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Baltic Report: March 28, 2002

28 March 2002, Volume 3, Number 9

This issue covers events in the Baltic states from 15 to 21 March 2002.
Responding to the 19 February letter of Dave Peterson, the president of the U.S. company NRG Energy, Prime Minister Siim Kallas wrote on 21 March that he sees no reason to change the decision of the previous government to end negotiations with NRG on the privatization of the Narva oil-shale power plants, BNS reported. Kallas noted that the political and economic situation in Estonia has changed dramatically in the six years since the talks on the sale of the plants began. He rejected Peterson's claim that Estonia had backed out of the deal by refusing to include the Estonian Oil Shale Company and its assets as collateral for reconstruction loans. He added that the terrorist attacks in the United States on 11 September resulted in banks demanding more guarantees, which NRG was unable to offer. He concluded by stating that U.S. investments in Estonia are always welcome, and thanked NRG for the six-year cooperation.

After a meeting of the agriculture ministers of the EU and candidate states in Brussels on 19 March, Estonia's Agriculture Minister Jaanus Marrandi said that since there is little chance the EU will increase its proposed agricultural subsidies to candidate countries, Estonia should thus focus on obtaining higher production quotas, the daily "Postimees" reported the next day. He explained the low subsidies offered by the EU as an unwillingness of larger EU member states to incur additional expenses. According to Marrandi, the proposed quotas by the EU are based on recent years when production levels were particularly low, and do not reflect Estonia's agricultural potential. Former Agriculture Minister Ivari Padar addressed the EU's assertion that granting equal subsidies to farmers from current EU member countries and new EU member states would increase living standards for the latter too abruptly. He argued that farmers in the new EU states will have to make far greater investments than their counterparts, and thus, "the higher subsidies would be fully justified."

Speaking at the summit meeting in Barcelona of 15 EU member and 13 candidate countries on 15 March, Siim Kallas underscored the necessity to reduce the restrictions imposed on EU candidate countries as a precondition for increasing Europe's competitiveness, BNS and ETA reported. He called for alleviating restrictions "in areas such as agriculture, the labor market, and the transportation market." Commenting about the summit in the daily "Postimees" on 16 March, Kallas said that while the representatives of some countries have agreed on the need for liberal reforms, others have called for caution. In regard to the summit's most debated issue, the liberalization of EU's energy markets, he noted that Estonia supports those efforts, but that his country is not currently connected to EU energy grids. Kallas also said differences in direct taxation are a means for promoting competition between EU countries, and should be left as an independent tool of member governments.

Aleksander Kwasniewski assured his Estonian counterpart Arnold Ruutel in Warsaw on 18 March that Poland supports Estonia's NATO bid and would like Estonia to be invited to join the alliance at the NATO summit in Prague this fall, PAP reported. "We are convinced that Estonia fulfills all criteria required by NATO," Kwasniewski noted. He added that Poland would also like to see Latvia and Lithuania in NATO, as well as those striving for membership, such as Slovakia, Slovenia, Bulgaria, and Romania. "We are determined on this point," Kwasniewski said.

Parliament Defense Committee Chairman Tiit Tammsaar asserted that the lack of proper military training grounds in Estonia may become a serious problem for holding the Baltic Eagle 2002 exercises in September, ETA reported on 18 March. Noting that Latvia and Lithuania have successfully held similar exercises in the past few years, he accused the Defense Ministry of not addressing the issue several years ago. Defense Ministry Chancellor Indrek Kannik said the exercises will take place, probably at the planned central training grounds near Tapa, but that he is not sure whether the state will succeed in purchasing 120 privately owned plots of land for the grounds in time.

