Baltic Report: November 5, 2002

NOTE TO READERS:
This issue covers events in the Baltic states from 19 to 25 October 2002.
EU CANDIDATES AGREE TO TALK AS BLOC ON FARM, FINANCE ISSUES.
Foreign ministers from the 10 countries -- Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia -- vying to join the European Union in 2004 held talks in Prague on 22 October, LETA reported the same day. They agreed that they would only negotiate with the EU as a united bloc on the difficult issues of agriculture and finance, sign an accession treaty by next spring, and join the EU in early 2004. Speaking for the group, Czech Foreign Minister Cyril Svoboda said, "Our common solidarity is creating a new climate in Europe."

RUSSIAN PRIME MINISTER SAYS ACCEPTABLE KALININGRAD SOLUTION NEAR.
Speaking in Kaliningrad on 22 October, Russian Prime Minister Mikhail Kasyanov said a solution to the problem of access to Kaliningrad Oblast following expected European Union expansion will be resolved at an EU-Russia summit in Copenhagen on 11 November, Russian news agencies reported. Kasyanov added that he cannot predict whether it will be a permanent solution or an interim one, but he noted that talks with the EU have been proceeding more smoothly than previously. The prime minister, who was in Kaliningrad to chair a session of the Naval Collegium, also said that the personal-income growth rate in the oblast is lower than the national average and called for special government measures to support the exclave's economy.

ENVOY SAYS TRANSITIONAL SOLUTION TO KALININGRAD ISSUE PENDING.
The EU's Council of Foreign Ministers has decided to postpone a final decision on the Kaliningrad issue, presidential envoy to the EU on Kaliningrad Dmitrii Rogozin told reporters on 22 October, ITAR-TASS reported. Rogozin said that Lithuania "will be allowed to find, together with Russia, a form of control over railway transit that will satisfy both sides," and, in the meantime, the current status of such transit will continue until 1 July 2003. According to Rogozin, while a final decision on Kaliningrad will not be adopted in the near future, a solution for the transition period will be "legally formalized."

* Standard & Poor's issued a list of the 100 largest banks in terms of equity capital in 14 Central and Eastern European countries, ETA reported. The list included four banks from the Baltic states. Estonia's Hansapank and Uhispank were the 19th and 62nd largest, respectively. Latvia's Parex Bank was 64th and Lithuania's Vilniaus Bankas 85th.

* At a 21 October conference in Luxembourg on the EU's Northern Dimension Initiative, Lithuanian Deputy Foreign Minister Justas Vincas Paleckis told representatives from Latvia, Estonia, Poland, Iceland, Norway, and Russia that the initiative's action plan for 2004-06 should include more active EU-Russian cooperation, and development of the Kaliningrad region, BNS reported. Estonia's Foreign Minister Kristiina Ojuland, also attending the conference, said the plan should focus on developing transportation and energy in the region, ETA reported the same day. And, Latvian Foreign Ministry State Secretary Maris Riekstins stressed the need for the European Commission to improve the coordination of the EU's financial instruments -- PHARE, INTERREG, TACIS, and IPSA, LETA reported on 22 October.

LOCAL ELECTIONS BOLSTER CENTER-REFORM COALITION.
The State Election Committee announced that 52.4 percent of eligible voters participated in local elections throughout the country on 20 October, ETA reported the following day. Turnout was thus higher than for local elections in 1999 (49.8 percent) or 1996 (52.1 percent). In the capital, Tallinn, the Center Party garnered 38.5 percent of the vote and 32 of the 63 seats on the City Council and is thus likely to continue its center-right coalition with the Reform Party, which took 11 seats. The centrist Res Publica party, formed in late 2001 and which advocates more conciliatory policies toward non-Estonians, won 17 seats, while the Estonian United People's Party took three seats on the Tallinn City Council. The right-wing Pro Patria Union gained 6.8 percent of the vote but will not be granted seats under the system for distributing local mandates, while the Moderates and People's Union each fell short of the 5 percent threshold for representation with 4.9 percent and 3.3 percent, respectively. In Tartu, which is Estonia's second-largest city, the Reform Party gained 23 seats; Pro Patria, nine; Res Publica, eight; Center Party, six; and the Moderates, three. The Center Party emerged the clear winner of elections to local councils in the largest northwestern cities of Narva and Kohtla-Jarve. The party garnered 50.5 percent of the vote and 18 of the 31 seats in Narva, and 42.8 percent and 17 seats of the 35 seats in Kohtla-Jarve. Across the country, Res Publica performed better than many predicted, winning 385 seats in 100 of the 117 councils for which the party competed. In the western seaside resort of Haapsalu, the centrist Res Publica gained eight of the 21 seats and, by forming a coalition with the right-wing Pro Patria Union, which gained four seats, will supplant the Reform Party (six seats), which has ruled the city since 1996. The Center Party won the other three seats. Representatives of Pro Patria declared that there were few winners but many losers in a contest between similarly thinking parties. Pro Patria Chairman Mart Laar called on right-leaning parties like the Reform Party, Res Publica, Pro Patria, and the Moderates to work together to deny the left-leaning Center Party from gaining greater power.

