Baltic Report: January 25, 2004

PRESIDENT SIGNS 2004 STATE BUDGET.
Arnold Ruutel signed the country's 2004 state-budget bill into law on 29 December, BNS reported. The budget, which was adopted by parliament earlier this month, foresees revenues of 47.62 billion kroons ($3.76 billion) and expenditures of 47.69 billion kroons (see "RFE/RL Newsline," 18 December 2003). The opposition Center Party urged Ruutel on 23 December not to promulgate the budget bill, arguing that it violates the constitutional right to state assistance by setting the subsistence allowance at just 500 kroons. The Center Party also suggested that the transfer of four percentage points of the 33 percent social tax from the state-pension insurance fund to private pension funds for individuals who chose to join them is unconstitutional.

STATE BUDGET IN 2003 SHOWS SURPLUS.
The Estonian Finance Ministry announced on 2 January that the state budget showed a 1.86 billion kroon ($151 million) surplus in 2003, based on revenues nearly 4 percent above the budget forecast and expenditures that came in more than 1 percent below the allocated figure, BNS reported. The surplus will be placed in a currency-stabilization reserve fund, as prescribed by Estonian law. Analysts widely forecasted the surplus -- due in large part to higher-than-expected corporate-tax and value-added-tax (VAT) receipts -- after the government decided in August not to submit a second supplementary budget (see "RFE/RL Newsline," 7 August 2003).

COURT REINSTATES TAX BOARD DIRECTOR.
The Tallinn Administrative Court upheld a complaint by former Tax Board Director Aivar Soerd and declared his dismissal for alleged incompetence null and void on 22 December, BNS reported. The court ruled that Soerd must be allowed to return to his post and that he be paid back wages. Former Finance Minister Tonis Palts suspended Soerd in July (see "RFE/RL Newsline," 21 July 2003) and fired him in September, charging that he was not qualified for the job. Palts subsequently named Customs Board Director Aivar Rehe as Soerd's replacement and called for the merger of the Tax Board and Customs Board. Soerd returned to work on 23 December and expressed regret that all his former deputies have either left or are planning to leave their posts. It is unclear how long Soerd will remain director; parliament approved a bill on 17 December laying the foundation for the four-phase merger of the two boards, beginning on 1 January. Finance Minister Taavi Veskimagi announced on 29 December that he was appointing Rehe as the acting head of the merged boards.

STATE FORESTRY HEAD DISMISSED.
State Forest Management Center (RMK) Director Aigar Kallas tendered his resignation on 23 December after the RMK council proposed that he step down, BNS reported the next day. Council Chairman Andres Onemar said the council did not reproach Kallas over RMK's economic results, but he alleged errors in managerial judgment -- including the RMK development plan -- that prompted tension within the organization. Kallas said his dismissal was proposed by People's Union Chairman and current Environment Minister Villu Reiljan, who opposes a development plan that includes the dismissal of many RMK officials. Many of those slated for dismissal are rural residents and People's Union supporters, he added. The RMK board offered Kallas severance pay of 10 months' salary -- some 450,000 kroons ($35,700) -- if he resigned, instead of the six months specified in his contract.

* In an interview in a Narva newspaper, Prime Minister Juhan Parts said the work of the Estonian-Russian Intergovernmental Commission will have to be built anew following the parliamentary elections in Russia, which changed the composition of the State Duma, BNS reported on 29 December. He emphasized the need to resume talks on various important matters such as the double Russian duties on Estonian imports, also noting that Estonia must coordinate its positions with the EU. Parts specifically mentioned that a new bridge across the Narva River to Russia will be built if it is deemed economically feasible.

* The Estpla-8 infantry platoon and the CT-2 cargo team of the Estonian Defense Forces that arrived in Iraq the previous week have begun their service in the country, BNS reported on 23 December. The 32-member Estpla-8 is serving in the Abu Ghurayb borough of Baghdad carrying out operations together with U.S. Army units, the U.S. Military Police, and Iraqi police in order to ensure order, find illegal weapons, combat smuggling. The 13-member CT-2 cargo team is based at a U.S. airfield about 20 kilometers northwest of the city of Al-Nasiriyah. The units are scheduled to remain in Iraq until 19 June.

