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Baltic Report: May 28, 2001


28 May 2001, Volume 2, Number 13
REGIONAL
HAVEL CALLS FOR NATO WITHOUT RUSSIA BUT WITH BALTIC STATES.
In a speech delivered on 11 May to the Bratislava summit of NATO candidate countries, Czech President Vaclav Havel said NATO must expand to include the entire geographic and culturally historic area commonly perceived as "the West" extending "from Alaska in the west to Tallinn in the east," CTK reported. He said Russia should not be offered NATO membership, because it is a "huge Euro-Asian power" that will always have its own "specific role in world politics." Collaboration between NATO and Russia must be based on the so-called Founding Act, which "creates preconditions for a true partnership." This would also be "more dignified" for Russia itself, since the act "de facto puts Russia on the same footing as the community of all 19 members of the alliance." Havel said that unlike Russia, the Baltic states, "not only geographically, but also through their history and culture, consider themselves to be part of the West." He said he "fails to understand" why the Baltic states "should not be offered membership as soon as possible." Such a failure would be akin to "yielding to some geopolitical or geostrategical interests of Russia" and "would amount to confirming the legitimacy of the [1939] Ribbentrop-Molotov pact" of Russia's right to surround itself with a cordon sanitaire or "with a sphere of interests euphemistically called 'near abroad.'"

BALTIC STATES, U.S. SIGN AGREEMENT MODERNIZING AIR CONTROL.
U.S. Trade and Development Agency Regional Director Ned Cabot and the heads of Latvian, Lithuanian, and Estonian aviation control agencies signed an agreement in Riga on 14 May calling for developing a plan to introduce in the Baltic states satellite technology standards that meet the requirements of the International Civil Aviation Organization, BNS reported. Under the agreement, the U.S. will contribute $650,000 and send air navigation experts to draft the plan, which is to be developed in 15 months. Cabot said that the plan is the most extensive satellite technology research program in Europe this year. It will start with studies but the actual commissioning of the program could take four or five years and require investments of several tens of millions of dollars.
* Representatives of Estonia and Latvia met with representatives of Russia's Pskov, Leningrad, and Novgorod regions in Pskov on 18 May to discuss the prospects of cross-border cooperation after the enlargement of the European Union, BNS reported. The seminar, organized by the St. Petersburg center of integration studies with support from the Swedish Foreign Ministry, focused on how EU enlargement would affect bilateral relations and the development of trade, business contacts, cross-border cooperation, and improvement of the environmental situation in the region.


ESTONIA
MODERATES ELECT NEW CHAIRMAN.
By a vote of 299 to 13, with three invalid ballots, the congress of the Estonian Moderates in Tallinn on 19 May elected Foreign Minister Toomas Hendrik Ilves as its chairman, BNS reported. Ilves became the only candidate when Social Affairs Minister Eiki Nestor and Agriculture Minister Ivari Padar were nominated but declined to run. Ilves said he favors the proposal by the young Moderates to introduce a graduated income tax rate and that the abolition of corporate income taxes should be reconsidered since it has not helped reduce unemployment. Former Chairman Andres Tarand was elected as the party's official candidate for the Estonian presidency.

CONTINUING CONTROVERSY OVER TALLINN MAYOR.
The general meeting of the Tallinn chapter of the Pro Patria Union party on 12 May voted 109 to 81 that Juri Mois remain in his post as mayor of Tallinn, BNS reported. The Moderates and the Reform Party, the other partners in the ruling coalition in the Tallinn City Council, have repeatedly called on Mois to resign. Earlier in the week, 16 of the 18 Pro Patria deputies in the Estonian parliament sent a letter to Mois urging him to resign and ministers Toivo Jurgenson, Juri Luik, Tarmo Loodus, and Tonis Lukas expressed their support for the letter although they did not sign it. The Tallinn chapter of the Reform Party on 16 May decided to continue to demand the resignation of Mois, BNS reported. The previous evening the board of the Tallinn chapter of the Pro Patria Union offered a compromise -- the Reform Party would be allowed to select the mayor while Mois would replace Rein Voog as the chairman of the Tallinn City Council. The Moderates accepted the proposal to exchange the seats between the parties, but the Reform Party rejected it and the next day gathered the needed 17 signatures for a motion of no-confidence against Mois. Four deputies from the Center Party, three Russian-speaking politicians, and a Coalition Party deputy joined the nine Reform Party deputies in signing the motion. The vote will be taken on 31 May and will need to gain the support of at least 33 of the 64 deputies in the council to pass.

