Baltic Report: November 1, 2001

NATO CANDIDATES IN SOFIA SAY ENLARGEMENT WILL HELP FIGHT AGAINST TERROR.
The so-called Vilnius Group of 10 NATO candidate countries, meeting in Sofia on 5 October, said in a joint statement that the 11 September terrorist attacks on the U.S. have added a sense of urgency to their arguments for joining the alliance, international agencies reported. The heads of state from Albania, Bulgaria, Croatia, Estonia, Latvia, Lithuania, Macedonia, Romania, Slovenia, and Slovakia said enlarging NATO to absorb countries in Eastern Europe and the Baltic countries will help the world in the struggle against global terrorism. Addressing the gathering, NATO Secretary-General Lord George Robertson said the 11 September terrorist attacks have "neither derailed the enlargement process, nor slammed NATO's door shut."

MOSCOW CONTINUES TO RAISE ETHNIC ISSUE IN ESTONIA, LATVIA.
Foreign Minister Igor Ivanov told visiting OSCE High Commissioner on National Minorities Rolf Ekeus on 5 October that Moscow remains concerned about the treatment of ethnic Russians in Estonia and Latvia, ITAR-TASS reported. Meanwhile, on 4 October, an article in "Vremya novostei" noted that Latvia's decision to allow NATO ships carrying nuclear weapons to visit its ports may cause Moscow to "change its mind" and to deploy tactical nuclear missiles in Kaliningrad. At the Congress of Compatriots in Moscow, attended by about 600 delegates from 47 countries on 11-12 October, Moscow Mayor Yurii Luzhkov called the attitude toward Russian-speaking people in Latvia and Estonia "blatant apartheid," LETA reported.

BALTIC, NORDIC ENERGY COMPANIES SIGN ON FOR ESTLINK PROJECT.
Seven mostly state-owned energy companies signed a memorandum of understanding on the implementation of the "Estlink" project in Tallinn on 9 October, BNS reported. The project -- in which Estonia's Eesti Energia, Latvia's Latvenergo, Finland's Pohjolan Voima Oy, Helsingin Energia, and TXU Nordic Energy Oy, Sweden's Granige AB, and Norway's Statkraft SF are involved -- foresees the laying of an electric power cable between Estonia and Finland to link the electrical power systems of the Baltic countries and Scandinavia. The seven electric utilities plan to create a company next spring to oversee and maintain the power cable. The installation of the proposed 315-megawatt underwater power cable, which is expected to cost about 100 million euros ($90 million), should be completed in 2004.

RUSSIA LOBBIES FOR UNIFIED ELECTRIC GRID WITH UKRAINE, BELARUS, LITHUANIA, AND ARMENIA.
Viktor Glukhikh, the head of a business group uniting entrepreneurs from the post-Soviet states and the Baltic countries, said his organization is pushing to link Russia's electric power grid with those of Ukraine, Belarus, Lithuania, and Armenia, RBK reported on 13 October. Russia's Unified Energy Systems head Anatolii Chubais also supports this idea, Glukhikh said.

NEW PRESIDENT TAKES OFFICE.
Arnold Ruutel took his oath of office as president in front of parliament on 8 October, BNS reported. In his inauguration speech, Ruutel set three priorities for his presidency: restoring positive population growth, ensuring equal opportunities in education, and reducing unemployment. Ruutel stressed that he will seek to develop good and friendly relations with Russia, noting that an important step in this direction would be the signing of the border agreement that was initialed in 1996, but has yet to be signed due to Russian reluctance. The president also asserted: "Estonia unconditionally supports the fight against terrorism, but no nationality or major world religion can be regarded as terrorist." In his final act as president, Lennart Meri submitted a draft law proposing the direct election of the president by popular vote and the establishment of a Constitutional Court to adjudicate disputes between the president, the cabinet, and the parliament on constitutional matters.

LAAR ENCOURAGED BY CHENEY'S SUPPORT.
In an interview in "Postimees" on 18 October, Mart Laar said he was pleased with the meeting he had at the White House in Washington the previous day with U.S. Vice President Dick Cheney, BNS reported. Defense Minister Juri Luik and Estonian Ambassador to Washington Sven Jurgenson also attended the meeting. Laar said Cheney thanked him for Estonia's support in the fight against terrorism and assured him that the attacks in New York and Washington on 11 September have not changed America's political priorities and that NATO enlargement will proceed with no third-party interference. Laar also held talks with Senator John McCain (R-Arizona) during which the privatization of Narva Power Plants by U.S.-based NRG Energy was briefly discussed.

