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Baltic Report: June 24, 2002

24 June 2002, Volume 3, Number 21

This issue covers events in the Baltic states from 7 to 13 June 2002.
U.S. Defense Secretary Donald Rumsfeld attended a meeting of Baltic and Nordic defense ministers in Tallinn on 8 June, ETA reported. Estonian Defense Minister Sven Mikser said the fight against international terrorism was the main topic of the meeting. Rumsfeld told a press conference after the meeting that he sees no shortcomings in the Baltic countries' preparations for NATO membership. "I can only see their efforts and mutual cooperation," Rumsfeld said. He particularly praised their cooperation with Nordic countries, noting that this is important because NATO countries also cooperate closely. Rumsfeld added that the Baltic states have made serious contributions to the war on terrorism, particularly by allowing aircraft of countries in the antiterrorism coalition to use their airspace without any conditions and to land on their territory. However, he cautioned that no decisions on which countries will be invited to join NATO at the alliance's November summit in Prague have been made and that, therefore, all candidate countries must continue their efforts.

The prime ministers of 11 Baltic-region countries plus representatives of the European Union gathered in St. Petersburg, Russia, on 10 June for a two-day meeting of the Council of Baltic Sea States, Western and Russian news agencies reported. Much of the discussion centered on Russian concerns about EU expansion and the Kaliningrad exclave. Speaking to journalists before the meeting, Russian Prime Minister Mikhail Kasyanov said that Russia insists on "the unimpeded transit of cargo and movement of Russian citizens from Kaliningrad Oblast," ITAR-TASS reported. He told the meeting that Russia might agree to resolve the Kaliningrad issue if the EU offered to issue visas at the border for Russian citizens. Responding to EU concerns about illegal immigration and drug trafficking through Kaliningrad Oblast, Kasyanov asserted that he does not believe that these problems are more pronounced in Kaliningrad than in other parts of the region and thus the EU has no grounds for its rigid position. The council also discussed regional environmental problems, organized crime, and energy cooperation.

Accompanied by a large delegation that includes Deputy Premier Qian Qichen and three ministers, Jiang Zemin began a two-day visit to Tallinn on 12 June with a meeting with his Estonian counterpart, President Arnold Ruutel, ETA reported. Their talks focused on international cooperation, NATO and EU enlargement, and bilateral relations, including greater use of Estonian ports for the transit of Chinese goods. Trade between the two countries increased dramatically last year to 6.8 billion kroons ($410 million). China was Estonia's fifth-largest trading partner, accounting for 5.1 percent of total trade turnover. Foreign Minister Kristiina Ojuland and her Chinese counterpart, Tang Jiaxuan, signed an agreement on mutual legal assistance which will improve efficiency in handling criminal cases. Jiang had separate meetings with Prime Minister Siim Kallas, parliament Chairman Toomas Savi, and former President Lennart Meri on 13 June before flying to Iceland.

After a meeting with Prime Minister Kallas, EU Commissioner for Enlargement Guenter Verheugen told a press conference in Tallinn on 13 June that he believes Estonia is among the countries with whom accession talks will be completed at the Copenhagen summit at the end of the year, ETA reported. Estonia closed the Institutions and Regional Policy and Structural Instruments chapters earlier in the week and has completed 26 of the acquis communautaire's 31 chapters. In subsequent talks with Foreign Minister Ojuland, Verheugen said he expects Estonia to close the energy chapter before the Spanish EU presidency expires at the end of this month and that EU member countries will agree on a common position on agriculture, the most disputed policy area, since they do not want to halt EU expansion.

At an economic conference in Tallinn on 10 June, former U.S. President Bill Clinton said that NATO remains the chief security guarantee for Estonia, ETA reported. He asserted that the three Baltic states deserve membership in NATO and that Estonia has a good chance of becoming a gateway between NATO and Russia, thus helping to strengthen the U.S.-Russian partnership. Clinton also noted that Estonia should not fear the EU and, after joining, should try to oppose protectionism in Europe. He also held talks with President Ruutel, toured Tallinn's Old Town, and visited several high-tech enterprises together with former Estonian President Meri.

