Baltic Report: June 27, 2000

ANTI-COMMUNIST CONGRESS HELD IN VILNIUS.
Participants from 23 countries attended a three-day congress in Vilnius from 12-14 June to discuss the crimes of Communism. At the conclusion of the session, delegates formed a nine-member tribunal, called Nuremberg II, to provide a social, political, and legal evaluation of the subject. Russian human rights activist Yelena Bonner, Russian parliamentarian Sergei Kovalyev, and former Polish President Lech Walesa were among the speakers. Kovalyov told the congress, "It was my nation that tolerated Communism, it was my nation that was fascinated with the idea of Communism and welcomed it, and occupied the Baltic countries, and not only them. I would like to stress that although the main culprits are the Communists, we [Russians] cannot say either that we had nothing to do with it all. Please accept my apologies." The Duma member's statement stands in sharp contrast with last week's statement by the Russian Foreign Ministry claiming that the USSR sent its troops [to Lithuania] in 1940 at the request of national authorities and "then existing international law." The tribunal is to reconvene on 4 September to issue conclusions and a verdict. The work of the tribunal was hampered because the organizers of the congress could not find a lawyer to act as defense counsel for Communism.

BALTS STEP UP PRESSURE ON COMMUNIST CRIMES.
Estonian Prime Minister Mart Laar, at a "Crimes of Communism" conference in Tallinn, said an "authoritative international evaluation" for communist crimes similar to the Nuremberg trial of Nazi war criminals should be created, Reuters and ETA reported 14 June. Laar said that "one of these phenomena has been declared criminal and the other not. It is the greatest inequality of our time." Laar added that he and Hungarian Prime Minister Viktor Orban are cooperating in the creation of an international foundation to investigate communist crimes. Speaking at a ceremony in Riga commemorating the deportations of Latvians by the Soviet Union in 1940, Latvian President Vaira Vike-Freiberga said there could be no end in the hunt for war criminals, regardless of ideology. She also "apologized to the Latvian people as a human being" for the atrocities which had been committed against them.

U.S. TAKES NOTE OF BALTICS' HISTORY AND PROGRESS.
U.S. President Bill Clinton accepted the diplomatic credentials of Estonian Ambassador Sven Jurgenson and Latvian Ambassador Aivis Ronis on 15 June. Clinton told Jurgenson that "the United States welcomes and supports Estonia's aspiration to NATO membership," Reuters reported. Clinton also congratulated the 31-year-old Ronis as the youngest ambassador in the Washington diplomatic corps and praised Latvia's development and policies towards neighboring states. The United States Senate on 14 June adopted a resolution sponsored by Senator Richard Durbin (Democrat-IL) which marked the important role played by the United States policy of not recognizing the illegal occupation of the Baltic states by the former Soviet Union. The resolution also commended Estonia, Latvia, and Lithuania for their success in implementing economic and social reforms.

RUSSIA CRITICIZES EU AND NATO ENLARGEMENT...
While in Madrid on 14 June, Russian President Vladimir Putin warned that "premature admission of the former Soviet republics to the European Union could ruin Eastern Europe's economy," BNS reported. Putin said that the stability of the entire region would be endangered because there are trade relations between the former Soviet republics and Russia. The following day in Berlin, Putin repeated his earlier warnings that further eastward enlargement by NATO could endanger international stability. He called for the OSCE to be upgraded to a full-scale regional security forum as an alternative to NATO enlargement, and called U.S. plans to build an anti-missile defense system "very dangerous" and destroying the balance of power.

�WHILE BALTS DEFEND THEIR INTERESTS.
Estonian President Lennart Meri rejected as incorrect Russian President Vladimir Putin's statement that NATO's further eastward enlargement would endanger international stability, Reuters reported 16 June. Meri said the history of NATO showed it had increased stability for both its members and its neighbors. "Mr. Putin's statement regrettably ignores one of the basic principles of the OSCE subscribed to by Russia herself, that all countries have the inherent right to choose their own security arrangement, including joining the alliance," Meri said, adding that "no country has ever contested the right of Russia and Belarus to form a security alliance." The prime ministers of the three Baltic countries also disputed Putin's warnings that NATO enlargement endangered international stability. The three prime ministers agreed to cooperate in seeking compensation claims from Russia for the Soviet-era occupation of their countries, BNS reported.