* Justice Minister Ken-Marti Vaher dismissed criticism voiced by prominent members of the Estonian legal community of plans to impose harsher penalties for drug-related crimes, BNS reported on 29 December. He affirmed that drug trafficking should not be viewed as just a violation of the regulations concerning the handling of narcotics, but as an attack against the supreme human values -- life and health. Vaher said life-imprisonment is the only penalty that can have an effect on the leaders of the narcotics trade, who are not intimidated by penalties of several years' imprisonment. This punishment would only be applicable to the organizers of large-scale trade in narcotics and those who hire underage persons as dealers. Tartu University Legal Department Dean Kalle Merusk said the longer sentences will only increase the number of inmates and thus raise the level of crime in general.

* President Arnold Ruutel signed several new laws on 24 December, including amendments launching the tax reform that the parliament approved on 17 December, BNS reported. The amendments call for raising the monthly tax-exempt figure from the current 1,000 kroons ($79) to 1,400 kroons in 2004, 1,700 kroons in 2005, and 2,000 kroons in 2006, and decreasing the personal income-tax rate from the current 26 percent to 24 percent in 2005, 22 percent in 2006, and 20 percent in 2007. Another law provided for the merger of the Tax and the Customs boards starting from January 2004.

* The Finance Ministry stated on 22 December that it expected the country's current account deficit to reach 15 percent of gross domestic product by the end of the year, BNS reported. The deficit, which is primarily due to the use of largely foreign money to finance investments and consumption, is not expected to decrease in 2004. The global economy is recovering slowly and several infrastructure development and production modernization projects, which need large amounts of import input, will continue.

* The railway operator Eesti Raudtee (Estonian Railway) concluded a 60 million euro ($75 million) loan agreement with a syndicate of banks led by the Nordea Bank to refinance a World Bank's International Finance Corporation (IFC) loan received in 2001, LETA reported on 22 December. The syndicate also includes Uhispank, Hansapank, and Vereins-und Westbank. The 2001 loan was for $50 million, which was mainly invested in the infrastructure and replacement of train engines.

* Students of the Tallinn Pedagogical University, the Estonian Institute of Humanities, and the Estonian Art Academy sent a letter to Education Minister Toivo Maimets on 29 December protesting plans to postpone the founding of the new Tallinn University, which was expected for the fall of 2004, by one year, LETA reported.

* The government has issued a decree that raised the minimum monthly salary from 2,160 kroons ($171) to 2,480 kroons and minimum hourly salary from 12.9 to 14.6 kroons, BNS reported on 1 January. The new minimum pay is expected to make up 33.7 percent of the forecast average gross monthly pay of 7,362 kroons.

* According to customs statistics, in November Estonia imported goods worth 10.66 billion kroons ($840 million) and exported goods worth 8.59 billion kroons, resulting in a foreign-trade deficit of 2.07 billion kroons, BNS reported on 24 December. The deficit was almost one-third lower than the 3.0 billion kroons deficit in October, when imports and exports were worth 11.73 and 8.73 billion kroons, respectively.

* The number of police prefectures in Estonia was reduced from 17 to four starting from the beginning of the year, BNS reported on 2 January. The main aim of the reform is to have more policemen patrolling the streets and reduce management costs.

PRIME MINISTER SETS 2004 PRIORITIES.
In a year-end state-radio broadcast, Einars Repse told listeners that his top priorities in 2004 will be combating corruption, increasing child-care allowances, and ensuring that EU structural funds are used effectively, BNS reported on 2 January. Repse reiterated his previous claim that "corruption won't be tolerated" in Latvia. Repse also voiced concern about the demographic situation in Latvia and suggested that the child-care allowance should equal a parent's monthly salary. He said the government is working on legislation to increase child-care allowances starting in 2005, adding that the Welfare Ministry has set up a task force to draft a proposal for raising allowances to families with newborn children. With the expected entry into the European Union in May, Latvia will become eligible for EU assistance that is projected at 625 million euros ($787 million) in 2004, provided that Latvia supplies co-financing of 205 million euros.

CABINET APPOINTS REPRESENTATIVES TO PORT BOARDS.
The Latvian government appointed its representatives to the boards of the Riga and Ventspils ports on 23 December, completing a process that was supposed to have ended in time for those bodies to start work by the beginning of December, LETA reported. According to amendments to a law on port authorities passed by the parliament in October, the port boards, comprising four members each appointed by the government and city councils, should have begun working on 1 December. Prime Minister Einars Repse delayed the appointments "to ensure quality." The cabinet approved the representatives proposed for the Ventspils board by the Economy, Environment, Finance, and Transport ministries. But the government had rejected the Economy Ministry's candidate to the Riga board, Viesturs Koziols, who is a business partner of Latvia's First Party (LPP) leaders Ainars Slesers and Arnolds Laksa. The activities of the Riga port have been hampered by the absence of a board since August, when the government removed its representatives (see "RFE/RL Newsline," 7 August 2003).

