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Baltic Report: December 18, 2000

18 December 2000, Volume 1, Number 38
Senior leaders from all three Baltic states attended the European Union summit in Nice in early December. Estonian President Lennart Meri said in public comments that it was extremely important that the EU continues to expand if it is to maintain the credibility of its claims that it will grow. And Lithuanian President Valdas Adamkus said that the applicant countries had already contributed to the formation or a more stable and prosperous Europe.

The Baltic Assembly in Vilnius on 8-9 December declared that "the early integration of Estonia, Latvia, and Lithuania into NATO is in the interest of promoting democracy and security in Europe," but the delegates refused to accept Lithuania's proposal that the statement should suggest that the invitation of at least one Baltic state would be beneficial for all three. Because of this and other disputes, they did not have enough time to prepare a final version of an appeal to Russia asking it to recognize the occupation and annexation of the three states in 1940 and open talks on compensation.
* Education officials from all three Baltic countries on 8 December signed an accord in Palanga that allows students from any of the three to enroll in universities of any of the other two on the same terms as students from the country in which the educational institution is located.
* The UN Economic Commission forecasts that the GDPs of Estonia, Latvia, and Lithuania will grow by 5.5. 4.5, and 2.1 percent in 2000, and 5.5, 4.4, and 3.5 percent in 2001, respectively, BNS reported on 6 December.

More than 4,000 pensioners demonstrated in front of the Estonian parliament on 6 December to demand higher pensions, ETA reported. Rally leaders, including the Estonian People's Union and the Pensioners' Association, said that pensions should be raised by an average of 110 kroons ($6.20) a month in order to keep pace with inflation. At the beginning of 2000, there were 371,354 pensioners in Estonia, and consequently financing that increase would cost the government 410 million kroons a year. Prime Minister Mart Laar has said that an increase in pensions may be possible in April 2001, but Finance Minister Siim Kallas has indicated that the government is unlikely to consider any increase before 2002.

Estonian and EU negotiators on 4 December agreed to provisionally close the chapter on the free movement of goods, an indication that the two sides are very close to a final agreement, ETA reported. The chapter in the aquis is one of the most extensive, involving nearly 500 legislative acts; among applicant countries, only the Czech Republic has closed it. Harmonization of Estonia's legislation in this area with that of the EU is estimated to cost 300 million kroons ($17 million), but Tallinn has not asked for a transition period.

President Lennart Meri on 30 November suggested Rein Muellerson, professor of law at London's King's College, and Kaido Pihlakas, a Tallinn lawyer, as candidates for the vacant position of legal chancellor, the official who rules on the constitutionality of legislation. The post has been vacant since June, when Eerik-Juhan Truuvali's seven-year term expired. In October, the parliament rejected Meri's first nominee, Priit Kama.

Narva's city council elected Center Party member Imre Liiv, 31, as mayor by a vote of 16 to 14, BNS reported on 4 December. Liiv replaces Eldar Efendiyev, also of the Center Party, who resigned on 26 October in advance of an anticipated no-confidence vote by the council. Liiv had been head of the Narva office of the ESS security company.

Germany's HypoVereinsbank, the Banca Commerciale Italiana, and UnCredito Italiano have signed a financing agreement with Ruma Estonia OU worth 3.8 billion kroons ($205 million) to construct a modern steel terminal in Tallinn's Muuga Port, BNS and ETA reported on 29 November. According to "Aripaev Online," this is the largest-ever investment in Estonia, exceeding the 3.5 billion kroons that Swedbank paid to take over Hansapank. Expected to be operational in 2002, the new facility will have 35,000 square meters of warehouse space, an export/import facility, and a line for galvanizing steel with an annual capacity of 400,000 tons. The terminal will comply with all EU environmental safety requirements, but there may be other problems ahead: U.S. steel industry officials have said that the use of Russian or Ukrainian raw materials at the site might trigger dumping charges against International Steel Industries, the owner of Ruma Estonia, "The Wall Street Journal" reported on 4 December.

The Estonian Privatization Agency on 27 November approved the sale of Edelaraudtee (Southwest Railway) to the British company GB Railways for 10 million kroons ($538,000), ETA and BNS reported. The British company is obliged to invest 260 million kroons in Edelaraudtee over five years and guarantee jobs for 366 of the current 830 employees. On 29 November GB Railways paid the 10 million kroons, half of the sum in Estonian privatization vouchers, and appointed three members to the Edelaraudtee supervisory council, one of whom became the council's chairman.

