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Baltic Report: August 3, 2001


3 August 2001, Volume 2, Number 20
REGIONAL
U.S. SENATE HAILS 10TH ANNIVERSARY OF RESTORED BALTIC FREEDOM.
The U.S. Senate on 18 July passed a resolution marking Estonia's, Latvia's, and Lithuania's 10th anniversary of freedom from Soviet rule, BNS reported on 20 July. Helsinki Commission Chairman Senator Ben Nighthorse Campbell, who introduced the resolution, declared: "The people of the Baltic countries broke away from the oppressive regime of the Soviets and mounted successful efforts to build democracies. They can serve as an example in leadership for other former Soviet republics." He noted the timely passage of the resolution during the commemoration of Captive Nations Week in the U.S. The resolution also calls on President George W. Bush to continue to build the close and mutually beneficial relations that the U.S. has maintained with the Baltic states since the restoration of their independence.

BALTIC STATES, KALININGRAD TO EXCHANGE EXPERIENCE IN UNEMPLOYMENT REDUCTION.
National employment authorities of the Baltic states and the Russian exclave of Kaliningrad signed a protocol on mutual exchange of experience in reducing unemployment on 23 July in Riga, BNS reported. The protocol provides for an exchange of information regarding regional labor market legislation and employment documents, methodological materials, and other information projects. The officials noted that the specific characteristics of unemployment vary in each of the countries, but that similar methods could be utilized for reducing unemployment. A major problem in the Baltic states is the level of unemployment among youths aged 15-25. While the overall unemployment rate stands at 8.7 percent in Latvia, 12.6 percent in Lithuania, and 13.9 percent in Estonia, the same rate for youths is 14.2, 13, and 24 percent, respectively.

HUNGARIAN PREMIER SUPPORTS NATO MEMBERSHIP FOR BALTIC STATES.
Victor Orban said on 23 July in Budapest that Hungary strongly supports the admission of the Baltic states into NATO, AP reported. Orban, speaking to an annual meeting of Hungarian ambassadors on home leave, said he wants "Hungarian foreign policy to put special emphasis on the Baltic republics, especially Estonia."
* The Hansapank group signed a loan agreement of 30 million euros ($25.7 million) on 20 July with the European Investment Bank for financing small and medium-size businesses in the Baltic states, BNS reported. The minimum amount of a loan will be 20,000 euros and will cover some 70 percent of joint project costs and investments into long-term assets. The average annual interest of the loans will be about 8 percent.
* Latvian and Lithuanian electrical utility officials signed a memorandum on mutual cooperation in Riga on 18 July, BNS reported, that calls for an expanded common electricity market in the Baltic states, the creation of development strategies for the energy sector, information exchange, and integration into relevant institutions of the EU. The memorandum is based on a joint Baltic government resolution of 9 July calling for the creation of a single market, integrated with the Scandinavian and West European markets and setting up an independent body of transmission system operators.


ESTONIA
EU COMMISSIONER'S QUESTIONS ABOUT TALLINN'S ADMINISTRATIVE ABILITY ANSWERED.
The EU commissioner for regional policy and institutional reform, Michel Barnier, in an interview with RFE/RL on 17 July, declared that the preparation of projects in Estonia slated for EU funding is insufficient. Barnier is in charge of the Instrument for Structural Policies for pre-Accession (ISPA) aid fund, which supports large projects in the fields of transport and the environment -- such as road and railway upgrades, waste management, and water purification systems -- that are essential to candidates' preparation for EU membership. He noted that Estonia had failed to launch any environment and transport projects in 2000-2001 for which more than 60 million euros ($51.4 million) had been allocated. After talks with Prime Minister Mart Laar and other officials on 18 July, Barnier, however, stated that "there is no reason for great concern and the projects are making progress," the daily "Postimees" reported on 20 July.

