Baltic Report: December 21, 2001

BALTIC FOREIGN MINISTERS ATTEND U.S. CHARTER MEETING.
Foreign Ministers Toomas Hendrik Ilves (Estonia), Indulis Berzins (Latvia), and Antanas Valionis (Lithuania) attended this year's meeting of the Baltic-U.S. Partnership Charter in Washington on 10 December, BNS reported. U.S. State Department Undersecretary for Political Affairs Marc Grossman told the session that the 11 September terrorist attacks in New York and Washington increased the need to expand NATO. U.S. Deputy Secretary of State Richard Armitage praised the progress the Baltic states have made in their efforts to join NATO, and urged them to continue restructuring their economies and developing their military forces. He emphasized that Russia will not be given a veto right on NATO enlargement. During a dinner organized by the U.S. NATO committee, Valionis and Berzins also spoke with National Security Adviser Condolleezza Rice. The next day the ministers and Grossman participated in a teleconference on the American Embassy Television Network.

BALTIC STATES TO RECEIVE COMPENSATION FOR FORMER EMBASSIES IN PARIS.
French Foreign Minister Hubert Vedrine and his counterparts from Lithuania, Latvia, and Estonia signed agreements in Paris on 13 December compensating the Baltic states for their embassy buildings that were handed over to the Soviet Union in 1940, BNS reported. Although the buildings still legally belong to those Baltic states, their return was hampered by the Russian Federation, which uses them for diplomatic purposes. France agreed to purchase the property rights to the former Latvian Embassy for 26 million French francs ($3.5 million), and Lithuania's for 23 million francs. The prewar Estonian Embassy building was demolished and replaced by a diplomatic residence for the Russian Embassy. France will pay 25.7 million francs in compensation to Estonia.

ROMANIA, BALTIC STATES AT OPPOSITE ENDS OF EU SUPPORT SPECTRUM.
Popular support for EU enlargement is largest in Romania and weakest in Estonia and Latvia, AFP reported on 10 December, citing a recent Gallup Poll commissioned by the EU. Eighty percent of Romanians and 74 percent of Bulgarians are of the opinion that membership of their country in the EU would be "generally, a good thing," while only one in three Latvians and Estonians, and 41 percent of Lithuanians, share that opinion. Among leading candidates for EU membership, support runs from a low of 39 percent in Malta, to 46 percent in the Czech Republic, 51 percent in Poland, and 60 percent in Hungary.

* A study by the U.S. Brookings Institute in November recommends that the best possible scenario for NATO enlargement includes inviting the Baltic states, Slovakia, and Slovenia to membership at the summit meeting in Prague in November 2002, BNS reported on 4 December.

* A congress of Germany's Christian Democratic Union in Dresden identified NATO membership of the Baltic countries as a key foreign policy priority, BNS reported on 6 December. The Social Democratic-Green government of Chancellor Gerhard Schroeder has not yet announced an official position on NATO enlargement.

SAVISAAR ELECTED NEW MAYOR OF TALLINN.
Center Party Chairman Edgar Savisaar was elected mayor of Tallinn on 13 December by a City Council vote of 34 to 15, with two invalid ballots, BNS reported. Earlier that day, the council approved by a vote of 38 to five, with 20 abstentions, a no-confidence motion against Mayor Toni Palts of the Pro Patria Union. Prior to the vote the council accepted the resignation of its chairman, Rein Voog of the Reform Party, who also quit the council in protest against his party's decision to form a new coalition with the Center Party. In the election for the new chairman, Reform Party deputy Maret Maripuu defeated Pro Patria Union candidate Aimar Altosaa by a vote of 35 to 25. In an apparent effort to show its desire to maintain the three-party coalition in the parliament, the Reform Party faction decided to retract its demand that the introduction of electronic identification cards be voluntary and not mandatory.

OSCE TO CLOSE MISSION.
The Permanent Council of the Organization for Security and Cooperation in Europe (OSCE) decided in Vienna on 13 December not to extend the mandate of its mission to Estonia, in effect ending its nine-year presence on 31 December, ETA reported. Foreign Minister Toomas Hendrik Ilves said that during his five years in office the closure of the mission was his third-highest priority, trailing only Estonia's efforts to join NATO and the EU. Prime Minister Mart Laar said that the mission's departure marks the end of an era in the country's history, and brings Estonia into the family of normally functioning democracies.

REFORM PARTY LEAVES COALITION IN TALLINN...
Reform Party regional board and city council deputies decided in Tallinn on 5 December to leave the coalition that rules the capital's city council, ETA reported. Regional board Chairman Urmas Paet said that there were two main reasons for the decision: the plan by Mayor Tonis Palts of the Pro Patria Union to borrow 1.5 billion kroons ($86 million) next year, and the recent mismanagement of finances by the city's Security and Integration Department.