* The European Union told Eastern European and Mediterranean candidates on 13 June they should not count on EU leaders setting a target date for concluding the current expansion negotiations when they meet in December. EU Enlargement Commissioner Guenter Verheugen said that the EU needed to evaluate the progress reports on each country, which are due in November.

* Turkish Foreign Minister Ismail Cem visited the three Baltic countries from 7-9 June. Cem met with officials and discussed European integration and bilateral relations. In Tallinn, Cem said, "European security is not complete when the Baltic states are not members of NATO," adding that "this is a standpoint that we will affirm in NATO," ETA reported. Cem also said that he was convinced that Latvia will become an EU member before Turkey, LETA added.

ESTONIA LOOKS FOR REVENUE TO COVER GROWING BUDGET DEFICIT.
The Estonian government intends to take 222 million kroon ($13.88 million) from the profits of the Port of Tallinn to help cover its growing budget deficit, "Postimees" and ETA reported 13 June. The amount represents 75 percent of profits earned by the state-owned facility in 1999 and had been intended for financing improvements and expansion of port facilities. The Finance Ministry directed the Port of Tallinn to borrow the replacement funds needed for any investments in facilities this year. The government is also considering taking funds from other state-owned enterprises such as the Estonian Broadcasting Center and Eesti Telekom.

CHANGES TO ESTONIAN LANGUAGE LAW PRAISED BY EU...
EU Enlargement Commissioner Guenter Verheugen praised the passage of amendments to the Estonian language law on 14 June and said that the language law amended is now in total compliance with all OSCE and EU norms, ETA reported. The amendments, passed by a 50 to 1 vote, removed controversial provisions on language usage in the private sector, except for essential services such as police, emergency health care and public health protection, labor safety, and consumer protection. Also, the parliament on 14 June eased the naturalization process for disabled applicants, removing requirement such as language and constitutional exams.

...BUT PARLIAMENT ALSO ADOPTS TWO CONTROVERSIAL BILLS.
The parliament on 14 June had one of its busiest and most contentious sittings of the current session. After hours of heated debate, a 51-37 margin passed the watered-down but still controversial pay rise bill that sets the ministerial wage at 24,755 kroons ($1,515) a month, or 5.5 times that of the national average wage, ETA reported. The parliament also approved a 5 percent value added tax (VAT) on heating from the current 0 percent, to come into effect 1 July. Two members of the ruling coalition--the Pro Patria Union and Reform Party--pushed to harmonize the VAT for heating with everything else at 18 percent, but the third partner--Moodukad (the Moderates)--voted with the opposition to pass the watered-down version by a 56-32 margin. Finance Minister Siim Kallas of the Reform Party said a revised budget with a deficit may now be necessary to cover the anticipated 100 million kroon loss in government revenues.

ESTONIAN GOVERNMENT TO FUND EUROSKEPTICS.
Prime Minister Mart Laar discussed the need for a balanced debate in a commentary in "Postimees" on 14 June, where he said the "one-sided 'Europropaganda'" was not good for Estonia and that "we need an objective discussion of the theme." BNS on 15 June reported that the government will allocate 200,000 kroons ($12,170) to organizations against Estonia's integration with the European Union. Groups will have until 1 August to present projects for funding.

* The Estonian parliament adopted an amendment to the income tax law 15 June raising the limit on tax free income from 800 kroons ($50) to 1,000 kroons per month. The limit on tax free income was last raised in January from 500 kroons to 800 kroons per month.

* Parliament speaker Toomas Savi called for the end of the OSCE mission to monitor minority rights in Estonia because the parliament had adopted the changes to the Estonian language law recommended by the OSCE. President Lennart Meri, Prime Minister Mart Laar, and Foreign Minister Toomas Hendrik Ilves have already called for the end of the monitoring mission.

* The Estonian parliament voided the law on foreign investment on 15 June because the European Union does not allow any restrictions on the movement of capital among member countries, ETA reported. The now voided law had allowed the government to name fields of activity where foreign capital could be banned or licensed.

* The commission for interagency coordination of Estonia's NATO membership preparations on 16 June said that Estonia will have to improve the organization and training of its reservists, BNS reported. The Estonian Defense Ministry this week endorsed a proposal to increase the salary of soldiers from 1,500 kroon to 3,000 kroon for each month they stay in the military beyond their service as conscripts. At the same time the length of service for conscripts will be cut from 12 months to eight this fall.