CONTROVERSY OVER PRIVATIZATION OF ESTONIAN RAILWAYS CONTINUES...
The State Audit Office declared on 16 July that the Estonian Privatization Agency assumed "unlawful financial obligations" in the privatization of 66 percent of the shares in Eesti Raudtee (Estonian Railways) to Baltic Rail Services (BRS), BNS reported. The audit office ruled invalid the privatization agency's earlier decision to allow BRS to claim a total of 350 million kroons for the purchase of Russian locomotives, possible losses from an ongoing income tax case, and demands from the bankrupt Valga refrigerator car firm against the purchase of the shares. The audit office also claimed that the privatization agreement was signed without the knowledge of the Privatization Agency Council, which was not provided the full details of the agreement. On a related issue, the European Bank for Reconstruction and Development, Estonian Hansapank, and Swedish Swedbank have decided not to fulfill earlier loan promises to BRS, ETA reported on 26 July. BRS had been seeking loans for 360 million kroons to help meet its obligation to pay more than $1 billion kroons ($56.8 million) for the Eesti Raudtee shares by 31 August.

...WHILE CRIMINAL CASE FAILS TO DEVELOP.
The State Prosecutor's Office announced on 26 July that there were no legal grounds for charging Transport and Communications Minister Toivo Jurgenson and Privatization Agency Director-General Jaak Liivik in connection with the state guarantees granted to the buyer of Eesti Raudtee (Estonian Railways), because the information submitted by the State Audit Office did not contain sufficient evidence to warrant a prosecution, ETA reported. The audit office had appealed to the prosecutor to start a criminal investigation of what it considered improper conduct by the privatization agency in the railway case.

RUSSIAN ORTHODOX CHURCH REJECTS ESTONIAN PREMIER'S COMPROMISE.
Leonid Morozkin, the press spokesman for the Estonian Orthodox Church subordinate to the Moscow Patriarchate, said that the synod of the Russian Orthodox Church decided on 13 July that it cannot accept the draft of the statutes and the change in the name of its branch in Estonia as suggested by Estonian Prime Minister Mart Laar, BNS reported. He noted that the Russian Orthodox Church granted the Estonian Orthodox Church autonomy in 1920 and cannot change its status to that of only a diocese, as Laar suggested. The synod believes that the name is sufficiently different from that of the already registered Estonian Apostolic Orthodox Church, which is subordinate to the Constantinople Patriarchate, and views the Estonian Interior Ministry's decision to reject the church's registration seven times as unilateral interference by a secular state into canonical affairs.

SWISS PRESIDENT SUPPORTS ESTONIA'S MEMBERSHIP IN EU.
In talks with his Estonian counterpart Lennart Meri in Tallinn on 19 July, Moritz Leuenberger stressed that Switzerland considers Estonian accession to the EU important, although Switzerland is not a member of the union, ETA reported. He noted that although Estonia has been successful in handling ethnic minorities, Switzerland has also dealt with the issue and "we can share our experience and make new contacts to handle these problems." Meri mentioned that the two countries should retain their very friendly relations and thanked Switzerland for the aid it has given to Estonia's defense forces. At a later meeting with Prime Minister Mart Laar, the Swiss president said that he is impressed by the emphasis being placed on the use of the Internet and information technology in the day-to-day operations of government institutions and that Estonia could serve as an example to Europe in the field.

POLISH FOREIGN MINISTER SUPPORTS ESTONIA'S NATO BID.
In a one day visit to Tallinn on 24 July, Wladyslaw Bartoszewski stressed Poland's support for the admission of the three Baltic states to NATO, BNS reported. He reminded Defense Minister Juri Luik that Russia had actively opposed Poland's NATO membership, but subsequent relations between the two states "have been the best since the East bloc's collapse 10 years ago." Bartoszewski told parliament Deputy Chairman Tunne Kelam that it is important that Estonia raise its defense expenditures to 2 percent of GDP even though the measure would be difficult for the state and not very popular. The Polish minister said that NATO membership for the Baltic states is a foreign policy priority for Poland and that he named Poland's neighbors first when asked by U.S. Secretary of State Colin Powell which countries deserved NATO membership.

