Baltic Report: September 20, 2001

NORDIC COUNTRIES REAFFIRM SUPPORT FOR BALTIC MEMBERSHIP IN NATO.
Foreign ministers from Denmark, Norway, Iceland, Sweden, and Finland discussed a broad range of topics, including the enlargement of the European Union and NATO, with their Baltic state counterparts in Helsinki on 28 and 29 August, BNS reported. The Nordic ministers expressed their firm support for inviting the three Baltic states to join NATO at the 2002 Prague summit and stressed that non-members have no veto on the decision. The ministers said the admission of the Baltic states would add to the stability of Europe and would not be directed against any state. They also dismissed speculation that NATO membership of one or more Baltic states would force the region's neutral countries, Sweden and Finland, to join the Atlantic alliance, and said current EU candidate countries should participate in discussions on the future of Europe.

PUTIN STRATEGY ON NATO EXPANSION.
Speaking in Finland on 2 September, Russian President Vladimir Putin again expressed his opposition to the Baltic states joining NATO, saying that they should instead follow Finland's approach, Russian agencies reported. Putin also said there is no longer a military conflict in Chechnya but rather a mopping-up operation, expressed his support for free speech, and called for the Baltic countries to treat ethnic Russians better. An article in "Komsomolskaya pravda" on 28 August said that Putin's talk about possible Russian membership in NATO is intended to convert that alliance into something "absurd." The paper suggested that the inclusion of the Baltic countries in the near future and Ukraine later on is likely and that Russia has to do something to render their membership meaningless.

* A poll conducted by the Institute of Sociology and reported by "The St. Petersburg Times" on 4 September found that 20 percent of the residents of the northern capital view Estonia and Lithuania as enemies of Russia, and that 25 percent have that opinion of Latvia. Outside the city, in Leningrad Oblast, the poll found, those figures were even higher.

* The Russian delegation's report at the UN conference on racism in Durban, South Africa about alleged violations of the rights of Russian-speaking populations in Latvia and Estonia did not attract much attention because it was delivered in the evening on the third day of the conference in a near-empty hall, BNS reported on 6 September.

NO ONE ELECTED IN THREE ROUNDS OF PRESIDENTIAL ELECTION.
The 101 deputies of the Estonian parliament failed to elect a president despite three rounds of voting over two days, ETA reported. On 27 August Center Union candidate Peeter Kreitzberg received 40 votes, Moderates candidate Andres Tarand received 38, and 13 ballots were left blank. A candidate needed 68 votes to win. The next day Kreitzberg remained a candidate in the two rounds of voting while Pro Patria Union candidate Peeter Tulviste replaced Tarand. In the second round, Kreitzberg received 36 votes, Tulviste got 35, and 19 ballots were left blank. In the third round the same two candidates received 33 votes each with 24 blank ballots. Kreitzberg saw his support decrease because the People's Union decided not to back him after the Center Party refused to back People's Union's candidate Arnold Ruutel during subsequent voting in the electoral college. The electoral college is made up of the 101 parliament deputies and 266 local government representatives and will next be convened on 21 September. The other party in the ruling coalition, the Reform Party, followed the recommendation of its board that the electoral college should determine the winner and thus did not nominate its candidate, Toomas Savi, in the parliament's voting. The electoral college will have two polls to elect a president. If no candidate receives the required majority in the first vote, a second vote will be held the same day between the two candidates who received the most votes in the first round. If no candidate achieves a majority, the election of the president will shift back to the parliament.

CHIRAC CONVINCED OF ESTONIA'S READINESS TO JOIN EU.
French President Jacques Chirac told his visiting Estonian counterpart, Lennart Meri, during a meeting at the Elysee Palace in Paris on 31 August that there can be no doubt that Estonia deserves a place in the first wave of EU enlargement, BNS reported. Chirac expressed great satisfaction with his recent state visit to Estonia and noted that Estonian-French relations are very good, although the low level of economic relations is regrettable. He asked Meri questions about Estonia's relations with other countries, above all Finland, Lithuania, and Germany. Meri, who arrived in Paris on 27 August, opened the exhibition "Estonian Painting in the 20th Century" in the Luxembourg Gardens on 30 August and discussed the situation in Russia as well as international security, world religion, and humanitarian issues with French Senate Chairman Christian Poncelet.