TURKEY SUPPORTS NATO MEMBERSHIP FOR ESTONIA.
Turkish Foreign Minister Ismail Cem told visiting Estonian counterpart Toomas Hendrik Ilves in Ankara on 17 October that his country supports the entry of Estonia into NATO as soon as possible, ETA reported. Cem noted that NATO membership should not be dependent on the interests of any third country. The ministers noted that bilateral relations are very good, but trade should be increased. Cem said that Turkey can learn from Estonia's experience in attracting foreign investment. Prime Minister Bulent Ecevit and Defense Minister Sabahattin Cakmakoglu also spoke with Ilves about the need to continue the various projects through which their states give support to Georgia and Azerbaijan.

VIEWS DIFFER WITHIN RULING COALITION.
The Reform Party is distancing itself from the unpopular moves of its coalition partner, the Pro Patria Union, "Eesti Paevaleht" reported on 12 October. Reform Party chairman, Finance Minister Siim Kallas promised to review plans to raise electricity tariffs and to oppose the increase unless the need for it is clearly documented. The Reform Party takes a softer line on two other important Pro Patria projects: a proposal to introduce national ID cards and the administrative-territorial reform proposal to reduce the number of local governments. The board of the third coalition partner, the Moderates, met on 11 October and defined a different set of priorities for itself and the coalition, emphasizing the role of its ministers in making good on the party's election pledges and program priorities.

MINISTER ADMITS ADMINISTRATIVE REFORM BOGGED DOWN.
Interior Minister Tarmo Loodus admitted that the government will not be able to implement the controversial reduction in the number of local governments called for in its territorial administrative reform plan before the next local elections in October 2002, BNS reported on 12 October. Loodus noted that most local governments oppose radical reform and that one of his Pro Patria Union's coalition partners, the Reform Party, opposes any forced merger of local governments. The chairman of the European Union's Committee for Regions, Jos Chabert, declared during a visit earlier in the week that Estonia, with 247 local governments, has far too many such governments for a country with a population of 1.4 million. Chabert said that Belgium established a more efficient system of local governments by reducing their number from 600 to 200.

RUSSIA CONDITIONS TARIFF ABOLITION ON CHURCH ISSUE.
Jaak Saarniit, the managing director of the Estonian Large Enterprises Association, was told by Russian Deputy Premier Viktor Khristenko during a visit to Moscow last week that Russia will not grant Estonia equal trade conditions until the issues concerning the Estonian Orthodox Church in Estonia are resolved, the daily "Aripaev" reported on 15 October. Although the Estonian Orthodox Church, subordinate to the Moscow Patriarchate, has applied for registration on several occasions, Estonian authorities have denied it, arguing that it would be confused with the already-registered Estonian Apostolic Orthodox Church, which is subordinate to the Constantinople Patriarchate. Successful registration could play a role in determining the future of assets that once belonged to the Russian Orthodox Church in Estonia.

PRO PATRIA OPPOSES REMOVING LANGUAGE REQUIREMENT FROM ELECTION LAW.
Pro Patria Union faction chairman Tiit Sinissaar asserted on 16 October that amendments to the laws on parliament and local elections proposed the previous day by Kadri Jaatma of Pro Patria Union, Moderate Tonu Koiv, and Paul-Eerik Rummo of the Reform Party should be opposed, ETA reported. The amendments would abolish the requirement that candidates for these offices know enough Estonian to be able to understand legislative language and other texts; report on issues on the agenda; and express their opinions, ask questions, and communicate with voters. Jaatma said that the existing law does not prevent non-Estonian speaking candidates from running for office in local councils. The primary reason for the amendments appears to be an effort to convince the Organization for Security and Cooperation in Europe (OSCE) to end its 10-year mission to Estonia, as the language requirement was one of the few things criticized in the OSCE's latest report on Estonia.