FRENCH ARMY CHIEF PROMISES CONTINUED SUPPORT.
The commander of the Estonian defense forces, Rear Admiral Tarmo Kouts, informed General Jean-Pierre Kelche on 18 July about the development and future plans of the Estonian armed forces, BNS reported. Kelche later discussed with Defense Minister Juri Luik European security, the situation in the Balkans, and developments in Russia. He promised Prime Minister Mart Laar France's continued help with and support for his country's efforts to join NATO and praised the structure of the country's defense forces. Kelche, however, noted that NATO enlargement is a political rather than military decision, and stressed that the more successful a country is in accession talks with the European Union, the higher its reliability in the eyes of NATO. He declared that Moscow's claims that NATO's expansion into the Baltic states would pose a threat to Russia's security cannot be taken seriously, but carefully avoided saying which countries are likely to receive invitations to join NATO at the Prague summit next year.

CPI INCREASED 1.6 PERCENT IN Q2.
The state Statistics Office announced on 20 July that the consumer price index rose by 1.6 percent in the second quarter of 2001 as compared to the first quarter and 6.7 percent compared to the second quarter of 2000, BNS reported. The most significant price increases were for food, housing services, and gasoline, while the cost of communications services fell by 1.2 percent.

AGRICULTURAL PRODUCTION INCREASING.
The Statistics Office announced on 25 July that in the first half of 2001 the production of milk had increased by 11 percent, eggs by 5 percent, and meat and poultry by 3 percent in comparison to the same period last year, ETA reported.
* The government empowered Finance Minister Siim Kallas on 17 July to sign a 45 million euro ($38.6 million) loan with the Nordic Investment Bank to finance the repair of state roads, BNS reported. The loan is for 15 years, but only the interest will be due the first ten years. The loan will be used to rebuild the Maardu-Aaspere section of the Tallinn-Narva highway to upgrade the Ikla-Tallinn-Narva road.
* Interior Minister Tarmo Loodus and representatives of EADS Deutschland GmbH signed a contract on 24 July to purchase 20 maritime surveillance radars for 411 million kroons ($22.9 million), BNS reported. The cost will also cover installation and maintenance over 25 years. The first radars should be installed in 2003 with the last completed before the end of 2004.
* The Statistical Office on 18 July released a survey showing that the number of Russian-speaking students in Estonia's general educational establishments declined from 63,087 in the 1999-2000 school year to 59,135 in the 2000-2001 school year, BNS reported. The number of Russian-speaking students in vocational schools fell by 364 during the same period, to 10,346.
* President Lennart Meri on 18 July appointed Kaja Tael ambassador to Great Britain, replacing Raul Malk, who had served in the post since 1996 -- except for a six-month period in 1998-1999 when he served as foreign minister, BNS reported. The 40-year old Tael is a graduate of Tartu University and was a presidential foreign-policy adviser from 1995-1998 and since 1999 has been the director general of the Foreign Ministry's policy planning department.
* Regional Affairs Minister Toivo Asmer met in Tallinn on 18 July with Vladimir Blank, the deputy governor of Russia's Pskov Oblast. The two discussed the possibility of setting up a Euroregion consisting of neighboring areas of Estonia and Pskov Oblast, BNS reported. Blank said that Pskov would soon make an official proposal to establish an Euroregion as an apolitical and decentralized zone of cooperation.
* A four-day joint seminar on fighting organized crime, sponsored by the FBI and the Estonian Interior Ministry, began in Tallinn on 16 July with more than 50 specialists from 16 European countries and the U.S. participating, BNS reported. During the seminar, reports on how the FBI, Scotland Yard, and other European law-enforcement agencies fight organized crime and the organized crime situation in various countries were presented.
* The Citizenship and Migration Board announced on 19 July that in the first six months of 2001 Estonian citizenship was granted to 1,714 people. Another 218 persons renounced their citizenship, resulting in a net increase of 1,496 Estonian citizens, BNS reported.
* According to information released by the Estonian Mobile Telephone on 18 July, 645,900 people or slightly more than 47 percent of the Estonian population use mobile phones, BNS reported.


