Baltic Report: September 16, 2003

NOTE TO READERS:
This issue covers events in the Baltic states from 30 August to 7 September 2003.
BALTIC COUNCIL OF MINISTERS CALLS FOR IMPLEMENTATION OF INFRASTRUCTURE PROJECTS.
At the Baltic Council of Ministers session in Vilnius on 5 September, the prime ministers of the Baltic states, joined by their Polish and Finnish counterparts, Leszek Miller and Matti Vanhanen, signed a joint statement calling for "resolute measures" to implement infrastructure projects in the Baltic Sea region, BNS reported. It specifically mentioned the Rail Baltica railroad project and the linking of the Polish-Lithuanian and Estonian-Finnish electricity systems. European Commission Vice President Loyola de Palacio told the meeting that the projects could be included on the EU list of priority projects only if all involved countries adopted a deal on implementing them. She noted that the EU normally co-funds only 10 percent of power network connection projects, but this might be increased to 20 percent.

ESTONIAN, LATVIAN PRESIDENTS CAMPAIGN JOINTLY FOR EU MEMBERSHIP.
Estonian President Arnold Ruutel and Latvian President Vaira Vike-Freiberga met in Rezekne in eastern Latvia on 4 September and discussed preparations for their countries' upcoming EU membership referendums, the development of a joint energy system, the publication of an Estonian-Latvian dictionary, and the establishment of an Estonian school in Riga, BNS reported. They then spoke in favor of EU membership at a meeting with students and local residents at Rezekne College before flying to Viljandi in southern Estonia for another pro-EU meeting. It is planned that the presidents will make more such visits in both countries to bolster the unity of the Baltic states. Rezekne and Viljandi were chosen since they are towns of similar size that are also the cultural and educational centers of their respective regions.

MEETING IN PRAGUE, SMALL COUNTRIES DISTANCE THEMSELVES FROM DRAFT EU CONSTITUTION.
Fifteen representatives of EU candidate countries and some of the smaller current EU members, meeting in Prague on 1 September, said in a joint declaration that they have identified a range of issues that separate their collective view of the proposed European constitution from the position of the continent's larger countries, dpa reported. These issues range from "some aspects of institutional structures [and] decision-making procedures, to special types of flexible cooperation, which could require further consideration." The statement did not name specific demands by different countries and called the draft constitution "a good basis" for the Intergovernmental Conference slated for 4 October in Rome. The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia attended the meeting alongside representatives of Austria, Greece, Ireland, Portugal, Denmark, Finland, and Sweden.

* Representatives from the highest audit institutions of the Baltic states, Denmark, Finland, Sweden, and the European Court of Auditors held their annual conference on 4 and 5 September in the southern Estonian town of Otepaa, LETA reported, citing "Eesti Paevaleht." The State Audit Offices of Estonia, Latvia, and Lithuania had begun holding annual conferences in 1994 and were joined by the other institutions in 2000.

VERHEUGEN SAYS ESTONIA WON THE BEST EU ACCESSION DEAL.
EU Enlargement Commissioner Guenter Verheugen told Prime Minister Juhan Parts in Tallinn on 1 September that Estonia has achieved the best accession agreement among the candidate countries, BNS reported. Verheugen noted the country still must take additional domestic measures in a few areas such as fishing. He said the EU will not punish Estonia if it votes "no" in the 14 September EU membership referendum, but inquired: "Where will you find a market for your products, investors, and who will protect Estonia's interests on the international level?" According to Verheugen, geography and history are the two main factors that will influence Estonians to vote in favor of joining the EU. Parts informed Verheugen about the position that Estonia will probably take at the EU intergovernmental congress in October, although views might still be modified as a result of suggestions from the government or parliament. In talks with parliament speaker Ene Ergma and Foreign Affairs Committee Chairman Rein Lang, Verheugen said that Russia will have to abolish the double duties on imports from Estonia if Estonia joins the EU.