LANGUAGE REQUIREMENTS FOR PRIVATE SECTOR EMPLOYEES ESTABLISHED.
The government on 15 May established requirements of proficiency in the Estonian language for people working in the private sector, BNS reported. The language proficiency requirement had currently applied only to physicians, pharmacists, and psychologists working in the private sector. Under the government decree, proficiency in Estonian at least at the intermediate level will be required from all employees in the trade and service spheres. Advanced proficiency in Estonian will be required from teachers of private schools and universities, captains of ships or aircraft, rescue workers, and security employees. Education Minister Tonis Lukas said that he does not think that the new requirements will increase unemployment, but he said that it will encourage non-Estonians to learn Estonian.

FINANCE MINISTER PRESENTS DRAFT 2002 BUDGET.
Siim Kallas on 17 May presented the draft state budget for 2002, which foresees total expenditures of 32.7 billion kroons ($1.84 billion), BNS reported. The estimated revenues for 2002 are 33 billion kroons, or 3 billion kroons more than in the draft 2001 budget. The greatest planned increased expenditures are 843.5 million kroons for state pension insurance; 646.8 million kroons for the Social Affairs Ministry, primarily for the Sick Fund; and 381.6 million kroons for the Defense Ministry. The draft calls for expenditures for the Justice Ministry to decrease by 142 million kroons and for the Agriculture Ministry by 30.9 million kroons.

ESTONIAN ORTHODOX CHURCH OF THE MOSCOW PATRIARCHATE REFUSED REGISTRATION.
The Estonian Interior Ministry declared on 21 May that it cannot formally register the Estonian Orthodox Church of the Moscow Patriarchate under that name because it is not clearly discernible from the already officially registered Estonian Apostolic Orthodox Church, which is subordinate to the Constantinople Patriarchate, BNS reported. Interior Minister Tarmo Loodus proposed that the Church assume a different name and provide new wording of some articles in its statutes. Two days later Nikolai Balashov, acting secretary for interconfessional relations at the Moscow Patriarchate, declared that the Church will not change its name or statutes to obtain official registration, BNS reported. He claimed that the registration refusal was political, as the final version of the statutes had been drawn up in contact with ministry officials who did not express any objections at the time. Balashov said that in 2000, after the ministry had refused to register the Church, it had rewritten its statutes and submitted a new application in January 2001. He also stated that the ministry's recommendation to rename the Church the "Russian Orthodox Church in Estonia" is not acceptable, since more than one-fourth of its clergy is made up of ethnic Estonians. Balashov intends to achieve registration by pressuring the Estonian authorities via such international organizations as the European Union and Council of Europe.