The director of the International Monetary Fund's second European department, John Odling-Smee, advised Prime Minister Kallas in Tallinn on 11 June that the government should not adopt a second supplementary budget but instead place any budget surplus in reserve, ETA reported. The same day, President Ruutel promulgated an addendum to the state budget that the parliament adopted earlier in the month, incorporating 410 million kroons ($24.6 million) in additional expenditures to the 2002 budget of 33.13 billion kroons.
* U.S. President George W. Bush told former Prime Minister Laar at the White House on 10 June that his country had a good chance to be admitted to NATO in the next round of enlargement, BNS reported the next day. Laar was in Washington to attend the two-day congress of the International Democratic Union, an association of Conservative and Christian Democratic parties in which Estonia's Pro Patria Union is a full member.
* Estonian Ambassador to Switzerland Mart Laanemae and Swiss Tax Board Director Urs Ursprung signed an agreement on avoiding double taxation in Bern on 11 June, ETA reported. The agreement was initialed in March 2001, and the Estonian government endorsed it in July. It still must be ratified by the parliaments of both countries. Last year, Switzerland was 21st among Estonia's trade partners with about 1 percent of total trade.
* Parliament Chairman Toomas Savi told a meeting of parliamentary leaders from EU member and candidate countries in Madrid on 8 June that Estonia was happy that the EU was maintaining its structure as a federation, BNS reported. This was important since Estonia desired "clarity that our sovereignty won't be restricted against our will."
* In a speech at a meeting of the Euro-Atlantic Partnership Council in Brussels on 7 June, Defense Ministry Deputy Chancellor Margus Kolga expressed the hope that the Partnership for Peace program for East European countries would continue after the admission of new members to NATO in the fall, BNS reported. He mentioned that Estonia has shared its experience in reform with several countries, especially Georgia and Ukraine, and is ready to do so in the future.
* During a FAO conference in Rome attended by delegations from 180 countries, Agriculture Minister Jaanus Marrandi discussed agriculture issues with his Spanish and Danish counterparts, whose countries hold the EU presidency this year, ETA reported on 10 June.
* The 101-member parliament adopted unanimously with 85 votes a law on national defense in peacetime on 13 June, BNS reported. The government had submitted the bill, which is necessary for NATO membership, to the parliament in September 2000, but it had been fundamentally changed to include recommendations by the parliament's National Defense Committee.
* The parliament passed on 12 June the bill that provides that the earlier passed new Penal Code will go into effect on 1 September, BNS reported the next day. The parliament approved the recommendation of the government that there was no need to review all the administrative and criminal sentences in effect and only 2,000 of 15,000 cases will be reviewed.
* The board of the parliament appointed on 13 June its two alternate deputies to the Convention on the Future of Europe: Ulo Tarno from the Center Party and Liia Hanni from the opposition Moderates, BNS reported. Parliament Deputy Chairmen Peeter Kreitzberg from the Center Party and Tunne Kelam from the Pro Patria Union were appointed as the main deputies in March, but no agreement was reached for naming alternates at that time.
* The government approved on 11 June a bill to merge the Economy Ministry with the Transport and Communications Ministry by 1 November and sent it to the parliament for approval, ETA reported. The initial costs of the merger are 0.8 million kroons ($48,000) plus the expenses on merging IT systems. The number of employees in the merged ministry will be cut by 10-15 percent resulting in savings of 2 million kroons per year.
* President Ruutel appointed Colonel Alar Laneman the chief of the General Staff on 13 June, ETA reported. The president had initially delayed approving the appointment, which had been proposed by the National Defense Council, because Laneman had been involved in the drowning of 14 Estonian servicemen in a training accident in 1997, but accepted Laneman's explanations at a meeting the previous day.
* The Tallinn City Council adopted on 13 June a new budget strategy which puts off balancing the budget until the year 2006 in order to maintain the present level of investment, BNS reported. Mayor Edgar Savisaar said that any lowering of the annual nearly 1 billion-kroon ($60 million) investment level would have a great negative impact on the city's development.
* The annual convention of the People's Union in Tallinn on 8 June re-elected Villu Reiljan as party chairman by an overwhelming vote of 979 to less than 15 with about 30 abstentions, BNS reported. Parliament deputies Mai Treial and Ants Kaarma were re-elected vice chairmen along with alcohol-trading-firm owner Mario Sootna, who will be the union's candidate for the mayor of Tallinn. Reiljan said the various political parties should conclude a basic national policy document tentatively called the "Charter of Estonia," which President Ruutel proposed in his inauguration speech.
* The Statistics Office announced on 7 June that the consumer price index in May was 0.3 percent higher than in April and 4.1 percent higher than in May 2001, ETA reported. The prices of goods increased by 0.3 percent in May with food products rising by 0.2 percent and nonfood items by 0.5 percent. Services became 0.1 percent more expensive.