OPPOSITION REJECTS PROPOSED 2003 BUDGET.
The opposition Pro Patria Union and the Moderates, supported by the People's Union, succeeded in defeating the first reading of the proposed 2003 budget submitted by the government by a vote of 46 to 45 on 23 October, ETA reported. The Pro Patria Union, which has proposed an alternative budget, criticized the government for submitting a deficit budget and being unfriendly to children, education, and culture. The government held an extraordinary session by phone after the vote and resubmitted the same budget with no amendments the next day.

COALITIONS FORMED IN CITIES.
Center Party Chairman Edgar Savisaar and Tallinn Deputy Mayor Rein Lang from the Reform Party signed a coalition agreement in Tallinn on 25 October, BNS reported. It appears likely that Savisaar will continue as Tallinn mayor and Maret Maripuu of the Reform Party will lead the City Council. The two parties signed a similar coalition in Tartu that day in which the roles were reversed; Andrus Ansip from the Reform Party will remain mayor and the Center Party's Aadu Must will stay on as City Council chairman. In Parnu, although the Reform and Center parties won 17 of the 33 seats, they are considering expanding the coalition by including the Pro Patria Union's five deputies

CHAIRMAN OF MODERATES RESIGNS.
Former Foreign Minister Toomas Hendrik Ilves announced his resignation as chairman of the Moderates on 23 October due to the party's poor showing in the recent local elections, BNS reported. "The Moderates are the only strong social-democratic party defending working people's interests in Estonia, but I'm regarded as an intellectual with my head in the clouds," he said. Ilves will meet with the party's board on 28 October to discuss his resignation, but he is expected to continue as leader of the party until a congress is held in late November or early December. Ilves said he is not planning to leave the party and plans to run for the parliament in the spring.

SOCIAL AFFAIRS MINISTER DISCUSSES LABOR-MARKET ISSUES IN FINLAND.
Siiri Oviir held talks on the free movement of persons and labor-market developments with Finnish Labor Minister Tarja Filatov in Helsinki on 24 October, BNS reported. Their ministries have established a joint working group to discuss labor movement between the two countries. Estonia has provisionally closed the chapter on the free movement of persons in its membership talks with the European Union but would prefer to negotiate a shorter transition period via bilateral agreements with each EU member country. Oviir also met with Social Affairs and Health Minister Maija Perho.

CULTURE FUND GETS NEW MANAGER.
The Culture Promotion Fund's (Kultuurkapital) governing council elected Raul Altmae, a 30-year-old former security-police official, from a list of 17 candidates for managing director on 22 October, BNS reported. Former Director Avo Viiol was fired after admitting he embezzled some 8 million kroons ($533,000) from the fund's account and gambled it away (see "RFE/RL Newsline," 19 August 2002). The scandal resulted in the resignation of Culture Minister Signe Kivi on 16 August. Her successor, Margus Allikmaa, complained it was not easy to find a manager capable of restoring the fund's reputation and credibility. Altmae will start working on 1 November.