STATE GUARANTEE FOR LOAN TO PUBLIC TELEVISION.
The government agreed on 22 May to give a state guarantee for a 37 million kroons ($2.07 million), 10-year loan to Estonian Television (ETV), or less than half of the 77 million kroons that had been requested, BNS reported. The cabinet set two conditions to grant the guarantee: the culture, justice, and finance ministries must prepare a draft law on turning ETV and Estonian Radio into a joint public broadcasting organization by 5 June, and ETV must sign an agreement on the use of budgetary appropriations with the government. The cabinet meeting also decided that in the negotiations for EU membership it will ask for a 6 1/2 year transition period on the abolition of tax-free trade on its Baltic Sea ferry lines, ETA reported on 23 May. The reason for the appeal is to ensure the competitiveness of the Estonian lines with Swedish and Finnish shipping firms that receive support from their governments.
* The Estonian duo Tanel Padar and Dave Benton won the Eurovision song contest held in Copenhagen on 12 May with the song "Everybody" by composer Ivar Must, BNS reported the next day. President Lennart Meri, Prime Minister Mart Laar, and Foreign Minister Toomas Hendrik Ilves immediately telephoned to congratulate the winners with Ilves even declaring: "Just like Estonia was the first eastern European country to win the Eurovision, Estonia also will be the first eastern European country to enter the European Union." The victory makes Estonia the host of the next Eurovision contest in the spring of 2002.
* U.S. President George W. Bush announced on 16 May that he will nominate Senior Foreign Service diplomat Joseph M. de Thomas as the next ambassador to Estonia, BNS reported the next day. If the Senate confirms the appointment, de Thomas will replace Melissa Wells, who has served in Tallinn since October 1998.
* In the first visit by an Estonian delegation to Kaliningrad on 14-15 May, Ambassador to Russia Tiit Matsulevits declared that Estonia supports Kaliningrad's integration into European structures, BNS reported. The delegation visited several of the current 20 enterprises fully or partly owned by Estonian capital in Kaliningrad region.
* The head of Great Britain's anti-drug coordinating unit, Keith Hellawell, during a visit to Tallinn on 11 May, declared that the Baltic countries are not major countries of transit for drugs going to Scandinavia, BNS reported. Hellawell informed national Police Director Harry Tuul, the chief of national security police, Juri Pihl, and Interior Ministry Chancellor Mart Kraft about Britain's experience in combating drug trade. Estonia and Britain are expected this summer to sign an intergovernmental memorandum on cooperation in the struggle against proliferation of illegal drugs, organized crime, illegal immigration, international terrorism, and other grave crimes.
* Peeter Kreitzberg, the presidential candidate of the Center Party, signed an appeal adopted by participants at a seminar on the effects of Estonia's accession to the European Union, demanding the suspension of the country's current EU talks, BNS reported on 15 May. The appeal states that the suspension should continue "until a politically suitable time" when the negotiations correspond to the will of the majority of the people and "proposals based on national interest have been made for the application of exceptions and periods of transition in the accession agreement."
* President Lennart Meri spoke about the role of small states at the symposium "New Balance of Forces" at St. Gall University in Zurich on 18 May. The next day, the Max Schmiedheiny Foundation presented him with the Liberty 2001 prize worth 200,000 Swiss francs ($120,000) in recognition for his efforts to promote individual responsibility and liberty, BNS reported. On 20 May, Swiss President Moritz Leuenberger told Meri that he will visit Estonia in July.
* Henrik Hololei, head of the Estonian Eurointegration Bureau, announced on 16 May that Denmark would support projects in Estonia on nature protection and preparations for NATO and EU accession with nearly 260 million kroons ($14.6 million) this year, BNS reported.
* After a visit on 15-20 May to the chemical plants and mines of the Harbin Gas & Chemical Industry Corporation in the northern Chinese region of Harbin, representatives of the Viru Chemical Group signed a cooperation agreement for establishing a joint venture, BNS reported on 22 May. Viru Chemical will assume the responsibility for designing and building in Harbin an oil-shale processing plant with an annual capacity of half a million tons of oil shale within two years.
* The Reform Party published the first number of a Russian-language newspaper called "Liberal Forum" with a press run of 15,500 copies of which 14,000 were distributed as a supplement to the 19 May edition of the Russian-language daily "Molodezh Estonii," BNS reported. The newspaper, which is expected to be issued twice a month, will be primarily circulated in Tallinn and northeast Estonia.
* The government on 15 May endorsed a proposal to take a 45 million euro ($40 million) loan from the Nordic Investment Bank to finance the reconstruction of the Tallinn-Narva and other state highways, BNS reported.
* Interfax and ITAR-TASS on 21 May both quoted unnamed "reliable sources" in Moscow as claiming that Chechen leader Aslan Maskhadov is making a concerted attempt to contact Estonian Defense Ministry officials, at least one of whom had allegedly said that some members of that country's General Staff are ready to provide material and technical assistance to the Chechen fighters. Both Russian agencies said their unidentified sources suggested that Maskhadov's approach to the Estonians was prompted by a decrease in the funds he previously received from Islamic extremist organizations.


LATVIA
COALITION AGREEMENT SIGNED IN RIGA CITY COUNCIL.
More than two months after the municipal elections, the Social Democratic Workers Party and For Fatherland and Freedom/LNNK (TB/LNNK) finally signed a coalition agreement in the Riga City Council on 24 May, BNS reported. With the inclusion of six small parties: the Green Party, the Democratic Party, the Labor Party, the Russian Party, the Welfare Party, and the Latvian Farmers Union, the coalition will have 34 of the 60 seats in the council. The TB/LNNK refused to include the left-wing For Human Rights in a United Latvia in the coalition, but members of that party will retain the posts of deputy mayor and heads of some of the council's commissions. Two days earlier the council had prepared the formation of the coalition by implementing one of the conditions that the TB/LNNK had demanded, LETA reported. By a vote of 46 to five, with six abstentions, it amended its regulations to replace its board with a presidium, consisting of the council chairman and deputy chairmen as well as representatives from all the factions, whose number is determined by the number of deputies they have on the City Council.

BUNDESTAG PRESIDENT SUPPORTS EU, NATO MEMBERSHIP.
Wolfgang Thierse told Prime Minister Andris Berzins in Riga on 24 May that he supports the Baltic states' bids to join NATO and the European Union, LETA reported. Thierse expressed interest in economic achievements and reforms, particularly in sectors where German assistance was used. Speaking to the Latvian parliament, Thierse noted that EU enlargement would be the greatest test for European security and stability in the postwar period and that it would be shortsighted and detrimental to pretend that the EU can admit any of the associated countries by a specific deadline. While noting that Latvia has made significant progress in various sectors, as detailed in the latest report of the European Commission, he pointed out that is still has much to do in the privatization, agrarian, environmental protection, and justice sectors.

