made great progress in its bid for NATO membership over the past year and has a good chance of being invited to join the alliance in November in Prague, BNS reported. Other factors Nash mentioned as making such an invitation more likely are the 11 September terrorist attack on the United States, and that country's increasing cooperation with Russia.

LATVIAN, RUSSIAN CULTURE MINISTERS SIGN COOPERATION AGREEMENT.
Karina Petersone and Mikhail Shvydkoi signed an agreement on cooperation between their ministries in Moscow on 14 March, BNS reported. It replaces a similar treaty, signed in March 1996, which was effective through March 2001. Petersone cited the Latvian cinema days in Moscow and St. Petersburg planned for late April, and performances of the Latvian National Opera in Moscow in spring 2003 as examples of future cultural cooperation.
* Prime Minister Andris Berzins met Confederation of British Industries Secretary-General Digby Jones in London on 13 March and attended an official dinner held by the European Economics and Financial Center (EEFC). The next day he delivered an address called "Latvia for Europe and Europe for Latvia" at the conference "European Union Enlargement: Possibilities and Opportunities" organized by the EEFC and EBRD and attended a dinner hosted by EBRD President Jean Lemierre.
* French Senator Jacques Chaumont discussed bilateral cooperation and issues pertaining to EU integration with Foreign Minister Indulis Berzins on 13 March in Riga, LETA reported. The chairman of the parliament's Foreign Affairs Commission, Guntars Krasts, informed him about the course of social integration and naturalization in Latvia.
* The Riga City Council revoked on 13 March the permits it had issued earlier to two Latvian organizations to hold events honoring the World War II Latvian Legion on March 16, LETA reported. There was a fear that these events could result in counter activities by Russian groups who regard the legion as having been a Nazi SS organization. The Simon Wiesenthal Center in Jerusalem issued a statement the next day praising the Riga decision not to allow any marches.
* The Riga Regional Court decided on 12 March to release Mikhail Farbtukh, an 87-year-old, ex-Soviet official convicted on genocide charges, from serving his jail term due to poor health, BNS reported. He had been sentenced to a seven-year prison term in 1999 for the deportation of 31 Latvian families to Siberia in 1941, but the sentence was later reduced to five years.
* The National Radio and Television Council decided on 13 March not to extend the five-year broadcasting license of the "Biznes & Baltija" Media Group because the Supreme Court ruled in 2001 that it had violated copyright laws, LETA reported. The station, which has changed its name to "Russkoye Radio Riga," had asked to continue its broadcasts until it receives a court ruling on a new appeal.
* The parliament rejected on 14 March the proposal of the opposition Social Democratic Workers Party faction to restore Lattelekom telephone company's monopoly over fixed-line communications until 2013, LETA reported. The main incentive for the proposal was the desire to save the expenses of a long legal battle with Lattelekom's part owner and strategic investor, Tilts Communications.
* The consumer price index (CPI) in February was 0.3 percent lower than in January, but 3.3 percent higher than in February 2001, LETA reported on 8 March. In February the costs of goods fell by 0.5 percent, but those of services grew by 0.1 percent.
* The national employment service announced on 11 March that a total of 96,935 people were registered as unemployed on 1 March, up 3,054 people from a month ago, LETA reported. The rise represents an increase of .3 percent in the unemployment rate, to 8.2 percent in February.


LITHUANIA
NATO EXPERTS COMPLETE FINAL EVALUATION OF LITHUANIA.
Deputy Secretary-General for Defense Planning and Operations Edgar Buckley arrived in Vilnius on 8 March to help complete the last report on Lithuania's readiness to join the alliance before the NATO summit in Prague in November, ELTA reported. Other NATO officials spent the week in Lithuania gathering information for the report. Buckley told Prime Minister Algirdas Brazauskas that he is pleased with Lithuania's domestic political picture, democratic development, foreign policy, relations with neighbors, macroeconomic progress, and public support for NATO membership. He told a subsequent press conference that Lithuania needs to continue the reforms of its armed forces and fulfill its pledge to have a motorized-infantry battalion that is capable of taking part in combat operations outside Lithuania by the end of the year.