LATVIA
VERHEUGEN REAFFIRMS LATVIA'S READINESS TO JOIN EU.
EU Enlargement Commissioner Guenter Verheugen told President Vaira Vike-Freiberga during a lunch at her Jurmala residence on 20 July that Latvia has made satisfactory progress toward EU membership and has a good chance of being included among the first-round EU enlargement candidates, BNS reported. In doing so, Verheugen reaffirmed the comments he made to Vike-Freiberga during the recent World Economic Forum session in Salzburg (see "Baltic States Report," 23 July 2001). Verheugen also held talks the same day with Prime Minister Andris Berzins, Foreign Minister Indulis Berzins, and parliament Chairman Janis Straume. The previous day, Verheugen visited the western towns of Liepaja and Kandava, declaring that it is necessary to travel outside the capital to better understand the situation in the entire country. In talks with Liepaja Mayor Uldis Sesks, Verheugen asserted that the only way for the Baltic states to defend their sovereignty is in cooperation with other sovereign countries.

U.S. GOVERNMENT SAYS LATVIAN STEEL REBAR DUMPED IN U.S. MARKET.
The U.S. International Trade Commission declared that imports of steel reinforcement bars (rebar) from Latvia and several other countries are sold at "less than fair market value" in the U.S., causing damage to the domestic steel industry there, and threatened to apply additional import duties of up to 232 percent, BNS reported on 16 July. The U.S. Trade Department had previously imposed a 17 percent antidumping duty for steel rebar imports from Latvia. The Liepajas metalurgs company was one of the largest exporters of steel rebar to the U.S., sending about half of its production there, but has reduced its shipments to the U.S. significantly. Liepajas metalurgs President Kirovs Lipmans said the company decided not to completely halt exports to the U.S. so as to avoid being forgotten in the event the U.S. commission changes its decision. He said that the company has found other customers in Europe, South America, and Africa, although it sells its products in those markets for lower prices than to the U.S.

RENOVATED FREEDOM MONUMENT UNVEILED.
President Vaira Vike-Freiberga, Prime Minister Andris Berzins, and parliament Chairman Janis Straume attended the unveiling ceremonies on 24 July of the renovated Freedom Monument in downtown Riga, LETA reported. Work to repair the monument, originally built in 1935 by sculptor Karlis Zale, had been underway since November 1998. The renovations were financed by private donations of 540,000 lats ($850,000). The chairman of the Freedom Monument Restoration Fund, Raimonds Bulte, gave the president a silver reproduction of the monument, thereby symbolizing its return to the people. Vike-Freiberga said that the monument, adorned with the inscription "For the Fatherland and Freedom," was devoted to the memory of those who fought for Latvia's independence and is still recognized today as a national symbol.

EU REGIONAL COMMITTEE CHAIRMAN PRAISES LATVIA'S ACCESSION PREPARATIONS.
Jos Chabert told a press conference in Riga on 26 July that his two days in Latvia convinced him that the country will soon end the EU accession negotiations and return to the "family of Europe to which it belongs." The previous day, President Vike-Freiberga expressed the hope to Chabert that his visit will give a positive impetus for regional reform implementation and balanced development of Latvia's regions.

GOVERNMENT BACKS INCREASED 2002 BUDGET DEFICIT.
The government on 24 July approved a draft 2002 budget that anticipates revenues of 741 million lats ($1.16 billion) and expenditures of 855.6 million lats, LETA and BNS reported. The resulting budget deficit will make up about 2.76 percent of GDP, much higher than this year's anticipated deficit of 1.8 percent of GDP. Finance Minister Gundars Berzins said that greater expenditures are needed to facilitate efforts at NATO and EU integration as well as to provide increased funding for education. The 2002 budget must be sent to the Saeima for consideration by 1 October.

PENSIONERS CALL ON PREMIER TO TACKLE SOCIAL PROBLEMS IMMEDIATELY.
Leaders of the Latvian Pensioners Federation at a meeting on 19 July called on Prime Minister Andris Berzins to begin tackling social problems immediately, LETA reported. They asked that pensions be indexed, the option for early retirement be retained, and that working pensioners be allowed to receive pensions. They also want to see the social budget deficit reduced. Berzins expressed regret that financial considerations would make it impossible to retain both the early retirement option and offer pensions to working pensioners.