PRESIDENT VISITS GREECE.
In her speech to the Athens Forum, an annual political and economic conference whose primary focus this year is the development of information technology (IT), Vaira Vike-Freiberga on 19 May talked about Latvia's possibilities in the "electronic world." While admitting that IT development in Latvia has not yet reached a sufficient level, she pointed out that it has been selected as a top priority for the country. In talks with former European Commission President Jacques Santer on 21 May, Vike-Freiberga discussed decision-making processes in the EU and the possibilities for small countries to protect their interests, BNS reported. She also had meetings with the chairman of the Greek parliament and the defense, transport, and communications ministers. President Konstantinos Stephanopoulos told Vike-Freiberga on 22 May that Greece will support Latvia's efforts to join the EU and NATO especially since the admission of the Baltic states to NATO would create an additional guarantee for security in Europe.

PREMIER'S MEETINGS IN SLOVAKIA.
After attending the Bratislava summit, Premier Andris Berzins conducted talks on 14 May with his Slovak counterpart Mikulas Dzurinda, CTK reported. They discussed bilateral -- particularly economic --relations, and NATO expansion. Berzins told journalists after the meeting that it would not "make sense" for the three Baltic states to be separately invited to join NATO, but that if Lithuania alone is invited to join in 2002, it would be "a disappointment, but not a catastrophe." Dzurinda reiterated the position expressed during the summit that the more countries that are invited to join, the better for both candidates and European security at large. Berzins was also received by Slovak President Rudolf Schuster and Parliamentary Speaker Jozef Migas.

TWO MORE CHAPTERS IN EU TALKS CLOSED.
In its pre-accession talks with the European Union, Latvia closed the chapters dealing with the free movement of capital and business legislation in Brussels on 17 May, BNS reported. It has now completed 13 of the 31 chapters. Latvia also opened talks on two new chapters regarding taxes and financial control. The EU said it is willing to consider Latvia's request for a transition period for the required gradual leveling of the excise taxes on cigarettes to EU standards. Talks in the financial control chapter will deal with the compatibility of Latvia's state and municipal funds control system with the financial control accepted in the EU.

PARLIAMENT CREATES TASK FORCE FOR PROMOTING REPATRIATION OF ETHNIC MINORITIES.
Members of the Latvian parliament have established a task force for the promotion of repatriating people to their ethnic homelands, BNS reported on 14 May. The task force consists of seven deputies from the For Fatherland and Freedom/LNNK (TB/LNNK), People's Party, and Social Democrats, and is headed by TB/LNNK deputy Juris Vidins. Vidins said that the aim of the task force is to urge the country's executive bodies, including the Foreign Ministry, to take a more active stance in solving the problems of repatriation and to increase the funding of the repatriation fund. He expressed regret that no Latvian institution has reacted to Russian President Vladimir Putin's announcement that it would be beneficial for Russians to return to Russia, as the country lacks workers and its demographic situation has worsened. At the beginning of the year there were more than 551,000 registered non-citizens in Latvia, most of whom are ethnic Russians.

KONONOV CASE CONTINUED AFTER MOSCOW PROTEST.
Russian Foreign Ministry spokesman Aleksandr Yakovenko said that the actions of the Latvian authorities against Vasilii Kononov represent "a new challenge to all who respect the achievement of those who struggled with Nazism," Interfax reported. Yakovenko said that the charges of military crimes against the 78-year-old "partisan anti-fascist" are without foundation. On 21 January 2000, the Riga District Court had found Kononov guilty of war crimes -- the murder of nine civilians in the Mazie Bati village in May 1944 -- and sentenced him to six years in prison. Kononov appealed the verdict and the Supreme Court released him in April on grounds of poor health while additional investigations were conducted. The Latvian prosecutor-general completed the required additional investigation and presented charges of war crimes against Kononov to the Riga Regional Court on 24 May, BNS reported.

'BALTIC SEA PARTNERSHIP 2001' OPENS IN RIGA.
Prime Minister Andris Berzins and the economy ministers of the Baltic states spoke at the official opening of the International Business Forum "Baltic Sea Partnership 2001" in Riga on 17 May, LETA reported. The main purpose of the forum is to provide an opportunity for small- and medium-size Baltic businesses (168 Latvian, 83 Lithuanian, and 53 Estonian are participating) to find partners, establish contacts, and sign contracts with representatives of 620 companies from 27 other European states. More than 10,000 such meetings are expected during the forum's two days.

ADMINISTRATIVE-TERRITORIAL REFORM.
At the 11th Congress of the Latvian Association of Municipalities and Districts in Jurmala on 18 May, Prime Minister Andris Berzins called on local authorities to participate more actively in the debate on administrative-territorial reform, LETA reported. He pointed out that the law on reform was already passed, but the number and size of the new territorial units could be changed if local authorities propose alternatives with adequate justification. Berzins urged local authorities to take part in the discussion of issues pertaining to Latvia's campaign to join the European Union. He also stressed that the government will continue to cooperate with local authorities on the renovation of schools, health care, and rural roads.