During the government's information hour on 20 March, Siim Kallas told the parliament that it will be difficult to fulfill the governing coalition's pledge to raise average pensions to 40 percent of average wages, BNS reported. He expressed regret that a lack of funds made it impossible for the government to support the Moderates' proposal to increase pensions from 1 April by more than the indexation approved by the previous government. After a general meeting of the coalition the same day, Reform Party parliament faction Chairman Jurgen Ligi announced that the coalition does not plan to yield to EU pressure in its membership negotiations, and will maintain its tax laws granting companies tax exemptions from reinvested profits.
* U.S. Secretary of State Colin Powell told Foreign Minister Kristiina Ojuland in Washington on 19 March that President George W. Bush supported a larger rather than smaller enlargement of NATO, BNS reported. That day she also met with Senators Richard Durbin, Richard Lugar, Gordon Smith, and John McCain. The next day Ojuland presented Senator Jesse Helms with the Pro Terra Mariana order which had been awarded to him earlier. Senate Minority Leader Trent Lott also praised her country's decision to raise defense expenditure to 2 percent of GDP.
* Estonia's Economy Minister Liina Tonisson and Russia's Transport Minister Sergei Frank signed a bilateral agreement on ship traffic on Lake Peipus and surrounding waterways on 20 March in Moscow, ETA reported. The document will enable the reopening of a shipping line between Tartu, Estonia, and Pskov, Russia.
* Chief negotiator with the EU Alar Streimann closed the chapters on customs union, transport policy, free movement of persons, and justice and home affairs in talks in Brussels on 21 March, ETA reported. This raised the number of completed chapters from 20 to 24.
* Tallinn Mayor Edgar Savisaar signed an agreement under the European Union ISPA program on 15 March which will support the construction of a new Tallinn refuse management center with 202 million kroons ($11 million), ETA reported. The funds will be used for the closing of the Paaskula dump site (130 million kroons), which does not correspond to modern requirements and the building of access roads to the new dump site at Joelahtme (72 million kroons).
* The local Russian-language newspaper "Narvskaya gazeta" in the border city of Narva is continuing its editorial campaign against the law, passed on 4 December, establishing Estonian as the language in which local governments must conduct their business, BNS reported on 15 March. The newspaper expressed its dissatisfaction with Legal Chancellor Alar Joks' statement that the law does not contradict the Estonian Constitution.
* The government on 19 March approved and sent to the parliament five amendments to the aliens' law which concerned family reunification and fraudulent marriages, ETA reported. The proposed changes would allow spouses of Estonian residents to migrate outside of the immigration quota, grant better guarantees to underage children, and allow an adult child to live permanently with a parent in Estonia if the child is not capable of living on his own due to health reasons or a handicap.
* President Ruutel proclaimed on 21 March the Gambling Tax Act adopted by the parliament on 13 March, BNS reported. He thus ignored the appeal of the representative assembly of the Estonian Nonprofit Associations Roundtable on 18 March urging him not to sign the law because it would not ensure purposeful, open, transparent, and public allocation of funds from gambling tax revenues and provide opportunities for violations and malpractice.
* The Central Bank of Estonia announced on 18 March that foreign direct investment in 2001 totaled a record 9.4 billion kroons ($522 million), ETA reported. The leading investors came from Finland, Sweden, and Holland and directed their funds to finance, energy, natural gas and water supplies, processing industry, and trade. Estonia's direct investments abroad were also at a record-setting volume of 3.2 billion kroons.
* Ambassadors of Yugoslavia and India Radoje Z. Zesevic and Om Prakash Gupta presented their credentials to President Ruutel on 21 March, BNS reported. Noting the recently signed agreement on cooperation in the spheres of culture, education, and sports between their countries, Ruutel expressed the hope to Zesevic, the first Yugoslav ambassador to Estonia, that economic and trade relations would also be established soon. India has provided scholarships to Estonian students and done much to introduce its culture to Estonia.

The EU presidency issued a statement on 21 March declaring that Latvia alone has the right to determine its state language, LETA reported. The previous day, OSCE official Gerard Stoudmann created an outrage in Latvia by suggesting that Russian should also be granted the status of a state language. Prime Minister Andris Berzins called the suggestion irresponsible, and even urged Stoudmann to resign. The statement read: "There is no expectation whatsoever on the part of the EU that Latvia should change or amend the provision that establishes that the Latvian language is the state language of Latvia." The Danish Embassy in Riga was used to release the statement because the current presiding country, Spain, does not have an embassy in Latvia, and Denmark will take over the EU presidency in July. In addition, OSCE High Commissioner on National Minorities Rolf Ekeus said the EU does not expect Latvia to change or supplement legal norms that stipulate Latvian as the state language.

