Baltic Report: October 22, 2001

POWELL URGES BALTIC STATES TO DEVELOP ANTITERRORISM PROGRAMS.
In letters to all three Baltic foreign ministers, U.S. Secretary of State Colin Powell encouraging the three Baltic countries, under the U.S.-Baltic Charter and through the Baltic Partnership Commission, to participate in the worldwide fight against terrorism, BNS reported on 24 September. Powell noted: "We have rededicated ourselves to a vision in which you...have a vital role to play. We remain steadfast in our commitment to help you prepare yourselves for full integration in the trans-Atlantic community." The three Baltic foreign ministers had planned to meet Powell earlier this month in Washington, where they were to attend the annual Baltic Partnership Commission meeting. However, that meeting was canceled after the terrorist attacks of 11 September.

RUSSIAN DEPUTY PREMIER SAYS BALTIC EU MEMBERSHIP MAY HURT RUSSIA.
Speaking at the Baltic Forum in St. Petersburg on 24 September, Deputy Prime Minister Ilya Klebanov said Moscow is concerned that future Baltic membership in the European Union may have negative consequences for Russian exports, RIA-Novosti reported. If the Baltic countries become EU members, Klebanov noted, Russian exports through those countries will become subject to EU antidumping rules and maximum quotas will be set on exporting oil and nuclear fuel. Consequently, Klebanov said, Russia will seek a special agreement lest it be forced to raise prices and price itself out of the market. At the same time, however, he indicated that the Nordic-Baltic region is becoming ever more important for Russia as a bridge to Europe.

'VILNIUS-10' FOREIGN MINISTERS MEET IN SLOVENIA.
The three Baltic foreign ministers -- Estonia's Toomas Hendrik Ilves, Indulis Berzins of Latvia, and Antanas Valionis of Lithuania -- attended the 47th annual assembly of the Atlantic Treaty Association in Bled, Slovenia. During that meeting, they also met with their Vilnius Group counterparts to discuss the implications of the 11 September terrorist attacks on the U.S. for international security and the prospects for further NATO enlargement. In a joint statement, the foreign ministers expressed their solidarity with the U.S. and affirmed that NATO remains the most important guarantor of peace and stability.

BALTIC SEA REGION E-BUSINESS FORUM HELD IN RIGA.
On the final day of the Baltic Sea Region E-Business Forum in Riga on 26-28 September, Organization for Economic Cooperation and Development (OECD) Secretary-General Donald Johnston said that the Baltic states have the necessary basic infrastructure with the necessary institutions and well-educated people to successfully develop an information-technology-based society, BNS reported. On 27 September, Estonian Prime Minister Mart Laar told the forum that public- and private-sector cooperation is a precondition for implementing E-projects, such as Estonia's E-government project that allows government members to participate in cabinet sessions from anywhere in the world. Laar's Baltic counterparts, Andris Berzins of Latvia and Algirdas Brazauskas of Lithuania, also spoke at the forum, and at a subsequent meeting the three premiers discussed the global situation following the 11 September terrorist attacks in the United States and agreed to develop a joint program for combating terrorism.

RUUTEL ELECTED PRESIDENT.
Estonia's electoral college, consisting of 101 parliamentary deputies and 266 local government representatives, on 21 September elected 73-year-old Arnold Ruutel, the chairman of the last Supreme Council of the Estonian SSR, as Estonia's president, BNS reported. In the first ballot that day, Ruutel, the honorary chairman of the opposition People's Union, received 114 votes; current parliament chairman Toomas Savi (Reform Party), 90; Peeter Tulviste (Pro Patria Union), 89; and Peeter Kreitzberg (Center Party), 72. In the second ballot, Ruutel defeated Savi on a vote of 186 to 155, with 23 unmarked ballots and two ballots with both candidates crossed out. Ruutel, who lost the previous two presidential elections to President Lennart Meri, admitted that he had not expected to win, and said that he considers Estonia's membership in the European Union and NATO the highest foreign policy priorities.