...AND FORMS NEW COALITION WITH CENTER PARTY.
The Reform Party and the Center Party in the Tallinn City Council signed a coalition agreement on 7 December, ETA reported. Reform Party faction Chairwoman Maret Maripuu and Tallinn regional party head Urmas Paet, along with Center Party faction Chairman Toivo Tootsen and Center Party Chairman Edgar Savisaar, signed the agreement. The agreement calls for the abolishment of one deputy mayor and several City Council deputy chair positions, and for the city not to take out any more loans than the City Council approved this summer. The previous day, Center Party deputies initiated a successful no-confidence motion against Tallinn Mayor Tonis Palts of the Pro Patria Union.

TALKS CONTINUE OVER FATE OF RULING COALITION.
The meeting of the coalition council decided on 10 December that the boards of the Pro Patria Union and the Moderates will send a written statement to the Reform Party asking it to explain its conduct in the Tallinn City Council, where it joined a coalition with the opposition Center Party, ETA reported. Pro Patria Union Chairman and Prime Minister Mart Laar said that the three-party coalition should stay together because it's unlikely another coalition can be formed in the current parliament. Reform Party Chairman Siim Kallas also argued for maintaining the coalition in an article published in "Eesti Paevaleht" the same day. The coalition's council meeting devoted considerable time to discussing an increase in the 2002 state budget as proposed by the Moderates, and in urging Reform Party deputies to withdraw their recommendation that planned ID cards should be voluntary and not obligatory.

ESTONIAN MADE OFFICIAL LANGUAGE OF LOCAL COUNCILS.
The parliament by a vote of 42 to nine, with four abstentions, passed a bill on 4 December making Estonian the official language in local councils, BNS reported. The law will go into effect on 21 October 2002 after new elections to local governments are held. It requires all local council sessions, as well as all official documents and minutes of those sessions, to be in Estonian. The government may grant local councils the right to use another language to conduct business, if the language is that of the majority of the permanent residents of the locality. The parliament earlier rejected by a vote of 24 to 37 a bill proposed by the opposition Center Party to grant local councils the right to decide what language to use for their sessions.

JOINING SCHENGEN SYSTEM TO BE COSTLY.
Kristel Praun, the deputy head of the Interior Ministry's Foreign Relations and Eurointegration Department, estimated that it will cost about 655 million kroons ($37.4 million) for Estonia to implement the Schengen border and customs control system from 2001-05, the daily "Eesti Paevaleht" reported on 3 December. The greatest expenditures (569 million kroons) are for investments in training and equipment needed to bring the country's external border controls up to EU standards. Integration into the Schengen Information System will require more than 32 million kroons, but the funds are expected to be obtained from the EU's PHARE program. Estonia is preparing to join the Schengen Agreement in two stages; the first should be completed by 2004 and cover external borders, passport controls, and the full adoption of Schengen laws. The second stage is to be completed by 2006, when Estonia's borders will become the internal borders of the EU.

NEW POLITICAL PARTY ESTABLISHED.
The political association Res Publica became the political party Union for the Republic - Res Publica at its founding congress on 7 December in Tallinn, ETA reported. The party unanimously elected 68-year-old emigre political science professor Rein Taagepera as its chairman, even though he said that he would serve in the post for only six months. Taagepera promised that the new party will be more transparent in its decision making than other parties, and expressed hope that it will win at least 15 seats in the next parliamentary elections in March 2003. The party also intends to participate in the elections to local councils in October 2002. Former President Lennart Meri welcomed the formation of the new party, while criticizing the current government for its plans to privatize Estonia's energy system. The party's board at its first meeting on 10 December elected Arvi Altmae, Andres Jalak, and Siim Kiisler as the party's deputy chairmen.

FREE-TRADE AGREEMENT SIGNED WITH BULGARIA.
Foreign Ministry Deputy Chancellor for Politics Vaino Reinart and Bulgarian Deputy Economy Minister Ljubka Katsakova signed a bilateral free-trade agreement in Sofia on 11 December, ETA reported. The agreement must still be approved by the countries' parliaments, but is scheduled to come into force beginning on 1 January 2002. The agreement lifts restrictions on trade of manufactured goods, and liberalizes agricultural trade. Reinart also held talks with Deputy Foreign Minister Petko Draganov on economic cooperation, several draft agreements, and their countries' efforts to join the European Union and NATO.