NEW PREDOMINANTLY RUSSIAN PARTY REGISTERED.
The registration of the new political party Unity in Estonia was completed on 9 October, BNS reported the next day. Governing board member Igor Pisarev said the party has 1,325 members, two-thirds of whom live in Tallinn and the rest in other parts of Estonia. He rejected the media's designation of the party as "Russian," as about one-third of its members are ethnic Estonians. The party considers itself to be center-right and sees as its goal facilitating the formation of a middle class in Estonia. The party's founding congress was held on 3 August, but the party chairman will only be elected in November at the first meeting of the party's board. The most prominent member of the party is Gennadi Ever, a member of the Tallinn city council, who is currently under arrest for alleged involvement in the murder of Vitali Khaitov, his former business partner and the publisher of the country's largest Russian-language newspaper, "Estoniya."

* The Pro Patria Union-Reform Party coalition in Tartu's City Council collapsed, as the Reform Party formed a new coalition with the Center Party and Tartu 2000 Plus on 17 October. The next day, Centrist Aadu Must, a professor of history at Tartu University, was elected council chairman replacing Peeter Tulviste, who had been Pro Patria's presidential candidate, BNS reported. Anto Ili of Tartu 2000 Plus replaced Ilona Merzin of Pro Patria Union as deputy mayor.

* The government on 6 October withdrew its bill to merge the state-owned national TV network ETV and radio station Eesti Raadio into one public broadcasting unit under one budget, ETA reported. The bill will be supplemented with descriptions of the structure and budget of the merged unit and resubmitted to the parliament.

* The government submitted two United Nations conventions on combating international terrorism to the parliament for ratification on 9 October, BNS reported. The UN General Assembly adopted the conventions against bomb terrorism in December 1997 and on preventing the financing of terrorism in December 1999. The Estonian government signed the conventions on 6 September 2001.

* The government will pay part of its debt to UNESCO in order to preserve its voting rights, ETA reported on 10 October. The government allocated 1 million kroons ($58,000) from its reserve fund and the Culture Ministry 1.7 million kroons to settle more than half of the country's unpaid dues to the organization prior to UNESCO's upcoming 31st general conference.

* The parliament on 10 October continued work on amendments to the tobacco excise act, which would increase the price of a pack of cigarettes by approximately one kroon. The rise would go into effect by 1 July 2002 and is expected to provide some 35 million kroons in added government revenue.

* The parliament's European Affairs Committee called on Estonia to secure special status for the mining and use of oil shale during EU membership negotiations, BNS reported on 9 October. Since locally-mined oil shale is Estonia's most important energy source, Estonia could benefit from EU help in dealing with pollution and social problems in the northeastern shale-mining region.

* Representatives of Estonia, Finland, and Russia signed on 9 October at Toila in northern Estonia a protocol stating their intent to develop the region's private sector potential and increase cooperation among its businessmen through the Gulf of Finland Growth Triangle project, BNS reported. The project was initiated by Finland's South Alliance, an association of seven self-government unions, which made proposals for cooperation to the committees handling foreign relations for St. Petersburg and surrounding region in Russia and to the Enterprise Estonia Foundation.

* SEAF Growth Fund, a U.S. venture capital investor, signed an agreement on 11 October to invest $500,000 in Tartu-based gene technology company Asper Biotech, BNS reported. The company's has developed a gene analysis detector that it has patented in the EU, the U.S., Canada, and several Asian countries. SEAF will acquire a 16.7 percent share of the company.

* Major General Ants Laaneots is to be appointed Estonia's defense attache to Russia and Ukraine, although he will reside in Estonia and continue in his duties as the head of the war college, "Postimees" reported on 11 October.

* The International Institute for Management Development, headquartered in Lausanne, Switzerland, ranked Estonia 22nd among 49 states evaluated in this year's World Competitiveness Yearbook, BNS reported on 11 October. Estonia was ranked higher than such developed states as Spain, France, Japan, Korea, and Greece. Latvia and Lithuania were not included in the survey.

* The Estonian Statistics Office announced on 5 October that the country's Consumer Price Index rose by 0.1 percent in September compared to August, reflecting a year-on-year increase of 5.7 percent, BNS reported.