Two thousand of the more than 4,700 inmates in Estonia's six prisons began a hunger strike on 1 December to protest rules banning parcels for inmates and requiring that half of inmates' personal savings and any money sent to them be used to compensate victims in accordance with a new prison law that went into force that day. Previously, only money earned by inmates was subject to such deductions. The protests were peaceful except in the Viljandi youth prison where on 2 December some 20 inmates barricaded a lounge and smashed all its windows. BNS and ETA reported about the strike from 2 to 9 December.
* Estonia had a trade deficit in October of 1.916 billion kroons ($103 million), with exports of 6,825 billion kroons and imports of 8,741 billion kroons, BNS reported on 27 November. Total customs revenue in October was 1,111 billion kroon, 79.7 percent of which was revenue from VAT.
* The government on 28 November decided to oppose a bill offered by deputies in three of the coalition parties that would have continued to require that candidates for high office to swear that they have had no ties with foreign intelligence services, ETA reported. Prime Minister Mart Laar noted that legal experts have pointed out that the requirement could only be extended by a referendum since it had been instituted by a referendum in the first place. He added that the government was interested in a continued vetting procedure "at a certain level" and that the parliament could approve an analogous procedure under a different name.
* The government on 28 November approved a bill abolishing the restrictions on foreigners purchasing real estate near the coastline, ETA reported. The current law differentiates between Estonian citizens and foreigners and thus violates the EU principle of free movement of capital. The bill, which would comply with article 56 of the EU foundation agreement, still must be approved by the parliament.
* The Veterinary and Food Inspectorate on 28 November banned all beef imports from Germany after the recent discovery there of several cases of mad cow disease, BNS reported. The previous week Estonia banned beef imports from Spain.
* Lt.Gen. David S. Weisman, a U.S. military representative at NATO, told Estonian Foreign Minister Toomas Hendrik Ilves on 29 November that the U.S. will continue to support Estonia's efforts to join NATO, BNS reported. During his two-day visit to Estonia, Weisman also met with Defense Minister Juri Luik and visited the navy's new flagship, the Admiral Pitka, the Amari airspace surveillance center, and the peacekeeping operations center in Paldiski.
* Estonian and Russian officials have agreed to exchange information and personnel between border regions in the two countries, BNS reported on 30 November. Director General of the Estonian Police Department Harry Tuul and Maj. Gen. Vladimir Datsyuk, head of the interior affairs department of Russia's Pskov, signed the accord which builds on the December 1997 cooperation agreement.
* Defense Minister Juri Luik and army chief Rear Adm. Tarmo Kouts on 30 November laid the cornerstone for Estonia's first new military complex to be built since the recovery of independence, BNS and ETA reported. Luik noted that building new defense structures is considerably cheaper than restoring those formerly used by Soviet forces. The defense ministry plans that most conscripts will be trained at the Tapa complex, which will also house the Tartu and Kalev infantry battalions, an artillery group, and an anti-aircraft division. Construction should be completed by 2004.
* Estonia's government had a surplus in October, the first time it has been in the black in 2000, ETA reported on 30 November. That lowered the overall ten-month budget deficit to 212.8 million kroons ($12 million) or approximately 0.25 percent of GDP.
* President Lennart Meri visited Paris on 4-5 December to discuss plans for the opening of an exhibition there next spring "Estonian Art at the Turn of the Millennium," BNS reported.
* Kreenholm Holding Ltd., the largest industrial firm in Estonia, has signed an agreement on 6 December with a syndicate of Western banks for a 25.8 million euro ($22.8 million) investment loan to modernize production, BNS reported. Kreenholm was successfully privatized in 1995 and currently sends more than 80 percent of its production to Western Europe and the U.S.

Lawmakers on 30 November approved the 2001 budget on a vote of 67 to 32, BNS and LETA reported. Revenues are planned to increase by 4.3 percent to 1.436 billion lats ($2.297 billion) and expenditures to 1.503 billion lats, resulting in a budget deficit of 73 million lats or 1.7 percent of GDP. The budget assumes a 4.4 percent GDP growth and a 3.5 percent inflation rate. The largest expenditure increases are planned for Latvia's integration into NATO and the EU as well as for education.