CORPORATE INCOME TAX RATE TO BE REDUCED.
The government decided on 22 May to lower the corporate tax rate next year, BNS reported. Finance Minister Gundars Berzins said that although the size of the reduction will only be determined during the preparation of the 2002 budget, the current rate of 25 percent will be lowered to 15 percent over a three-year period. He claimed that this is the most simple and general way to alleviate the tax burden and improve the business environment in Latvia. Opponents, however, argue that since the tax reduction is not directly related to the amount of investments, it is not the most effective way to encourage investments. Moreover, since the personal tax rate will remain at 25 percent, many self-employed persons may elect to register as companies in order to pay lower taxes. But Berzins estimated that such actions would result in a difference of only some 1.5 million lats ($2.37 million).
* At the 22 May Washington meeting of the U.S.-Latvian economic cooperation task force within the framework of the Baltic Charter, U.S. officials praised Latvia's economic achievements since the previous meeting in April 2000, LETA reported. The head of the delegation, Economy Minister Aigars Kalvitis, spoke about Latvia's trade and investment climate, its greater exports, economic relations with Russia, and attraction of investments. The U.S. expressed readiness for cooperation in new sectors, such as boosting e-commerce and e-management in Latvia.
* German Foreign Ministry State Secretary Dr. Gunter Pleuger told his Latvian counterpart Maris Riekstins during the annual Latvian-German consultations in Berlin on 15 May that Germany believes it is realistic for Latvia to complete its EU pre-accession talks by late 2002, BNS reported. The officials also discussed Latvia's desire to be invited at the Prague summit in 2002 to join NATO, and agreed that cooperation -- particularly economic -- between their states is successful.
* Liechtenstein took over the presidency of the Council of Europe (CE) from Latvia in Strasbourg on 11 May, BNS reported. Council of Europe Secretary-General Walter Schwimmer praised Latvia's six-month presidency, putting a special emphasis on the admission of Azerbaijan and Armenia, assistance given to the former Yugoslavia and Bosnia-Herzegovina in helping them meet membership criteria, and efforts to improve the situation in Chechnya.
* Privatization Agency General Director Janis Naglis told a press conference on 16 May that the deadline for the validity of privatization vouchers should be extended from the present deadline of 31 December 2001, LETA reported. He said that currently about 18 percent of the privatization vouchers worth a total of about 550 million lats ($866 million) have not been used. Moreover, Naglis noted that suits in the Constitutional Court are to be expected if the deadline is not extended, as the rights of voucher owners are protected by the Law on Privatization.
* Foreign Minister Indulis Berzins and OSCE mission head in Latvia Peter Semneby discussed the development of the naturalization process in Riga on 16 May, as well as the law on the social integration fund, and the possibility of lowering the naturalization tax, LETA reported.
* Environmental Protection and Regional Development Minister Vladimirs Makarovs and Czech Regional Development Minister Petr Lahnit signed an agreement in Riga on 11 May for the promotion of tourism, LETA reported. The two countries will establish a joint tourism committee for developing the priorities of cooperation for the next two years.
* Latvian and Estonian Economy Ministers Aigars Kalvitis and Mihkel Parnoja, in a meeting in Riga on 17 May, agreed that their countries will maintain a common stance on energy directives in their membership negotiations with the EU, BNS reported.
* Without the parliament's approval, four deputies from different parties traveled to Minsk on 21 May where they discussed economic relations with First Deputy Foreign Minister Sergei Martinov. The next day they held talks with Prime Minister Vladimir Yermoshin, who noted that in an upcoming meeting with Kazakh President Nursultan Nazarbaev he would discuss the issue of Kazakh oil transit through Latvian ports, BNS reported. Parliament Deputy Chairman Rihards Piks said that the parliament's presidium did not authorize the trip because Latvia does not recognize the current Belarusian parliament as legitimate.
* Parliament deputies established a Tibetan support group on 17 May in preparation for the planned visit to Latvia by Tibet's leader-in-exile, the Dalai Lama, scheduled for 21-23 June, BNS reported. The group's leader, Peteris Apinis, said that the group will have 15 members from all the parliament's factions. The Dalai Lama, who had visited Latvia unofficially in 1991, is expected to meet with parliament members, Buddhist organizations, and other parties representing the republic's social, cultural, and spiritual life.
* Welfare Minister Andrejs Pozarnovs and Polish Labor and Social Policy Minister Longin Komolowski agreed in Riga on 21 May on interstate cooperation in the reduction of unemployment, BNS reported.
* The government on 22 May endorsed Latvia's accession to the Council of Europe convention on citizenship, BNS reported. The current citizenship law meets the convention's requirements.