SUPPORT FOR EU ENTRY RISES TO 70 PERCENT.
A poll of 1,000 people conducted by the EMOR research company in the second half of August indicated that 71 percent of voting-age citizens intended to participate in the 14 September referendum on EU membership, BNS reported on 2 September. Of them, 70 percent said they will vote in favor of EU membership, and 30 percent were against membership. This was an increase from the poll in July in which comparable numbers were 62 and 38 percent. Compared with July, there was a significant growth in the pro-EU views of supporters of the main political parties, rising from 62 to 77 percent for the Moderates, from 64 to 76 percent for the Pro Patria Union, from 71 to 78 percent for the Reform Party, from 63 to 68 percent for Res Publica, and from 47 to 57 percent for the People's Union. The lone exception was the Center Party; the pro-EU views of its supporters rose only from 47 to 48 percent.

AGREEMENT ON AVOIDING DOUBLE TAXATION SIGNED WITH SPAIN.
The secretary of state for European affairs at the Spanish Ministry of Foreign Affairs, Ramon de Miguel, and Foreign Minister Kristiina Ojuland, signed an agreement on the avoidance of double taxation in Tallinn on 3 September, BNS reported. In talks with Estonian Prime Minister Juhan Parts, de Miguel noted that membership in the EU has been a success story for Spain. "We are much more independent than we used to be," he said. De Miguel suggested that Estonia should follow the successful example of small countries such as Ireland and Portugal and added that it is important for Estonia to establish a strong administrative basis so that it can take full advantage of the opportunities offered by the EU. He also had meetings with Liina Tonisson, the deputy head of the parliament's Foreign Affairs Committee, and Henrik Hololei, the director of the State Chancellery's European Union Secretariat.

* A delegation from the city of Berlin, headed by Mayor Klaus Wowereit, arrived in Tallinn on the evening of 4 September, BNS reported. The next day, in talks with President Arnold Ruutel on the upcoming EU referendum in Estonia, Wowereit noted that Berlin had received considerable support from the EU and expected that Estonia would have the same opportunity. The delegation also discussed cooperation possibilities in waste management, city planning, housing renovation, public transport, and medicine with Tallinn Mayor Edgar Savisaar.

* NATO Secretary-General Lord George Robertson told Harri Tiido, the new Estonian ambassador to NATO, during his presentation of credentials on 3 September in Brussels, that Estonia needs more professional defense forces able to respond adequately to a crisis, BNS reported. He said that interoperable, rapidly-reacting, well-trained, and well-equipped defense forces are a requirement for both domestic defense activities and participation in NATO's joint operations.

* Agriculture Minister Tiit Tammsaar visited Austria on 2-4 September to attend an agricultural fair and ministerial conference, LETA reported. Austrian Agriculture Minister Josef Proell had invited him to take part in the conference "Dialogue and Cooperation Strategy in the Food Industry Sphere in the Expanding Europe," which was also attended by EU Farm Commissioner Franz Fischler and the agricultural ministers of the 10 EU candidate countries.

* President Arnold Ruutel met with the first minister of the National Assembly for Wales, Rhodri Morgan, in the central Estonian town of Viljandi on 3 September, BNS reported. They discussed cooperation, the future of the languages and culture of small nations, and Estonia's upcoming membership in the EU. Representatives of six Welsh companies accompanied Morgan on his trip looking for partners among Estonian businesses.

* Finnish Finance Minister Antti Kalliomaki promised his Estonian counterpart Tonis Palts in Tallinn on 5 September that his country would not consider Estonia a country with low tax rates, that is one that would be subject to the controlled foreign companies regulations, LETA reported. The ministers also discussed the current status of both Estonian and Finnish economies, the possibilities of further cooperation, and their positions on the EU Intergovernmental Conference starting in October.

* The largest mine sweeping operation in Estonian waters this year, Open Spirit 2003, began on 5 September in Muuga Bay with 17 ships from 12 countries, BNS reported. The ships are from Estonia, Latvia, Lithuania, Belgium, Denmark, France, Germany, Great Britain, Holland, Norway, Sweden, and Russia. The exercise, which will last until 15 September, will search for mines in the most mine-riddled Estonian waters, Muuga Bay and the Juminda area east of Tallinn.

* Economy and Communications Minister Meelis Atonen told a press conference in Tallinn on 2 September that the state would ensure smooth ice breaking in the coming winter, BNS reported. The work would be financed from the dividends of the state-owned Port of Tallinn company. The government has already assigned 6 million kroons ($425,000) to rent an additional icebreaker in the Gulf of Finland in the upcoming winter.

