Baltic Report: February 15, 2002

EU TO SCRAP SUBSIDIES ON FOOD EXPORTS TO ESTONIA.
At a meeting of Estonian and EU delegations on 1 February, the EU agreed to end export subsidies on foodstuffs exported to Estonia, with the exception of sugar and rice, which are not produced in Estonia, BNS reported. According to supplementary terms of the agreement, this measure must be preceded by Estonian readiness to register goods of EU origin on which no subsidy is paid. During the talks it was agreed that various trade limits on a number of agricultural products, such as berries, fruits, mushrooms, vegetables, certain meat products, and honey, would be scrapped. The same day, an agreement between Estonia and the EU which will eventually end quotas on Estonian fish and fish products exported to the EU went into effect.

ESTONIA TO CONTINUE ON NATO PATH.
Prime Minister Siim Kallas told NATO Assistant Secretary-General for Political Issues Gunther Altenburg in Tallinn on 7 February that Estonia will continue with preparations for speedy NATO membership, BNS reported. Kallas noted that the new ruling coalition's agreement states that Estonia will keep defense expenditures at 2 percent of gross domestic product as "the obligation to make preparations for NATO membership is extremely important for the new government." Altenburg is heading a delegation of NATO experts who are studying Estonia's defense structures to prepare a report to NATO member governments assessing Estonia's readiness for alliance membership.

STATE DEFENSE PRIORITIES DEFINED.
The annual plan which defines the priorities of state defense was agreed to by Defense Minister Sven Mikser and defense forces commander Rear Admiral Tarmo Kouts on 6 February BNS reported. The document defines Estonia's role in the NATO integration process, participation in European security and defense policy, as well as the implementation and development of the defense forces' structure during 2002. Mikser noted that more attention must be devoted to informing the public about the NATO accession process and the nature of the alliance. The officials said at a press conference following the signing that Estonia must provide at least 100 specialists from the Defense and Foreign Ministries and General Staff for cooperation with NATO, ETA reported. Some of the officials will represent Estonia at NATO headquarters in Brussels and be paid by Estonia, while others will work as NATO officials and receive their salaries from the Atlantic alliance.

FUTURE OF EUROPE CONVENTION REPRESENTATIVES NAMED.
The government decided on 5 February to name former President Lennart Meri as its representative to the Future of Europe Convention, which will begin on 28 February, BNS reported. The convention will be made up of representatives of the European Commission, the European Parliament, and the governments and national parliaments of EU member and candidate countries. It is expected to outline the functioning principles of the EU after enlargement and submit its proposals to the 2004 intergovernmental conference of the EU. The parliament on 31 January named parliament Deputy Chairman Peeter Kreitzberg of the Center Party and former Foreign Minister Toomas Hendrik Ilves of the Moderates as its two representatives, with Ulo Tarno from the Center Party and Tunne Kelam from Pro Patria Union as their alternates.

POLISH CULTURE MINISTER VISIT.
Andrzej Celinski completed a two-day visit to Tallinn on 4 February by signing a bilateral cultural cooperation agreement with his Estonian counterpart Signe Kivi, BNS reported. They also agreed that the Chopin Institute in Warsaw and other institutions will continue to be involved in the organization of a young pianists' competition in Tallinn devoted to Frederic Chopin's works. Celinski awarded the first prize in this year's competition to Gintaras Janusevicius, a young pianist from Lithuania. He also extended an invitation to Kivi to visit Warsaw and Gdansk at the end of April.

* The nine-year church dispute between Estonia and Russia may be settled soon, as the Orthodox Church in Estonia subordinate to the Moscow Patriarchate is prepared to give up its demands for legal continuity and unconditional use of property, which had earlier hindered its registration at Estonia's Interior Ministry, ETA reported on 7 February. It will be known as the Estonian Orthodox Church of the Moscow Patriarchate.

* Foreign Ministry Deputy Chancellor Vaino Reinart on 1 February told a visiting Albanian delegation, headed by Foreign Ministry European Department head Arqile Sota, about his country's experience in economic and political reform, BNS reported. The meeting also focused on bilateral relations, Euroatlantic integration, and developments in the Balkan region.