Latvia successfully closed the Taxation and Regional Policy and Structural Instruments chapters in its EU membership negotiations on 11 June, raising the number of completed chapters to 27 of 31, LETA reported. Finance Minister Gundars Berzins noted that Latvia has been granted the longest transition period (until late 2009) among EU candidate countries for raising the excise tax on tobacco to EU required levels. It was also allowed to keep the annual "turnover" (total receipts) limit for which a company must register as a VAT payer at the current level, which is four times higher than set in EU directives. Latvia also received permission for its free ports and special economic zones to continue functioning after it enters the EU. International Financial Affairs Minister Roberts Zile told a press conference that Latvia should receive 1.16 billion euros ($1.06 billion) in financial aid from the EU in 2004-06, almost half of which would come from the Cohesion Fund.

The cabinet on 12 June approved a new economic-policy memorandum with the International Monetary Fund (IMF) that includes a pledge to reduce this year's state-budget deficit to 94 million lats ($154 million), BNS reported. The deficit would amount to 1.77 percent of gross domestic product (GDP) instead of the planned 2.45 percent (130 million lats). The memorandum forecasts that GDP will grow by 5 percent this year and by 6 percent in the following years, while inflation will remain stable at 3 percent and the current-account deficit at around 8.5 percent of GDP. The government expects that direct foreign investment will continue to cover around two-thirds of the current-account deficit, thus keeping foreign-debt levels down. Latvia also agreed to keep its currency, the lats, pegged to the IMF's Special Drawing Right (SDR) currency basket until the country joins the EU.

Accompanied by a delegation of more than 150 people, Jiang Zemin began his three-day visit to Latvia on 10 June with a welcoming ceremony at Riga Castle hosted by President Vaira Vike-Freiberga, LETA reported. The presidents then held talks that touched on a wide-range of topics, including Chinese support for Latvia's membership in NATO and the EU, greater economic cooperation, and human rights issues in China. Vike-Freiberga accepted Jiang's invitation to visit China. Latvia's previous president, Guntis Ulmanis, visited China in 1994. In the evening, a state dinner in Jiang's honor was broadcast live by Latvian state television. The Chinese leader met with Prime Minister Andris Berzins and parliamentary Chairman Janis Straume as well as visited Riga's Old Town before traveling to Tallinn on 12 June.

President Vike-Freiberga told the 41st annual Academy of Achievement summit in Dublin on 8 June that the new cooperation between NATO and Russia is beneficial for global security, LETA reported. Vike-Freiberga noted that Russia does not have a veto right on NATO enlargement and expressed the hope that Latvia's relations with Russia will improve after Latvia becomes a NATO member, just as Poland's did after it joined the alliance in 1999. Current and former Supreme Allied Commanders Europe Generals Joseph Ralston and Wesley Clark also spoke at a session devoted to NATO's new role in the world. At the summit's closing ceremonies, Vike-Freiberga presented the organization's Gold Medal to former Estonian President Lennart Meri.