The unofficial 16 March commemoration day for the World War II Latvian Legion passed without serious incidents, LETA reported. The legion, which was established in February 1943 as an SS unit, chose 16 March as its commemoration date because on that day in 1944 the legion was engaged in a fierce battle with the Soviet Red Army. The decision of the Riga City Council to withdraw the permits it had granted to two radical Latvian organizations to hold public commemorations of the date was praised by the Simon Wiesenthal Center in Jerusalem, whose director Efraim Zuroff wrote: "It is high time that Latvians fully internalize the fact that fighting on behalf of Hitler and Nazi Germany during World War II was the moral equivalent of supporting Osama bin Laden and his Al-Qaeda terrorist network." There was no traditional march through the city's streets from Riga's Tornakalns Railroad Station to the Freedom Monument, but several thousand people gathered to place flowers at the monument and sing the national anthem and other patriotic songs.

Foreign Ministry spokesman Vilmars Henins on 18 March dismissed as groundless charges by the Russian Foreign Ministry that the Latvian National Radio and Television Council's 7 March decision to not extend the broadcasting license of Russkoye Radio Riga is a violation the rights of minorities, BNS reported. He noted that the Supreme Court ruled in May 2001 that the station had violated copyright laws as well as several international agreements, including the Bern Convention on protection of literary and art works as well as the World Intellectual Property Organization agreement on copyrights. Henins said, "Russia is again trying to politicize issues that have a completely different form and content." The station's broadcasts ended on 13 March.

The court ruled on 19 March that changes to the pension law that reduced the pensions of working pensioners contradict the constitution, LETA reported. They will thus become null and void after the decision is officially published. The restrictions were introduced by the previous government led by Andris Skele in order to reduce pension expenditures. "Diena" on 20 March estimated that about 4.6 million lats ($7.4 million) will be needed this year to cover the additional costs resulting from the ruling. Fatherland and Freedom/LNNK parliament deputy and former Justice Minister Dzintars Rasnacs viewed the ruling as the "right decision," and said it is up to the government to decide where to obtain the funds for its implementation.
* Foreign Minister Indulis Berzins told the 58th session of the UN Human Rights Commission in Geneva on 21 March that his government's priority is an integrated society. LETA reported. He also discussed with UN High Commissioner for Human Rights Mary Robinson the role of the Latvian language in social integration processes and met with the newly appointed head of the UN European office, Sergei Ordzhonikidze.
* President Vaira Vike-Freiberga held a meeting on 21 March in Helsinki with major Finnish businessmen who are interested in Latvia's market and investments in Latvia, LETA reported. Later talks with Premier Paavo Lipponen focused on the latest developments in Europe, including agricultural quotas to EU candidate countries. Lipponen also reiterated Finland's support for Latvia's admission into NATO
* During the meeting of the Council of the Baltic Sea States in Moscow on 19 March, Russian Economic Development and Trade Minister German Gref told Economy Minister Aigars Kalvitis that Russia will introduce a uniform system of railroad transportation tariffs in September or October and lift discriminatory high transit tariffs, LETA reported the next day. They discussed Russia's efforts to join the World Trade Organization and Kalvitis said that their countries should sign agreements on prevention of double taxation and tax evasion, promotion and protection of investments, customs cooperation as well as cross-border cooperation.
* Latvian and Lithuanian Economy Ministers Aigars Kalvitis and Petras Cesna discussed bilateral economic cooperation in Moscow on 19 March, LETA reported. They discussed Latvia's National Development Plan, since Lithuania is currently preparing a similar document. The ministers also talked about the operations of the Lithuanian supermarket chain "T-Market" in Latvia and Latvian claims that dairy products were being sold at lower prices in Latvia than in Lithuania.
* Riga Mayor Gundars Bojars held talks in St. Petersburg on 17 March on various issues with local leaders, including Riga's participation in St. Petersburg's upcoming 300th anniversary celebration, LETA reported.
* Board Chairman of Farmers' Saeima Valters Bruss announced that a letter, signed by about 1,800 Latvian farmers, objecting to the European Commission's proposals on farm policy for any new EU member, was sent to the Council of Europe on 19 March, LETA reported.
* Ethnic Studies Center Director Nils Muiznieks presented on 18 March the results of its annual research on the human rights situation in Latvia in 2001, BNS reported. The greatest problem continued to be the high number of pending court hearing cases and prolonged terms of pre-trial detentions. Muiznieks said the biggest success last year was the adoption of the new labor law by Latvia and the implementation of several measures to promote naturalization of the noncitizen population.
* The Central Statistical Bureau announced on 15 March that the country's GDP in 2001 increased to 4.48 billion lats ($ billion) or 7.6 percent compared to 2000, BNS reported; per capita GDP was $3,210.
* The Latvian Central Statistics Office estimates the share of the shadow economy in the country as 17 percent, BNS reported on 15 March. Finance Minister Gundars Berzins said the shadow economy in Latvia has been reduced from 48 percent in 1999 to 25 percent in 2001.