ILLEGALLY ISSUED PASSPORTS WON'T BE CANCELED.
The Estonian cabinet on 22 October endorsed amendments to the citizenship law that allow people who were ineligible for citizenship but were given passports 10 years ago due to administrative errors to keep them, BNS reported. The amendments also would authorize new identification cards for those whose passports have expired. At least 1,500 passports were issued on the basis of defective documents or unchecked data, according to research by the Citizenship and Migration Board. The board sent letters to these individuals telling them they will have to apply for naturalization again and pass language tests to gain citizenship. Prime Minister Siim Kallas said people who acted in good faith should not suffer because of mistakes by officials, but added that this will not apply to people who knowingly submitted false information.

* The cornerstone for Estonia's Occupation Museum was laid on 22 October in a ceremony attended by former Estonian President Lennart Meri, ETA reported. The building should be completed by May 2003. The estimated 25 million-kroon ($1.6 million) construction cost is financed through the initiative of an Estonian-American, Olgar Kistler-Ritso, who has raised funds for the museum project since 1998. More than 12,000 objects have been collected for the museum which will cover both the Soviet and German occupations and span the years 1940-1991.

OFFICIAL RESULTS OF PARLIAMENTARY ELECTIONS ANNOUNCED.
The Central Election Committee said on 22 October that official results of this month's parliamentary elections differ slightly from the preliminary results (see "RFE/RL Newsline," 7 October 2002), LETA reported. The left-wing For Human Rights in a United Latvia (PCTVL) was awarded an additional seat, raising its total to 25, which the rightist People's Party lost to put the number of its deputies at 20. Of the 100 deputies -- 82 men and 18 women -- 33 served in the previous parliament. Four deputies chose not to list their nationalities, while the others declared themselves as Latvian (79), Russian (14), Polish (1), Karelian (1), and Jewish (1).

PARTIES DISCUSS DISTRIBUTION OF CABINET POSTS.
Representatives of the New Era, the Union of Greens and Farmers (ZZS), Latvia First Party (LPP), and For the Fatherland and Freedom/LNNK (TB/LNNK) discussed in coalition talks on 21 October the distribution of cabinet posts in a new government, LETA reported. The parties agreed that, in a cabinet headed by New Era Chairman Einars Repse, the New Era will have eight ministries, the ZZS and LPP three each, and the TB/LNNK two. The New Era has abandoned previously proposed candidates for the Agriculture and Transportation ministries (see "RFE/RL Newsline," 10 October 2002). Current Defense Minister Girts Valdis Kristovskis (TB/LNNK) appears likely to retain his post. Although the parties have accepted ZZS candidates Martins Roze and Raimonds Vejonis to head the Agriculture and Environment ministries, the ZZS is demanding the economy and transportation which have been promised to the LPP and TB/LNNK, respectively, LETA reported on 24 October.

PRESIDENT CALLS EU AND NATO MEMBERSHIP NATIONAL GOALS.
Vaira Vike-Freiberga told the 49th Latvian Intelligentsia Conference on integrated civil society in Latvia and the EU on 23 October that membership in the EU and NATO are not only the country's foreign-policy goals but national goals that will influence all aspects of people's lives, LETA reported. Membership in NATO will create security that will encourage foreign investors to enter Latvia with greater confidence and provide Latvia's businessmen with more potential foreign partners. She said the EU does not seek to exploit Latvia but wishes to unite Europe and make it "an important player in the international arena." Andrew Rasbash, head of the EU delegation in Latvia, expressed the desire for Latvia to conclude its EU entry talks by the end of the year, but he noted that Riga needs to strengthen the country's public-administration system, business environment, and especially the nongovernmental sector.

SOCIAL DEMOCRATIC WORKERS PARTY LEADERSHIP MANEUVERS TO REMAIN.
The council of the Latvian Social Democratic Workers Party (LSDSP) did not step down at a 19 October meeting, LETA reported, despite signs of pressure on the leadership following a disappointing showing in the 5 October parliamentary elections. Party Chairman Juris Bojars and two senior party members last week announced that they submitted their resignations (see "RFE/RL Newsline," 18 October 2002). Bojars explained that the party's charter has no clause permitting the council to resign, according to LETA. He also said he must head the organization of the party's upcoming congress, since as chairman he alone has the right to sign documents on behalf of the party, although party funds can be used only with the approval of the council. The council decided to hold the party's 34th congress in Riga's Kipsala Center on 23 November and to elect delegates for every three members of the party, rather than the current five. Dainis Ivans said that he would agree to run for the party's chairman at the 34th LSDSP Congress in November if he received support from the party and felt the opportunity to create a team that has "new thinking", LETA reported on 21 October. Three other Latvian parties -- Latvia's Way, the People's Party, and For the Fatherland and Freedom/LNNK -- will also hold their congresses in November.