EBRD PRESIDENT CALLS ESTONIA MOST SUCCESSFUL EU ASPIRANT.
European Bank for Reconstruction and Development (EBRD) President Jean Lemierre told Prime Minister Mart Laar in Tallinn on 2 October that Estonia is the most successful of the countries aspiring to membership in the European Union, BNS reported. He said that the EBRD is willing to grant longer-term loan guarantees to Estonian banks if the situation in the global economy deteriorates. Lemierre visited the headquarters of Eesti Energia and inquired about the planned projects for an underwater power cable between Estonia and Finland and the electric utility's proposed merger with Latvia's Latvenergo. He also noted that the EBRD is willing to provide credit for the renovation of Narva Elektrijaamad (Narva Power Plants) if its expected purchaser, the U.S. company NRG Energy, and Eesti Energia encounter difficulties in obtaining needed loans. Lemierre also met with Finance Minister Siim Kallas and Tallinn Mayor Tonis Palts.

ECONOMY MINISTER RESIGNS...
Mihkel Parnoja of the Moderates party unexpectedly announced his resignation as economy minister on 28 September, BNS reported. He said unpopular decisions he had made regarding the privatization of Eesti Raudtee (Estonian Railways) and Narva Elektrijaamad (Narva Power Plants) had been correct and necessary, but that he and his colleagues had failed to successfully explain the rationale for those decisions to the public. Parnoja, who survived two no-confidence votes during his tenure as economy minister, intends to return to the parliament as a deputy once President Lennart Meri accepts his resignation. The board of the Moderates accepted Parnoja's decision the next day and pledged to nominate a new economy minister as soon as possible.

...MODERATES' BOARD BACKS HOLOLEI AS ECONOMY MINISTER.
The board of the Moderates party on 4 October unanimously supported the candidacy of 31-year-old State Chancellery European Integration Office head Henrik Hololei as the next economy minister, Estonian media reported the next day. According to the ruling coalition agreement, Prime Minister Mart Laar is bound to nominate a Moderates-backed candidate, as the Moderates are responsible for that ministry. Hololei is set to replace Mihkel Parnoja, who unexpectedly resigned last week. On 5 October, Hololei said he will review the present functions of the ministry as well as the potential costs and benefits of a proposed merger with the Transport and Communications Ministry, ETA reported. Hololei said that the priority of the ministry will be to attract foreign investment by improving Estonia's already favorable reputation.

RULING COALITION PROMISES NOT TO QUARREL.
The ruling coalition of Pro Patria Union, the Reform Party, and the Moderates agreed on 24 September to avoid mutual accusations concerning their collective defeat in the recent presidential elections, ETA reported. Council chairman Andres Tarand of the Moderates asserted, "All the partners will wash their dirty laundry on their own." He also affirmed that the coalition will never agree to a suggestion by Reform Party Deputy Chairman Meelis Atonen that the opposition People's Union should be invited to join the ruling coalition. Prime Minister Mart Laar told reporters that the defeat could prove positive for the coalition, as it makes clear the need for its members to work together. He said that the coalition will not join forces against the new president, Arnold Ruutel, but will work with him "in a matter-of-fact way."

ESTONIAN AIR SUSPENDS FLIGHTS...
Estonian Air announced that it would suspend all flights from 26 to 28 September because insurance companies had reduced their maximum coverage for terrorist and war-like attacks from $1 billion to $50 million, BNS reported on 25 September. Such coverage is not sufficient, as the terms by which the company leases its aircraft require insurance of at least $500 million. The government refused the airline's request to give a guarantee for such insurance until 1 November, when a new insurance agreement will come into effect, as Estonian law prevents it from giving guarantees greater than 15 percent of the state budget. The government pledged to open talks with the Danish government about widening the guarantees to Maersk Air, which owns 49 percent of Estonian Air. The airline has canceled 10 flights a day to London, Riga, Moscow, Kyiv, and Hamburg, but will continue flights to Stockholm, Copenhagen, and Vilnius with planes leased by Maersk Air, ETA reported on 26 September.