JUDGE MURDERED IN RIGA.
The chairman of the Riga Regional Court's Criminal Case Council, Judge Janis Laukroze, was gunned down in broad daylight in the courtyard of his apartment building in central Riga on 15 October, LETA reported the next day. Relying on a security camera videotape and the testimony of 10 witnesses, police have drawn a composite portrait of the suspect, who fired seven shots and dropped one of the two weapons used to kill Laukroze at the scene. The government has announced a 10,000 lats ($16,000) reward for information related to the case. The motives for the murder are under investigation, but Laukroze's colleagues firmly assert that it is linked to his work. Laukroze presided over several sensitive cases, such as the trial of three Russian National Bolsheviks who seized the steeple of Riga's St. Peter's Church last November (see below) as well as drug-peddling and corruption trials, and assigned judges to hear other criminal cases. Prime Minister Andris Berzins declared that it is a matter of honor for the Interior Ministry to solve the murder within two months, and met with Prosecutor-General Janis Maizitis, who will head a joint task force of prosecutors and state police investigating the crime.

BELGIAN OFFICIAL SAYS LATVIA MAKES MOST PROGRESS AMONG EU CANDIDATES.
Meeting with parliament deputies in Riga on 15 October, Belgian Minister of State for Foreign Affairs Annemie Neyts said that Latvia had made the greatest progress among EU candidate countries, BNS reported. Latvian European Affairs Committee chairman Edvins Inkens noted that public opinion polls now indicate growing support for EU membership, but he suggested there is a need for more information about the social aspects of EU membership. Foreign Minister Indulis Berzins told Neyts that Latvia is ready to participate in discussions about the future of the EU, adding that Latvia was among the first candidate countries to submit an action plan for fulfilling the Schengen requirements.

FINLAND URGES LATVIA TO HURRY UP WITH EU TALKS.
Finnish Foreign Minister Erkki Tuomioja advised his Latvian counterpart Indris Berzins in Helsinki on 12 October that Latvia should try to complete as many chapters as possible in EU negotiations before the end of Spain's presidency of the European Union on 30 June 2002, and to leave the most complicated problems for last, BNS reported. The ministers also spoke about the global situation following the 11 September terrorist attacks on the United States and agreed that the fight against terrorism should not have any effect on the expansion of the EU and NATO. When asked later about the most complicated issues in the EU talks, Berzins said Latvia does not have any major problems, only "sensitive issues," for example, agriculture and fishing in the Gulf of Riga. He also delivered a lecture about Latvian-Finnish relations and their future prospects during the information day about Latvia as an EU candidate, which was organized by the Latvian Embassy in Finland and the European Commission.

EUROPEAN PARLIAMENT SECRETARY-GENERAL DISCUSSES EU EXPANSION.
Parliament Deputy Chairman Rihards Piks told Julian Priestley in Riga on 9 October that Latvians are becoming more positive about joining the EU, and that the number of EU supporters in rural areas is also growing, LETA reported. Piks noted that all political forces in the parliament unanimously support EU membership. Both officials agreed that informing the public about processes within the EU is vital not only for the candidate states but also for EU members. Priestley announced a plan to open European Parliament (EP) information centers in the capitals of the candidate countries once they complete their pre-accession talks. The officials also discussed the upcoming EP elections in 2004.

PRESIDENT VISITS HUNGARY.
Accompanied by several ministers and a delegation of 16 businessmen, Vaira Vike-Freiberga began an official three-day visit to Hungary on 16 October. During an official luncheon in her honor the next day, Vike-Freiberga thanked her Hungarian counterpart Ferenc Madl for supporting Latvia's entry into NATO and expressed the hope that both countries will join the European Union in 2004, BNS reported. The presidents observed the signing of a cooperation program on education and science for 2002-2005 by the countries' education ministers and of an agreement for readmission of illegal immigrants that is required by EU directives. In a meeting with Premier Viktor Orban, Vike-Freiberga noted that economic, defense, and education cooperation between the two states should be more intense. Orban said that Hungary plans to establish an embassy in Riga in 2003.

HUNGARIAN DEFENSE MINISTER SUPPORTS LATVIA'S PATH TO NATO.
Janos Szabo told Latvian parliamentary Defense and Interior Affairs Committee Chairman Dzintars Kudums in Riga on 10 October that the countries deserving of invitations to NATO membership at the Prague summit next fall are Slovenia, Slovakia, and the three Baltic countries, BNS reported. Szabo urged Latvia to focus on reaching the level of NATO member countries in the area of defense and noted that the security gained through NATO membership has helped boost foreign investments in Hungary, thus speeding up its EU entry negotiations. Later talks with Latvian Defense Minister Girts Valdis Kristovskis also touched upon international security following the terrorist attacks in the United States, and an analysis of Latvia's efforts to join NATO. They also discussed the situation in Russia and its opposition to further NATO expansion.