TRADE DEFICIT CONTINUES TO RISE.
The Statistics Office announced on 17 July that in the first five months of 2001 the total volume of imports was 854.4 million lats ($1.33 billion), or 15.8 percent greater than in the same period last year, LETA reported. Meanwhile, the volume of exports rose by only 14.2 percent to 529.3 million lats. European Union countries remained Latvia's main trading partners, accounting for 62.8 percent of exports and 52.4 percent of imports this year. Latvia's trade deficit with those countries grew as imports increased by 12.2 percent and exports by only 7.3 percent.

FITCH IBCA INCREASES DEVELOPMENT FORECAST RATING.
The international credit rating agency Fitch IBCA, in its annual credit rating for Latvia, issued on 17 July, upped Latvia's development forecast rating from "stable" to "positive," LETA reported. Fitch retained Latvia's credit ratings at: "BBB" for long-term loans in foreign currencies; "A" for long-term loans in local currency, and "F3" for short-term loans in foreign currencies. The agency noted that last year Latvia cut its budget's fiscal deficit and increased its GDP by 6.6 percent, while the current account deficit fell to 6.8 percent of GDP. Fitch gave Estonia a rating of "BBB+" and Lithuania a "BBB-," but both have the lower development forecast rating of "stable."

ESTONIAN, LATVIAN FINANCE MINISTERS FAIL TO AGREE ON TAX CONVENTION.
Siim Kallas and Gundars Berzins, at a meeting on 23 July in the border town of Valka, were unable to reach an agreement on how to settle a dispute concerning the 1993 bilateral agreement on the avoidance of double taxation, BNS reported. Arguing that Estonia had changed its income tax laws significantly in 2000 when it required companies registered in Estonia to pay taxes on profits only when those profits are distributed as dividends, Latvia on 31 May unilaterally suspended the implementation of the double-taxation avoidance agreement as of 1 June. The ministers agreed that Latvia will present by September the changes it would like to see in the agreement, in order to allow experts from both countries to discuss the proposed changes and reach an agreement before the end of 2001.

OSCE MISSION SAYS CONTROVERSIAL ESSAY CONTEST IN 'BAD TASTE.'
Peter Semneby, the head of the Organization for Cooperation and Security in Europe (OSCE) mission in Latvia, called the recent controversial essay contest by the Vieda publishing house and the publication of the book "We Will Give Latvia to No One" -- which contains some of the essays -- as an example of bad taste, BNS reported on 13 July. He said that the book's "content is...appalling, but not hateful" and does not promote national hatred as claimed in a protest by the Russian Foreign Ministry. Semneby noted that the book does not express the views of Latvian officials or government -- one of whose priorities is the integration of national minorities -- and does not warrant further attention.
* EU Commissioner for Regional Policy and Institutional Reform Michel Barnier told Latvian officials in Riga on 17 July that he was pleased with Latvia's decision to concentrate responsibility for EU structural funds in one institution subordinate to the Finance Ministry and asserted that EU candidate countries should take a more active role in discussing Europe's future, LETA reported.
* After a meeting with his Latvian counterpart, Raimonds Graube, and other military officers, French Armed Forces Commander General Jean Pierre Kelche told reporters on 17 July that the development of the Latvian armed forces is adequate with well balanced capacities and resources, LETA reported. In talks with Foreign Minister Indulis Berzins he noted the importance of political support for military reform, especially in order to obtain needed funding.
* Uzbek Foreign Economic Affairs Minister Elyar Ganiev traveled to Riga on 18 July to attend the third meeting of the Latvian-Uzbek Intergovernmental Commission, LETA reported. In a subsequent meeting with Foreign Minister Indulis Berzins, he talked about the possibility of using Latvian ports for transshipment of Uzbek goods, the formation of joint-ventures as well as Uzbekistan's efforts to join the World Trade Organization.
* Ventspils Mayor Arvids Lembergs called on Latvian Savings Bank President Arnolds Laksa to resign because the sale of 350,000 shares of bank stock to the British-registered firm Hafra Limited was a classic case of money laundering, BNS reported on 19 July. The shares were sold for 4.7 lats ($7.30) each, even though until recently they were valued at only 1.7 lats.
* The International Organization for Migration (IOM) Director-General Brunson McKinley suggested to Interior Minister Mareks Seglins on 19 July in Riga that Latvia should codify the status of illegal immigrants in the future, BNS reported. He noted that Latvia's borders will become the borders of the EU and it is possible that the flow of illegal migrants from Asia to Western Europe, which now primarily goes through southern Europe, could shift to Latvia. Seglins thanked the IOM for its assistance in restricting illegal immigration and helping cover the costs Latvia had incurred housing illegal immigrants.
* The Riga district court on 17 July approved a request by the Bank of Latvia to declare the Paritate Bank insolvent, BNS reported. The bank's losses on 22 June were calculated at 5.781 million lats ($9.01 million) with liabilities exceeding assets by 2.835 million lats.
* President Vaira Vike-Freiberga received on 24 July a letter of accreditation from Germany's new ambassador to Latvia, Eckart Herold, LETA reported.
* The AIDS Prevention Center announced on 16 July that 459 new cases of HIV infection had been reported so far this year, or only six less than in all of 2000, LETA reported.