...ANNOUNCES INCREASE IN AIRFARES.
Estonian Air announced on 3 October that it was increasing the prices of its tickets by 3-5 percent, to compensate for the higher cost of insurance after the September terrorist attack in the U.S., ETA reported. The airlines will have to pay the Danish insurer Codan premiums of $1 million per year instead of the previous $150,000.

PARLIAMENT PASSES CONTRACTS ACT.
The parliament on 26 September finally passed the Contracts and Non-Contractual Obligations Act, which was debated for more than two years, ETA reported. The act -- with 1,068 articles the largest act ever passed by the parliament -- is needed to facilitate Estonia's integration into the EU. Until it comes into force, probably in late 2002, all contractual obligations remain regulated by the Estonian SSR Civil Code.

NEW POLITICAL ASSOCIATION FORMED.
The new political association "With Reason and Heart" elected former Estonian Prime Minister Mart Siimann as its chairman during the association's founding congress in Jogeva on 30 September, BNS reported the next day. The congress also elected a governing board among which there is a large number of local government leaders. Siimann, who served as premier from 1997-1999 as a member of the Coalition Party, said that one of the new organization's goals is to prepare for the local elections, due in the fall of 2001. He noted that, although some members want the association to become a political party, most members do not want party status. It could, however, turn into a party if parliament approves proposals by some political forces to require that only political parties may compete in local elections.

TV1 BROADCASTS HALTED.
The Broadcasting Transmission Center stopped transmitting the programs of commercial television station TV1 on 3 October because TV1 owes the center 1.5 million kroons ($88,000), BNS reported. TV1 board Chairman Rait Killandi said he had signed an agreement with the station's owner, Poland's Polsat Media, in Warsaw the previous week to pay the debts, but the promised money had not been received. Station employees have not been paid since July and several employees have already quit their jobs. Killandi said that he had been assured by Polsat, which also runs LNT in Latvia, that it is interested in TV1's continued survival. TV1, the smallest of Estonia's four national television stations, held a 9.5 percent share of national television viewers in August.

* President Lennart Meri, during a visit to Berlin on 27 September, opened the newly renovated Estonian Embassy building which had served as the country's diplomatic mission between 1920 and 1940, BNS reported. Meri also held talks with his counterpart, German President Johannes Rau, and the chairman of the lower chamber of the parliament, Wolfgang Thierse.

* Prime Minister Mart Laar presented to the parliament a balanced draft 2002 budget on 26 September, based on estimates that economic growth in 2002 would be 5 percent and the rate of inflation 3.8 percent, BNS reported. He cautioned, however, that a slowdown in the world economy could reduce revenues.

* Justice Ministers Mart Rask (Estonia) and Yuri Chaika (Russia) signed a supplementary protocol to the Estonian-Russian legal assistance agreement in Moscow on 3 October, BNS reported. According to the protocol, the countries mutually recognize legal judgements in civil, family, and administrative matters, as well as in criminal cases involving compensation for damages and fines.

* President-elect Arnold Ruutel, on his Internet website, asserts that the sale of agricultural and forest land to foreigners should be banned for at least 10 years after Estonia becomes a member of the EU, BNS reported on 24 September. Ruutel called for a balanced policy toward membership in the European Union, noting that it makes sense only insofar as it supports and protects the development of Estonia as a nation-state.

* Prime Minister Mart Laar, Employers Central Association managing director Tiit Laja, and Trade Unions' Central Union Chairwoman Kadi Pornits signed an agreement on 25 September that the minimum monthly wage should be raised to 1,850 kroons ($109) and the minimum hourly wage to 10.95 kroons per hour, ETA reported. They also agreed that the minimum wage should be subsequently increased to reach 41 percent of average gross wages by 2008.