Prime Minister Andris Berzins on 29 November announced the beginning of the country's largest-ever campaign to involve the public in the fight against corruption, BNS reported. Financed by the PHARE anticorruption legislation, education, and public information program, the Latvian government, and other institutions, this effort is to last through July 2001. It will include the publication of various booklets and the production of television programs to explain what corruption is and how to combat it. Meanwhile, the parliament on 7 December ratified the Council of Europe's anti-corruption convention.

The Central Election Commission announced on 7 December that municipal elections will take place on 11 March 2001, BNS reported. Latvian citizens will elect representatives to 72 town councils, 473 county councils and, for the first time, seven area councils. Under amendments to the election law, lists of candidates in towns and areas where the population exceeds 5,000 will be accepted only from political groups and their registered and unregistered alliances.

People's Party Chairman Andris Skele on 30 November proposed that the enactment of the commercial law be postponed for six months, until 1 July 2001, LETA reported. The law as drafted would require some 100,000 companies to re-register with the government. Skele said that this requirement would be particularly painful for farms as well as small and medium-sized companies. But Prime Minister Andris Berzins and other party leaders told LETA that they are against postponing consideration of the legislation. Minister of Economy Aigars Kalvitis, however, agreed with Skele, arguing that the consequences of adopting the law have not been sufficiently evaluated. But on 6 December the government also agreed to the postponement because insufficient funds had been allocated for the registration process, BNS reported.

During visits to Brussels and Helsinki, President Vaira Vike-Freiberga restated Latvia's interest in joining NATO and the European Union as soon as possible. European Commission President Romano Prodi on 27 November praised Latvia's achievements, saying that the country is one of the best EU candidate states. And Finnish President Tarja Halonen on 30 November praised Latvia's progress in this regard as well. Foreign Minister Indulis Berzins made the same points at an international conference in Rome on 4 December, BNS reported.
* The United States will move its U.S. Department of Trade Baltic Office from Stockholm to Riga in early 2001, visiting U.S. Assistant Secretary of Commerce Patrick Mulloy told Latvian officials on 30 November, LETA reported.
* After meeting President Vaira Vike-Freiberga on 5 December, the Latvian parliament's foreign affairs committee agreed to send the Latvian-Australian extradition treaty to the full parliament for consideration, BNS reported. That paves the way for Riga to request the extradition of Konrads Kalejs, who resides in Australia and is accused of committing war crimes during World War II. The Latvian Prosecutor-General's Office has already assembled the necessary documents for such a request.
* National Bolshevik Party leader Vladimir Moskovtsev began a hunger strike on 7 December to protest his detention in the absence of a court judgment, BNS reported. He was arrested in late November on charges of involvement in illegal border crossings as well as the seizure of St. Peter's Church in Riga by National Bolsheviks from Russia.

On 8 December, Lithuania became the 141st member of the World Trade Organization, BNS reported. The WTO voted to admit Vilnius on condition that it ratifies 28 major agreements and fulfills its commitments to the organization. Lithuania is the last EU candidate country to be admitted to the WTO and also the last Baltic state to do so -- Latvia was admitted in 1998 and Estonia in 1999. President Valdas Adamkus told the WTO General Assembly in Geneva that membership "will secure and consolidate my country's due place in the global network of economic interdependence."

The cabinet on 6 December endorsed draft chapters for EU membership dealing with legal and internal affairs, energy, and finance control, BNS and ELTA reported. Under the terms of these accords, Lithuania will tighten its borders with Kaliningrad and Belarus. Moreover, it will ask for a transition period until 2008 to allow for the construction of the necessary fuel storage facilities the EU requires. With this approval, Lithuania now has formulated its negotiating positions with the EU on 26 of 29 main chapters of EU membership requirements.