* Estonia's most modern waste handling facility opened in Vaivara on 12 June, ETA reported. The complex can process up to 12,000 tons of hazardous waste per year, including oil products, solid waste, organic waste, and substances contaminated with pesticides. It is the first facility of its type to meet all environmental and safety requirements in the Baltic states. The construction costs of 77.3 million kroon ($4.5 million) were financed by the Estonian government, the EU's PHARE program and Denmark.

* Since the two small bombs went off in the popular Stockmann department store in late May, there has been a rash of fake bomb threats. Stockmann and several other shopping centers and supermarkets, even locations in Tartu, have been plagued by false bomb threats. The Interior Ministry reported on 16 June that since 1992 there have been 1,636 bomb threats in Estonia. In 1992 there were only seven, but by 1999 the number had grown to 445 bomb threats with 251 of them made against schools.

* Three rival parties of Russian speakers announced on 14 June the formation of a new organization named the Union of Russian Parties of Estonia. The founding document was signed by Estonian United People's Party chairman Viktor Andreyev, Russian Party in Estonia leader Nikolai Maspanov, and Russian Unity Party leader Alfrida Liivak. The new union aims to balance the new moderate party of Russian speakers, the Russian-Baltic Party in Estonia, founded by Estonian deputy Sergei Ivanov last week.

* The board of the Moderate Party decided not to take action against party member Mihkel Parnoja, the current economics minister in the three-party coalition government. Parnoja differs with his party on energy policy. Moderate Party chairman Andres Tarand has accused Parnoja of promoting a government monopoly in energy policy. Tarand told BNS, "We're democratic enough for me as the party chairman not to begin driving Parnoja out."

* Estonia's national air carrier Estonian Air opened a full service travel agency on the Internet, ETA reported on 12 June. The website offers a wide range of services, including the purchase of tickets and the booking of hotel and rental cars all over the world. The service uses the international booking system Amadeus and is located at http://www.ee.travelup.net

* The results of a survey by the Saar Poll market research firm released on 13 June shows that Estonians consider unemployment and crime to be the country's biggest problems. Unemployment was cited as the biggest problem by 30 percent of non-Estonians living in Estonia, and 22 percent of Estonians. Crime was identified as a serious problem by 14 percent of Estonians and 6 percent of non-Estonian residents. Some 49 percent of Estonians believe that developments in Estonia will lead to a better life. Among people with higher education, 64 percent believe life will improve while only 45 percent of secondary school graduates think this. At the same time, 61 percent said they suffer under tremendous stress from time to time, and fully half said that their educational level is not sufficient for them to cope with the new requirements of modern life in Estonia.

* The same Saar Poll survey showed that 71 percent of Estonians trust President Lennart Meri, while only 44 percent trust the parliament. This was a 2 percent drop for Meri since a May 1999 survey, but a 6 percent drop for the parliament. The central bank is trusted by 48 percent of the population, 44 percent trust the country's courts, and 48 percent trust the Estonian media.

TWO COMPETING DEMONSTRATIONS HELD.
LETA reported 13 June that the Riga City Council gave its approval for two separate and competing marches to be held this week. National Bolsheviks from the organization Uzvara (Victory) agreed to change their route and marched on 16 June from the Red Riflemen Monument to the headquarters of Lattelekom (Latvian Telecom) where they held a protest rally regarding the increase in telephone rates by the government monopoly. Carrying placards that read "Capitalism is Crap!" and "Lattelekom � A Gang of Murderers," the 40 protesters were noisy but orderly, BNS reported. The other permit issued to the parliamentary party For Fatherland and Freedom Party (LNNK), allowed a march on 17 June to commemorate Occupation Day�a day set aside recently by the Latvian parliament to commemorate the victims of the Soviet occupation which began on that day in 1940. Several thousand people walked from the Occupation Museum to the Freedom Monument where they were met be another 1,000 participants, BNS reported. President Vaira Vike-Freiberga addressed the crowd saying, "I would like to apologize as a human being, not as a president, to all victims of Communist terrorism who had experienced humiliation." Vike-Freiberga said that the deportations were a crime against Latvia--the nation and all of its people and were aimed at "breaking the resistance of Latvian defenders and their resolve to live free."