* The government decided on 5 February to send servicemen to Kyrgyzstan to support peacekeeping forces operating in Afghanistan in the framework of the Enduring Freedom international antiterrorist operation under U.S. command, BNS reported.

* The government approved on 5 February a bill amending the Administrative Procedure Act which will help complete the administrative law reform and make officials' activity considerably more citizen-friendly, BNS reported. The Justice Ministry said that it cuts red tape and increases people's rights in 134 laws regulating daily life. The cabinet also supported the idea of establishing widow pensions, but rejected the idea of the Moderates to hike monthly child benefits from 150 kroons to 300 kroons.

* Tartu University has invited King of Sweden Carl XVI Gustaf and the Russian President Vladimir Putin to its celebrations on 3 and 4 May commemorating the 370th anniversary of the foundation of Academia Gustaviana and the 200th anniversary of the re-opening of the university, ETA reported on 6 February.

* Andres Joesaar, member of the Estonian Broadcasting Council and former head of the commercial channel TV3 declined the offer of the council to become the new board chairman of public TV Eesti Televisioon (ETV), ETA reported on 4 February.

* The Statistical Office announced on 7 February that the consumer price index (CPI) grew by 1.3 percent in January compared to December and by 4.2 percent compared to January 2001, ETA reported. In January the price of services increased by 2.4 percent while that of goods rose by 0.7 percent (food products by 1.5 percent and manufactured goods -0.1 percent).

* Interior Minister Ain Seppik announced on 1 February that he will appoint Kalle Laanet, the 36-year-old former police chief of the western island of Saremaa, as the police chief of Tallinn, BNS reported.

PRESIDENT ATTENDS WORLD ECONOMIC FORUM...
President Vaira Vike-Freiberga began an extended visit to the U.S. on 29 January in New York, LETA reported. On 1 February at the World Economic Forum, she participated in a panel discussion led by Senator Hillary Clinton (D-New York) about Latvia's role in transatlantic security, and led a discussion on European identity. That day she also visited UN headquarters and signed two additional protocols to the UN Convention on the Rights of the Child directed against child prostitution and trafficking as well as a prohibition on the involvement of children in armed conflicts. During the forum she also met with OSCE High Commissioner on National Minorities Rolf Ekeus, Israeli Foreign Minister Shimon Peres, and Kazakh Deputy Prime Minister and Foreign Minister Qasymzhomart Toqaev. On 4 February she flew to Washington for scheduled meetings with U.S. Vice President Richard Cheney and Secretary of State Colin Powell.

...MEETS CHENEY AND POWELL...
Vaira Vike-Freiberga met in Washington on 5 February with U.S. Vice President Dick Cheney, BNS reported. He told her that the U.S. is ready to cooperate with Latvia in strengthening its democratic institutions and judicial system to better fight the corruption in the country. They also discussed the world situation after the 11 September terrorist attacks as well as NATO enlargement. Cheney said that U.S. cooperation with Russia in antiterrorist activities will not change its position that new NATO members will be admitted on the basis of their achievements and that no non-NATO country will hold veto rights. That day she also discussed these issues with Secretary of State Colin Powell, who also expressed approved for her initiative to abolish the state language requirement for candidates to parliament and local council elections.

....AND LECTURES ON FOREIGN POLICY IN HOUSTON.
President Vike-Freiberga delivered a lecture on Latvian foreign policy at the Baker Institute in Houston on 7 February, BNS and LETA reported. She asserted that EU and NATO membership are of equal importance to her country, saying: "You might as well have asked me which hand I would rather have cut off. I need both." She said that, following 50 years of Soviet occupation, Latvia yearns to return to Europe and that NATO would provide the security it needs "as it is a small country with a sad experience." Vike-Freiberga also met with Houston Mayor Lee Brown.