The decision by Lietuvos Telekomas to raise local phone rates and eliminate each subscriber's one hour per month of free local telephone calls as of 1 January 2001 has sparked a political firestorm in Vilnius. Prime Minister Rolandas Paksas urged Tapio Paarma, General Director of the Swedish-Finnish controlled firm, to roll back prices on local phone rates expected to hurt pensioners and Internet users in particular, ELTA reported on 1 December. Paarma insisted that the utility, which has a monopoly on fixed line telephones in the country, could not reverse its 27 November decision, but he said that it would work to improve Internet access and provide a wider range of services. Gediminas Jakavonis, chairman of the Social Liberals faction, part of the ruling majority in parliament, said Lietuvos Telekomas' actions reminded him of "typical racketeering," ELTA reported on 6 December. On the same day, Arturas Paulauskas, Speaker of the Lithuanian parliament expressed concern that the rate hike would cripple the plans of the ruling majority to "build an information society." The parliament's opposition Social Democratic faction on 7 December began collecting signatures among parliamentarians to create a commission to investigate the actions of the privatized utility, ELTA and BNS reported. On 1 January 2001 local calls made between 7:00 a.m. and 8:00 p.m. will increase from 0.09 to 0.12 litas ($0.0225-0.03) per minute; evening calls through midnight will also increase .03 litas, while rates for calls abroad will decrease slightly. Monthly subscription fees will remain at 17 litas for residential users and decline 16 percent for business users to only 30 litas per month.

The parliament on 28 November voted 99 to 7 with 2 abstentions to return to the pre-1997 procedure in which the prosecutor-general is appointed by the president with the parliament's approval, rather than by the parliament on the recommendation of its Legal Affairs Committee, "Kauno Diena" reported the following day. The nine no votes against came from members of the former ruling majority. Incumbent Prosecutor-General Kazys Pednycia, who was appointed to a sevenyear term in 1997, will have to resign but will serve as acting head until his replacement is appointed. He has been severely criticized both for his ties to the former Conservative government and for his failure to prevent the increase in crime. Some deputies had called for a vote of no confidence to oust him. President Valdas Adamkus on 5 December nominated Antanas Klimavicius to the post. Klimavicius has been the head of the Interrogation Department of the Special Investigations Service.

The cabinet on 4 December agreed to a revised draft budget for 2001. The new document assumes revenues of 6.228 billion litas ($1.557 billion) and calls expenditures of 7.134 billion litas, BNS and ELTA reported. The new draft leaves a projected deficit of 906 million litas, 13 percent larger than the 2000 deficit and 1.9 percent of GDP. (If the 215 million litas earmarked for debt repayment is excluded utilizing IMF methodology for debt calculation, the deficit totals only 1.47 percent of GDP.) The new draft differs significantly from the one offered by the previous government: It allocates an additional 66 million litas to the interior ministry, the police department, the security department, the nuclear energy inspectorate and the tourism department. The government plans to review and revise the budget in May 2001, hoping to allocate any savings from the reform of various departments to spending on education. Finance Minister Jonas Lionginas said that at least 100 million litas will be used to renovate school buildings.

The parliament on 7 December voted 79 to 12 with 25 abstentions to amend the 2000 national budget by revising upwards projected revenues to 5.847 billion litas and expenditures to 6.647 billion litas, ELTA and BNS reported. The action was necessary because the ongoing economic recession has reduced tax revenues significantly. The new budget reallocates some funds for health care, education, municipal budgets and specialized areas such as 3.9 million litas to save the debt-ridden State Radio and Television. The reallocation includes 100,000 litas, which the army agreed to provide from its own budget, to the cash-strapped police department. But 236 million litas were cut from the servicing of the state debt and state support for pensions was reduced by 45.6 million litas. In a related measure, the parliament on a narrow vote passed the government's controversial proposal to reduce pension payments to working pensioners to only 138 litas per month, the base pension. The parliament also reduced the value-added tax (VAT) on municipal heating from 18 to 9 percent as of 1 January 2001.

Kazakhstan's Deputy Prime Minister Daniyal Akhmetov on 29 November met with Lithuanian officials to discuss supplying oil to Lithuania's refinery and other issues, ELTA reported. He and his Lithuanian counterpart Rolandas Paksas agreed to hold talks in the future with Russia in order to obtain more favorable rail transit tariffs. After visiting the Mazeikiai refinery and the Butinge oil terminal, Akhmetov traveled on to Riga and Tallinn.

The cabinet decided on 29 November to ask the parliament to loosen the ban on all tobacco advertising in Lithuania until 2004, BNS reported. The previous parliament had prohibited all forms of tobacco advertising as of May of this year. The postponement reflects both EU regulations and media outlet advertising losses. But the Lithuanian cabinet does want to retain the ban on television advertising of tobacco products.