On the third day of her five-day visit to Canada, Vaira Vike-Freiberga held talks in Ottawa on 12 June with Prime Minister Jean Chretien primarily dealing with Latvia's efforts to gain NATO and EU membership, BNS reported. Chretien assured her that the Canadian government will support the Baltic states joining NATO, since they "have deserved it." He also talked about Canadian experience in agricultural reform and subsidy policies, and the two discussed bilateral relations. Vike-Freiberga is scheduled to receive an honorary doctorate from McGill University in Montreal on 14 June before traveling to the United States.
* Parliament Chairman Janis Straume and three deputies of different parties accepted the invitation of Austrian National Council President Heinz Fischer and made an official visit to the Austrian parliament on 9-11 June, LETA reported. The delegation also met with Austrian President Thomas Klestil, Federal Council President Uta Barbara Puhringer, Council of Europe Parliamentary Assembly President Peter Schnieder, as well as members of the Austrian-Baltic parliamentary cooperation group.
* National Armed Forces commander Home Guard Colonel Raimonds Graube made an official visit to the Czech Republic on 10-12 June, LETA reported. On the first day he held talks with Czech Defense Minister Jaroslav Tvrdik and the Czech armed forces commander, Lieutenant General Jiri Sedivy. The next day he visited the military academy in Brno to discuss the possibilities of having Latvian officers study there. He concluded his visit meeting with Czech Senate, Foreign and Defense ministry officials, and Security Commission Chairman Michael Zantovsky.
* Latvian and Schleswig-Holstein Interior Ministers Mareks Seglins and Klaus Buss signed a protocol on cooperation between their police forces in Riga on 12 June, LETA reported. The protocol provides for regular exchange of information on the criminal situation in both countries, particularly focusing on organized crime, crimes connected with drugs, car theft, trafficking in humans, and economic crimes.
* Finance Minister Gundars Berzins and World Bank Polish and Baltic Regional Director Michael Carter signed an agreement in Riga on 13 June for a $2.03 million loan which will be used for the implementation of a housing project, BNS reported. The project provides for simplified issuing of mortgage loans to first-time buyers of apartments or houses.
* The European Investment Bank (EIB) has granted the Pirma Bank a 10 million-euro ($9.4 million) credit line for long-term lending to small and medium-size businesses, BNS reported on 10 June. Pirma Banka will be able to grant loans in lats, dollars, or euros for a period from three to 12 years to companies with net fixed assets below 75 million euros and employing under 500 people.
* Latvia's First Party Chairman Eriks Jekabsons sent an open letter to Prime Minister Andris Berzins on 10 June stating that the party takes no responsibility for the government's performance, but does not object that its members, Justice Minister Ingrida Labucka and Minister for State Administration Reform Janis Krumins, continue to serve in the government, LETA reported. Both ministers had joined the cabinet as members of the New Party, but were among the founders of the First Party at its congress on 25 May.
* The Economy Ministry dismissed Ojars Kehris, the chairman of the council of the Latvian energy company Latvenergo, and eight other members of its board on 10 June, BNS reported. The action was prompted by the law, passed in May, which forbids officials to hold more than one position in state institutions.
* Chairman of Latvia's Farmers Union Augusts Brigmanis announced at a press conference on 10 June that his party and the Green Party of Latvia will form a coalition, called the Union of Greens and Farmers, for the upcoming parliamentary elections, LETA reported. He said that the union hopes to get at least 10 percent of the electorate and participate in forming a right-wing coalition in the government.
* The parliament adopted on 13 June a law on human genome research, which is designed to develop a genetic information system of Latvia's residents and set up a genome database, BNS reported the next day. The information will be coded and kept secret with persons being allowed to request that it be erased.
* The Central Statistics Bureau announced on 10 June that the consumer price index in May was 0.3 percent higher than in April and 2.0 percent higher than in May 2001, LETA reported.
* The State Employment Service announced on 11 June that the number of registered unemployed on 1 June was 94,450 or 1,996 lower than a month earlier, LETA reported. The unemployment rate in May was 8.0 percent or 0.1 percent lower than in April.

Foreign Minister Antanas Valionis and EU Commissioner for Enlargement Guenter Verheugen approved an agreement in Luxembourg on 11 June under which Lithuania made a commitment to close the second reactor of its nuclear power plant at Ignalina in 2009, BNS reported. The agreement also states that the EU, recognizing that the decommissioning of the plant "represents for Lithuania an exceptional financial burden not commensurate with the size and economic strength of the country," is "ready to continue to provide adequate additional community assistance to the decommissioning effort" after Lithuania becomes an EU member. The Lithuanian Economy Ministry has estimated that the costs of closing the two reactors will amount to 2.4 billion euros ($2.2 billion) over the coming 20 years.