ARBITRATION COURT BACKS SWEDISH-OWNED POWER COMPANY IN DISPUTE WITH LATVIAN STATE.
The Stockholm International Court of Arbitration has ruled that the state of Latvia must pay 1.6 million lats ($2.96 million) in compensation plus legal costs of, according to a 22 December BNS report, "a couple hundred-thousand lats," to the Swedish owner of the Windau power plant in Latvia. The decision effectively enforces the terms of a 1997 contract on future power supplies between Latvian state-owned power company Latvenergo and Windau, which is controlled by Nycomb Synergetics Technology (Nycomb). At the time of that contract, the Latvian state compelled Latvenergo to pay small producers like Windau a considerably higher rate for energy supplies. The arbitration court ordered Latvenergo to pay the higher rate to Windau until September 2007, resulting in an estimated 5 million lats in additional costs. Both sides have until 10 January to appeal the ruling. "I don't think this is a case that should be appealed, as the laws in the matter were rather unclear and changed frequently," Latvian Justice Minister Aivars Aksenoks said. Economy Minister Juris Lujans, who had expressed certainty that Latvia would win the dispute, said Latvia will seek avenues to appeal the 80-page decision.

* A delegation, led by Environmental Protection Minister Raimonds Vejonis, participated in a meeting of environment ministers from EU member and candidate countries in Brussels on 22 December, LETA reported. The ministers discussed draft regulations on steady organic pollutants, an interim transit system for trucks going through Austria, and other matters.

* In an interview broadcast on Latvian Independent Television on 21 December, National Harmony Party (TSP) Chairman Janis Jurkans said there was no split in his party, LETA reported the next day. After the TSP council decided to exclude Riga Deputy Mayor Sergejs Dolgopolovs from the party on 15 December, several other members quit the party. The TSP congress in November showed that the party was not splitting and that they supported the decision to quit the For Human Rights in a United Latvia alliance.

* Parliament deputy Jakovs Pliners of the left-wing For Human Rights in a United Latvia alliance said that although no specific protest actions against the school reforms that will start in September are planned, "there will be action" if the reforms are not postponed, BNS reported on 27 December. He said that it should be sufficient to increase the number of lessons teaching Latvian grammar and literature and there was no need to require that at least 60 percent of courses be taught in the Latvian language.

* Latvian State Television (LTV) Director General Uldis Grava said he considered Labvakar advertising company director Edgars Kots as the most suitable candidate to replace him upon his retirement from the post on 16 January, LETA reported on 23 December. He mentioned that among the candidates Kots has the most experience in working in television. Kots accepted Grava's offer to become his deputy director that day.

* The Constitutional Court decided on 17 December that it will not initiate a case against the parliament's decision in October to recall Latvia's Socialist Party deputy Martijans Bekasovs from the European Parliament, LETA reported on 30 December. The court ruled that the parliament's decision had been based on the political will and beliefs of the deputies, which are not regulated by law.

* Chairwoman of the Public Services Regulatory Commission Council Inna Steinbuka told a press conference on 29 December that tariffs in the telecommunications sector will decrease next year due to greater competition, LETA reported. Andris Virtmanis, head of the commission's Telecommunications Department, said that about 200 licenses were issued last year.

* The international rating agency Moody's Investors Service increased its financial strength rating of the Parex Bank, Latvia's largest bank in terms of assets and deposits, from D to D+ on 29 December, LETA reported. It retained the other previously given ratings of Ba1 for long-term deposits and NP for short-term deposits as well as a long-term outlook of stable.

* The minimum monthly wage was increased from 70 lats ($130) to 80 lats from the beginning of this year, LETA reported on 1 January. The guaranteed minimum income was raised from 15 to 18 lats with local governments having the right to establish a higher minimum-income rate in their district.

CONSTITUTIONAL COURT RULES THAT PRESIDENT VIOLATED CONSTITUTION.
The Constitutional Court ruled on 30 December that President Rolandas Paksas violated the constitution by granting citizenship to a Russian businessman who helped finance his election campaign, rferl.org reported the same day. The head of the court, Egidijus Kuris, announced that the decree, issued by Paksas on 11 April granting citizenship to Yurii Borisov, contradicted three articles (29, 82, and 84) of the Lithuanian Constitution. The decision of the court is final. Borisov was Paksas's main financial backer in his election campaign, and has been accused of selling arms to Sudan in a Lithuanian State Security Department (VSD) report. Borisov had given up his Lithuanian citizenship a few years ago when he acquired Russian citizenship.