EUROPEAN SOCIALISTS GATHER IN TALLINN.
The Party of European Socialists (PES) held a conference in Tallinn on 30 November and 1 December to discuss the foreign and security policy aspects of EU enlargement and the role of the Baltic states in it, BNS reported. The Moderates, a PES associate party, co-organized the event, the first PES conference in the Baltic states. Moderates Chairman and Foreign Minister Toomas Hendrik Ilves called on the EU to fulfill its promises in the final stage of the talks on admission of new members saying, "It won't be fair to seek additional excuses and pretexts to put the brakes on the accession process." PES Chairman and former British Foreign Secretary Robin Cook, while admitting that no country should be allowed to join the EU before being completely prepared, said that Estonia will have no problems being ready for entrance to the EU in 2004.

* Finance Minister Siim Kallas and head of the delegation of the European Commission in Estonia John Kjaer signed on 30 November a PHARE program financing memorandum for 17 projects, BNS reported. The EU will provide about 411 million kroons ($23.3 million) and the Estonian public sector about 135 million kroons for co-financing the projects.

* President Arnold Ruutel rejected as unconstitutional on 5 December amendments to the foreign loans and state guarantees to foreign loan agreements act, passed by the parliament on 20 November, ETA reported. The amendments say that once the parliament has given permission to the government to issue bonds for placement on foreign markets, the issue documents don't have to be ratified again by lawmakers. Ruutel declared that this contradicts Article 121 of the constitution, stating that the parliament must ratify agreements by which the state assumes proprietary obligations.

* Minister of Roads and Communications Toivo Jurgenson and Deputy Minister of Railways of the People's Republic of China Liu Zhijun signed an agreement on cooperation between their ministries on 6 December in Tallinn, ETA reported. Zhijun also visited and met with the leaders of the port of Tallinn.

* Eneko Landaburu, head of the European Commission (EC) directorate-general for enlargement, discussed with Finance Minister Kallas on 6 December Estonia's preparations for completing accession negotiations with the EU, ETA reported. He said that the EC planned to allocate extra funds for projects aimed at improving Estonia's administrative capability.

* Defense Ministry chancellor Indrek Kannik met on 5 December in Tallinn with Norwegian Defense Ministry State Secretary Gunnar Heloe to discuss defense cooperation and issues of NATO enlargement, BNS reported. Heloe also discussed defense cooperation with the parliament's state defense committee.

* The parliament on 5 December by a vote of 52 to four adopted a long-debated pension insurance law, BNS reported. The bill indexes yearly increases of state pensions based on the consumer price index and growth in social tax inflow, but doesn't decrease pensions if the index is negative. The law also provides opportunities for increasing pensions by postponing retirement and mandates lower pensions when taking early retirement.

* The Statistics Department announced that the consumer price index remained steady in November, but in comparison to November 2001, increased by 4.2 percent, ETA reported on 7 December. Food prices increased by 0.2 percent in November, but prices of other goods fell by 0.4 percent and those of services rose by 0.1 percent.

* The Labor Board announced on 10 December that there were 52,200 registered unemployed in November, 0.4 percent lower than in October, resulting in an unemployment rate of 6.3 percent, BNS reported.

* The Statistical Office announced on 5 December that in October exports increased by 12 percent from September to 4.88 billion kroons ($278 million) while imports grew by 19 percent to 6.56 billion kroons, BNS reported. The monthly trade deficit increased from 1.2 billion kroons in September to 1.7 billion kroons in October.

* Turkey's first ambassador permanently residing in Estonia, Omer Altug, presented his credentials to President Ruutel on 6 December, BNS reported. He reaffirmed Turkey's support for Estonia's membership in NATO and discussed increasing bilateral cultural and educational ties.

PARLIAMENT PASSES 2002 BUDGET.
The parliament by a vote of 62 to 31, with six abstentions, approved the national budget for 2002, LETA reported on 30 November. The budget is based on the predictions that GDP will rise by 6 percent and inflation will be 3 percent in 2002. It envisions revenues of 1.52 billion lats ($2.43 billion) and expenditures of 1.66 billion lats ($2.66 billion). The anticipated budget deficit of 140 million lats is around 2.45 percent of GDP. The deficit is the largest in recent years, and is deemed to be excessive by the International Monetary Fund, which noted that Latvia earlier agreed that the deficit would not exceed 1 percent of GDP.