LITHUANIA
PARLIAMENT OVERRIDES FIVE PRESIDENTIAL VETOES.
The parliament on 17 May on five occasions rejected recommendations made by President Valdas Adamkus in vetoing legislation and once again approved them with more than the required 71 votes, ELTA reported. The parliament, by a vote of 78 to 20 with five abstentions, restored 1 May as a state holiday and not simply as a commemorative day. Seeing more negative than positive aspects to the president's amendments, which were intended to strengthen anti-corruption measures, the parliament rejected by a vote of 78 to 18, with seven abstentions, the president's amendments to the Law on Gambling and by a vote of 90 to two, with seven abstentions, his suggestions for the Law on Gambling Tax. By a vote of 75 to 26, with four abstentions, the parliament also rejected the president's amendment to the Law on Public Trading of Securities, which would have required investors who purchase more than 50 percent of a privatized company to buy the shares of small individual shareholders at the same price the government paid only if that is specifically mentioned in the purchase agreement.

PARTIES SIGN AGREEMENT ON DEFENSE POLICY.
On the eve of the NATO Parliamentary Assembly in Vilnius, eleven political parties on 23 May signed the agreement "On Lithuania's Defense Policy in 2001- 2004," which supports the allocation of a steady 2 percent of GDP for defense purposes, "Kauno diena" reported the next day. The agreement was signed by the four ruling coalition parties -- the Liberal Union, the New Union (Social Liberals), the Center Union, and the Modern Christian Democratic Union; the main opposition parties -- the Social Democratic Party, and the Homeland Union (Conservatives of Lithuania); as well as the smaller parties -- the Lithuanian Christian Democrats, the Moderate Conservatives, the New Democracy Party, the Union of Young Lithuania, and the Union of New Nationals and Political Prisoners. The aim of the document is to show the world that the opinions of political parties in Lithuania do not differ on the desire for NATO membership and that the increased defense expenditures should help the country reach NATO requirements and thus facilitate the country's possible invitation for membership at the Prague summit in 2002.

IMF URGES FASTER TAX AND PENSION REFORMS.
International Monetary Fund (IMF) envoys Patricia Alonso-Gamo and Mark Horton told parliament Chairman Arturas Paulauskas on 14 May that Lithuania should pass necessary legislation on tax, pension, and other economic reforms, ELTA reported. They said that uncertainty about these reforms has a negative impact on the development of business and investments in Lithuania. The IMF officials stated that Lithuania made clear progress during the past 18 months, but that it needs to improve fiscal policy as well as the funding of municipal budgets and administration. The Lithuanian government and the IMF are expected to sign a funding agreement in July that will be in operation until the end of 2002.

YAVLINSKY TELLS LITHUANIANS RUSSIA IS WORRIED ABOUT NATO EXPANSION.
Leader of the Yabloko Party and Russian Duma deputy Grigorii Yavlinsky traveled to Vilnius on 22 May to speak at the "Integration of Europe: Economic and Security Consequences for Central and Eastern Europe" conference about the influence of European Union expansion on Russia, ELTA reported. After a meeting with President Valdas Adamkus, Yavlinsky told reporters that while Lithuania's membership in the European Union would be useful for Russia, its desire to join NATO causes worry. Yavlinsky, however, stressed that in his own opinion Lithuania as a sovereign country has the right to choose how to organize its own security system. He also disagreed with the decision by Russia not to participate at the NATO Parliamentary Assembly in Vilnius next week as it would have been a good forum for Russia to present its views on NATO expansion.

OFFER TO SELL ONE-THIRD OF OIL REFINERY TO LUKOIL.
Economy Minister Eugenijus Gentvilas told LUKoil Vice President Yurii Storozhev in Vilnius on 16 May that the government will allow the Russian gas giant to acquire a 33 percent share of Mazeikiai Nafta, ELTA reported. He did not mention the price or terms of the purchase, but he noted that LUKoil cannot obtain the operating rights to the enterprise because they were sold to Williams International, along with one-third of the Mazeikiai Nafta shares, in October 1999. Gentvilas mentioned that LUKoil would be able to appoint an associate deputy director as well as several members of the board. Storozhev said that LUKoil will seriously consider the Lithuanian government's proposal, but he added that he thinks that the Russian gas company "could operate the enterprise more efficiently." It is not clear whether LUKoil President Vagit Alekperov will visit Vilnius this month as was agreed during a meeting with Lithuanian President Valdas Adamkus in Moscow in March.

TWO CHRISTIAN DEMOCRATIC PARTIES UNITE.
The Lithuanian Christian Democratic Party (LKDP) and Christian Democratic Union (KDS), in a joint conference in Vilnius on 12 May, voted 258 to 31 with 7 abstentions to merge into a single party, which will be called the Lithuanian Christian Democrats (LKD), ELTA reported. Former LKDP chaplain, Monsignor Alfonsas Svarinskas, accused LKDP Chairman Algirdas Saudargas of betrayal and with some 30 supporters demonstratively left the conference, hinting that they might form a new party. KDS Chairman Kazys Bobelis was elected LKD chairman and Saudargas and KDS member Edvardas Pabarcius were elected as deputy chairmen. Petras Grazulis of the LKDP was elected chairman of the LKD board with Ignas Vegele (KDS) and Grazina Paliokiene (LKDP) as his deputies. Both Christian Democratic parties failed to pass the 5 percent barrier in the last parliamentary elections and Bobelis, Saudargas, and Grazulis are the only LKD deputies in the Lithuanian parliament.