PARLIAMENT FORMS IMPEACHMENT COMMISSION.
Lawmakers approved on 22 December in an 86-19 vote with 11 abstentions the 12-member ad hoc commission for the impeachment of President Rolandas Paksas, "Lietuvos rytas" reported the next day. The commission includes six parliamentary deputies: Social Democrats Alfonsas Macaitis and Julius Sabatauskas; Liberal-Centrists Raimondas Sukys and Gintaras Steponavicius; Social Liberal Vaclovas Karbauskis; and Conservative Jurgis Razma. The other six commission members are lawyers chosen by drawing lots from among candidates proposed by the Courts' Council and the Prosecutor-General's Office. The commission was instructed to present its conclusions to parliament on 13 February. On 23 December, lawmakers elected 77-year-old Courts' Council nominee Pranciskus Zalkauskas, a Supreme Court consultant who worked as a Soviet-era Supreme Court judge for 35 years, to chair the commission. Seimas M.P. Sabatauskas was elected deputy chairman.

PRESIDENTIAL IMPEACHMENT COMMISSION HOLDS FIRST SESSION.
The 12-member ad hoc commission on the possible impeachment of President Paksas held its first meeting on 29 December, "Kauno diena" reported the next day. Commission Deputy Chairman Julius Sabatauskas told reporters that the 2 1/2-hour session did not resolve any of the issues on its agenda, which include determining who should be called as witnesses. The closed-door session was attended by Paksas's legal counsel, which has increased from the three lawyers who represented him at an earlier meeting of the Constitutional Court to six. The new additions are Kestutis Stungys, Vytautas Sviderskis, and Rimas Andrikis, three of Vilnius's top defense lawyers. Sabatauskas said the president's lawyers may present proposals to the commission, but are prevented from protracting its work since all decisions are made collectively by the commission itself. The commission will seek security clearance from the State Security Department to receive classified information, Sabatauskas added.

PRESIDENT'S BACKERS LOSE VENUE, BUT ESTABLISH CIVIC GROUP.
Several thousand, mostly elderly, supporters of embattled President Paksas gathered in and around the Trade Union Palace building in Vilnius on 20 December to found the "For the President and a Just Lithuania" movement, "Lietuvos rytas" reported on 22 December. The group marched to the Trade Union Palace after the management of the Vilnius Concert and Sports Palace canceled a rental contract for that venue the previous day, citing organizers' failure to meet their obligations. Some of the group's supporters had reportedly come by bus from Kaunas and other Lithuanian cities. Speakers condemned the parliament, which is holding impeachment proceedings against Paksas (see "RFE/RL Newsline," 19 December 2003), with some calling for the ouster of parliament Chairman Arturas Paulauskas. The rally formally declared the establishment of the organization and elected a coordination council that includes parliamentary deputies Julius Veselka and Rolandas Pavilionis, Liberal Democratic Party Chairman Valentinas Mazuronis, presidential adviser Gintaras Surkus, and writer Vytautas Petkevicius. Some 500 police officers were present but did not intervene.

LOCAL LEADERS APPEAL TO PRESIDENT TO MAKE 'RESOLUTE AND RIGHT' DECISION.
An appeal signed by 35 of the country's 60 county and city leaders urging embattled President Paksas not to visit Lithuanian towns in order to avoid creating rifts in society was delivered to the head of state on 24 December, ELTA reported. Attempting to rally support, Paksas has been engaged in a campaign that includes town-hall-style meetings throughout the country. The appeal, which was initiated by the Liberal Centrist mayor of Anyksciai, Darius Gudelis, said Paksas's visits to Lithuanian towns are "provoking the splitting of society and disappointment with truth and democracy." Noting that the "recent developments are causing damage to the authority of the presidency and weakening the image of our state among foreign partners," and that "the continuing presidential crisis may bring about international isolation for Lithuania," it urged Paksas to make "a resolute and right decision." The appeal has been widely perceived as a plea for Paksas to resign amid impeachment proceedings alleging that he has compromised national security and Lithuania's national interests.