At a meeting of the Euro-Atlantic Partnership Council (EAPC) defense ministers in Brussels on 7 June, Lithuanian Defense Minister Linas Linkevicius and his Portuguese counterpart Paulo Sacadura Cabral Portas signed a treaty on bilateral cooperation in defense, BNS reported. The EAPC is composed of 19 NATO member countries and 27 countries participating in the NATO Partnership for Peace program. Lithuania has signed defense cooperation treaties with 26 countries, including all NATO members except Iceland and Luxembourg. A similar treaty with Luxembourg is currently being drafted. Linkevicius was the first speaker at the meeting, stressing that the council should maintain the Partnership for Peace program as an instrument of successful practical cooperation. He also held talks on bilateral military cooperation with his Armenian counterpart Serzh Sarkissian, who accepted an invitation to visit Lithuania at the end of August.

Valdas Adamkus on 13 June vetoed and sent back to the parliament for reconsideration a proposed hunting law and amendments to the country's law on alcohol control, ELTA reported. He objected to the hunting law as it "enshrines the possibility of using private land for hunting purposes without the consent of its owner" and thus violates the constitutional right to private property. Adamkus also suggested amending the requirement that hunting areas have a minimum of 1,000 hectares by exempting current private hunting areas of at least 200 hectares. The president said the envisaged absolute ban on outdoor advertising of alcoholic drinks contradicts a rational policy of differentiation between strong and weak drinks. The parliament did not take into consideration the possible harmful consequences of a total ban, he said, as Lithuanian breweries are among the largest sponsors of sporting and cultural events in this country. Adamkus called for allowing outdoor advertising of beer, naturally fermented wine, and cider.

Thousands of entrepreneurs and tradesmen gathered in front of the parliament building in Vilnius on 10 June to rally against what they called the "ruination of small business" in the country, ELTA reported. They were protesting a government resolution of 6 May which called for strict accounting for patent-holders and new labeling rules for nonfood products. The rally was organized by the Association of Small-Businessmen and Tradesmen, whose chairman, parliamentary deputy Eduardas Sablinskas of the New Union (Social Liberals), has proposed postponing the accounting measures until 1 January 2003. Prime Minister Algirdas Brazauskas has strongly rejected efforts to change the rules. Opposition party leaders Kazys Bobelis of the Christian Democrats and Kestutis Glaveckas of the Center Union told the demonstrators that they support their demands, "Kauno diena" reported on 11 June.