ELECTRICITY UTILITY TO GET $24.6 MILLION LOAN.
Latvenergo concluded an agreement on 24 October for a loan of 15 million lats ($24.6 million) for the reconstruction of Riga's Thermoelectric Power Station No. 1 (TEC-1), BNS reported. Parex Bank President Valerijs Kargins said the syndicated loan, joined by Parex Bankas in Lithuania and the Baltic investment company Suprema, "is the largest loan ever organized by a local syndicate in Latvia." The loan is for a five-year period and carries an interest rate of the six-month LIBOR plus 0.5 percent (50 basis points). The reconstruction of TEC-1 is expected to begin next year and be completed in 2005. It is expected to increase the station's capacity and thus reduce the need for energy imports from the other Baltic states and Russia. Latvenergo received loans of 22 million lats from the Nordic Investment Bank in May and of 48 million lats from the European Investment Bank in June.

* Pope John Paul II blessed the Latvian state and people during talks with Prime Minister Andris Berzins in the Vatican on 25 October, BNS reported. Latvia and the Vatican signed a new international treaty replacing the Concordat of 1922. The agreement defines the legal status of the Roman Catholic Church, outlines cooperation in education and culture, and sets terms for activities by the Catholic Church in the Latvian Army and in penitentiary facilities.

* Defense Ministry State Secretary Edgars Rinkevics participated in the international conference "Bridging the U.S.-European Perception Gap and Meeting New Challenges" in London on 21 October, LETA reported. The conference was organized by the nongovernmental organization Wilton Park.

* A delegation from the Foreign and Defense ministries helped Georgia prepare its national program for NATO integration in Tbilisi on 23-25 October, BNS reported. The delegation held talks with the Georgian inter-institution committee, which is developing Georgia's NATO-membership program and met with Foreign Minister Irakli Menagharishvili. It had been invited by the Georgian Foreign Ministry in cooperation with NATO's International Security Advisory Board.

* A delegation from the Bank of Russia, headed by its First Deputy Chairman Andrei Kozlov, visited Latvia on 24 and 25 October, BNS reported. Kozlov and Latvian Finance and Capital Market Commission Chairman Uldis Cerps signed an agreement allowing the financial-supervisory bodies of both countries to exchange information needed for surveillance functions and also securing cooperation and joint inspections. Latvian Commercial Banks' Association President Teodors Tverijons expressed regret that Kozlov did not discuss Russia removing Latvia from the list of offshore zones to which it had been added in February 1999.

* Economy Minister Aigars Kalvitis, Foreign Minister Indulis Berzins, and Latvian Development Agency Director-General Maris Elerts signed an agreement about cooperation in economic matters abroad in Riga on 21 October, LETA reported. The agreement calls for active cooperation, information exchange, and mutual support in providing Latvian companies with information about business opportunities abroad, foreign offers of cooperation, various export and investment projects, participation in foreign fairs, trade missions, and visits. Latvia plans to open economic representations in the U.K., Germany, and Sweden next year, in the Czech Republic, Russia, and Japan in 2004, and in the U.S., Denmark, and Poland in 2005.

* The government decided on 22 October to cancel the loans and accrued penalties of 800,000 lats ($1.3 million) and 260,000 lats given to the Jelgava and Liepaja sugar refineries, respectively, BNS reported. The State Property Fund had issued the loans in 1994. Prime Minister Andris Berzins said that the action would boost the development of the sugar industry in Latvia by allowing the companies to pay more attention to modernization which will be needed to counter the greater competition which will arise after Latvia joins the EU.