OUTGOING DIPLOMAT ESCHEWS LITHUANIAN PRESIDENTIAL ASSIGNMENT.
Lithuania's outgoing Ambassador to Spain and several other countries, Vytautas Dambrava, declared on 30 December that he would not accept a post as embattled President Rolandas Paksas's representative for special assignments, BNS reported on 30 December. Paksas had signed a decree on 22 December appointing the 83-year-old Dambrava as his representative for relations with Lithuanian emigrants, the international Jewish community, Euro-Atlantic integration, and public-diplomacy issues. In a letter to Paksas, Dambrava reportedly thanked the president for his trust but wrote: "The current situation shows that not Lithuania but our personal ambitions are at the center of our concerns. Giving thanks for the confidence in me, I am truly sorry that I cannot make a meaningful contribution working in your team at the moment." Dambrava's duties as ambassador to Spain, Brazil, Morocco, and Andorra ended on 15 January.

* Kaliningrad Duma Chairman Vladimir Nikitin and Duma member Solomon Ginsburg held talks in Vilnius on 19 and 20 December with parliament Foreign Affairs Committee Chairman Gediminas Kirkilas, BNS reported. They discussed events of 2003, summarized the work done by the Lithuanian-Russian Inter-Parliamentary Forum, which is co-chaired by Nikitin and Kirkilas, and made plans for further cooperation. Kirkilas expressed the hope that Moscow would give the Kaliningrad Oblast greater economic independence, while Nikitin said Kaliningrad could become a "pilot project" in the cooperation between the EU and Russia.

* Parliament speaker Arturas Paulauskas issued a statement on 22 December in which he expressed concern over the participation of radical pro-Soviet groups, such as Yedintsvo, at the pro-Paksas rally at the Trade Union Palace on 20 December, ELTA reported. He noted that these groups are disguising themselves as supporters of the president, but are pushing their real cause to hinder Lithuania's independence and its planned membership in NATO and the EU.

* The parliamentary Operative Activities Commission ruled on 22 December that the State Security Department did not violate any laws by recording telephone conversations that President Paksas had participated in because the department had received court permission to tap the phones of those persons with whom the president was speaking when the conversations in question were recorded, BNS reported. The commission made the decision by a vote of four in favor with two abstentions and one member not attending.

* President Paksas, Prime Minister Algirdas Brazauskas, and parliament Chairman Arturas Paulauskas had breakfast together at the president's office on 23 December, BNS reported. Although this was the first meeting of the leaders after the later had suggested that Paksas should resign, the talks did not touch on political issues, but on the country's achievements this year and neutral matters such as alpine skiing.

* President Paksas signed the law on the 2004 national budget on 22 December, ELTA reported. The parliament on 11 December passed the national budget, which forecasts expenditures of 15.31 billion litas ($5.5 billion) and revenues of 13.67 billion litas. The budget estimates that Lithuania will receive 1.58 billion litas in aid from the EU while contributing only 440 million litas to the EU.

* The State Property Fund decided on 22 December to reject the privatization bid for the combined power-heat plant Mazeikiai Elektrine (ME) made by the Czech firm Falkon Capital and to accept the bid by Mazeikiai Oil, ELTA reported. The bid for the 85.7 percent share of the ME was 17.8 million litas ($6.4 million) or above the minimum price of 15 million litas. Control of ME was deemed critical for Mazeikiai Oil, as it supplies power and heat to the oil refinery.

* The Statistics Department announced on 30 December that in the first nine months of the year the country's gross domestic product (GDP) totaled 40.09 billion litas ($12.5 billion), or 8.3 percent more than in the same period in 2002, BNS reported. In the third quarter GDP grew by 8.8 percent to reach 14.36 billion litas and the per capita GDP stood at 4,150 litas.

* The Bank of Lithuania announced on 24 December that the current-account deficit in the first nine months of 2003 reached 2.33 billion litas ($730 million), or 5.8 percent of the country's GDP, BNS reported. The third-quarter deficit of 812.5 million litas was almost five times greater than the 177 million litas deficit in the third quarter of 2002. Although there was a decline in the foreign-trade deficit, a marked increase in the negative-income balance and a decrease in the positive balance of services resulted in the deficit higher. In 2002, the current-account deficit stood at 2.670 billion litas, or 5.3 percent of GDP. The bank also announced that the total money supply rose by 42.4 million litas, or 0.3 percent, in November compared with October and reached 16.85 billion litas. The money supply increased by 2.4 billion litas, or 16.5 percent, compared to November 2002.