PRESIDENT CALLS FOR ABOLISHING LANGUAGE REQUIREMENT FROM ELECTION LAW.
Vaira Vike-Freiberga told experts meeting at the Riga Palace on 6 December to assess ways the provision in the Election Law requiring candidates for parliament and local councils to be fluent in the official state language could be abolished, BNS reported. She stated that the provision is undemocratic because it creates unequal positions for Latvia's citizens. Vike-Freiberga called on the experts to offer suggestions by early January on how to amend the law, after which she will present those suggestions to the parliament. Deputies from the conservative party For Fatherland and Freedom/LNNK, and the People's Party were critical of the president's request, while those from Latvia's Way said they will provide comments only on specific proposals. Peter Semneby, the head of the OSCE's mission to Latvia, said that the president's request may help convince the OSCE to end the work of its mission in Latvia.

ENERGY CHAPTER IN EU MEMBERSHIP TALKS CLOSED.
The delegation to the EU, headed by Foreign Minister Indulis Berzins, completed the energy chapter in its EU membership negotiations in Brussels on 12 December, BNS reported. The EU delegation was headed by Belgium's Foreign Minister Louis Michel, although EU commissioner for enlargement Guenter Verheugen also participated in the talks. Latvia was allowed a transition period until the end of 2009 for the accumulation of the required 90-day reserve of oil products. Latvia has now completed 22 of the 31 chapters in the membership talks. The meeting also addressed the chapter on telecommunications and information technologies, whose closing is delayed not by Latvia's, but EU failures to reach a common position.

NATO ENLARGEMENT TO IMPROVE FINLAND'S SECURITY.
Finnish Defense Minister Jan-Erik Enestam began his two-day visit to Latvia on 3 December with talks with Foreign Ministry State Secretary Maris Riekstins, BNS reported. They discussed the latest developments in Europe's security policy and NATO enlargement. Enestam said that admitting the three Baltic states into NATO at the Prague summit in November 2002 would be the best solution for improving the security situation in the Baltic Sea region. Riekstins expressed thanks for Finland's support for Latvia's efforts to join the alliance, as well as for the country's participation in joint Baltic projects in the defense sphere. Enestam visited the Defense and Foreign ministries and parliament officials on 4 December, as well as the BALTNET National Information Center in Riga and the naval forces and divers training centers in Liepaja.

PRESIDENT VISITS GENEVA.
Vaira Vike-Freiberga held talks with World Trade Organization Director-General Mike Moore on 11 December in Geneva, LETA and BNS reported. They discussed Latvia's negotiations for entry into the EU, during which the Latvian president stressed the importance of the agricultural sector in many of Latvia's regions. While visiting the UN representation in Geneva Undersecretary-General Vladimir Petrovsky told Vike-Freiberga that the UN is very satisfied with its cooperation with Latvia, and that the organization views the development of the Baltic Sea region very favorably because it has resulted not only in the cooperation of states, but also of individual regions within the zone. Vike-Freiberga and Geneva Canton Vice President Laurent Moutinot discussed possible cultural cooperation. At the UN congress devoted to the 50th anniversary of the UN Refugees Convention on 12 December, the Latvian president urged officials not to think of refugees in bureaucratic and abstract terms but "as human being whose lives are in your hands and whose lives your decisions can help to change." That day she also discussed economic and scientific cooperation with Swiss President Moritz Loenberger and children's rights with UN Commissioner for Human Rights Mary Robinson.

EUROPEAN COMMISSION ENLARGEMENT HEAD VISIT.
Eneko Landaburu held a meeting on 5 December with members of the parliament's European Affairs Commission to discuss EU enlargement matters, LETA reported. He praised Latvia's progress toward integration into the EU, but mentioned areas that need to be improved, such as enhancing the administrative capacity for administrating EU's structural funds, increasing the independence and efficiency of courts, and controlling the country's external borders. Landaburu stressed the importance of informing the population about the meaning of EU enlargement, and said that although the EU does not require candidate countries to hold a referendum on EU membership since a decision by the parliament is sufficient, it generally expects such referendums to be held. In talks with International Financial Affairs Minister Roberts Zile, he noted that Latvia will have to do a lot of work to improve its public administration capacity.

GOVERNMENT ADOPTS NEW TAX CONVENTION WITH ESTONIA.
On 4 December, the government adopted a new Latvian-Estonian government convention on avoiding double taxation and tax evasion in respect to income tax, BNS reported. It replaced an earlier agreement that Latvia suspended after Estonia passed new corporate income tax regulations in June 2000. The convention sets maximum limits on tax rates that can be imposed on dividends, royalties, and capital in the other country. Interest payments will be subject to taxes of up to 15 percent, but only 5 percent if the taxpayer owns at least a 25 percent share in the dividend-paying company. Interest payments will be subject to taxes of up to 10 percent of their gross value. Royalties will be taxed up to 5 percent of their gross value if the royalties are used for production or the purchase of commercial or scientific equipment, and 10 percent in other cases. The main goal of the convention is to create a stable business environment, increase foreign investment, and improve international tax procedures in line with international standards.