TWELVE YEARS OF RESTORED INDEPENDENCE CELEBRATED.
The parliament briefly mentioned the declaration of the restoration of Lithuania's independence on 11 March 1990 at the first meeting of its spring session on 10 March, ELTA reported. There was no formal meeting of the parliament on 11 March, and members' seats were taken by young people who were born on that day in 1990. Parliament Chairman Arturas Paulauskas told the young people, who were given copies of the Restoration of Independence Act and a book about its signatories, that they should seek higher education and knowledge. The chairman of the parliament in 1990, Vytautas Landsbergis, also expressed his wish for the 12-year-olds to be energetic, diligent, and just, in order for them to be happy in a free Lithuania. He noted that the 150 children born that day in Lithuania is only slightly larger than the 141 deputies in the parliament. Various Independence Day commemorations and religious services were held throughout the country.

SOCIAL DEMOCRAT ELECTED FIRST DEPUTY CHAIRMAN OF PARLIAMENT.
Ceslovas Jursenas was elected first deputy chairman of the parliament by 80 votes on 14 March, ELTA reported. Some members of the opposition did not participate in the vote, arguing that their opinions about the appointment were not sought, and that the post should have been given to a member of the opposition. Earlier discussions on appointing former Premier Rolandas Paksas to the post fell apart after he and his supporters left the Liberal Party in January. Social Liberal Arturas Skardzius, Social Democrat Vytenis Andriukaitis, and Liberal Gintaras Steponavicius are currently serving as parliament deputy chairmen.

PREMIER REPORTS ON LAST YEAR'S WORK.
Algirdas Brazauskas delivered to parliament a 400-page document about the activities of the government in 2001 even though he became prime minister only in July, ELTA reported. In presenting the annual report, he stated that membership in the EU and NATO are the country's main foreign policy goals, and that the accomplishments of his government include a 5.7 percent growth in the country's GDP with a rather stable 2 percent annual inflation. He also noted the government's success in collecting planned budget revenues, and the restructuring of the country's energy system. His report was praised by the ruling coalition, with parliament Chairman Arturas Paulauskas calling it "a progressive, detailed, and versatile document." However, the head of the opposition Liberal Union faction, Gintaras Steponavicius, called the report "a formal document void of specificity" that did not mention such unfavorable factors as the growing tax burden, the introduction of more bureaucratic procedures, and lack of pension reform. Conservative Andrius Kubilius described the report as "boring, bureaucratic, and not fit for public debate."

REGIONAL WASTE-MANAGEMENT PROJECT SIGNED WITH EU.
The Finance Ministry and the European Union signed a memorandum in Vilnius on 13 March on co-financing an environmental project in the Alytus region in southern Lithuania, ELTA reported. The project, which is estimated to cost 7.8 million euros ($6.9 million), calls for the better collection and transportation of waste from the southern cities of Alytus, Druskininkai, and Birstonas, as well as closing Alytus's old dump site and opening a new one. The EU will supply 3.9 million euros from its Instrument for Structural Policies for Pre-Accession (ISPA) program, while Lithuania's share will come from private investments (1.8 million euros), state budget funds (1.5 million euros), and loans.