Valdas Adamkus told the summit meeting in Barcelona on 15 March that Lithuania will fulfill the commitments it has made concerning the closure of the first reactor of the nuclear power plant at Ignalina, but lacks the funds to finance the closing of the second reactor, ELTA reported. He expressed his hope that the EU will make a clear-cut long-term commitment to help support the plant's shutdown far beyond the 2006 date for which funds have been assigned. The cost of closing the plant, which supplies more than 75 percent of the country's electricity, is estimated at 3 billion euros ($2.67 billion). Adamkus also pointed out the need to improve the international transport corridors in Central and Eastern Europe, which he said are far below EU standards but will be needed for increased transit trade to and from Russia.

In Vilnius on 19 March, Prime Minister Algirdas Brazauskas and his Ukrainian counterpart Anatoliy Kinakh discussed the scheduled closure of the Ignalina nuclear power plant, ELTA reported. Brazauskas gladly accepted Kinakh' s offer to share Ukraine's expertise on dismantling equipment, the storage of used materials, and other issues. The premiers also spoke about their common desire to expand bilateral economic cooperation and trade. They agreed to form a joint working group to discuss ways to increase the transit trade of both countries, and Ukrainian trade through the port of Klaipeda in particular. If Lithuania joins the EU, it will have to end its free-trade agreement with Ukraine. Kinakh mentioned that Ukraine plans to become an associated member of the EU in 2007, and be prepared for membership obligations by 2010-11. In later talks with President Adamkus, Kinakh expressed his support for Lithuania's efforts to join NATO.

Representatives of the opposition Liberal Union, Center Union, Conservatives, and Modern Christian Democrats registered a draft resolution on 18 March criticizing Prime Minister Brazauskas's report on the activities of the government in 2001, "Kauno Diena" reported (see "RFE/RL Newsline," 13 March 2002). The resolution stated that the report was full of statistical information, but lacked any analysis or evaluation of the government's work. They complained that the premier did not express his opinion on such important issues as the restoration of savings accounts, compensation for nationalized property, as well as the future reforms of the education and pension systems. The parliament budget and finance, economy, and foreign affairs committees also met the same day and expressed a favorable opinion of the premier's report.

Valdas Adamkus decided not to sign into law amendments to the laws on employment contracts and holidays that the parliament passed on 12 March, and sent them back for revision on 21 March, ELTA reported. The amendments to the employment contracts law are intended to end the widespread practice among employers of concluding fixed-term employment contracts with employees. The modification to the holiday law would limit the maximum term of unpaid holiday per year to 30 calendar days. Before making a decision on the laws, Adamkus held talks with representatives of political parties, business, and other experts. He said the amendments would increase unemployment, as employers would hire fewer workers, and that employees would not have been able to travel abroad for advanced training if it exceeded 30 days.

During an official two-day visit to Italy, parliament Chairman Arturas Paulauskas heard firm pledges from top officials that Italy backs Lithuania's efforts to join the European Union and NATO, "Lietuvos rytas" reported on 21 March. On 19 March, Italian Chamber of Deputies Chairman Pier Ferdinando Casini said he favors the rapid inclusion of Lithuania into the EU, and urged Lithuania to maintain good-neighborly relations with Russia. Paulauskas raised the issue of the return of Lithuania's pre-World War II embassy in Rome, which the Italian fascist government handed over to the Soviet Union during the war, and mentioned that France has agreed to compensate Lithuania for the similar loss of its embassy in Paris. The next day, Senate Chairman Marcello Pena also discussed EU and NATO enlargement with Paulauskas.