COMPENSATION ACCEPTED FOR MARCH OIL SPILL.
Maritime Environment Administration Director Guntis Drunka has agreed to accept the offer of Lithuania's Mazeikiai Oil to pay $40,000 in compensation for the oil spill of the Butinge floating oil terminal in March, BNS reported on 7 December. Latvia initially asked for 62,000 lats ($98,000) in damages, and threatened court action when Mazeikiai Oil offered only 6,000 lats. About 3 tons of oil were spilled at Butinge on 6 March, some of which drifted into Latvian waters. Fortunately for Latvia, the oil from the much-larger oil spill on 23 November, which is now estimated to be at least 59 tons, drifted south and not into its territorial waters. Mazeikiai Oil announced that the cause of the November spillage was deterioration of an underwater hose, and not poor operations.

* President Vike-Freiberga formally unveiled the newly built memorial to Nazi victims in Bikernieki forest in the outskirts of Riga on 30 November, BNS reported. The ceremony was attended by a number of ambassadors, Foreign Minister Berzins, and Latvia's chief rabbi Natans Barkans. The ceremony was held on the 60th anniversary of the first deportations of Jews from Riga.

* Foreign Minister Berzins and U.S. Undersecretary of Defense for Policy Douglas Feith signed an agreement on cooperation in nonproliferation of weapons of mass destruction in Washington on 11 December, BNS reported the next day. Under the seven-year agreement the U.S. will assist Latvia in strengthening border control, rescue, and special service capacities with aid totaling about $1 million in the first year.

* EU Commissioner for Agriculture, Rural Development, and Fisheries Franz Fischler decided to authorize the Latvian Rural Support Service to administer EU pre-accession aid program SAPARD funds, LETA reported on 12 December. Latvia expects to get some 13.5 million lats ($21.3 million) annually from SAPARD.

* During the annual meeting of OSCE foreign ministers, Danish Foreign Minister Per Stig Moller assured his Latvian counterpart Indulis Berzins in Bucharest on 3 December of further Danish support for his country's efforts to join the EU and NATO, BNS reported. They also discussed the fate of the OSCE mission in Latvia which might be ended this year.

* UNESCO Director-General Koichiro Matsuura discussed on 7 December with President Vike-Freiberga Latvia's further work within UNESCO, LETA reported the next day. He took part in a presentation of the electronic version of the Dainu skapis (Cabinet of Folksongs), included in the UNESCO Memory of the World Register. Matsuura also held talks with University of Latvia Rector Ivars Lacis, Education and Science Minister Karlis Greiskalns, and Guntars Krasts, the head of the parliament Foreign Affairs Commission.

* In opening the offices of the Naturalization Administration's Information Center in Riga on 7 December, Gunter Weiss, the head of the European Commission delegation in Latvia, called on Latvia's non-citizens to become naturalized and thus become future citizens of the European Union, LETA reported.

* A planned meeting of a parliament delegation, headed by Chairman Janis Straume, with Israeli Foreign Minister Shimon Peres did not take place on 5 December because of terrorist acts in Jerusalem, BNS reported. The previous day the delegation met with Israeli Infrastructure Minister Avigdor Liberman, who had recently visited Latvia. Straume also held talks with his Israeli counterpart Avraham Burg.

* Bank of Latvia President Einars Repse handed his resignation to parliament Chairman Janis Straume on 30 November so that he could devote his full time to leading the still-to-be-established political party Jaunais Laiks (New Era), LETA reported.

* The 7th Congress of the Latvian Socialist Party in Riga on 8 December re-elected Alfreds Rubiks as the party chairman, LETA reported. Parliament deputy Martijans Bekasovs and Filips Stroganovs were elected deputy chairmen. The congress decided to participate in the next parliament elections on the ticket of For Human Rights in a United Latvia.

* The consumer price index in November increased by 0.2 percent compared to October and by 3.1 percent compared to November 200, BNS reported on 10 December. Higher food expenses raised the prices of goods by 0.3 percent, while those of services increased by 0.1 percent.

* Representatives of the Chinese spiritual movement Falun Gong staged a demonstration outside the Embassy of the People's Republic of China in Riga on 10 December, LETA reported. They were protesting the "torture and murders of supporters of the movement in China's prisons."

* On the recommendation of Economy Minister Aigars Kalvitis, the cabinet approved on 11 December Latvian Privatization Agency (LPA) board member Arnis Ozolnieks as the new LPA director-general and board chairman, LETA reported. He is to replace Janis Naglis as director on 14 December.