* The group of six Estonian mine-clearing experts, commanded by Lieutenant Jaanus Ende, returned home on 1 September after completing a six-month mission in Afghanistan, BNS reported. They had served in an international brigade with soldiers from Spain, France, Germany, and other nations clearing mines in the vicinity of Kabul. A replacement team flew to Afghanistan on 18 August and began service on 20 August.

* The Estonian Chamber of Commerce and Industry and the Estonian Small and Medium-sized Companies Association are considering opening an office in Brussels, LETA reported on 2 September. They believe that it is important for Estonian business to have more personal contacts and information exchange with EU countries, particularly in Brussels where political decisions are made.

* The Statistical Office announced on 5 September that in July the country's imports were valued at 7.8 billion kroons ($550 million) and exports at 4.7 billion kroons, resulting in a trade deficit of 3.1 billion kroons, BNS reported. Compared with June when the trade deficit was 2.2 billion kroons, imports grew by 6 percent while exports declined by 9 percent.

* The Statistical Office announced on 5 September that in August the consumer price index (CPI) remained the same as in July, but was 1.3 percent higher compared to August 2002, BNS reported. In August the price of goods declined by 0.3 percent with food prices falling by 0.6 percent and nonfood items remaining unchanged, while the costs of services rose by 0.5 percent.

VERHEUGEN PRAISES PREPARATIONS FOR EU MEMBERSHIP.
After meeting with Latvian President Vaira Vike-Freiberga on 3 September, EU Enlargement Commissioner Guenter Verheugen told reporters that Latvian citizens should understand that their vote in the referendum on EU membership on 20 September is about the future of the country and not the performance of the current government, LETA reported. At a meeting with Prime Minister Einars Repse, Finance Minister Valdis Dombrovskis, and Justice Minister Aivars Aksenoks, Verheugen praised Latvia's progress in its preparations to join the EU and discussed the intergovernmental congress, beginning in early October in Rome, which aims to adopt the new EU constitution. On 4 September, Verheugen gave a lecture on the EU at the Daugavpils University in which he said that membership in the EU should help reduce the large differences in development between Riga and the rest of Latvia.

COMMISSION SELECTS NEW CORRUPTION PREVENTION BUREAU CHIEF.
The commission for selecting the next chief of the Corruption Prevention Bureau (KNAB), headed by Prime Minister Einars Repse, was unanimous in selecting by secret ballot Security Police officer Juta Strike as its nominee on 3 September, BNS reported. The commission earlier reduced the number of candidates from 58 to 11 (see "RFE/RL Baltic States Report," 28 August 2003). Strike, a 33-year old woman, has a degree in law and has worked as an investigator with the Interior Ministry's Investigations Department and as a lawyer for the municipal-transport company in Copenhagen before becoming a department head in the Security Police. The government and parliament are expected to approve her nomination.

LATVIA GOES TO COURT TO CANCEL DIGITAL TV CONTRACT.
The Transportation Ministry officially confirmed on 2 September that it filed suit in the Stockholm Court of Arbitration on 29 August asking that last November's agreement between Latvia's Digital Radio and Television Center (DLRTC), a wholly-owned subsidiary of the state-owned Latvian State Radio and Television Center (LVRTC), and the British company Kempmayer Media Limited (KML) and its Latvian subsidiary Kempmayer Media Latvia, be declared null and void, LETA reported. On 1 September, the Corruption Prevention Bureau launched a criminal case against DLRTC officials for signing the agreement, which officials allege contains terms that are disadvantageous for Latvia, without notifying the government in advance. According to the agreement, DLRTC committed to provide KML a 4 million lats ($6.9 million) advance and supply a 22.9 million lat ($39.5 million) bank guarantee to pay for the project by 1 February. If the money were not forthcoming, the agreement calls on DRLTC to pay KML penalties of about $5,300 a day.

PRIVATIZATION AGENCY BOARD TO BE SUSPENDED?
The Privatization Agency's (PA) supervisory council adopted a resolution calling for the suspension of the PA board pending an investigation into allegations by the governing New Era Party that the PA board had acted improperly in allowing several state-owned facilities to be privatized at a discount, "Diena" reported on 5 September. The council's decision, backed by New Era representatives to the PA council, also has the support of Economy Minister Juris Lujans (from the Latvia First Party), who as state proxy holder could call a general meeting of PA shareholders to formalize the decision as soon as mid-September.