LATVIAN BRAIN DRAIN FORECAST IN TECHNOLOGY SECTOR.
A survey conducted by the information technology company Tieto Konts suggests that one-third of information technology students in Latvia plan to pursue their future careers outside of Latvia, LETA reported on 14 June. Some 77 percent of respondents also said they would go abroad for an indefinite period if they were offered study opportunities or work. Organizers of the survey say that the main motivation appears to be financial, though many also stressed the need for experience and professional skills gained from being abroad. The Latvian Development Agency hosted a seminar on foreign investments on 15 June where agency Director-General Maris Elerts said that information technology, communications, pharmaceuticals, biotechnology, and value-added commerce were the sectors which could become the driving force for the growth and development of Latvia's economy, LETA reported.

LATVIAN CHILD PORNOGRAPHY CASE INVOLVES GERMAN TV CHANNEL.
The Riga Children's Rights Protections Center has petitioned the Prosecutor General's office to investigate the legality of recent erotic film footage shot in the swimming pool of Natalija Draudzina High School in Riga, LETA reported 12 June. Riga City Council Chairman Andris Argalis ordered the Riga School Board to reprimand the principal at the school for renting out the school's swimming pool to the film crew. Latvian politics has been racked in recent months by pedophilia charges against former government ministers, though all of the charges have been dismissed after exhaustive investigations.

LATVIAN PARLIAMENT SUPPORTS LIMITATION OF ALCOHOL SALES.
The Latvian parliament on 15 June passed amendments to the law on local governments allowing municipalities to place restrictions on alcohol sales, LETA reported. However, an attempt to link beer sales to the provision was defeated. The amendments came after several municipalities, such as Valmiera, placed restriction on alcohol sales in evenings. The new mayor of Riga, Andris Argalis, is also a firm supporter of the measure because of the growth of disorderly conduct in Riga and an increase in the number of car accidents associated with drunk driving.

* The Latvian Prosecutor General's office is drafting genocide and war crimes charges against expatriate Konrads Kalejs and will seek to extradite him from Australia, BNS reported 17 June. Head prosecutor Rudite Abolina said that the legal motions may be ready to be filed by July. Latvia and Australia have coordinated a draft extradition treaty which should be signed soon. According to the prosecutors, Kalejs headed the external security guards of the Salaspils concentration camp in Nazi-occupied Latvia during World War II.

* The prosecutor in the case against Yevgeny Savenko, accused of genocide against the Latvian people, recommended that the Kurzeme Regional Court in Liepaja sentence the defendant to a five-year term of imprisonment if he is found guilty, LETA and BNS reported 16 June. Savenko, 85, said in his final statement to the court that he has never felt any hatred for Latvians. He was only doing his duty and obeying orders during World War II when he served as a senior investigator of the People's Commissariat in Riga from 1940 to 1941, and as deputy head of the Liepaja branch of the commissariat from 1945 to 1950. Members of the Socialist Party attempted to disrupt the court proceedings.

* Latvian Minister of Welfare Andrejs Pozarnovs told BNS on 13 June that several diplomats from EU countries had expressed their concern about the large number of tuberculosis patients in Latvia. The WHO cited Estonia, Latvia, and Russia as examples of countries where more than 10 percent of tuberculosis cases involve viruses resistant to the two most effective medicines currently used to treat the disease.

* President Vaira Vike-Freiberga said on Latvian Television on 15 June that Russia will not be able to afford aggressive rhetoric against Latvia in the future when Latvia becomes a member of the European Union, because "then it would be targeted against the European Community." This is an example of the "soft security" which candidates hope to achieve through EU membership.

* The Latvian parliament on 15 June adopted a law joining the Council of Europe's intergovernment anti-corruption group GRECO. The organization was established to help member governments with anti-corruption efforts, both sharing new crime fighting methods, monitoring of cases, and working with foreign experts.

* The Ministry of Economy issued 14 authorizations for the construction of small power generators, "Diena" reported on 15 June. Thirteen of the units are to be small hydropower plants operated by the company Novators and will have a capacity of 3.5 megawatts. The 14th will be a cogeneration plant operated by a municipal enterprise Grobinas siltumtikli (Gronia Heat Network). Earlier in the year, the ministry gave permission for the construction of 11 wind generators by entrepreneur Juris Kajaks.