* Foreign Minister Toomas Hendrik Ilves told departing Chinese Ambassador Mingrong Zou on 1 October that relations between the two countries are very good and that bilateral trade had increased tenfold in the last three years, BNS reported.

* Reverend Nikolai Balashov, a representative of the Moscow Patriarchate's External Relations Department, during an OSCE conference in Warsaw on 26 September, rejected conditions offered by Prime Minister Mart Laar for the registration of the Estonian Orthodox Church of the Moscow Patriarchate, BNS reported. Reverend Balashov explained that the proposed draft statutes lacked references to documents on the basis of which the church is operating in Estonia and made no mention of the autonomy of the church.

* Fishery talks with the European Union, held on 2 and 3 October, ended without results as the two sides failed to reach an agreement on exchanging fishing quotas, BNS reported. Estonia has not yet decided what quota it will set for sprat caught in its waters in exchange for a quota of Atlantic cod.

* The Foreign Ministry has agreed to pay the U.S. public relations firm Downey McGrath Group more than 3 million kroons ($176,000) to lobby in U.S. political circles and the media in favor of Estonia's admission to NATO at next fall's Prague summit, ETA reported on 28 September.

CABINET SPLIT ON DRAFT 2002 BUDGET.
Finance Minister Gundars Berzins announced on 26 September that the government will not be able to present the 2002 draft budget to the parliament as it had planned by 1 October, LETA reported. Berzins had presented a budget draft, calling for a deficit 1.73 percent of GDP, for consideration within the cabinet earlier in the month. This draft was rejected, Berzins said, because some ministers demanded greater expenditures based on optimistic revenue forecasts that are tied to such potentially unpredictable sources as increased foreign investment and Russian oil transshipment fees. On 2 October, the Finance Ministry presented to the cabinet an amended draft budget, calling for a deficit of 2.14 percent of GDP, LETA reported. Finance Ministry Deputy State Secretary Inguna Sudraba said the amended draft includes a 3 percent cut in the corporate income tax rate that the People's Party demanded as a condition for supporting the draft budget. The cabinet must still reach agreement on five issues -- budget revenues, expenditures, deficit, negotiations with municipalities, and lowering the corporate income tax -- before a final budget proposal can be sent to the parliament.

EBRD READY TO HELP PRIVATIZE LASCO.
European Bank for Reconstruction and Development (EBRD) President Jean Lemierre reaffirmed to President Vaira Vike-Freiberga in Riga on 1 October that his bank plans to make further investments in the country, LETA reported. He told a press conference that the EBRD is prepared to participate in the privatization of the Latvian Shipping Company (LASCO) if two conditions are met -- the company must be capable of operating independently after the privatization, and the privatization process must be transparent. Lemierre also said that the EBRD will devote special attention to financing the small and medium-sized enterprise sector in Latvia, which employs the vast majority of the country's workers. If asked by the government and the plan's strategic investor, Lemierre said the bank was willing to offer its expertise and funding for the construction of a new paper mill in eastern Latvia.

WORLD BANK WANTS HIGHER TOBACCO TAX.
The World Bank mission to Latvia is urging the country to raise its excise tax on tobacco to the EU's recommended level of 57 percent of the average price of a pack of cigarettes, BNS reported on 24 September. The head of the World Bank's health reform project in Latvia, Dominic Haazen, told reporters that "experience of many world countries shows that the most effective means to fight smoking is to increase the excise tax on tobacco." Latvian Finance Ministry Excise Tax Department head Maris Juruss noted that the current excise tax of 5.10 lats ($8.24) and 6.10 lats per 1,000 filter and non-filter cigarettes, respectively, is about 42 percent of the price of a pack of cigarettes. Juruss said the country will need at least 10 years to raise the excise tax to the recommended level, because of the flood of contraband cigarettes that would likely enter Latvia if the annual increase were larger than 1-2 percent.