PRESIDENT APPOINTS NEW HEALTH MINISTER.
Valdas Adamkus appointed the director of the Radiology Center at the Santariskiu Clinic of Vilnius University, Romualdas Dobrovolskis, as the new health minister on 15 May, ELTA reported. The post had been vacant since the resignation of Vinsas Janusonis in early April. The Social Liberal Party earlier nominated Deputy Health Minister Eduardas Bartkevicius for the post, but Adamkus refused to appoint him, arguing that he preferred that the health minister be a qualified manager or lawyer and not someone from the ranks of Lithuania's medical personnel. Although the 61-year-old Dobrovolskis is a physician, he has had considerable administrative experience.

DEPUTY CHAIRMAN OF PARLIAMENT DISMISSED.
In a secret ballot on 15 May, the parliament voted 72 to two, with one spoiled ballot, to dismiss Peasants Party Chairman Ramunas Karbauskis from the post of deputy parliament chairman, ELTA reported. The dismissal proposal, signed by 42 deputies from the ruling coalition, claimed that Karbauskis has failed to carry out his duties of supervising the work of the parliament's committees and commissions. As supporters of Karbauskis did not participate in the vote, it was not immediately clear whether the 71 required votes would be gathered. The deciding role was evidently played by the nine Conservative deputies. The parliament also unanimously ratified the European Social Charter of 1996, accepting commitments to observe 86 out of its 98 provisions.

LITHUANIAN PREMIER PRESENTS ANNUAL REPORT ON GOVERNMENT ACTIVITIES.
Rolandas Paksas presented a more than 300-page report on the activities of his cabinet to the parliament on 24 May, ELTA reported. He pointed out that Lithuania has made great progress in its negotiations on membership in the European Union, having completed 15 of the 31 chapters or the same number as Poland and the Czech Republic. The most painful issue connected with EU membership is the fate of the nuclear power plant at Ignalina. Paksas said the main priorities for the future are "to achieve EU membership, NATO membership, and the privatization of strategic enterprises." When asked by Conservative Andrius Kubilius to name the three main tasks his government has accomplished, Paksas listed the privatization of the Lithuanian Savings Bank, the privatization of Lithuanian Shipping Company, and progress in EU negotiations.

FOREIGN MINISTER VISITS FINLAND.
Finnish President Tarja Halonen told Antanas Valionis in Helsinki on 21 May that Finland supports Lithuania's bid for membership in the European Union, BNS reported. She noted with satisfaction that Lithuania had reached the midpoint of its EU admission negotiations when it closed two more chapters on 17 May. Valionis discussed the pace of Lithuanian EU integration with his Finnish counterpart, Erkki Tuomioja. He also talked about his country's relations with Russia and the Kaliningrad exclave, noting that negotiations have been started regarding the introduction of visa regulations for Kaliningrad residents, who are currently able to visit Lithuania visa-free.

CREDIT RATING RAISED.
The international rating agency Fitch IBCA, Duff & Phelps announced that due to the considerable improvement in Lithuania's economy over the past 18 months it is raising the country's long-term foreign currency rating from BB+ to BBB-, "Lietuvos rytas" reported on 17 May. The short-term foreign currency rating has been upgraded from B to F3, while the long-term local currency rating remains unchanged at BBB+. Fitch noted that the budget deficit decreased from 7.8 percent of GDP in 1999 to 2.8 percent in 2000 and the current account deficit fell from more than 11 percent of GDP to 6 percent. The agency, however, stated that the current account deficit is still too large and the failure to secure long-term crude oil contracts with LUKoil is a concern.