SUPREME COURT REDUCES SENTENCES OF RUSSIAN RADICALS.
The court decided on 11 October to reduce the sentences of three Russian National Bolsheviks whom the Riga Regional Court in May had found guilty of terrorism after they seized the steeple of Riga's St. Peter's Church in November 2000, LETA reported. It ruled that they were guilty only of delinquency, not terrorism. The 15-year prison sentences given to Maxim Zhurkin and Sergei Solovey were reduced to six and five years, respectively, and one year of police supervision. The five-year sentence of Dmitrii Gafarov, who was underage when the crime was committed, was reduced to one year in prison and one year of police supervision. The lawyers for all three defendants said they were pleased with the ruling and would not file further appeals, even though they had requested in their petitions that the defendants be acquitted.

PEOPLE'S PARTY MAKES NEW CLAIMS ON BUDGET.
Meeting in Riga, delegates to a conference of the People's Party on 6 October decided to support the party's board and parliament deputies in reference to the 2002 draft budget, LETA reported. They called for the law "On State Pensions" to be amended so that pensioners who have worked for 30 or more years receive pensions of at least 45 lats ($72) per month, while those who have worked fewer years receive at least 30 lats per month. Parliament deputy Janis Lagzdins stressed that increasing small pensions is very important, because tens of thousands of pensioners receive pensions of less than 20 lats per month. The delegates backed keeping the early retirement option until 2005 and lifting restrictions on working pensioners so they can receive pensions of up to 90 lats per month. They also demanded that the corporate income tax should be cut over three years from 25 to 15 percent.

LASCO TAKES POSSESSION OF FIRST OF THREE NEW TANKERS...
Andris Klavins, the president of the state-owned Latvian Shipping Company (LASCO), and P.N. Tsakos, the owner of the Greek company Tsakos Shipping and Trade, signed documents in Riga on 18 October allowing LASCO to take possession of the first of three Panamax-class tankers, LETA reported. The 70,000-ton tanker, renamed the "Riga," was launched earlier this year at the Japanese port of Kawasaki and cost $41.6 million. LASCO was able to complete the controversial purchase after receiving a $30 million loan from Germany's Hamburgische Landesbank earlier this month. The company plans to obtain similar loans from Latvijas Unibanka/SEB and Nedship Bank by 15 November to purchase the other two tankers, which will be renamed "Zemgale" and "Latgale."

...PRIVATIZATION AGENCY FIRES LASCO TRUSTEES.
Meanwhile, the board of the Latvian Privatization Agency decided on 11 October to dismiss the three state trustees of LASCO as soon as the controversial purchase of the three new tankers is completed and LASCO has taken possession of the ships, LETA reported. The trustees have been accused of neglecting to inform the Privatization Agency and Economics Ministry about the tanker deal.

* President Vaira Vike-Freiberga delivered a speech at the NATO candidate states summit called "The Contribution of New Democracies to Euro-Atlantic Security" in Sofia on 5 October, LETA reported. Vike-Freiberga told a press conference in Riga the next day that the key outcome of the summit was the confirmation by senior U.S. officials that the terrorist attack on the U.S. had not changed its position on NATO enlargement, BNS reported.

* Prime Minister Andris Berzins and EU Enlargement Commissioner Guenter Verheugen spoke at the conference "The Social Dimension of EU Enlargement" in Riga on 12 October, LETA reported. Verheugen pointed out the need for candidate countries to improve their methods of decision-making and policy implementation strategies after they are admitted to the organization. He said that the EU will use the conference to help form its position on "sensitive" chapters of the membership talks, such as competition policy, environment, transport, and energy,

* Defense Minister Girts Valdis Kristovskis ended a visit to Austria on 5 October, during which he held talks with Austrian counterpart Herbert Scheibner on military cooperation, especially in training, BNS reported. He visited the Austrian Army noncommissioned officer school in Enns and the military academy in Vienna's Neustadt.

* Foreign Ministry State Secretary Maris Riekstins and Kuwaiti Ambassador to Latvia Faisal Rashed Al-Ghais signed an agreement in Riga on 5 October for the promotion and protection of mutual investments, BNS reported. Riekstins also met with a delegation from the Kuwaiti National Assembly that visited Latvia from 3 to 7 October.