* The net profit of the joint-stock company Ventspils Nafta (Ventspils Oil) was LVL 16.26 million ($10 million) in 1999, or nearly LVL 6 million less than in 1998, LETA reported on 16 June.

* Ventspils Mayor Aivars Lembergs told LETA 12 June that he had already signed the petition calling for a halt to the privatization plan of the state joint-stock electric company Latvenergo. The campaign for the referendum against the privatization of the government-owned monopoly began on 1 June and will continue through 30 June. The Central Voting Commission has set up 640 sites throughout Latvia for gathering signatures on the petition.

* The U.S. government will grant $500,000 to the Latvian police and prosecutor's office, LETA reported on 16 June. The aid is provided through the U.S. Embassy in Latvia and includes special night-reflector equipment, computers, and other machinery.

* Under the amended pension law on 1 July, the retirement age for women will be raised to 58 years from the current 57.5 years, LETA reported on 12 June. The "early retirement" age for women is also being raised, from 55.5 years to 56 years. Under the pension law, only 80 percent of the total sum will be paid to people who retire early, after 2 July.

LAW DIRECTS LITHUANIAN GOVERNMENT TO SEEK COMPENSATION.
The parliament gave final approval to a bill calling on the Russian Federation, as the legal successor to the Soviet Union, to pay compensation for five decades of Soviet occupation, Reuters and ELTA reported on 13 June. The legislation still needs the signature of President Valdas Adamkus, but a group of Russian Duma members responsible for relations with the Lithuanian Seimas have canceled their planned working visit to Lithuania. The legislation sets out a timetable for the government to seek monetary compensation from Russia for the repression and environmental damage caused during the 1940-1990 Soviet rule. A delegation for the negotiations must be formed by 1 September, and the compensation demand must be made by 1 November. Former Lithuanian President Algirdas Brazauskas said the majority of strategic sites built in Lithuania in Soviet times were financed with Soviet funds and constructed by all republics of the USSR, ITAR-TASS reported 13 June.

LITHUANIAN PARLIAMENT KILLS BILL TO LOWER DEFENSE SPENDING.
The Lithuanian parliament on 15 June defeated a bill on shifting funds from defense spending to education by a 64 to 12 margin, ELTA reported. The bill, introduced by the non-parliamentary party New Alliance (Social Liberals) and placed on the parliamentary agenda by popular support from a petition drive which gathered thousands of signatures. The proposal sought to divert about 148 million litas ($37.5 million) from this year's budget from defense and reallocate it to education. Opponents of the bill, including the government, linked it to politicians fueling anti-NATO populist sentiment, though the New Alliance claims it supports NATO integration. Because of revenue shortfalls, the government has already reduced spending across the board. The defense forces are expected to receive only 75 percent of funds appropriated to them for this fiscal year.

VOLATILE MARKET FORCES LITHUANIAN TELECOM IPO SCALE BACK.
The volatile global high-tech market forced the Lithuanian government to trim its initial public offering (IPO) of Lithuanian Telecom stock to 3.15 litas ($0.78) per share, Reuters and ELTA reported on 10 June. The government also cut the size of the tranche from 35 to 25 percent, retaining a 10 percent share of the partially-privatized company. Analysts had expected the shares to bring a price of 3.60-3.80 litas during the subscription period, which ended 9 June. The stock began trading in Vilnius and London on 12 June where the average price settled at 3.19 litas with a total turnover valued at 11.129 million litas ($2.78 million), ELTA reported 12 June. Two leftist opposition parties, the Democratic Labor Party (LDDP) and Social Democratic Party (SDP) have asked President Valdas Adamkus to intervene and instruct the State Comptroller and Anti-Corruption Special Investigation Service to calculate the losses incurred by the state in this sale of telecom shares. The government has said that without the revenues from the sale of shares which it yielded, it would have had to borrow funds from international markets to cover obligatory budget expenditures.