DEFENSE COOPERATION AGREEMENT WITH SLOVAKIA SIGNED.
Estonian and Slovakian defense ministers Juri Luik and Jozef Stank, respectively, signed a cooperation agreement in Tallinn on 4 September, BNS reported. The document names 14 areas in which the two countries plan to develop cooperation, including accession to NATO, defense policies, training of civilian staff in the defense forces, legislation pertaining to the armed forces, environmental protection, and the establishment of contacts between their military units. Slovakia accepted a proposal to send an officer to the Baltic Defense College in Tartu. The ministers agreed that their countries should not engage in unfriendly rivalry, but work together on their goal to receive an invitation to join NATO at the 2002 Prague summit. They also discussed developments in central and northern Europe as well as relations with Russia in view of its opposition to NATO expansion.

TRANSPORTATION COOPERATION MEMORANDUM WITH DENMARK SIGNED.
Danish Transportation Minister Jacob Buksti and Estonian Transportation and Communications Minister Toivo Jurgenson signed a cooperation memorandum in Tallinn on 5 September, ETA reported. The Danish Transport Ministry agreed to provide 90 percent of the financing for two projects: the monitoring of noise levels at Tallinn airport and a risk analysis of the Muuga port in Tallinn. The Estonian Aviation Department will provide 10 percent of the 6.5 million kroons ($375,000) needed for the noise study, while Tallinn Port will provide a similar share of the 7.35 million kroons port study. Jurgenson said Denmark's support for Estonia's transport sector has increased two-three times over the past two years and, "Today's memorandum will make the cooperation on the level of interministerial projects more concrete."

LOCAL RAILROAD PASSENGER TRANSPORT EXPANDED.
The Transport and Communications Ministry concluded a passenger transport agreement on 24 August with Edelaraudtee, the company that handles passenger transport on Estonian Railways, that will result in more trains being added to routes that were almost closed down for half a year, ETA reported. Edelaraudtee's board chairman, Henn Ruubel, said that according to the agreement additional passenger trains will be added on the Tallinn-Tartu, Tartu-Valga, Tartu-Elva, Tartu-Orava, and Tallinn-Jahvi routes. Earlier plans to replace some of these money-losing routes with buses were met with strong protests. The parliament raised financial support to Edelaraudtee to 148.3 million kroons this year, and foresees expenditures of 159.3 million kroons in 2002, and 140 million kroons in 2003 before ending state support for passenger trains in 2004.

THREE INTERNATIONAL BANKS TO GIVE LOAN FOR ESTONIAN POWER PLANTS.
Societe Generale Investment Banking, Bank of Tokyo-Mitsubishi, and KBC Bank N.W. signed a mandate contract on 7 September in Tallinn with Eesti Energia (Estonian Energy) and U.S.-based NRG Energy to provide a 285 million euro ($252 million) loan for the renovation of Narva Elektrijaamad (Narva Power Plants), ETA reported. The term of the loan is 14 years. NRG Energy also plans to invest $70.5 million of its own funds into the project. The bulk of the loan will be spent on the renovation of two power blocks in the Eesti and Balti power plants in which old steam boilers will be replaced by circulating fluid-bed boilers.

FITCH IBCA UPGRADES ESTONIA'S CREDIT RATING.
The Bank of Estonia announced on 30 August that the credit rating agency Fitch IBCA has upgraded Estonia's long-term foreign currency rating from BBB+ to A-, ETA reported. The short-term foreign currency rating was raised from F2 to F1, and the long-term local currency rating from A to A+. Bank of Estonia Vice President Andres Sutt said that the upgrading of the ratings is remarkable because it occurred at a time when global economic perspectives are under question and transition economies are insecure. Fitch noted that Estonia has an efficient, mostly foreign-owned banking system, extensive foreign investments, consistent economic policy, and is progressing rapidly in its EU accession talks. Estonia's economy grew by 6.9 percent last year, accompanied by a solid rise in exports, and the state debt is only 5.4 percent of GDP. The country's disadvantages include its small economy, high current account deficit, high unemployment rates, inequality between the country's regions, as well as environmental damage, and strained relations with Russia.