* With only Latvia's Way deputy Karlis Leiskalns voting against, the parliament passed amendments to the Rules of Procedure raising the severance pay for the 67 of the 100 deputies who lost their seats in the recent election, from one month's to three months' salary, on 24 October, BNS reported As the parliament's budget for this year does not provide for such large allowances, half of it will be paid from next year's budget.

U.S. SENATOR PRAISES LITHUANIA'S PROGRESS.
The vice chairman of the Senate Intelligence Committee, Senator Richard Shelby (R-Alabama), met with Lithuanian President Valdas Adamkus and Foreign Minister Antanas Valionis on 19 October in Vilnius, BNS reported. The aim of the visit was to learn more about Lithuania's achievements, its preparation for NATO membership, and the country's economic situation. Noting that he visited Lithuania before its independence was reestablished in 1991, he praised its progress. Shelby said he was not involved in preparations for the visit to Lithuania by President George W. Bush, slated for after the NATO summit in Prague on 21-22 November, but was sure that "it will be a great day."

EURO TO BECOME LEGAL TENDER.
Parliament voted 63 to one with four abstentions on 22 October to adopt amendments to the laws on foreign currency and money that eliminate a provision defining the litas as the sole legal tender in Lithuania, ELTA reported. Settlements in foreign currencies will also be allowed in noncash transactions, and use of the euro will be permitted by mutual agreement for both cash and noncash settlements. Parliament Budget and Finance Committee Chairman Algirdas Butkevicius said, according to ELTA, "This amendment makes the euro equal to the litas in terms of settlements, except for the provision that these settlements can be made only upon mutual agreement of the parties." The move is intended to ease transactions when banks are closed, for instance, and there is no place to exchange currency.

ENLARGEMENT COMMISSIONER SUPPORTS ADDITIONAL EU AID TO CLOSE POWER PLANT.
Prime Minister Algirdas Brazauskas persuaded EU Enlargement Commissioner Guenter Verheugen in Brussels on 24 October that Lithuania needs additional support to dismantle reactors at its Ignalina nuclear-power plant, modernize other power stations, and carry out related environmental and other projects, BNS reported. Verheugen pledged to support Lithuania's position in discussions with European Commission President Romano Prodi and leaders of other EU member states. He also thanked Lithuania for its "flexible" position on the Kaliningrad transit issue and said Vilnius will receive guarantees in the EU accession agreement that it may join the Schengen zone together with the first new members of the EU.

LITHUANIA 'MOST DEPENDENT' COUNTRY ON NUCLEAR POWER.
The International Atomic Energy Agency released a report on 22 October that put Lithuania's share of nuclear-generated electricity at 77.6 percent of the total 2001 national output, BNS reported. Nuclear plants produced 11.36 billion of the country's total, 14.64 billion kilowatt hours, the study found. Lithuania was followed by France (77.1 percent), Belgium (58 percent), Slovakia (53.4 percent), Ukraine (46.4 percent), Sweden (43.9 percent), Bulgaria (41.5 percent), South Korea (39.3 percent), Hungary (39.1 percent), and Slovenia (39 percent). At the end of 2001, there were 438 nuclear-power plants worldwide generating 16.2 percent of total electricity. In 2000, France was the leader with a 76.4 percent share and Lithuania second at 73.7 percent.

GOVERNMENT SAYS GAZPROM IS POTENTIAL INVESTOR IN STATE-OWNED GAS COMPANY.
The cabinet on 23 October formally named Russian gas giant Gazprom as the potential buyer of a 34 percent stake of Lietuvos Dujos (Lithuanian Gas) set aside for sale to a gas provider, ELTA reported. Prime Minister Brazauskas said the decision does not mean Lithuania has accepted Gazprom's preliminary offer for the shares, unofficially reported to be 80 million litas ($23 million), but rather has cleared the way for further negotiations. Lithuania sold a 34 percent stake for the strategic investor to the consortium of German utilities Ruhrgas and E.ON Energie for 116 million litas in June. Brazauskas admitted the negotiations may take some time and probably will not be completed by the proposed 20 November deadline.