'REPSE'S PARTY' HOLDS FOUNDING CONGRESS.
The founding congress of a new center-right political party Jaunais laiks (New Era) was held in Riga on 2 February and as expected elected former Bank of Latvia President Einars Repse as its chairman, LETA and BNS reported. He told the congress that as soon as the party gains power it will begin restoring the welfare of the people in Latvia; honest businessmen will be guaranteed support of the state, and residents -- security. Repse also pledged that the party will fight corruption and drug dealing. The congress also elected Valdis Dombrovskis, Edgars Jaunups, Ausma Ziedone- Kantabne, Grigorijs Krupnikovs, and Karlis Sadurskis to the party's board.

NEW PRESIDENT OF LATVIAN SAVINGS BANK ELECTED.
The shareholders meeting of Latvijas Krajbanka (Latvian Savings Bank) on 4 February elected Latvijas Unibanka Vice President Zigurds Jerumanovs as president and board chairman, LETA reported. The meeting was called because Latvijas Krajbanka President Arnolds Laksa, who owns 12.5 percent of the bank's shares, submitted a letter of resignation on 31 January, apparently over continued conflicts with the shareholders from three Ventspils companies that own a combined 30.4 percent stake in the bank. The Latvian state is the bank's largest shareholder with a 32.1 percent share. The bank's vice president, Gundars Sturis, also resigned.

UKRAINIAN FOREIGN MINISTER DISCUSSES INTERSTATE AGREEMENTS.
Indulis Berzins and Anatoliy Zlenko discussed bilateral relations in Riga on 6 February and agreed to continue working on several draft agreements, including ones on the protection of classified information, cooperation in culture, and the fight against economic and financial violations, BNS reported. Zlenko expressed support for Latvia's efforts to join the EU and NATO and noted that joining those structures are also priorities of Ukrainian foreign policy. The ministers decided to form an intergovernmental Latvian-Ukrainian economic commission in Riga in March to enhance economic cooperation, with Berzins noting that Latvia backs Ukraine's efforts to be admitted to the World Trade Organization.

* According to the "Environmental Sustainability Index 2002" distributed at the World Economic Forum, Latvia was ranked 10th out of 142 states, LETA reported on 5 February. The index's scores are based upon a set of 20 core indicators, each of which combines two to eight variables for a total of 68 underlying variables. Finland was ranked first, followed by Norway, Sweden, Canada, Switzerland, Uruguay, Iceland, Austria, and Costa Rica. Estonia was ranked 19th, Lithuania 28th, the United States 51st, Russia 74th, Italy 86th, Great Britain 98th, United Arab Emirates 142nd.

* Foreign Ministry state secretary Maris Riekstins expressed surprise with the Agriculture Ministry's position opposing the ratification of the sea border treaty with Lithuania, signed in the summer of 1999, since it is in conflict with the cabinet's position, BNS reported on 5 February. The Agriculture Ministry is supporting the demands of Latvian fishermen that the treaty should not be ratified unless Lithuania grants them better fishing rights.

* Riga City Council members and Moscow city administration representatives met in Riga on 2 and 3 February to discuss their experience in handling migration issues, BNS reported on 4 February. The subjects discussed included intercity migration, possible introduction of exemptions during seasonal migration between countries, and other migration-related problems. The Moscow representatives wanted to study Riga's experience in curbing prostitution because in Moscow this phenomenon is not governed by any municipal or government decrees.

* The Cabinet of Ministers approved a draft law which allows compulsory military service to be replaced with alternative national service because of conscience or religious beliefs, BNS reported on 5 February. The alternative service of 24 months or 18 months for university graduates can be served in state or municipal institutions, search and rescue operations, social care, medical assistance or customs control. The law is expected to go into effect from 1 July.

* The Ministry of Justice has worked out amendments to Articles 68 and 79 of the Constitution that would regulate issues connected with Latvia's entry into the European Union, LETA reported on 2 February. Article 68 would be changed to state that in signing international agreements, Latvia can delegate a part of the state's authority to international institutions with the goal of enhancing democracy. Article 79 will state that an amendment to the Constitution submitted for national referendum will be deemed adopted if at least half of the electorate has voted in favor.