THOUSANDS PROTEST PLANNED EDUCATION REFORM.
Approximately 4,000 people gathered in Riga's Esplanade Park on 4 September to protest a planned move to make Latvian the primary language of instruction in minority schools beginning in the fall of 2004 (see "RFE/RL Newsline," 10 April 2003), BNS reported. Riga City Council Executive Director Maris Tralmaks refused three requests to hold such a rally, so it was officially held as a meeting of parliament deputies with voters, for which no permit is required. Parliamentarian Jakovs Pliners, the chairman of the recently established BITE party, told the assembled crowd that the planned reforms should be abandoned and schools should be given the right to decide in what language to conduct their classes. Other speakers at the rally were parliament Deputy Nikolajs Kabanovs, Riga City Council members Tatyana Jemeljanova and Sergejs Zaletajevs, and the head of the Equal Rights party, Tatyana Zhdanoka.

* Ramon de Miguel, the secretary of state for European affairs at the Spanish Foreign Ministry, held talks on EU expansion with Foreign Minister Sandra Kalniete in Riga on 4 September, LETA reported. De Miguel and Foreign Ministry State Secretary Maris Riekstins signed an agreement on the prevention of double taxation and tax evasion. De Miguel also discussed the integration process in Latvia with Society Integration Affairs Minister Nils Muiznieks and expressed approval for what is being done.

* Accompanied by a delegation of around 50 entrepreneurs, Berlin Mayor Klaus Wowereit attended the Berlin Days taking place in Riga on 3 and 4 September, a Latvian Foreign Ministry press release reported. He had meetings with President Vike-Freiberga, Deputy Prime Minister Ainars Slesers, Economy Minister Juris Lujans, and Riga Mayor Gundars Bojars. Wowereit also delivered a lecture called "Capital Cities Berlin and Riga as partners in the European Union" at the Stradins University in Riga.

* First Minister of the National Assembly for Wales Rhodri Morgan held talks on 4 September with Foreign Minister Sandra Kalniete, Deputy Prime Minister Ainars Slesers, and Riga Mayor Gundars Bojars, BNS reported. He also participated in a round table discussion with Agriculture Minister Martins Roze, the Regional Development Agency, and the Latvian Development Agency. He told a press conference that he saw many parallels between the Celtic countries of Ireland, Wales, and Scotland and the three Baltic states and noted that Welsh, like Latvian, is "a language no one knows."

* A delegation from the Taiwanese capital, Taipei, headed by Mayor Hsin Lee, met with Riga Mayor Gundars Bojars on 5 September, BNS reported. They discussed tourism opportunities in Riga after Latvia joins the EU and invited Bojars to visit Taipei next spring to get acquainted with their achievements in the information technology sector.

* Parliament speaker and Union of Greens and Farmers (ZZS) leader Ingrida Udre on 2 September suspended her involvement in the commission evaluating candidates to head the Corruption Prevention Bureau (KNAB) because the bureau has opened a criminal case against the ZZS on document forgery regarding political contributions, LETA reported. The ZZS refuses to comply with the bureau's demand to give up contributions of almost 75,000 lats ($118,000) until a court determines whether the contributions were illegal.

* Up to one half of Latvia's grain harvest, valued at 48 million lats ($82.8 million), remains unharvested as a result of wet weather, Latvian media reported on 3 September. Agriculture Minister Martins Roze is working with farmers' organizations to consider options to help affected farmers. Roze also told "Diena" that it should be clear by the end of September whether Latvia will need to import grain to cover any resulting shortages.

* The government task force evaluating pulp mill projects, headed by Deputy Prime Minister Ainars Slesers, decided on 3 September that no special government support should be given to the project offered by Finland's Metsaliitto company, BNS reported the next day. Among the factors affecting the decision was the upcoming reduction in corporate income tax from 25 to 15 percent, and the conclusion that the ecological damage could outweigh the possible economic gain.