PRESIDENT STUMPS FOR NEW HIGH-TECH INSTITUTION.
President Adamkus told an information-technology (IT) conference on 21 October that while he is glad computer literacy in Lithuania is improving, there is a clear need to establish an institution to coordinate IT activities among state institutions, ELTA reported. Petras Austrevicius, Lithuania's chief negotiator with the EU, noted that EU membership would open new opportunities to attract IT investments to Lithuania. The head of the European Commission's delegation in Lithuania, Michael Graham, told the conference that Lithuania still has problems organizing EU-funded projects, and although the state has accomplished much in the IT field, nontransparent services-procurement tenders have raised doubts about the effective use of EU funds.

* Parliament Foreign Affairs Committee Chairman Gediminas Kirkilas visited Spain on 22 and 23 October in order to present his country's position on the question of transit between the Kaliningrad Oblast and Russia, BNS reported. He held talks with representatives from the Spanish parliament and officials from the Defense and Foreign ministries.

* Foreign Ministry Secretary Darius Jurgelevicius and Croatian Economy Minister Ljubo Jurcic signed a free-trade agreement in Zagreb on 24 October, ELTA reported. The agreement will go into effect on 1 January 2003. Croatia is the 31st country with which Lithuania has established a preferential-trade regime.

* Some 50 officers from 21 NATO and Partnership for Peace countries participated in the military exercise Cooperative Aura 2002 in Vilnius on 21-25 October, BNS reported. The exercise familiarized NATO partnership members with political and military crises management and with crisis procedures of NATO headquarters.

* State Border Guard Service Chief Algimantas Songaila attended a meeting of the border chiefs of EU member and candidate countries with the EU Strategic Committee on Migration, Borders, and Asylum in Brussels on 22 October, BNS reported. He reported on the situation on Lithuania's borders, noting the favorable results in decreasing illegal migration. Border guards detained 1,551 illegal immigrants in 1996, 1,382 in 1997, 495 in 1998, 261 in 1999, 100 in 2000, and 107 in 2001.

* A delegation of high-ranking Russian border guards headed by Deputy Chairman of the Logistics Department Lieutenant General Anatolii Turta visited Lithuania on 23-25 October, BNS reported. Their Lithuanian counterparts informed them about their activities in the field of supply and funding, state border demarcation, and creating infrastructure in the area neighboring the state border. The delegation visited a section of the Lithuanian-Belarus border, inspecting existing border-crossing points and those under construction.

* At a meeting of the EU Integration Commission of Government (VEIK) on 22 October, Prime Minister Brazauskas instructed ministries and other public offices to work out specific proposals on how to erase the drawbacks identified by the European Commission's most recent progress report on Lithuania, ELTA reported. Chief negotiator with the EU Petras Austrevicius noted that Lithuania will have to strengthen the professional skills of judges and prosecutors, continue anticorruption work, complete pension reform and privatization of the energy sector, reduce unemployment, and simplify company bankruptcy procedures.

* Dalius Prevelis, the director of the State Social Insurance Fund (SoDra), filed a letter of resignation on 22 October, "Lietuvos rytas" reported the next day. The action was apparently prompted by a TV3 report the previous day about a suspected fraudulent tender for the fund's computer-maintenance contract. The contract was won by the little-known Etnomedija Intercentras company with whose owner Prevelis and his daughter spent a two-week vacation in Crete in July.

* A few hundred veterans of World War II staged a protest in front of the parliament building in Vilnius on 24 October demanding the restoration of earlier state pensions to all veterans, BNS reported. Two years ago the parliament passed amendments to the State Pension Law which took away state pensions from former employees of Soviet-era party and repressive state structures, which enforced the Soviet occupation of Lithuania. In June, the Constitutional Court ruled that the signing and promulgation of the amendments had violated constitutional procedures. The demonstrators protested that the payment of the state pensions to these persons had not yet been restored.

* More than 200 representatives of youth organizations participated in the conference "Youth for NATO" at the parliament on 23 October, BNS reported. The conference unanimously passed a resolution backing Lithuania's efforts to gain NATO membership as soon as possible. Several hundred young people from Lithuania, Latvia, and Estonia plan to go to the NATO summit in Prague in November to demonstrate their support for their countries' entry into the organization.