In a speech to the eighth congress of the Association of Local Governments of Lithuania (LSA) in Vilnius on 12 June, Valdas Adamkus called for the direct election of mayors as a way to strengthen local government in the country, ELTA reported. Other speakers -- including Center Union Chairman Kestutis Glaveckas, Christian Democrats Chairman Kazys Bobelis, and Liberal Union Chairman Eugenijus Gentvilas -- expressed support for the proposal. While not opposing it, parliament Chairman Arturas Paulauskas said he doubts that parliament will have enough time to pass the necessary amendments to the Constitution before the next local elections, which should be held in February or March. The parliament, however, is debating a proposal to move up the elections to 22 December, when the presidential elections will he held. Association President Bronys Rope said the association's board opposes changing the date of the local elections.
* At the meeting of government leaders of the Council of the Baltic Sea States in St. Petersburg, Russia, on 10 June, Prime Minister Brazauskas said that Lithuania will try to pay as much attention as possible to the interests of residents of Russia's Kaliningrad Oblast when adopting EU law, BNS reported. He said that there should not be any problems in cargo movement, transit, or power-supply fields, but the EU will not permit Lithuania to continue its visa-free policy for Kaliningrad residents. On 11 June he told Russian Prime Minister Mikhail Kasyanov that Lithuania considers the creation of a visa-free transport corridor through its territory for Russian citizens to be "very unlikely." He expressed the hope that a compromise on Kaliningrad will be found. Kasyanov also pledged to inform him if Russia decided to extract oil from the controversial oil field D-6 not far from the Kursiu Nerija Spit National Park.
* Brazauskas told a business forum in St. Petersburg on 11 June that the share of Russian capital in the Lithuanian economy was growing significantly and would increase even more after planned investments into Mazeikiu Nafta, Lietuvos Dujos, and the Lifosa fertilizer plant are completed, ELTA reported.
* Foreign Minister Valionis headed the delegation in Luxembourg which closed the Energy and Regional Policy and Structural Instruments chapters in the EU membership negotiations on 11 June, ELTA reported. This raised the number of completed chapters to 28 of 31 and placed Lithuania along with Cyprus in first place among the candidate countries. The remaining chapters are Agriculture and Financial and Budgetary Provisions, which no country has so far completed, as well as the Other chapter which will only be opened after all chapters are closed.
* President Adamkus read a report on 7 June at the Munich Economic Forum on Postenlargement Europe in which he stated that Lithuania would stand by its commitment to close its nuclear reactor if it received sufficient support for the decommissioning, BNS reported. He held talks with Bavarian Prime Minister Edmund Stoiber on increasing economic cooperation. Adamkus also spoke at a live broadcast on CNBC television on the topic of investments in Lithuania.
* The ninth session of the Lithuanian-Polish Interparliamentary Assembly was held in Vilnius on 7-8 June, ELTA reported. The session, chaired by parliament Deputy Chairmen Arturas Skardzius and Tomasz Nalecz, focused on the place of Lithuania and Poland in uniting Europe and the role of their parliaments in the process. It also touched on relations with Russia and the position of Kaliningrad after the two countries join the European Union.
* The Environment Ministry has offered to assist Kaliningrad Oblast to deal with pollution in the Nemunas River coming from the waste water of the cities of Sovetsk and Neman and the paper and pulp enterprises based there, ELTA reported on 13 June. The ministry is willing to pay for expert consultations on the feasibility of building treatment facilities and on getting aid from international organizations
* Social Security and Labor Minister Vilija Blinkeviciute headed the Lithuanian delegation at the International Labor Organization (ILO) annual conference in Geneva on 10 June, ELTA reported. Lithuania that day was elected for the first time ever as a full member of the ILO Governing Board for 2002-05. Blinkeviciute delivered a report on 11 June about the implementation of international labor norms in Lithuania.
* Prime Minister Brazauskas told the parliament on 13 June that the government intends to postpone the introduction of strict bookkeeping requirements for patent holders until 1 August, ELTA reported. He noted that this would allow the completion of the necessary documentation for the new rules and the organization of seminars in cities and districts.
* Efraim Zuroff, the director of the Jerusalem office of the Simon Wiesenthal Center, told a news conference in Vilnius on 12 June that he was presenting a new project for the three Baltic countries which he hoped would encourage "the ultimate prosecution of Nazi war criminals," ELTA reported. He did not reveal any details about the project, but spoke about them with Rimvydas Valentukevicius, the chief prosecutor of the special investigation division under the Lithuanian Prosecutor-General's Office.
* The 14th Congress of the Lithuanian Farmers Union at the Dotnuva research center elected Genute Staliuniene, a farmer from the Kaunas district, as the next chairperson of the organization on 7 June, ELTA reported. Prime Minister Brazauskas told the congress that farmers needed help to receive payment from processing enterprises on time. He also mentioned the need to resolve the issue of selling land to foreigners and foreign legal entities.
* Defying the Kaunas Administrative Court which suspended on 5 June the decision of the Kaunas City Council to oust Mayor Erikas Tamasauskas, the council elected Social Democrat Giedrius Donatas Asmys as the new mayor on 10 June, ELTA reported. He received support from all 24 of the 41 council members who attended the meeting. Asmys took the oath of office that same evening, but the central government's representative in the Kaunas region, Rasa Maslauskiene, suspended his election the next day since it was in violation of the court's ruling.
* The Statistics Department reported on 10 June that in May the consumer price index declined by 0.3 percent compared to April, but was 0.5 percent higher compared to May 2001, ELTA reported. In May the costs of consumer goods fell by 0.4 percent, but the costs of services rose by 0.1 percent.
* Because of its successful structural reforms and increased transparency, the international rating agency Standard & Poor's improved the borrowing prospects for the electric utility Lietuvos Energija (Lithuanian Energy) from negative to stable, ELTA reported on 10 June. It retained its long-term borrowing rating at BB+ and short-term rating at B.