LATVIA AND ESTONIA INK NEW AGREEMENT ON DOUBLE TAXATION.
After four days of talks, Finance Ministry officials from Latvia and Estonia meeting in Riga initialed a new agreement to avoid double taxation, which is to become effective on 1 January 2002, BNS reported on 21 September. The agreement must still be approved by both governments and parliaments, but if the parliaments should fail to ratify the accord in time it will take effect retroactively. In order to prevent double taxation, both countries will use the simple credit method with the right to tax dividends, interests, and royalties being divided between the country of income origin and the country of residence. About 50 percent of Estonia's foreign investments are in Latvia, where more than 500 firms with Estonian capital now operate.

PREMIER VISITS ST. PETERSBURG.
Upon returning to Riga on 25 September, Andris Berzins told a press conference that the third annual Baltic Development Forum in St. Petersburg proceeded in an amicable fashion and Russia did not openly oppose the efforts of the Baltic states to join NATO, LETA reported. The forum, attended by senior officials from Estonia, Finland, Denmark, Russia, and the European Commission, addressed alternatives for developing the Baltic Sea region. During the forum Berzins also held talks with Viktor Cherkesov, Russian President Vladimir Putin's representative in the Northwestern region, and St. Petersburg Governor Vladimir Yakovlev.

GOVERNMENT ACCEPTS SCHENGEN IMPLEMENTATION PLAN.
Interior Minister Mareks Seglins announced on 3 October that the cabinet had accepted a plan of action to fully implement the Schengen requirements on Latvia's borders that will be required should Latvia become a member of the European Union, BNS reported. The plan addresses topics such as border control, visas, migration, police cooperation, drug control, legal cooperation, the Schengen information system, and protection of personal data. The plan notes which Schengen rules Latvia already complies with, and sets a time frame to develop additional required legislation. The largest expenditures called for under the plan are to secure Latvia's external border and establish the Schengen information system, which on the basis on Finland's experience will cost an estimated 7 million lats ($11.3 million).

* The government passed regulations on 2 October giving the defense minister authorization to permit foreign warships carrying nuclear weapons to enter Latvia's territorial waters, LETA reported. Previously, warships with nuclear engines or weapons had been banned, but the law was amended to make it compatible with laws of other NATO countries.

* During talks in Riga on 3 October Anne-Marie Esper Larsen, the head of the Danish Foreign Affairs Ministry's secretariat for bilateral aid to Central and Eastern Europe countries, declared that Denmark's aid to Latvia in 2002 would be retained at the same level as this year, LETA reported. She noted that projects that promote Latvia's readiness to enter the EU and NATO have a priority. Denmark provides about 15 percent of all foreign aid received by Latvia.

* The parliament on 4 October adopted a new competition law increasing the number of conditions companies must meet before being allowed to merge, BNS reported. The Competition Council must approve any corporate mergers of companies with a combined annual turnover of more than 25 million lats ($40.2 million) or if one of the companies holds a dominant position on a specific market prior to the merger. The law will go into effect on 1 January 2002.

* Maris Kaijaks, one of three state trustees of the Latvian Shipping Company (LASCO), resigned on 25 September and called on his colleagues Druvis Skulte and Ivars Kalviskis to do the same, LETA reported. Economy Minister Aigars Kalvitis said that Kaijaks had made the right decision, as the trustees had made irresponsible decisions concerning the proposed purchase of three new tankers.

* During an emergency meeting on 26 September, the council of the Latvian Privatization Agency decided to allow the Latvian Shipping Company to borrow $90 million for its controversial purchase of three Panamax tankers, LETA reported.

* The organizers of the right-of-center party being formed by Bank of Latvia President Einars Repse announced that the new party will be called "Jaunais laiks" (New Era), LETA reported on 28 September.