* The port of Ventspils retained its position as the busiest port in the Baltic Sea by handling 37.9 million tons of cargo in 2001, LETA reported on 5 February. St. Petersburg was second with 36.9 million tons, and Tallinn third with 32.3 million tons. During January of this year Ventspils also handled 3.0 million tons of cargo, which is 0.15 million tons or 5.2 percent more than during January last year, BNS reported on 5 February.

EU ENLARGEMENT OFFICIAL WARNS AGAINST TRANSITION PERIOD FOR LAND SALES.
Anders Henriksson, the head of the Lithuanian division of the Enlargement Directorate of the European Commission, told members of the parliament's Rural Affairs Committee on 5 February that they should not demand a seven-year transition period for allowing the sale of agricultural land to foreigners, ELTA reported. He said a transition period is not needed and would in fact be "harmful" to Lithuania's interests. Henriksson noted that Lithuania did not ask for a transition period when it completed the relevant negotiations chapter last March, and that to demand one now would be counterproductive, as it would shake the EU's confidence that Lithuania will stand by what was agreed to earlier. Agriculture Minister Jeronimas Kraujelis explained that the transition period is needed to gain the necessary two-thirds support of the parliament for amending Article 47 of the constitution.

RULING SOCIAL LIBERALS THREATEN IMPEACHMENT OVER WILLIAMS INVESTMENT AT MAZEIKIU NAFTA.
Deputy head of the Social Liberal party's faction in the parliament Vytautas Kvietkauskas told a press conference that the ruling party was in consultation with lawyers to develop charges of impeachment against lawmakers who had allowed U.S.-based Williams International to partially privatize the state-owned oil refinery known as Mazeikiu Nafta, ELTA reported on 1 February. Declining to name individuals, Kvietkauskas said, "those who donated Mazeikiu Nafta to the American Williams Company," should be impeached and prosecuted. Russian oil suppliers, primarily LUKoil, have regularly refused to ship crude oil to the refinery over the last three years which has led to large operating deficits at the plant. On 6 February, ELTA reported that LUKoil president Vagit Alekperov was holding talks at Williams' central headquarters in Tulsa, Oklahoma. LUKoil management has said publicly that it would buy a controlling interest in Mazeikiu Nafta if it was granted management control of the refinery.

PEG SHIFTED FROM U.S. DOLLAR TO EURO.
Bank of Lithuania President Reinoldijus Sarkinas announced on 1 February that the Lithuanian litas will be pegged to the euro at a rate of 3.4528 litas to one euro as of the following day, ELTA reported. The rate was determined by taking the U.S. dollar/euro exchange rate ($0.8632 per euro) announced by the European Central Bank earlier that afternoon and dividing it by four, as the litas had been pegged to the dollar at a rate of four to one since April 1994, when Lithuania adopted a currency board arrangement that will be retained. The decision to shift the peg was made so that there would not be any more exchange rate fluctuations in trading with the EU, which Lithuania hopes to join in 2004.

SALE OF LITHUANIAN AGRICULTURE BANK APPROVED.
Lithuanian Privatization Commission Chairman Eduardas Vilkas announced on 4 February that the commission has approved the sale of a 76 percent stake in Zemes Ukio bankas (Agriculture Bank) to the German bank Norddeutsche Landesbank Girozentrale (Nord/LB), ELTA reported. The State Privatization Fund also approved the sale and submitted it to the government for approval on 6 February. Although the sale price was not officially announced, sources indicate that Nord/LB will pay 71 million litas ($17.75 million) for the shares and invest a further 145 million litas in the bank. According to preliminary data, Zemes Ukio bankas posted an unaudited net profit of 8.46 million litas in 2001, making it the second most profitable bank in Lithuania for the year.