* Fulfilling a request by Riga Mayor Gundars Bojars, Finance Minister Valdis Dombrovskis allowed Gints Celmins to participate in the Riga Free Port board meeting on 5 September so that there would be a quorum to approve the appropriation of 840,000 lats ($1.3 million) to build a customs checkpoint in the port, LETA reported. The matter is not fully settled as Celmins refused to support the signing of a land-lease agreement with the State Revenue Service necessary for the project, saying he had not received any authorization on the matter.

* The Daugavpils City Council voted 11 to four to approve Rita Strode of Latvia's Way as the new mayor on 4 September, LETA reported. She had served as the deputy chairwoman of the council since 1999. Strode is the city's third mayor since Latgale's Light leader Rihards Eigims lost the post in a no-confidence vote in April; his replacement, Ivars Skincs, decided to quit in August to return to his former post of director at a Daugavpils high school.

* The parliament adopted on 4 September amendments to the parliamentary election and referendum laws which extend the hours of polling stations by three hours, BNS reported. They will be open from 7 a.m. to 10 p.m. The measure was primarily prompted by the desire to increase voter participation in the EU membership referendum which will be held on 20 September. The parliament rejected the proposal by the opposition People's Party to follow the example of Lithuania and hold the referendum over two days.

* In the first eight months of the year, Ventspils Nafta company handled 8.4 million tons of oil and oil products or 22.8 percent less than in the same period last year, BNS reported on 4 September. The decline was primarily due to the continued refusal of Russia to send any oil by pipelines, resulting in the export of oil only received by rail.

DEBATE RAGES OVER DEFENSE SPENDING AFTER 2004.
Former Homeland Union (Conservatives of Lithuania) Chairman Vytautas Landsbergis told a press conference in Vilnius on 1 September that he is worried about the failure of the current ruling coalition to extend the 2000 agreement among Lithuanian political parties to spend at least 2 percent of GDP on defense for another four years, "Kauno diena" reported on 2 September. He expressed the fear that the accord, which expires in May 2004, might not be extended as "the interests of the state might be sacrificed for the interests of the ruling party." Deputies of the ruling Social Democratic Party rejected the charges, saying that there is no need to hurry to extend the agreement because it is still valid. Parliament Deputy Chairman Vytenis Andriukaitis even stated that the debate could wait until September 2004 as a topic for the parliamentary elections.

PRESIDENTS AGREE TO FOCUS MORE ON INFRASTRUCTURE PROJECTS.
Rolandas Paksas told visiting Estonian Prime Minister Juhan Parts on 4 September that more attention should be devoted to the three strategic infrastructure projects of the Baltic states, ELTA reported. They are the Via Baltica highway, the Rail Baltica railway, and the connection of the electrical systems of Lithuania and Poland, as well as those of Estonia and Finland. Parts agreed and also noted Estonia's efforts for greater cooperation in the energy sector as indicated by Eesti Energia's bid for one of the two Lithuanian electricity-distribution companies (see "RFE/RL Newsline," 4 September 2003) and interest in the possible construction of another nuclear-power plant at Ignalina. Parts, who arrived one day early for the Baltic Council of Ministers session, said that he hopes Estonia will follow Lithuania's example in its upcoming referendum and vote in favor of EU membership.

VISIT BY GERMAN PARLIAMENTARY DELEGATION.
A delegation of German parliamentarians headed by Bundestag Vice President Susanne Kastner began a four-day visit to Lithuania on 1 September, ELTA reported. On 2 September, the delegation visited the Lithuanian parliament where its chairman, Arturas Paulauskas, thanked Germany for ratifying the agreements for Lithuania's membership in the EU and NATO. Parliamentary deputies of both countries discussed health care, measures to combat unemployment, methods to prevent human trafficking, and other issues. On 3 September, the delegation traveled to the resort town of Druskininkai in southern Lithuania and to the Lazdijai-Ogrodniki border checkpoint on the Lithuanian-Polish frontier.