* Vaira Paegle, the head of the Latvian delegation at the Council of Europe's Parliamentary Assembly, was elected as one of the vice presidents of the assembly unanimously on 27 September, LETA reported.

* Riga Regional Court Judge Inara Steinerte brought to an end the three-year-long Banka Baltija fraud trial on 25 September, LETA reported. Judge Steinerte will now consider the evidence presented and come back with a verdict. The main defendants, Banka Baltija board chairman Aleksandrs Lavents and president Talis Freimanis, did not attend the session due to poor health.

* Statistics released on 4 October by the Citizenship and Migration Administration show that, as of the end of September, 8,396 citizens and 17,142 non-citizens still had not exchanged their former USSR passports for Latvian citizen or non-citizen documentation, LETA reported on 4 October. However, officials suggest that the actual number of non-citizens without valid Latvian documents is probably lower, as many of them may have emigrated before the new documents became available.

LITHUANIA GRANTS U.S. AIRSPACE RIGHTS FOR ANTITERRORISM CAMPAIGN.
Responding to a U.S. request, the Lithuanian government on 26 September agreed to grant the United States overflight privileges as part of the campaign against terrorism, BNS reported. Deputy Foreign Minister Giedrius Cekuolis told reporters after a meeting with U.S. defense attach� Lieutenant Colonel Albert Zaccor that this action demonstrates Lithuania's political will as an ally of the U.S. and NATO. Lithuania also granted the right for American transport or military planes to landing rights at Zokniai airport near the city of Siauliai, whose runways are long enough to be used by all planes. That same day, Estonian officials declared they too would grant overflight privileges should the U.S. request it, ETA reported.

NEW AGRICULTURE MINISTER APPOINTED.
President Valdas Adamkus appointed New Union (Social Liberals) parliament deputy Jeronimas Kraujelis as agriculture minister on 2 October, ELTA reported. Prime Minister Algirdas Brazauskas had nominated the 63-year-old chairman of the parliament's Rural Affairs Committee the previous week to replace Kestutis Kristinaitis, who resigned on 20 September. Adamkus hesitated to approve Kraujelis, citing his long-standing view that it is inappropriate for a minister to also be a parliament deputy. The president finally agreed to the choice after further talks this week with the premier and parliament Chairman Arturas Paulauskas. Kraujelis worked for many years in the Lithuanian SSR's Agriculture Ministry, eventually rising to the post of deputy agriculture minister in 1989-1991. He later was the director and president of the National Association of Agricultural Companies. The parliament held a special session on 3 October to allow Kraujelis to take his oath of office.

PRIME MINISTER VISITS LATVIA.
Algirdas Brazauskas held talks during his two-day working visit to Latvia with high-level officials from that country, ELTA reported. The premier gave speeches at the Baltic Sea Region E-Business Forum on 27 September (see "Regional") and at Council of the Baltic Sea States Ministerial meeting on Information and Communications Technology (ICT) the next day, ELTA reported. He discussed with Latvian Prime Minister Andris Berzins the need for Latvia to ratify the sea-border treaty between their countries, the possible renewal of oil exploration off their coasts, and the participation of both countries in Poland's plan to pipe natural gas from Norway. Brazauskas told President Vaira Vike-Freiberga that their countries should simplify procedures and expand border-crossing points to eliminate the lines of trucks that often form at the borders. The leaders also spoke about their negotiations to join the EU and NATO, and the possibility of signing an agreement on the free movement of labor between their states.