GORBACHEV RESPONSIBLE FOR DEATHS IN VILNIUS, SAYS BUTKEVICIUS.
Former Defense Minister Audrius Butkevicius testified in the appeals case of the convicted leaders of the attempted 13 January 1991 Soviet coup in Lithuania, ELTA reported 13 June. Convicted Communist Party members Mykolas Burokevicius and Juozas Jermalavicius had hoped that Butkevicius would confirm their claims that the Lithuanian government had anticipated the coup attempt and sent snipers to attack their own compatriots. Butkevicius confirmed that he had worked with the medical institutions "to prepare them for [the] treatment of victims. But this does not mean that I put people under Soviet tanks and forced them to attack Russian military vehicles." Instead, Butkevicius blamed Mikhail Gorbachev, the president of the former USSR, "for the bloody aggression in Vilnius." Butkevicius said, "I do not possess documents but have got evidence from many people that Gorbachev had worked out directives for USSR Minister of Internal Affairs Boris Pugo, KGB Chairman Vladimir Kryuchkov, and Defense Minister Dimitri Yazov. These directives contained plain instructions on what actions these services should undertake. The status of Gorbachev's order...stirred up the whole military machine."

RULING PARLIAMENTARY FACTION DEFEATS PRESS TAX BILL.
The ruling parliamentary faction, the Homeland Union-Conservative Party, defeated a bill which would have applied the country's 18 percent value added tax (VAT) to newspapers throughout the country, ELTA reported 13 June. Currently, the VAT is rebated to the newspapers and other publications. The Homeland Union released a statement saying that it had never supported the measure which was authored by its former coalition partner, the Christian Democratic Party.

CATHOLIC CHURCH DISAPPOINTED AT LITHUANIAN COURT RULING.
The Bishops' Council of the Roman Catholic Church in Lithuania voiced disappointment at the ruling by the Constitution Court concerning religious institutions and the public schools. The court on 13 June ruled that schools run jointly by the state and religious organizations, and the practice of religious groups issuing teachers' certifications are violations of the country's constitution. This affects two schools in Lithuania that are jointly established by the Ministry of Education and the Catholic Church, as well as 11 municipal governments that have sponsored schools with local religious institutions, BNS and ELTA reported. The issue was taken to court by the left-wing opposition parties, the Democratic Labor and Social Democrats, against the original amendments championed by the Christian Democrat Party, until recently a member of the ruling coalition.

* A Lithuanian Foreign Ministry spokesman told BNS on 12 June that it was regrettable that the Russian Foreign Ministry had issued a statement on 9 June claiming that the 1940 annexation of Lithuania by the USSR was lawful. The official said that the Russian government had implicitly acknowledged the illegal occupation and annexation in the Lithuanian-Russian Agreement of 1991 on Basic Mutual Relations. Parliament Chairman Vytautas Landsbergis, in commenting on the Russian Foreign Ministry statement, said: "Almost 60 years ago, on June 15, 1940, it was Soviet tanks which crossed the Lithuanian border, not Lithuanian tanks that went over the Soviet frontier."

* ELTA reported on 12 June that Prime Minister Andrius Kubilius has written to German Chancellor Gerhard Schroeder, just days after the latter's visit to Vilnius, to remind Schroeder that the direct payment of compensation to Lithuanians who had been forced into slave labor in Germany during World War II had not yet been resolved. Currently, the German government is proposing to compensate Lithuanian victims only through claims made in Moscow or Minsk.

* The Lithuanian Seimas approved a strategy on rural development and agriculture which is required for Lithuania's EU membership negotiations, BNS reported on 13 June. The law specifies that dairy, cattle breeding for consumption, horticulture, berry plantations, flax production, gardening, and food processing are priority sectors for Lithuania's economy. Special emphasis is given to developing an agricultural sector based on market-oriented single family farms. The state also intends to protect the domestic agricultural market and sustain the income of agricultural producers. Almost one-third of Lithuania's population is directly engaged in agriculture.

* The Lithuanian government voted to allow the Defense Ministry to set up an air defense battalion in the northern district of Siauliai, BNS reported 15 June. The government decree turns over 60 hectares of state land in the villages of Gudeliai and Maumaiciai in the Siauliai district--with no time limit--to the Ministry of Defense. The battalion will be housed in refitted buildings formerly used by Soviet troops. Sweden has agreed to provide armaments for the new battalion.

* BNS reported on 15 June that the government voted to reduce the amount of goods not subject to import duties allowed into the country by private individuals. The former 1,000 litas ($250) limit has been lowered to 700 litas per person. Persons under the age of 15 are allowed to take in goods at a maximum value of only 360 litas. The government said that these norms are in line with EU standards and are aimed at reducing the large-scale import of cheaper goods from neighboring states such as Belarus or Russia's Kaliningrad region.