* The government accepted on 11 December a Latvian-German agreement providing for the mutual recognition of higher education in the other country, BNS reported. The agreement also outlines use of academic degrees in the two countries and regulates a variety of other issues.

PARLIAMENT ADOPTS 2002 BUDGET.
The parliament adopted the 2002 budget on 13 December by a vote of 72 to 51, with two abstentions, ELTA reported. Based on the assumption that GDP will grow by 4.0 percent and inflation will be 2.6 percent in 2002, the budget foresees revenues of 10.33 billion litas ($2.58 billion) and expenditures of 12.26 billion litas. The parliament also approved the 2002 budgets for the State Social Insurance Fund (SoDra), which predicts a deficit of 34 million litas arising from revenues of 4.58 billion litas and expenditures of 4.61 billion litas, and for the Compulsory Health Insurance Fund, which foresees a balanced budget of 1.83 billion litas The parliament also amended the personal income tax law by increasing the monthly tax-free minimum from 214 to 250 litas, beginning on 1 April 2002.

WILLIAMS CANCELS AGREEMENT WITH YUKOS.
The U.S. company Williams International, which operates Mazeikiu Nafta (Mazeikiai Oil), announced on 12 December that it has canceled its agreement with the Russian oil company Yukos, the daily "Lietuvos rytas" reported the next day. The two companies signed an agreement in June by which Yukos agreed to pay $75 million, loan another $75 million, and supply 4.8 million tons of crude oil per year to the refinery in exchange for a 26.85 percent share of Mazeikiu Nafta. Randy Majors, the board chairman of Mazeikiu Nafta, told a news conference that the main stumbling block was the failure to reach an agreement on whether penalties would be imposed if Yukos failed to supply the promised supply of crude oil. Yukos officials argued that the situation was made more complicated by Russia's recent agreement with OPEC to reduce oil exports. Majors expects the negotiations with Yukos to be continued next year.

TALKS WITH POLISH FOREIGN MINISTER.
Antanas Valionis and Wlodzimierz Cimoszewicz met informally in the resort city of Druskininkai on 1 December, BNS reported. It was Cimoszewicz's first trip to Lithuania as foreign minister, although he visited in 1996-97 when he was premier. The ministers discussed a wide range of issues including the integration of their countries into the European Union and Polish support for Lithuania's membership in NATO. They set a date to meet with experts later this month to discuss an agreement on the spelling of Lithuanian and Polish names. Lithuania suggests that all names should be transliterated without using diacritical marks, while Poland supports the use of diacritics. The discussions on establishing a spelling system were opened in 1997, but were discontinued in 1999 following disagreements. The ministers also spoke about relations with neighboring Belarus and Russia, and Russia's Kaliningrad exclave wedged between Poland and Lithuania.

FOREIGN MINISTER MAKES NEW CONTACTS WITH TURKISH, SPANISH COUNTERPARTS.
At the OSCE's Ninth Ministerial Council meeting in Bucharest, Antanas Valionis on 3 December outlined Lithuania's priorities in relation to the OSCE during its current six-month chairmanship of the Council of Europe, BNS reported. He met with Spanish Foreign Minister Josepe Pique, who expressed his country's full support for Lithuania's efforts to join the EU. Valionis spoke about the future establishment of a Spanish embassy in Vilnius and again invited Spanish Prime Minister Jose Maria Aznar to visit his country. Aznar's visit to the Baltic states on 11 September was canceled in mid-flight when he learned about the terrorist attacks in the United States. Valionis also held talks with his Turkish counterpart Ismail Cem, whom he thanked for Turkish support for Lithuania's bid to join NATO. They also discussed the planned visit to Lithuania next year by Turkish President Ahmet Necdet Sezer.

FOREIGN MINISTER VISITS MOLDOVA.
Antanas Valionis as the current chairman of the Council of Europe's Committee of Ministers met on 6 December in Chisinau with his Moldovan counterpart Nicolae Dudau and urged the re-establishment of a dialogue between Moldova and the Transdniester region, Flux and BNS reported. Valionis also called on the Moldovan government to recognize the Bessarabian Metropolitan Church and discussed with his counterpart the situation in the Gagauz-Yeri autonomous region. In addition, he inquired about the plans to reintroduce Soviet-era structures of local administration. The two ministers signed agreements on visa-free travel for their diplomats, and readmission of illegal immigrants. Valionis also met with parliamentary speaker Evgenia Ostapciuc, who told him Moldova is the only CIS member that has passed a law on safeguarding the rights of national minorities.