PRESIDENT VISITS IRELAND.
Valdas Adamkus began a three-day visit to Ireland on 24 September with talks in Dublin with his Irish counterpart Mary McAleese on bilateral links, economic and cultural relations, European integration, and the international political situation, ELTA reported. He later met with Prime Minister Bertie Ahern, House of Representatives Chairman Seamus Pattison, and Senate Chairman Brian Mullooly. Ahern assured him that Ireland firmly supports Lithuania's efforts to join the European Union and both leaders expressed the hope that the countries would establish embassies in the other's capital. The next day, Adamkus met with Dublin Mayor Michael Mulcahy, and during a business forum attended by some 30 Lithuanian entrepreneurs from the construction, finance, and IT sectors, called Irish businessmen "the Celtic tigers." Adamkus also said he is convinced the economy of Lithuania will reach similar growth rates to those of Ireland. Adamkus visited Cork on 26 September and met with Irish Vice President Aine Hyland and the city's mayor, Tom O'Driscoll.

VERHEUGEN: LITHUANIA CAN EXPECT GOOD EVALUATION FROM EUROPEAN COMMISSION.
Enlargement Commissioner Guenter Verheugen told President Valdas Adamkus in Brussels on 4 October that the European Commission (EC) progress report on Lithuania, which will be officially released on 13 November, will give the country a positive evaluation of its preparations for EU membership, ELTA reported. Adamkus also met with EC President Romano Prodi, where they discussed the status of Lithuania's energy sector reforms and the closing of the nuclear power plant in Ignalina. The EC officials did not set any specific date for the closure, and Prodi noted that it is a problem not only for Lithuania but for all of Europe. The joint Lithuanian and EC task force analyzing the social and economic impact of the plant's closing is expected to finish its report by the end of the year. Adamkus also presented Oskaras Jusys as the new head of the Lithuanian mission to the EU. Jusys will replace Romualdas Kalonaitis, who had served since 1997.

LITHUANIA SEEKS 13 TRANSITION PERIODS IN EU AGRICULTURE TALKS.
Deputy Agriculture Minister Dalia Miniataite announced on 23 September that Lithuania intends to ask for 13 transition periods in agriculture policies in its negotiations for European Union membership, BNS reported. The majority of transition periods are in the sectors of veterinary medicine, preservation of plant diversity, and public health. Lithuania is asking for transition periods until 1 January 2012 for the implementation of requirements for the protection of plant varieties, and until 1 January 2009 for bringing veterinary inspection fees into line with those applied in the EU and for additional rules on milk and milk products. The actual negotiations on the agriculture chapter will begin in early October in Brussels.

GOVERNMENT ADOPTS GAZPROM PLAN FOR PRIVATIZING LIETUVOS DUJOS.
The government agreed on 1 October to a proposal by Russian natural gas giant Gazprom for the privatization of the state-owned utility Lietuvos Dujos (Lithuanian Gas), which offers both the strategic investor and the gas supplier equal 34 percent shares in the company while the government retains a 24 percent share, ELTA reported. The remaining 8 percent is currently privately owned. The main competitors as strategic investor are Germany's Ruhrgas and France's Gaz de France, as the U.S.-registered Russian gas provider Itera does not fulfill the condition of having at least 10 years of experience in gas-distribution systems.

GERMAN NORD/LB ONLY BIDDER FOR LAST STATE-OWNED BANK.
Norddeutsche Landesbank Girozentrale (Nord/LB), which has had a branch office in Vilnius since 1999, was the only bank to file an application on 3 October to participate in the privatization of Zemes Ukio Bankas (Agricultural Bank), ELTA reported. Previous attempts to privatize the third-largest bank in Lithuania, which has assets of 1.66 billion litas ($416.5 million), failed in 1998 and 2000. The minimum price for the 76 percent state-owned share is 100 million litas. In early September three other Western banks -- Austria's Raiffeisen Zentralbank Oesterreich, the Nordic bank Nordea, and Finland's Sampo Bank -- expressed interest in privatizing the bank, but did not file formal applications. The government hopes to conclude a sales agreement by the end of this year, in order to complete the sale in the first quarter of 2002.