EESTI ENERGIA TO BID FOR ELECTRICITY DISTRIBUTION COMPANY.
Gunnar Okk, the executive director and board chairman of Eesti Energia, announced in Vilnius on 3 September that his company will make a bid to acquire a 71.35 percent stake in the distribution company Rytu Skirstomieji Tinklai (RST), ELTA reported. The state-owned Eesti Energia fulfills all the requirements for participation in the contest, but has not yet decided whether it will do so alone or with an unnamed Western investor. In any case, it will face serious competition from other energy companies that have expressed their interest in buying the company, including Germany's E.ON Energie, Finland's Fortum, France's Electricite de France, Poland's Polskie Sieci Elektroenergetyczne, and the U.S. group AES. Okk said that Baltic ownership of RST would be the best alternative and that, if successful, Eesti Energia would leave local management in charge but would introduce effective cost management and make targeted investments.

* EU Enlargement Commissioner Guenter Verheugen completed a tour of the Baltic states in Lithuania where President Rolandas Paksas awarded him on 4 September with the Grand Cross of the Order of the Lithuanian Grand Duke Gediminas for his assistance in Lithuania's integration into trans-Atlantic and European structures, ELTA reported.

* Ukrainian parliament speaker Volodimir Litvin made a three-day working visit to Lithuania from 4 to 6 September, BNS reported. At a meeting with Lithuanian parliament Deputy Chairman Ceslovas Jursenas in Palanga on 4 September it was decided that the first meeting of the Lithuanian-Ukrainian parliamentary assembly will take place in the first week of October in Kyiv to discuss their countries' cooperation with the EU. Litvin met with Lithuanian parliament Chairman Arturas Paulauskas on 5 September.

* Defense Minister Linas Linkevicius held talks in Budapest on 4 September with Hungarian Defense Minister Ferenc Juhasz, the head of the National Assembly Defense Committee Giorgi Keleti, and Foreign Ministry State Secretary Andras Barsony, ELTA reported. They discussed regional security issues, military cooperation, and strategic NATO directives adopted after the Prague summit.

* At an extraordinary parliament session on 2 September, the parliament approved by a vote of 73 to three the European Union Accession Treaty, which was presented by Foreign Minister Antanas Valionis, BNS reported. He also noted that the parliament will still have to pass 90 Euro-integration laws before the country officially joins the EU, planned for 1 May. The treaty has so far been ratified by EU members Germany and Denmark and four other candidate countries: Cyprus, Malta, the Czech Republic, and Poland.

* The parliament approved by a vote of 61 to one with eight abstentions on 4 September a bill authorizing the repurchase of the 47.3 percent of the shares of the textile company Alytus Tekstile for 1 million litas ($325,000), which the Hong Kong-based company Asean Interests had privatized in 1998, BNS reported. Asean, which is almost bankrupt, had never fully completed its pledge of major investments in Alytus Tekstile, which has growing debts to the Vilnius and Snoras banks and is facing bankruptcy. As it is the major employer and the largest heat and water consumer in Alytus, the closure of Alytus Tekstile would have a catastrophic effect on the city.

* At an international conference in Vilnius on 4 September marking the 10th anniversary of the Lithuanian Constitutional Court, President Rolandas Paksas spoke in favor of granting the president the right to appeal directly to the Constitutional Court if he doubts the legitimacy of a bill passed by the parliament, BNS reported. He said: "The presidential right of veto is a significant but insufficient measure. Therefore, the presidential right to apply to the Constitutional Court would be an additional guarantee of constitutionality in the state's system."

* The State Secrets Protection Coordination Commission rejected on 5 September the appeals by five of the seven diplomats who had worked in Russia and Belarus and submitted their resignations in July (see "RFE/RL Newsline," 28 July 2003). The diplomats had petitioned that their access to classified information be restored, BNS reported. The commission ruled that the diplomats "were tainted with unlawful relations and became vulnerable" and urged that the evidence that does not affect further investigation be made public.

* Olegas Ukrainecas, the head of the Butinge oil terminal, told a press conference on 5 September that the terminal had exported 7.5 million tons of crude oil in the first eight months of the year or more than the 6.2 million tons exported in 2002, ELTA reported. He predicted that the terminal would export about 11.5 million tons of oil this year, about half of which would be supplied by the Russian oil giant Yukos, which owns 53.7 percent of Mazeikiai Oil including the terminal.

* The Labor Exchange announced on 5 September that the number of registered unemployed persons at the beginning of the month was 157,900, or some 4,000 more than in the previous month, BNS reported. The unemployment rate increased from 9.5 to 9.7 percent.