EU ASKED TO EXTEND TRANSITION PERIOD FOR CIGARETTE EXCISE TAX.
The government on 6 December instructed both its European Committee and Foreign Ministry to negotiate with the EU for a transition period until 31 December 2010 for raising excise duties on tobacco products to EU-required levels, BNS reported. Lithuania had earlier requested a transition period until 1 October 2009, but the European Commission responded by suggesting a shorter transition period until 1 January 2007. Petras Austrevicius, Lithuania's chief EU negotiator, said that the reason for asking for a longer transition period was the directive by the EU Council in November to introduce from 2002 a minimum excise tax of 64 euros ($56) per 1,000 cigarettes instead of the current 57 percent of the average retail price of the most-popular brand of cigarettes. The new tax rate would more than triple the cost of a pack of Klaipeda cigarettes, the most popular locally produced brand, from the current price of 2.11 litas to 7.80 litas ($1.95).

TELEPHONE RATES TO BE INCREASED.
After meeting with Prime Minister Algirdas Brazauskas on 4 December, Lietuvos Telekomas (Lithuanian Telecom) head Tapio Paarma announced that telephone rates will be increased only once next year instead of the previously planned two increases, ELTA reported. Beginning on 1 July 2002, call connection fees will be raised from 0.12 ($0.03) to 0.14 litas, and the monthly subscription fee from 19 to 23 litas. The rates for local calls will increase from 0.11 to 0.12 litas per minute during the day, and from .06 to .08 litas in the evening. The monthly fees for pensioners and persons eligible for social support will decline from 17 to 16 litas beginning in 2002. While the rates for personal users will not be as great as previously planned, Paarma noted that Lietuvos Telekomas does not expect lower revenues. Planned reductions in monthly subscription rates for business phones from 28 to 23 litas will be cancelled.

PARLIAMENT REJECTS OPPOSITION PROPOSAL TO RECONSIDER 2002 DRAFT BUDGET.
By a vote of 56 to 68, with one abstention, the parliament on 6 December rejected the proposal by right-wing and centrist parties to return the 2002 draft budget to the government for reconsideration, BNS reported. The government's proposed budget foresees revenues of 8.8 billion litas ($2.2 billion) and expenditures of 9.94 billion litas. The parliament also adopted amendments to the Law on Excise Taxes that will raise the taxes on gasoline from 1,210 to 1,250 litas ($302.50 to $312.50) per ton beginning on 1 January 2002, and the duties on cigarettes from 32 to 36 litas per 1,000 cigarettes beginning on 1 April 2002. It also amended the Law on Legal Representation to allow lawyers from EU countries to practice in Lithuania, with those amendments going into effect on the day Lithuania enters the EU.

LIGHT INDUSTRY ASSOCIATION JOINS EURATEX.
The Lithuanian Association of Light Industry Enterprises was admitted as an associate member of the European textile and clothing organization Euratex at that organization's extraordinary general assembly in Brussels, ELTA reported on 11 December. Euratex is a 50-member umbrella organization for some 150,000 enterprises, which together employ around 2.2 million workers. The associate membership, while not granting a voting right, will allow Lithuanian light industry firms to present their products to EU entrepreneurs and associated structures, and to take part in international EU-funded projects. This is important because light industry accounts for about 20 percent of Lithuania's exports, with the bulk of those exports going to EU countries. In the first three-quarters of this year, light industry exports increased by 4.5 percent over 2000 levels to 2.44 billion litas ($610 million).

PROTOCOL TO COMBAT SMUGGLING ON KALININGRAD BORDER.
The chief of the Kaliningrad regional board of Russia's federal border service, Lieutenant General Vyacheslav Prokhoda, and acting commander of the Lithuanian State Border Protection Service Vaclovas Zabarauskas signed a protocol in Kaunas on 7 December after two days of talks, BNS reported. They agreed to combat smuggling together and make efforts to reduce lines at the borders. The most common goods smuggled from Kaliningrad to Lithuania are cigarettes, alcoholic beverages, and gasoline, which are cheaper in Kaliningrad. Prokhoda said that the technology at Russian border checkpoints is significantly inferior to Lithuania's. While Lithuania introduced a modern border checkpoint at Kybartai, which allows up to 2,100 vehicles to cross each day, the infrastructure of the Chernyakhovskoye checkpoint on the Kaliningrad side remains unchanged and far below the capacity of the Lithuanian side. The two countries plan to issue special temporary permits that will allow Russian and Lithuanian residents who work in the neighboring country to cross the border without having to wait in line.