Polish President Aleksander Kwasniewski visited Lithuania on 1 December and Lithuanian Prime Minister Rolandas Paksas went to Warsaw on 5 December to solidify what both sides call their "strategic partnership." Kwasniewski met with his Lithuanian counterpart, Valdas Adamkus to discuss Lithuania's aspirations to join the EU and NATO. Paksas discussed the same issues with Polish Prime Minister Jerzy Buzek. Buzek said that talks will start soon on issues like the rules governing the spelling of Polish names in Lithuanian. Buzek also said the Polish government has donated 385,000 zlotys ($86,300) for the construction of a Lithuanian Center in Punsk and allocated 1.5 million euros ($1.32 million) for the closure of a reactor bloc at the Ignalina nuclear power plant.
* The Statistics Department announced that in the first ten months of the year Lithuanian railroads carried 25.7 million tons of freight, an increase of 7.9 percent compared to the same period in 1999, BNS reported on 27 November. Some 19.5 million tons of cargoes were reloaded at Klaipeda in this period, a rise of 53.8 percent. Meanwhile, Lithuanian air companies transported 294,300 passengers, an increase of 16.2 percent, and 2,600 tons of freight, a rise of 39 percent.
* Austria will allow Lithuanian citizens who were forced to work in Austria during World War II to receive direct compensation from Vienna, Austrian Foreign Minister Benita Ferrero-Waldner told her Lithuanian counterpart Antanas Valionis on 28 November. Germany, in contrast, requires that Lithuanians forced to work in Germany during the war apply for such payments through Moscow.
* Pope John Paul II has named Siauliai Bishop Eugenijus Bartulis to be the first ever chaplain bishop in Lithuania's armed forces, BNS reported on 28 November.
* U.S. Deputy Assistant Secretary of State for European Affairs Daniel S. Hamilton told President Valdas Adamkus in Vilnius on 29 November that Lithuania is moving "on the right track" for NATO membership and that the next U.S. administration will continue U.S.-Lithuanian cooperation and foreign policy, supporting NATO membership for the Baltic states.
* Justice Minister Gintautas Bartkus said on 30 November that there are some 200 Lithuanian citizens currently incarcerated in Russia, BNS reported. Of these, 19 have asked to serve their sentences in Lithuania.
* The Netherlands-based consortium B.B. Bredo failed to pay $47.6 million for the 75 percent share of the Lithuanian Shipping Company (LISCO) by the deadline of 1 December, thereby allowing Lithuania to end the controversial privatization of the company, Radio Lithuania reported. Bredo was dissatisfied with the successful activities of LISCO's small shareholders in court actions in Klaipeda that prevented it from selling or reregistering some of the ships as separate offshore companies in the Marshall Islands. The government decided not to void the privatization agreement but rather to investigate the financial consequences of canceling the agreement.
* The Finance Ministry announced on 4 December that former deputy finance minister Dalia Grybauskaite would replace Algimantas Rimkunas as deputy foreign minister responsible for economic relations, BNS reported. Rimkunas will become the ambassador to the United Nations in Geneva.
* Former Lithuanian prime minister Kazimiera Prunskiene led a parliamentary delegation to Moscow 2-6 December for talks with Russian Duma leaders. Duma Foreign Affairs Committee chairman Dmitrii Rogozin promised that the Duma would consider ratification of the Russian-Lithuanian border agreement and an accord eliminating double taxation on incomes, and a series of other agreements in the spring. On her return to Vilnius, Prunskiene said that her Russian interlocutors had not made any categorical statements about Lithuania's NATO aspirations during the visit. She said that they did urge that Vilnius abolish the law demanding compensation from Moscow for the damages during the Soviet occupation and promised to discuss a reciprocal reduction of customs duty if Lithuania would reduce the import duties on Russian oil products from 15 to 5 percent.
* On 5 December, 19 parliament deputies established an interparliamentary contact group for relations with Belarus, BNS reported. (This group parallels the 65 deputy-member interparliamentary group for relations with Russia.) Alvydas Medalinskas, the chairman of the parliament's foreign affairs committee, expressed regret on 7 December over the group's creation since Western states and Lithuania do not recognize the legitimacy of the current Belarus parliament and hold that the 13th Supreme Soviet, dissolved by Aleksandr Lukashenka in 1996, is the sole legitimate legislative body in Belarus. He suggested creating a Lithuanian-Belarusian relations association, registered with the ministry of justice and not at the parliament.
* Foreign Minister Antanas Valionis on 6 December dismissed Lithuania's chief EU membership negotiator Vygaudas Usackas from the post of deputy foreign minister, BNS reported. The day before Prime Minister Rolandas Paksas had offered him the position of the Director General of the European Committee, but Usackas declined.
* EBRD Director for the Baltic States George Krivicky and Siauliai Bankas board chairman Algirdas Butkus signed a five-year agreement in Vilnius on 7 December that will provide a 5-million euro ($4.5 million) credit line for lending to small and medium-sized enterprises, BNS reported.