LIBERAL UNION RE-ELECT PAKSAS AS CHAIRMAN.
The congress of the Liberal Union in Vilnius re-elected Prime Minister Rolandas Paksas as its chairman on 19 May by a vote of 343 to two, with 22 spoiled ballots, "Lietuvos rytas" reported on 21 May. Economy Minister Eugenijus Gentvilas, Vilnius Mayor Arturas Zuokas, and parliament deputies Dalia Kutraite-Giedratiene and Alvydas Medalinskas were re-elected as deputy chairmen. Although invited to the congress, President Valdas Adamkus did not even send a greeting, clearly expressing his displeasure with the party for not backing his veto of the re-establishment of 1 May as a state holiday a few days earlier. In the main address at the congress, Paksas reviewed the work of his government and expressed regret that reforms are slowed by excessive bureaucracy and inadequate support in the parliament from its coalition partner.
* After a meeting in Brussels on 17 May, the chairman of the European Committee, Petras Austrevicius, announced that Lithuania had completed the chapters on company law and on the free movement of goods in its EU negotiations talks, thus closing 15 of the 31 chapters, BNS reported. Lithuania also opened negotiations on the chapters on taxation and on financial control. For the first time it asked for transitional periods for the imposition of minimal excise duty rates on cigarettes and diesel fuel.
* Noting that overdue decisions often prove to be ineffective, Prime Minister Rolandas Paksas declared to the Bratislava summit of NATO candidate countries on 11 May that NATO enlargement should not be delayed, BNS reported. He said that there would be no losers in the expansion that would also benefit Russia. Paksas also noted that Lithuania was not only a country seeking security guarantees but also a country capable of making its own contribution to the collective defense system, as shown by its participation in the peacekeeping missions in former Yugoslavia.
* Kaliningrad City Mayor Yurii Savenko headed an official delegation that held talks in Vilnius on 13-15 May, BNS reported. On 14 May the delegation met with Lithuanian businessmen and the director-general of the Lithuanian Chamber of Commerce. The next day they met with members of the Lithuanian parliament's Foreign Affairs Committee and its contact group with the Russian Duma. Vilnius Mayor Arturas Zuokas and Savenko agreed to ask their national governments to support the reconstruction of a deteriorating bridge crossing the Nemunas River and approved a proposal to strengthen economic cooperation by sending Lithuanian agricultural products for processing in Kaliningrad and later sale throughout Russia.
* Maltese and Lithuanian foreign ministers Joe Borg and Antanas Valionis, respectively, signed a bilateral agreement on avoiding double taxation in Vilnius on 17 May, ELTA reported. Borg earlier held talks with President Valdas Adamkus on the possibilities of expanding cooperation in the spheres of economics, culture, science, and tourism and exchanged opinions about their efforts to join the European Union.
* The commander of armed forces, Brigadier General Jonas Kronkaitis, speaking at a meeting of defense chiefs at the Military Committee of the Euro-Atlantic Partnership Council in Brussels on 16 May, gave a short talk about one of the council's newer projects, the satellite video communications system between NATO states, which Lithuania has fully implemented, BNS reported. He also had meetings with the military leaders from Slovenia, Slovakia, and Poland and with members of the NATO Military Committee in Brussels.
* The Competition Council on 24 May gave its approval for Estonia's Hansapank, the largest commercial bank in the Baltic countries, to purchase 90.73 percent of the shares of the state-owned Lithuanian Savings Bank, BNS reported. Hansapank will immediately pay 150 million litas ($37.5 million) for the shares and pledges to invest another 150 million litas in the next two years.
* The parliament on 15 May rejected by a vote of 55 to 35 the resolution by Conservative deputy Rasa Jukneviciene proposing that Lithuania join international institutions in calling the 2000 parliamentary elections in Belarus undemocratic, BNS reported.
* A survey conducted by the Foreign Ministry indicated that EU membership would affect about 30 percent of the state's foreign trade turnover, BNS reported on 17 May. The biggest changes would occur in trade with 14 countries, the most important of which are Russia, the U.S., Belarus, Japan, Ukraine, and China. Trade with Ukraine would be the most affected since the existing free-trade agreement would become void. For example, the prices of the most popular goods exported in 1999 would increase by 10.9 percent.
* In the first four months of 2001, the freight volumes through the port of Klaipeda were 5.715 million tons or 20.8 percent less than in the same period in 2000, BNS reported on 17 May. The volume of exports declined by 21.6 percent to 4.628 million tons, while the volume of imports decreased by 17.1 percent to 1.087 tons.
* On learning that five oil companies had signed an agreement with Mazeikiai Oil pledging not to import fuel or to buy it from other importers, the Competition Council on 18 May imposed a fine of 100,000 litas ($25,000) on Mazeikiai Oil and fines ranging from 29,000 to 86,000 litas on the five companies, BNS reported.
* The decision of the Food and Veterinary Service to charge from 15 May five litas ($1.25) and 10 litas fees for the mandatory disinfecting of autos and trucks entering Lithuania aimed at preventing the spread of foot-and-mouth disease was condemned as unjustified and unfair by the president of the Latvian international truckers association "Latvijas auto," Valdis Trezins, LETA reported on 18 May. The service was forced to introduce the fees when no more funds were available.
* President Valdas Adamkus appointed Deividas Matulionis ambassador to Denmark on 16 May, BNS reported. The 38-year old Matulionis, an economist by education, began working in the foreign ministry in 1991 and had served as the prime minister's adviser on international relations since 1998.


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