* A report by the Open Society Institute released in Brussels on 11 October concluded that the political environment in Latvia does not promote the development of an independent court system, BNS reported. It criticized insufficient funding of the courts and unsatisfactory working conditions, which create other problems such as backlogs of untried cases and ineffective enforcement of verdicts and corruption. The authorities, especially the Justice Ministry, still retain too much influence on the courts in the areas of administering court powers, funding, and the career development of judges.

* The parliament, on a vote of 67 to 19 with 2 abstentions, passed amendments to the law "On Privatization Vouchers," extending the deadline for the validity of privatization and compensation vouchers to 31 December 2002 and 31 December 2003, respectively.

* International Ice Hockey Federation President Rene Fasel and Secretary-General Jan-Ake Edvinsson signed in Riga on 15 October an agreement to hold the ice hockey world championships in Riga in 2006, LETA reported. Prime Minister Andris Berzins, Riga Mayor Gundars Berzins, and Latvian Ice Hockey Federation President Kirovs Lipmans signed the agreement on behalf of Latvia, which pledged to build a new hockey arena for the event.

* U.S. President George W. Bush sent letters to President Vaira Vike-Freiberga and Prime Minister Andris Berzins thanking them for the expressions of friendship and support they had sent him after the terrorist attacks on 11 September, BNS reported on 11 October.

* The government on 9 October approved sanctions against Afghanistan that had been adopted by the UN Security Council, BNS reported. The sanctions forbid individuals and companies in Latvia to send any military equipment to territories in Afghanistan controlled by the Taliban, BNS reported. The sanctions also make it illegal for leading Taliban officials to enter Latvia or cross its territory in transit except when traveling for humanitarian reasons.

* The Latvian Central Statistics Office announced on 8 October that the consumer price index in September rose by 0.6 percent compared to August, and 3.6 year-on-year, BNS reported.

* The State Employment Service announced on 10 October that the rate of unemployment in September declined by 0.1 percent from August to 7.6 percent, BNS reported.

U.S. MIGHT NEED AIRSPACE IN ANTITERRORIST CAMPAIGN.
The deputy commander in chief, United States European Command (USEUCOM) General Carlton W. Fulford Jr. began a tour of the Baltic states in Vilnius on 15 October with a meeting with President Valdas Adamkus, ELTA and BNS reported. Their talks focused primarily on Lithuania's implementation of the program for NATO accession and its readiness to assume membership commitments. Fulford called Lithuania's permission for the U.S. to use its airspace and airports "a very important and significant contribution" to the antiterrorist campaign, as it would make it easier to proceed from the planning stages to the execution of military actions. In later talks with Defense Minister Linas Linkevicius, Fulford praised Lithuania's decision to increase security around its nuclear power plant at Ignalina.

CONCERNS ABOUT SECURITY OF IGNALINA NUCLEAR PLANT.
Belarusian Foreign Ministry spokesman Pavel Latushka on 11 October raised concerns about the security of Lithuania's Ignalina nuclear power plant, which is located near the Belarusian border. Latushka added that Minsk's concerns have been stirred by the 11 September terrorist attacks on U.S. cities. "The Belarusian side believes that Lithuania must show more responsibility and constructiveness in establishing an effective system of control over its airspace and interact with its neighbors in guarding and protecting the Ignalina nuclear power plant," Belapan quoted Latushka as saying. "The Lithuanian government...is concerned about the safety and security of the Ignalina plant without prompting and comments [from the outside]...A lot of money has been spent on that, and now foreign experts say it is one of the safest nuclear power plants in Europe," RFE/RL's Belarusian Service quoted Lithuanian Foreign Ministry spokesman Petras Zapolskas as saying. During a visit to the Ignalina plant that day, Defense Minister Linas Linkevicius declared that Lithuania will ask Belarus to cooperate with its decision to expand the no-flight zone around the plant from 10 to 20 kilometers, as the plant is itself only about 20 km from the border with Belarus.