LITHUANIA
U.S. CLAIMS LITHUANIA DOES NOT MEET MINIMUM STANDARDS FOR FIGHTING HUMAN TRAFFICKING.
A U.S. State Department report placed Lithuania on a list of 43 countries that are making significant efforts to fight trafficking in humans, but do not yet meet the minimum criteria, BNS reported on 18 July. The report said Lithuanian women are sold for sexual exploitation to customers in Western Europe (mentioning Germany, the Netherlands, Denmark, France, and Austria), Israel, and the United Arab Emirates. It noted that although the Lithuanian Criminal Code prohibits human trafficking with penalties "commensurate with the penalties for rape or sexual assault," and the government has investigated cases of trafficking, there have not yet been any prosecutions for the crime. The government was also criticized for providing limited funding for the prevention of trafficking and rehabilitation programs for victims. France, Sweden, Japan, Poland, Hungary, the Czech Republic, and Slovenia are among the other states listed in the same second tier as Lithuania. The report's third tier, composed of 23 countries where the situation is worse and little or no efforts are made to fight the lucrative business, includes Greece, Turkey, Israel, South Korea, Russia, and Belarus. The report does not mention Estonia or Latvia.

FRENCH PRESIDENT SAYS PARIS EMBASSY ISSUE RESOLVED.
Accompanied by a delegation of more than 100 officials and reporters, Jacques Chirac began a three-day official visit to the Baltic states in Vilnius on 26 July with a meeting with President Valdas Adamkus, ELTA reported. Chirac said that France "understands and favorably evaluates" Lithuania's efforts to join the EU and NATO. He stated that Lithuanian Foreign Minister Antanas Valionis and French Minister for European Affairs Pierre Moscovici have finally settled the fate of the Lithuanian Embassy in Paris, which was handed over to the USSR in 1940. Talks between Lithuanian and Russian officials about the return of the building had been unsuccessful for nearly 10 years. France agreed to purchase Lithuania's rights to the building for 23 million French francs ($4 million), a sum with which other facilities may be purchased.

NEW PRIME MINISTER'S FIRST FOREIGN TRIP.
In his first foreign visit since assuming office, Algirdas Brazauskas flew to Brussels on 24 July for talks with NATO Secretary-General Lord George Robertson and EU Commissioner for Enlargement Guenter Verheugen, BNS reported. The premier assured Robertson that the change in the Lithuanian government will have no effect on foreign policy and that NATO membership remains a priority for the country. Robertson noted that Lithuania has made great progress in preparing for NATO membership and stands a good chance of being invited for membership next year if reforms continue. The two-hour meeting with Verheugen focused on Lithuania's desire to be among the first candidates to be admitted to the EU. Among the major obstacles for this are the nuclear power plant at Ignalina and the visa-free agreement with the Kaliningrad region. The EU is primarily concerned about pushing up the date for closing the Ignalina plant, while Lithuania needs to obtain more funds to finance the shutdown and deal with the resulting unemployment.