By Paul Goble

The third World Congress of Finno-Ugric Peoples held in Helsinki this week called attention to the significance and vitality of linguistic communities and the difficulties of translating such communities into something more political.

Finnish President Tarja Halonen on 11 December welcomed representatives of 21 nations which speak languages in the FinnoUgric group. Only the three largest of these nations -- the 14 million ethnic Hungarians, the five million ethnic Finns, and the one million ethnic Estonians -- have their own states. They were represented by their presidents: Halonen of Finland, Ferenc Madl of Hungary and Lennart Meri of Estonia.

Most Finno-Ugric groups are small minorities spread across northern Russia. Indeed, the largest delegation at the three-day session was from Russia. More than 300 people arrived in the Finnish capital to represent 17 groups. In addition, the delegation from Russia delegation included Ethnic Affairs Minister Aleksandr Blokhin and representatives of both houses of the Russian parliament.

At her joint conference with Madl and Meri, Finland's Halonen said that the sessions had been "like a family meeting," although in an indication that these languages are not in every case so close as to be mutually intelligible, the three presidents spoke English among themselves.

Halonen said that "it's very important to feel an identity, your own background and cultural family." And she expressed the hope that "the presence of three presidents of three independent Finno-Ugric states will also give encouragement to those groups which are minorities."

Her two colleagues echoed these themes. Hungary's Madl stressed that "we must do more in legislation internally and internationally for the real protection of minorities." Estonia's Meri said the Finno-Ugric groups were all "like small islands." He said all of them face "the possibility of their languages becoming dead," something he urged the international community to try to prevent.

Perhaps significant in light of these calls was the presence at this meeting of representatives from the United Nations human rights commission, the Europarliament, and the Parliamentary Assembly of the Council of Europe.

This is the third such conference of the Finno-Ugric peoples since the collapse of communism in Eastern Europe and the disintegration of the Soviet Union made it possible for these communities to interact on an official level. The first was held in Syktyvkar, the capital of the Komi Republic in the Russian Federation, in 1992, and the second took place in Budapest, Hungary, in 1996.

The Finno-Ugric groups emerged out of the migration of peoples from the Baikal region many centuries ago. For most of their subsequent history, they have lived separate existences and their languages and cultures have increasingly diverged. Sometimes this divergence has been the result of natural processes and sometimes it has reflected the policies of the governments of the countries in which they found themselves.

But in the last decade, these groups increasingly have sought one another out, with those which have achieved independent statehood now able to talk to those who seek greater protection of their linguistic and cultural rights or even political independence.

On the one hand, the three independent Finno-Ugric countries have sought to provide educational and publishing opportunities for their linguistic relatives. And on the other, the Finno-Ugric minorities in Russia and elsewhere have sought to revive and promote their own cultures, drawing on both this assistance and their own internal resources.

So far, these newly reasserted linguistic ties have become a source of pride. But they have not acquired a political coloration that might point to greater activism or a drive for some kind of broader political unity. That may be a source of strength in that these linguistic ties will continue to exist below the radar screen of those who might fear the resurgence of these cultures.

But it also means that organizations like the Finno-Ugric conference may become political battlegrounds in yet another way. Indeed, the presence of the large delegation from Russia in Helsinki this week recalls a Soviet-era practice in which Moscow attempted to exploit such nominally non-political groups to advance its agenda.

But in the post-Cold War era, such efforts could easily have the unintended consequence of generating a countervailing political force among peoples who have been separated for a very long time but who increasingly feel that they belong together.