DRAFT 2002 BUDGET SUBMITTED TO PARLIAMENT...
Finance Minister Dalia Grybauskaite presented the draft 2002 budget to the parliament on 18 October, ELTA reported. It foresees revenues of 8.72 billion litas ($2.18 billion) and expenditures of 9.86 billion litas. She noted that for the first time the budget includes all funds of the former Road Fund and revenues from all public fees and services, and is the first Lithuanian budget with a tax system in line with EU norms. The revenues are based on projections that the country's GDP will grow by 5 percent and the number of employed workers will increase from 1.05 million in 2001 to 1.12 million in 2004, with the average monthly gross wage increasing from 1,034 to 1,148 litas over that time. The budget foresees expenditures of 4 and 6.23 percent of expected GDP for health and education, respectively. President Valdas Adamkus told Grybauskaite the previous day that he will not sign such a budget since it contradicts earlier passed laws that set expenditures for these fields at 5 and 6.69 percent of GDP.

...DEFENSE BUDGET FOR 2002 IN LINE WITH NATO STANDARDS.
The Defense Ministry announced on 17 October that the expenditures for defense in the 2002 budget were drafted taking into account the standards used by NATO countries, ELTA reported. The state will spend a maximum of 50 percent of total defense expenses for personnel, 22 percent for purchases of equipment and weapons, and around 14 percent for the training and education of servicemen. Complying with the agreement signed by all political parties in the spring, appropriations designated as defense spending in 2002 account for 2 percent of GDP, or about 1 billion litas ($250 million). Defense expenditures this year are 923 million litas, or 1.95 percent of GDP. The Defense Ministry will spend more than two-thirds of the 2002 defense expenses (813 million litas), with other institutions spending 190.5 million litas.

STATE INVESTMENTS TO BE REDUCED NEXT YEAR.
The government on 10 October approved a draft state investment program for the years 2002-2004 that was presented to the parliament along with the draft 2002 budget, BNS reported. The program calls for state investments of 1.16 billion litas ($290 million) in 2002, or some 9 percent less than this year. More than half of the funds (628 million litas) will come directly from the state budget, 200 million litas from the state Privatization Fund, and the remainder from international loans. The greatest recipients of state investments will be the transport sector (330 million litas), national defense (280 million litas), preparation for EU membership (187 million litas), environmental protection (85 million litas), and education and science (84.6 million litas). The program foresees state investments decreasing to 1.15 billion litas in 2003 and to 1.06 billion litas in 2004.

PRESIDENTS OPEN POLISH EXPORTS FAIR IN KAUNAS.
In Kaunas on 16 October, Presidents Aleksander Kwasniewski (Poland) and Valdas Adamkus (Lithuania) officially opened the Polish exports fair Polexport 2001, organized for the eighth time by the Polish-Lithuanian Chamber of Commerce, ELTA reported. They also delivered speeches at the economic forum "Lithuania and Poland: 10 Years of Cooperation -- Successes and Prospects." Adamkus noted that the volume of trade between the two countries will soon reach $500 million per year. He also praised efforts to improve the highways and railroads connecting the two countries, update communications, and join their energy networks. Kwasniewski said that the two countries are not competitors but partners in seeking EU membership and it would be beneficial for both states to join the union simultaneously. During his one-day working visit, Kwasniewski also informed Adamkus that he recently told Russian President Vladimir Putin in Moscow that Poland fully supports inviting the three Baltic states to join NATO at the Prague summit next fall.

FOREIGN MINISTER SPEAKS AT ERFURT CONFERENCE.
During a working visit to Germany on 12 October, Antanas Valionis delivered a speech at the Erfurt conference titled "Together in a Single Europe" in which he focused on the 10th anniversary of Lithuanian-German diplomatic relations, ELTA reported. Noting that some people in Lithuania and other new democratic states in Eastern Europe thought that their countries would immediately join NATO and the EU, NATO has so far admitted only three new members and the EU none. Valionis said that enlargement is an increasingly likely reality, as evidenced by the dynamic pace of talks and preparations, and that Lithuania will enter Europe as a country with a clear understanding of its role in an effective Euro-Atlantic alliance. Valionis discussed with Michael Steiner, an adviser to the German chancellor, Lithuania's role in the antiterrorist coalition and its contribution to security as well as the increasing support for NATO membership in Lithuania.

ENTRY VISAS FOR KALININGRAD TO BE IMPOSED IN 2003.
On 9 October, the Lithuanian government's European Integration Commission (VEIK) endorsed the Schengen draft action plan, which must be in force before Lithuania can join the European Union, ELTA reported. The plan will require citizens of Belarus and Ukraine, including train passengers and truck drivers, who are traveling to Kaliningrad Oblast through Lithuania to obtain visas beginning on 1 January 2003. Kaliningrad residents will need visas for any travel to or through Lithuania beginning on 1 July 2003. However, Lithuania plans to issue long-term and low-cost visas to Kaliningrad residents. VEIK also expressed the opinion that Lithuania should ask the EU to lengthen by two years (until 1 January 2010) the transition period for building up the required 90-day oil stocks, which will cost some $125 million.