Rimas Kraujelis, head inspector of the Cultural Protection Department, has said that archeologists have resumed excavations at a former military base in Vilnius where construction workers uncovered a mass grave last fall, BNS reported. Based on scraps of cloth and buttons from uniforms, he said that the workers had evidently uncovered the bodies of soldiers from Napoleon's army, which invaded Russia in 1812. It was originally thought that the remains of Polish soldiers had been discovered. It is not clear how many bodies are buried at the site, but people familiar with the ongoing work say they could number 1,000 or more. French Embassy adviser Olivier Poupard said the French Defense Ministry plans to send experts to take part in the investigations, which Kraujelis estimated could take around a month, AFP reported.
* The parliament approved on 19 March the agenda of the spring session, including a proposal to revoke the law, passed by the previous parliament in 2000, demanding monetary compensation from the Soviet Union for 50 years of occupation, BNS reported the next day. Some Russian officials have mentioned the law as an obstacle for the ratification of the 1997 Lithuanian-Russian border agreement.
* Chief of the Czech defense staff Lieutenant General Jiri Sedivy held talks in Vilnius with Defense Minister Linas Linkevicius and armed forces commander Major General Jonas Kronkaitis, and visited the training corps in Rukla, the airspace monitoring station in Karmelava near Kaunas, and the Lithuanian Military Academy in Vilnius on 19 March, BNS reported. At a press conference the next day, he praised the work of Lithuanian medical officers in a Czech field hospital during the humanitarian mission in Albania in 1999 and proposed that they could join a Czech team in peacekeeping operations in Afghanistan.
* Deputy Foreign Minister Giedrius Cekuolis headed a delegation which held political consultations on security issues in Brussels on 19-20 March with the aim of securing support for Lithuania's NATO membership, BNS reported. He had meetings with the head of the European Security Directorate at the Belgian Foreign Ministry Mark Geleyn, diplomatic adviser to the Belgian prime minister Peter Moors, and State Minister for Foreign Affairs Annemie Neyts-Uyttebroeck as well as NATO officials and ambassadors in Brussels. The delegation traveled to The Hague on 21 March for two days of talks with the Dutch Foreign Affairs and Defense ministries on NATO enlargement, European security and defense policy, and bilateral relations with neighboring states.
* Deputy Foreign Minster Evaldas Ignatavicius and a delegation of business people traveled to Egypt on 18 March to attend the opening of the International Cairo Trade Fair, BNS reported. He also had meetings with Egypt's Foreign Trade Minister Youssef Boutros-Ghali, Deputy Foreign Minister Mohammed Shaban, and members of the parliament's Security and Foreign Affairs Committee.
* Chief EU negotiator Petras Austrevicius completed the chapter on taxation in the EU membership talks in Brussels on 21 March, thus raising the number of settled chapters to 24, ELTA reported. He succeeded in obtaining a transition period until 1 January 2010 for raising the excise tax on tobacco products up to EU requirements and a six-year transition period for the accumulation of compulsory oil reserves.
* The European Bank for Reconstruction and Development on 19 March issued on its website ( a new strategy for its investments in Lithuania, ELTA reported. The bank will concentrate its activities in the sectors of energy, rail, municipal infrastructure, and financial services. It will aim to attract additional foreign investment to Lithuania and continue to develop small and medium-sized businesses.
* The Privatization Commission on 5 March gave permission to the German energy companies Ruhrgas and E.ON Energie to form a consortium in order to bid on a 34 percent stake in the state-owned gas utility Lietuvos Dujos, BNS reported. The consortium has until 2 April to submit its final offer, including a share price and the level of planned investment.
* At the conference entitled "Agriculture in the Context of EU Enlargement" in Vilnius on 21 March, farmers called on the state's delegation for EU accession talks to obtain higher production quotas and direct payments from Brussels, ELTA reported. Prime Minister Brazauskas told the conference that EU membership would be useful for all Lithuanians and that the prices of agricultural products would increase after accession.
* The council of the Center Union announced on 16 March its decision to propose party Chairman Kestutis Glaveckas as its candidate for Lithuania's president. BNS reported. The party is expected to make the official selection of its candidate at a conference on 8 June which will also mark the 10th anniversary of the party.
* New Chinese Ambassador Chen Yuming presented his credentials to President Adamkus in Vilnius on 18 March, BNS reported. He had worked earlier at China's diplomatic missions in Romania and the United Nations.