EU COMMISSIONER BARNIER URGES BETTER USE OF EU FUNDS.
The EU Commissioner for regional policy and institutional reform, Michel Barnier, told President Valdas Adamkus in Vilnius on 19 July that Lithuania should make better use of the special EU funds allotted to the country, the daily "Lietuvos rytas" reported the next day. He noted that Lithuania currently receives about 125 million euros ($107 million) from various EU funds, but that the aid would rise to at least $1 billion should Lithuania become an official member state. Barnier is in charge of the Instrument for Structural Policies for pre-Accession aid fund from which Lithuania is currently receiving EU assistance of 66 million euros for six projects. Adamkus mentioned that agriculture will be among the most difficult chapters for Lithuania to close in its EU membership negotiations, and expressed the hope that aid from the SAPARD fund will finally be received and accelerate reform.

PARLIAMENT CHAIRMAN VISITS WASHINGTON.
Arturas Paulauskas began a five-day visit to Washington on 24 July by participating in a friendly basketball game with four U.S. congressmen, including John Shimkus, who had played in a similar game during the May NATO Parliamentary Assembly in Vilnius, "Lietuvos rytas" reported the next day. On 25 July he visited the Holocaust Memorial Museum, met with representatives of U.S. Jewish organizations, and had separate meetings with Senators Richard Durbin and Peter G. Fitzgerald, and Congressman Elton Gallegly. The next day Paulauskas discussed with House of Representatives Speaker Dennis Hastert and nine other Congressmen his countries efforts to join NATO and its relations with Russia. They appreciated Lithuania's decision to hold an extraordinary parliament session to approve laws needed for the Williams-YUKOS oil deal. Williams International Investment Director Randy Barnard assured Paulauskas that the company is willing to seek additional oil from other Russian oil companies.

YUKOS MEETS ITS JULY CRUDE OIL OBLIGATIONS TO MAZEIKIAI REFINERY.
The Russian oil company YUKOS is fulfilling the pledge it made in June to Williams International to supply the Mazeikiai oil refinery with at least 300,000 tons of crude oil in July, ELTA reported on 13 July. YUKOS Vice President Mikhail Brudny sent an appeal to the Lithuanian parliament that day asking it not to delay the passage of amendments to laws necessary to allow the successful completion of the YUKOS-Williams International agreement signed on 14 June, under which YUKOS would acquire 26.85 percent of Mazeikiai Oil shares for $150 million in investments and loans while supplying the refinery with 4.8 million tons of crude oil per year for the next 10 years. The new coalition in the parliament and the new government led by Algirdas Brazauskas has not declared its position on the YUKOS agreement while the Russian oil companies TNK (Tyumen oil company) and LUKoil continue to lobby in hopes of displacing YUKOS.

LITHUANIA'S TOP OFFICIALS MEET TO DISCUSS YUKOS AGREEMENT.
At a meeting on 20 July, President Valdas Adamkus, Prime Minister Algirdas Brazauskas, and parliament Chairman Arturas Paulauskas expressed their approval of the agreement recently reached between Williams International and the Russian oil firm YUKOS to supply crude oil to Mazeikiai Nafta, ELTA reported. However, the participants asserted that there are a number of points in the agreement that should be made more favorable to Lithuania prior to the extraordinary parliamentary session scheduled to be held from 30 July to 3 August. The leaders also discussed the country's energy sector, next year's budget, the disbursement of funds obtained by the Privatization Agency, and other issues.

FRENCH ARMY CHIEF TIGHT-LIPPED ABOUT NATO CANDIDATES.
The commander of France's armed forces, General Jean-Pierre Kelche, completed a two-day visit to Lithuania on 16 July with a meeting with President Valdas Adamkus, ELTA reported. In talks with Defense Minister Linas Linkevicius, he praised Lithuania for its determination in reaching its objectives and realistic attitude, noting that "Lithuania has chosen the right path and knows where it's going." Linkevicius thanked Kelche for French assistance in training junior staff officers, for French language classes in military schools, and the large supply of ammunition delivered recently. Kelche, however, refused to comment officially on France's position on Lithuania's possible membership in NATO, saying the decisions on enlargement will be taken during the alliance's summit in Prague next year.