* Minister of Finance Vytautas Dudenas notified President Valdas Adamkus on 14 June that this year's revised state budget would be short an additional 130 million litas ($32.5 million) in revenues, ELTA reported. This additional deficit is projected despite forced cutbacks in spending of 130 million litas earlier in the year and a slight revival of the economy, which is generating increased tax inflows.

* The city government of Vilnius has acknowledged that it owes 94.1 million litas ($23.53 million) in back taxes to the central government, BNS and ELTA reported on 16 June. The amount reflects collected 1998-1999 income taxes which the city kept and used to pay teacher salaries, rather than turn over the sum to the central government. City officials maintain that the central government owed the city about 100 million litas during this period, although the Finance Ministry denies the debt. City officials will use money from its privatization fund and also borrow money to repay the disputed taxes to the Finance Ministry.

A De Facto Veto?

By Paul Goble

A senior German defense official says that NATO must secure Moscow's agreement before it undertakes any further expansion, thereby apparently acknowledging what many East Europeans have long suspected: that the Russian government now has a de facto, if not de jure veto over the Western alliance's future plans.

Speaking in the Estonian capital of Tallinn on Monday, Walter Kolbow, the state secretary of the German defense ministry, stated that Moscow does not have a real right to block NATO's expansion. But he immediately added that the Western alliance must overcome Russia's current objections before taking in any new members, thus effectively making Moscow the final arbiter of the decision.

While Kolbow refused to predict whether NATO will invite Estonia, Latvia, and Lithuania to join in 2002, the German defense official emphasized that "Russia's participation in European security processes is important," adding that "even Russia's entry into NATO cannot be totally ruled out." But he did concede that "this is a question of distant future."

Coming on the heels of Russian President Vladimir Putin's friendly meetings with German Chancellor Gerhard Schroeder in Berlin, Kolbow's words seem certain to spark a firestorm of speculation in Eastern Europe about the possible existence of yet another deal between Moscow and Berlin concerning their fate.

That is all the more likely for three reasons. First, in recent days, Putin has said repeatedly that Germany is now Russia's principle foreign policy partner, assertions that have disturbed many in Eastern Europe who have suffered both when Moscow and Berlin have agreed as well as when the two have not. Moreover, some Western analysts have already noted that setting Germany against the U.S. has long been a Russian priority.

Second, leaders of NATO countries have gone out of their way to welcome Russia back to the NATO-Russian permanent joint council. Kolbow was no exception. In Tallinn, he welcomed the fact that NATO and Russia "again sit at the same table," after a period of what he called the "disrupted" relations "after the Kosova conflict." Such warm words are also likely to enhance suspicions.

And third, many East Europeans are likely to view Kolbow's remark as evidence that their suspicions about NATO-Russian cooperation are well-founded, whatever other Western leaders may say. When the NATO body including Russia was created, U.S. President Bill Clinton said that it gave Russia "a voice, not a veto." Many in Eastern Europe are likely to suspect that Kolbow's words reflect the actual state of affairs.

But Kolbow's remarks may very well have broader consequences in the alliance itself, in Eastern Europe, and in Moscow.

Some in NATO may seek to disown Kolbow's words or to suggest that he was speaking only for himself. Such denials, if they in fact are issued, will tend to create additional tensions within the alliance, something that may also serve Moscow's effort to block NATO expansion. But if no one in NATO disowns Kolbow, East Europeans will conclude that he was speaking for all the current members.

Across Eastern Europe, such a conclusion in turn will simultaneously exacerbate national debates about whether to make the effort NATO membership requires or shift spending to other areas. If East Europeans conclude now that they are unlikely to get in, some are likely to pull back from their earlier commitments, others will seek an accommodation with Russia, and at least a few may try to go it alone.

In Moscow, both the possible tensions in NATO and the divides within Eastern Europe are likely to cause Putin and his government to step up their efforts to divide the alliance and weaken its resolve to enhance the security of Europe and the North Atlantic.

But regardless of what NATO leaders say after Kolbow's remarks, many in the Russian capital seem certain to see his comments as a green light to do just that.

Mr. Goble is the director of communications and technology at RFE/RL.