MOST CROSSING POINTS ALONG BELARUS BORDER TO BE SHUT DOWN.
The head of the Lithuanian Border Service, Algimantas Songaila, announced on 11 October that 23 of 29 border-crossing points with Belarus will be closed and the security at the remaining posts will be increased, BNS reported. The action is needed to bring security along the 650-kilometer long border up to EU standards. Songaila said that the checkpoints along the border with Russia's Kaliningrad exclave already meet future requirements and need a minimum of funding to improve their existing infrastructures.

* Accompanied by a delegation of businessmen, Foreign Minister Antanas Valionis flew to Belgrade on 14 October for the first visit to Yugoslavia by a Lithuanian official since World War II, BNS reported the next day. Valionis and his Yugoslav counterpart Goran Svilanovic signed a cooperation protocol and expressed the need for treaties on avoiding double taxation, protection of investments, and cooperation in culture, education, and sports. Yugoslavia is seeking membership in the Council of Europe, whose Ministerial Committee will be headed by Lithuania for six months beginning in November. Valionis also met Yugoslav President Vojislav Kostunica, Prime Minister Dragica Pesic, Serbian Prime Minister Zoran Djindjic, and the speakers of both houses of the Yugoslav parliament.

* At a press conference on 9 October marking the 10th anniversary of the reestablishment of Lithuanian-Russian diplomatic relations, Russian Ambassador to Lithuania Yuri Zubakov said that good relations are made more difficult by the previous parliament's passage of a law calling for Russia to compensate the $20 billion damages inflicted under Soviet rule and Lithuania's efforts to join NATO, BNS reported.

* European Parliament Secretary-General Julian Priestley discussed with parliament chairman Arturas Paulauskas on 10 October Lithuania's preparations to have deputies in the European parliament, BNS reported. Priestley noted that the national languages of new member states will be considered wholly equal to those of current members and there will be a need for many qualified translators and people trained in parliamentary procedure.

* Noting the need for more revenue, the government on 9 October postponed for six months a planned increase in the monthly tax-exempt minimum income from 214 litas ($53.50) to 250 litas, BNS reported the next day. The new limit on tax exempt income will come into force on 1 July 2002.

* The 141-member Lithuanian parliament, by a vote of 50 to 0 with 7 abstentions, on 9 October adopted a resolution supporting antiterrorist operations by the U.S. and its allies "in seeking to liquidate the main hearths of terrorism," BNS reported. Some parliament deputies expressed unfavorable opinions about the resolution, and did not take part in the voting.

* The government approved a draft 2002 budget for the state-run social insurance fund, SoDra, on 15 October. BNS reported. It projects revenues of 4.56 billion litas ($1.14 billion) or 3 percent greater than in 2001 and expenditures increasing by 1.9 percent to 4.5 billion litas.

* The State Plant Protection Service on 9 October imposed a three-month ban on unprocessed potato imports from Ukraine, Poland, Belarus, and Germany, BNS reported the next day. Potatoes imported from these countries were found to be infected with potato ring rot.

* The ambitious project by the Lithuanian Transportation Association LINAVA, together with the Swedish company Nordina Rederi, to establish a ferry service between Klaipeda and Wismar, Germany using two high-speed ferries has collapsed, ELTA reported on 12 October. Although LINAVA is seeking another partner, it appears that the project is not viable since the high costs of starting the service are unlikely ever to be recovered.

* The parliament, by a vote of 74 to 3 with 15 abstentions, approved on 16 October a plan to distribute the authorized capital and liabilities of state-run electric utility Lietuvos Energija (Lithuanian Energy) among the five companies that will be created when its restructuring takes effect, BNS reported. Lietuvos Energija will continue to operate the transmission network and own hydroelectric plants in Kaunas and Kruonis. There will also be two electricity distribution companies and two production companies in Elektrenai and Mazeikiai.

* Lithuania's CPI fell by 0.2 percent in September, but increased by 2.1 percent compared to July 2000.