INDUSTRIAL CONFIDENCE INDICATOR CONTINUES TO FALL.
The Statistics Department announced on 25 July that Lithuania's industrial confidence indicator, which reflects business trends in the country, fell from -8 in May to -10 in June, BNS reported. This March, the indicator was positive (+2) for the first time in seven years, but it has subsequently declined. The indicator is calculated by evaluating the demand for industrial production as well as forecasts for industry and industrial reserves. The decrease in the indicator in June was primarily due to a decline in production; 24 percent of the respondents said that their production output fell in June compared to 14 percent who said that in May. The share of respondents whose production output increased in June was 34 percent compared to 45 percent in May, while the share whose production remained unchanged fell from 43 to 41 percent. The percentage of respondents anticipating a decline in production output in the next three to four months grew from 16 percent in May to 18 percent in June, while those seeing an increase fell from 27 to 24 percent.
* U.S. President George W. Bush sent a letter of congratulations to Prime Minister Algirdas Brazauskas, welcoming the new government's plans to keep up the pace of reforms in Lithuanian national defense and to make progress in the country's NATO Membership Action Plan (MAP), BNS reported on 17 July. Bush wrote that he hoped American investments in Lithuania's energy sector, which he said were beneficial to both countries' national energy strategies, would receive support.
* The U.S. steel processing company Penninox launched a stainless steel production facility project in Klaipeda on 13 July, BNS reported. U.S. Ambassador to Lithuania John F. Tefft said during the project launch ceremony that this is Penninox's first plant in Europe, which will employ around 140 Lithuanian residents and attract $45 million in investments.
* Swiss President Moritz Leuenberger, on a short visit to Vilnius on 20 July, held talks with President Valdas Adamkus, ELTA reported. The presidents pledged to continue mutual cooperation and called for greater bilateral trade.
* A maritime safety seminar, organized by NATO's South Atlantic Regional Headquarters under NATO's Partnership for Peace Program, was held in Klaipeda on 16-18 July, BNS reported This was the first time the seminar was held in a non-NATO member state. The seminar was attended by 28 officers from Great Britain, U.S., Algeria, Bulgaria, Romania, Croatia, Lithuania, and Latvia.
* The Road Transport Directorate and the European Investment Bank on 20 July signed an agreement for a loan of 50 million euros ($42,8 million) to finance reconstruction of highways, BNS reported. The total cost of the highway modernization project is 115 million euros of which 65 million euros is expected from the ISPA Fund,
* Kauno Vandenys (Kaunas Water) signed an agreement with the European Bank for Reconstruction and Development on 20 July for a loan of 14.7 million euros ($12.6 million) for financing the construction of a biological sewage treatment facility and of an iron removal system at the Petrasiunai water inlet as well as developing the water-supply network, BNS reported. EBRD Director Thomas Maier noted that this was the first time the bank had granted a loan to a company in Lithuania without a state guarantee.
* The Lithuanian Gambling Commission, in its first meeting on 17 July, elected Ceslovas Blazys, a former Vilnius chief police commissioner and interior minister, as its chairman, ELTA reported. Vytautas Janulis was elected deputy chairman and Jonas Ragauskas as secretary. The gambling law went into effect on 1 July, but no gambling establishments were opened because the commission that is empowered to issue licenses had not been formed. Although the gambling law was passed in April, the president, premier, and parliament chairman had each named their two nominees to the commission only in July.
* The State Border Service announced on 23 July that in the first half of the year 1.793 million foreigners visited Lithuania, ELTA reported. This was an increase to 5,500 or 0.3 percent compared to the same period last year. The greatest number of visitors came from Latvia (583,000), Russia (498,000), Belarus (272,000), and Estonia (109,000).
* President Valdas Adamkus accepted on 24 July the credentials of the Dutch, Chilean, and Japanese ambassadors to Lithuania -- Pim Richard Dumore, Shohei Naito, and Jaime Lagos Erazo, respectively, ELTA reported. Dumore will be the first Dutch ambassador to reside in Vilnius since his predecessors had lived in Riga. Naito and Erazo reside in Copenhagen. The next day Adamkus accepted the credentials from the first ambassadors to Vilnius from Nigeria and Zambia, Alfred J. Nanna and Josephine Sarah Kafwembe, respectively, BNS reported.


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