AGREEMENT TO ENCOURAGE INTERSTATE TOURISM WITH BELARUS SIGNED.
Lithuanian Deputy Economy Minister Gediminas Miskinis and Belarusian Sports and Tourism Deputy Minister Henadz Alyaksenka signed an agreement in Vilnius on 6 February aimed at increasing tourism between the two countries, BNS reported. The agreement provides for better sharing of statistics on tourism and information about events, as well as for increased contacts between travel agencies and related associations in the two countries. Miskinis noted that in 2001 only Poland and Russia had more visitors to Lithuania than the 640,700 from Belarus. He expressed regret that less than 2 percent of the Belarusians spent a night in Lithuania, as the vast majority only came to trade in small items and immediately returned to Belarus. This was also true for some 400,000 people from Lithuania who visited Belarus, of whom only 10 percent said tourism was the purpose of their visit.

* Chief Commissioner of the Lithuanian Tax Police Department Darius Samuolis and Polish Deputy Finance Minister Jacek Uczkiewicz signed a memorandum in Vilnius on 7 February regulating the exchange of information about the prevention of money laundering, BNS reported. After the signing, Uczkiewicz lauded the new cooperation with Lithuanian institutions in exposing financial crimes. Lithuania has signed similar memoranda on the exchange of information with the financial intelligence agencies of Latvia, Estonia, Belgium, the Czech Republic, Finland, and Croatia, while the Tax Police has cooperation agreements with law enforcement institutions of Belarus, Georgia, Kazakhstan, Russia, and Ukraine.

* Lithuanian and Russian Transportation Ministers Zigmantas Balcytis and Gennadii Fadeyev agreed in Moscow on 5 February to set up a joint working group to unify cross-border cargo transit tariffs to Klaipeda and Kaliningrad by 14 February, ELTA reported. Presently tariffs for Russian cargo bound to Klaipeda by railway are 20 to 44 percent higher than those going to Kaliningrad.

* Accompanied by Land Forces Commander Brigadier General Valdas Tutkus and Deputy Chief of Staff for international cooperation Lieutenant Colonel Gediminas Dapkevicius, Defense Minister Linas Linkevicius visited Denmark on 5 and 6 February, BNS reported. They came to NATO's Allied Forces North East Europe joint headquarters in Karup for talks with its commander Lieutenant General Ove Hoegh-Guldberg Hoff on the training of Lithuanian officers and preparations for working at NATO headquarters. The second day Linkevicius and his Danish counterpart Svend Aage Jensby discussed NATO enlargement, and further contributions to the war on terrorism.

* Chief EU negotiator Petras Austrevicius during a visit to Spain on 5 February met with Secretary General of the Spanish foreign ministry for foreign policy Carlos Bastarreche Sagues and other ministry officials, ELTA reported. They discussed the issues of agriculture, fishing policy, EU financial assistance, and a transition period for the excise tax on tobacco products.

* Lilija Rudaitiene of the Agriculture Ministry told BNS on 1 February that the EU has cut duties on processed agricultural products from Lithuania by 10 percentage points, effective immediately. Lithuania, in turn, has pledged to reduce import duties on EU farming products by 1 percent annually until it enters the EU.

* The Vilnius Area Administrative Court ruled on 1 February that the government should present proposals to the parliament on compensating municipalities for the lost revenues that 29 Lithuanian municipalities did not receive from the central government's budgets of 1997 through 2000, BNS reported. The court agreed with the municipalities that the government had legislated unfunded mandates giving the municipalities new functions to perform, without providing any funds to carry them out.

* The government on 6 February approved a draft law liquidating the free economic zone (LEZ) in Siauliai formed five years earlier, ELTA reported. Economy Minister Petras Cesna said that the zone had accumulated enormous debts and failed to attract any investors.

* Parliament Chairman Arturas Paulauskas called on politicians and farmers on 6 February not to bring the country's progress on the road to EU membership to a halt with demands for a transition period on the sale of domestic farmlands to foreigners, BNS reported.

* Lithuanian Ambassador to Denmark Deividas Matulionis and South Korea's envoy to Lithuania Kie-ok Chung signed an agreement on visa free entry between both countries in Copenhagen on 7 February, ELTA reported.