LIBERAL DEMOCRATIC PARTY HOLDS FOUNDING CONGRESS.
Former Prime Minister Rolandas Paksas was elected chairman of the newly established Liberal Democratic Party in Vilnius on 9 March, receiving support from 563 of the 566 delegates, BNS reported. Parliament deputy and former Environment Minister Henrikas Zukauskas was elected the party's first deputy chairman, with parliament deputies Dalia Kutraite and Vladas Zalnerauskas, architect Valentinas Mazuronis, businessman Remigijus Acas, and Klaipeda University Professor Vytautas Valevicius elected deputy chairmen. Paksas said the party's principles are "liberalism toward business, social policy based on labor, and order in the state." He noted the party supports Lithuania's efforts to join the EU and NATO, and that Lithuania should remain a nuclear energy-producing country.
* Prime Minister Algirdas Brazauskas told an international conference in London on 14 March that Lithuania wants to rejoin the European family of nations as a strong and equal partner, BNS reported. He noted that the Kaliningrad region will greatly benefit from the spillover when its neighbors Poland and Lithuania join the EU. At a later meeting, British Industry, Energy, and Environment Minister Brian Wilson urged him to close the Ignalina atomic power plant by 2009 as the EU is requesting.
* A delegation of Czech businessmen, headed by Transport Minister Jaromir Schling, proposed to Vilnius Mayor Arturas Zuokas on 13 March to cooperate in building a new public transport system for the city, ELTA reported. At a later press conference in Klaipeda, Schling said that his country might consider directing more of its trade with Nordic countries through this Lithuanian port.
* The Klaipeda free economic zone (FEZ) sealed an agreement with Danish A. Espersen A/S for the construction of a fish processing factory which will employ about 250 people, ELTA reported on 8 March. Klaipeda FEZ Managing Director Eimantas Kiudulas noted that two other Danish companies had signed agreements to establish a logistic center and an electrical engineering component factory in the zone.
* Complying with a new European Commission requirement, Lithuania decided on 8 March to shorten the transition period it was requesting for bringing the national excise duty on tobacco products up to the EU levels by one year -- 31 December 2009, BNS reported. The price of Klaipeda, the most popular brand of locally produced cigarettes, will increase from the current 2.11 litas ($0.54) per pack to 7.80 litas.
* The Competition Council and the Bank of Lithuania on 14 March granted permission to Germany's Norddeutsche Landesbank Girozentrale to buy a 76 percent stake in Zemes Ukio Bankas (Agriculture Bank ), the country's last state-owned bank, ELTA reported. The German bank is expected to pay 71 million litas ($17.9 million) for the share on 19 March and later invest a further 145 million litas in the bank.
* The parliament, by a vote of 47 to 26 with 17 abstentions, rejected on 12 March the proposal by President Valdas Adamkus to provide the privileges of an ex-president to Vytautas Landsbergis, who had been the chairman of the last Lithuanian Supreme Council and, following Soviet practice, had served as the head of state, ELTA reported.
* The Constitutional Court ruled on 14 March that the law on pharmaceutical activities requiring that the owner of a pharmacy have a degree in pharmacy was unconstitutional, ELTA reported. It stated that laws could be passed regulating the education of pharmacists, but the constitution did not allow any restriction of property rights based on education.
* The board of the Bank of Lithuania decided on 14 March to lower the minimum required reserve ratio for commercial banks from 8 to 6 percent, effective from 24 May, ELTA reported. The decision will allow the entry of another 260 million litas ($67 million) into local markets.
* In appreciation of the city's efforts to build a good civil society, UNESCO awarded Vilnius with the Cities for Peace prize, BNS reported on 8 March. Vilnius was selected over 21 other cities in the Europe and North America region. UNESCO Secretary-General Koichiro Matsuura will award the prize at a formal ceremony in Morocco on 18 March.
* Lithuanian Airlines delivered its last two Russian-made YAK-42 planes to Moscow on 13 March to the Russian company Aviatekhnologiya, which had purchased them, ELTA reported. Lithuanian Airlines now has only Western-built Boeing and Saab planes in its fleet.
* A study by the Austrian Ecological Institute on the safety of the 106 nuclear power plants in Europe stated that the Ignalina plant was the youngest and safest of all RBMK model reactors on the continent, BNS reported on 13 March. The most dangerous plant was Armenia's nuclear power plant, called Armenia, which received 13 risk points. The Ignalina plant with 11 risk points was still more dangerous than many other plants in Eastern and Central Europe.
* The consumer price index in February was 0.2 percent lower than in January, but 2.8 percent higher than in February 2001, ELTA reported on 8 March. In February, the costs of food products fell by 0.7 percent, of clothing and footwear by 1.5 percent, but transportation costs grew by 1.9 percent.


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