* Members of the International Security Advisors Group U.K. General Garry Johnson and Danish Lieutenant General Kjeld Hilings told ground forces commander Colonel Valdas Tutkus in Vilnius on 4 October that the Lithuanian military has already reached the level of many NATO member states in the areas of military readiness and interoperability, BNS reported. Lithuania has pledged to have ready by 2002 a mechanized infantry battalion able to take part in military operations abroad under Article 5 of the North Atlantic Treaty, and to have ready a rapid reaction brigade by 2006.

* Ambassador to NATO Ginte Damusyte officially presented Lithuania's NATO Membership Action Plan (MAP) to NATO Assistant Secretary-General for Political Affairs Guenther Altenburg on 2 October, BNS reported. The almost-80-page report documents the country's progress in meeting NATO membership requirements and reviews the country's democratic and economic development.

* The chiefs of the border services of Lithuania and Hungary, Algimantas Songaila and Jozsef Bendek, signed a protocol for greater cooperation and information exchange between their organizations in Budapest on 28 September, ELTA reported. The services plan to share information on illegal migration and document forgery and cooperate in the prevention of drug trafficking and other illegal activities in border areas.

* The International Monetary Fund agreed on 2 October to raise Lithuania's fiscal budget deficit target for 2002 by 90 million litas ($22.5 million) to 1.5 percent of GDP, BNS reported. The Finance Ministry made the request so that it could restore some of the planned expenditures for education, science, and health care, financed in equal shares from the state budget and the privatization fund.

* The parliament on 25 September passed the "Law on Packaging and Packaging Waste Management," which should reduce the volume of packaging waste and its negative effects on the environment in line with EU requirements, BNS reported. The law, which will go into effect on 1 January 2003, will require producers and importers who do not collect and utilize packaging waste to pay a pollution tax.

* The parliament on 25 September ratified the state treaty with Latvia on mutual aid in cases of natural disasters and other catastrophic events, BNS reported. It allows the counties to ask for and receive from one another aid in cases of natural disasters and catastrophes, such as industrial accidents. Under the treaty the two countries pledged to share information and technology as well as hold joint drills and exercises on disaster prevention and clean-up.

* The State Gambling Supervision Commission on 25 September received the first application for a gambling license from Olympic Casino Group Baltija, which is owned by the Estonian firm Benetreks Casino Group, ELTA reported. It plans to open three gaming-machine halls in Vilnius this year and to have 15 in Lithuania by late 2004.

* Responding to the request by President Valdas Adamkus to present its official position on the presidential elections in Belarus, the Social Democratic Party issued a statement on 1 October declaring that the elections were not sufficiently democratic and did not ensure the right of opposition candidates to campaign through the media, ELTA reported. The request had been made because three party members, who had been invited by the Belarusian parliament to monitor the election, had declared that they were fair and democratic.

* Shareholders of the utility Lietuvos Energija (Lithuanian Energy) on 1 October approved plans to sell the rights to the $48 million energy debt owed by the Belarus state company Belenergo to the Russian company Vangvard and Lithuanian firm Dzeirana for some $26.5 million, BNS reported. Vangvard agreed to pay $25.1 million for a $45.5 million share and Dzeirana $1.4 million for a $2.5 million share within a month.

* The National Labor Office announced on 3 October that there were 215,600 unemployed at the beginning of the month, representing an unemployment rate in September of 12.0 percent, a 0.1 percent decline from the rate in August, ELTA reported.

* LUKoil exported crude oil through the Butinge terminal, owned by Mazeikiai Oil, for the first time on 24 September, BNS reported. The Norwegian-registered tanker Bergitta departed that day with 100,100 tons of LUKoil crude oil. In late July, LUKoil signed an agreement with Mazeikiai Oil to export 1.4 million tons of crude oil through Butinge by the end of this year, but it is doubtful that this will be fulfilled.

* Lithuanian Airlines (LAL) announced on 3 October that it was raising airfares by at least 4 percent from 5 October, BNS reported. LAL managing director Stasys Jarmalavicius said that the extra money would be used to enhance flight safety to bring it into line with additional requirements set by international organizations.