CHRISTIAN DEMOCRAT PRESIDENTIAL NOMINEE CALLS FOR ESTABLISHING VICE PRESIDENCY.
Christian Democrat Party (LKD) Chairman Kazys Bobelis told a press conference on 10 December that if elected president he would establish the post of vice president, BNS reported. He said that one of the duties of the vice president would be to meet guests of rank considered too low for a president. The LKD council on 8 December unanimously elected the 78-year-old Bobelis, the oldest parliamentary deputy, to be their candidate for Lithuania's presidential election slated for next year. National polls indicate that Bobelis is the second or third most popular political figure in the country with a far higher approval rating than his own party. In a related vote the LKD council, in clear opposition to nine other right-wing and centrist political parties, expressed its support for the proposal by the Social Democrats to save money by holding local council elections, which are scheduled for the spring of 2003, at the same time as the presidential elections.

* Prime Minister Brazauskas in Ljubljana on 7 December discussed with his Slovenian counterpart Janez Drnovsek EU integration and bilateral cooperation, ELTA reported. The premiers said that they expected to conclude EU membership talks in 2002. Brazauskas also spoke about the closure of the Ignalina nuclear power plant as an important problem. He also talked with President Milan Kucan about the necessity to exchange information about the business environment in both states.

* Parliament Chairman Arturas Paulauskas met on 5 December in Brussels with parliament leaders of other EU candidate states to discuss the future of the European Union, ELTA reported. He also had separate meetings with Joint EU-Lithuanian parliamentary committee EU delegation Chairman Gary Titley, Chairman of European Liberal, Democrat and Reformat Group Pat Cox, and Europarliament Chairwoman Nicole Fontaine. The next day he held talks with European Commissioner on Enlargement Guenter Verheugen and Europarliament Foreign Committee Chairman Elmar Brok.

* Parliament Chairman Paulauskas on an official visit to the Netherlands on 3-4 December met with chairmen of the Dutch House of Representatives and Senate Jelte van Njivenhoven and Gerit Braks and leaders of the major political parties, BNS reported. He also visited the Amsterdam municipality, Rotterdam harbor, and the International Court of Justice in The Hague.

* Defense Minister Linas Linkevicius on a visit to Ankara on 4 December proposed to the Turkish General Staff that they use Lithuanian training grounds for military exercises, ELTA reported. Turkish defense leader Sabahattin Cakmakoglu assured him of Turkey's full support for Lithuania's membership in NATO.

* Former U.S. Deputy Secretary of State Strobe Talbott told Foreign Minister Valionis on 5 December that the Baltic states had real chances to receive invitations to NATO at the Prague summit meeting in Prague in November, ELTA reported. The next day President Adamkus awarded Talbott the Order of Grand Duke of Lithuania Gediminas for his work in strengthening ties between Lithuania and the U.S. On 7 December he told the students and staff of Vilnius University that the oil refinery at Mazeikiai, operated by Williams International, was in "good hands."

* Finance Minister Dalia Grybauskaite and World Bank representative in Lithuania Mantas Nocius signed agreements in Vilnius on 7 December granting Lithuania around $1.2 million to prepare for implementing pension reform and draft a housing project, BNS reported on 7 December. The aid will be provided through the Policy and Human Resources Development Fund of the Japanese government which has supported Lithuania with over $7 million in aid.

* Conservative Party Chairman Vytautas Landsbergis, its parliament faction head Andrius Kubilius, and other leading party members suggested to President Adamkus at a meeting on 5 December that an independent audit be carried out on the operations of the Williams International-operated Mazeikiu Nafta, ELTA reported. The next day Mazeikiai chief executive James Scheel said that the company was ready to supply all available information if such an audit was conducted since this could put an end to the political speculations surrounding its activities.

* Liberal Union board Chairman Jonas Cekuolis and Conservatives deputy chairwoman Rasa Jukneviciene told a press conference on 3 December that a forum of right-wing parties which link their roots with Lithuania's Sajudis and Poland's Solidarnosc was held in Warsaw over the weekend to discuss cooperation in the defense of European democratic values, BNS reported. They called the forum, which was attended by the Lithuanian Modern Christian Democratic Union and the Polish Law and Justice and Civic Platform parties, a highly significant event which will in the future be held on an annual basis.

* The Statistics Department announced that the consumer price index remained steady in November, but rose by 1.9 percent in comparison to November 2000, BNS reported on 10 December. Lithuanian officials had expected falling gasoline prices to lower the CPI, but costs of clothing and footwear increased much more than expected.

* The unemployment rate edged up by 0.3 percent to 12.5 percent in November, ELTA reported on 6 December. In early December the number of officially registered unemployed people was 217,370.