* U.S. Senator John McCain (R-Arizona), in a lecture in Tallinn on 24 August, asserted that he was "optimistic" that the three Baltic states would receive an invitation to join NATO at the Prague summit meeting next fall, Reuters reported. In a meeting with Prime Minister Mart Laar the next day, he noted that the U.S. administration will make the right decisions regarding the alliance's enlargement, proceeding from firm and moral principles, and that it will be upheld in the Senate. Also, Senator Richard Lugar (R-Indiana) joined the meeting and, after hearing arguments by Laar and McCain, also expressed support for the Baltic states' admission to NATO.

* Danish Foreign Minister Mogens Lykketoft arrived in Tallinn on 27 August to participate in the celebrations marking the 10th anniversary of the re-establishment of diplomatic relations between the two countries, BNS reported. He told the parliament the next day that Denmark supports the admission into NATO of the three Baltic states at the Prague summit. Lykketoft praised Estonia's progress in EU membership talks and said that relations between Denmark and Estonia would become even closer after Estonia joins the EU.

* Baltic Rail Services (BRS) on 31 August transferred to the Estonian Privatization Agency 1 billion kroons ($59 million) for a 66 percent stake in Eesti Raudtee (Estonian Railways), ETA reported. The new council of Estonian Railways met that day and replaced the company's board and its chairman, Parbo Juchnewitsch. BRS is also obligated to invest an additional 2.56 billion kroons in the company in five years.

* Balti Laevaremonditehas (Baltic Shipyard) on 28 August bought a 27.84 percent stake in the Lithuanian shipyard, Vakaru Laivu Remontas (Western Ship Repair), for $6.2 million from Lithuania's State Property Fund, ETA reported. On 5 September it purchased for some $20 million a further 64.97 percent of the shares which had been mortgaged to Latvia's Parex Bank.

* The Statistical Office announced on 5 September that in July imports were 5.3 billion kroons ($305 million) and exports 3.8 billion kroons or 20 and 29 percent, respectively, lower than in June, BNS reported. The decline in July imports was mainly at the expense of machines and installations (down 1 billion kroons), food (113 million kroons), and transport (110 million kroons).

* Prime Minister Mart Laar sent a letter on 5 September to the head of the Russian Orthodox church, Patriarch Aleksii II of Moscow and all Russia, assuring him that Estonia is ready to register the pro-Moscow Orthodox church under the name of the Estonian Orthodox Church of the Moscow Patriarchy, BNS reported. Laar also sent a draft of the church's statutes which would be consistent with Estonian laws. The vicar of the Estonian Apostolic Orthodox Church, Meletios Ulm, expressed his displeasure with the offer asserting that even though the premier stressed that only the full name of the church should be used, it was likely that only the first part would be used creating confusion with his church.

* Microsoft Europe President Jean-Philippe Courtois met with Prime Minister Mart Laar on 30 August and praised Estonia for the "e-government project" and the development of the information technology sector, ETA reported.

* The Tartu City Council on 6 September elected its four delegates to the electoral college which will elect the country's next president, BNS reported. Three of the four are deputies of the Reform Party and the fourth is from the Coalition Party-led electoral alliance Tartu 2000. The Pro Patria Union, whose presidential candidate is the council's chairman, Peeter Tulviste, will not have any delegates. The Tallinn City Council also chose eight of its 10 delegates to the electoral college with the Pro Patria Union, Reform Party, Russian faction People's Choice, and Center Party each winning two delegates.

* Estonian and Lebanese ambassadors to Poland, Aivo Orav and Ahmed Ibrahim, signed a joint communique in Warsaw on 3 September establishing diplomatic relations between the two countries, BNS reported.

PRESIDENT ATTENDS UN CONFERENCE IN SOUTH AFRICA.
At the invitation of UN High Commissioner for Human Rights Mary Robinson, Vaira Vike-Freiberga participated in the 3rd United Nations Conference against racism, discrimination, and xenophobia in Durban, South Africa. In speeches on 31 August and 1 September, she spoke about the reasons behind prejudice and racism, citing Latvia's experience during 50 years of Soviet occupation, LETA reported. Vike-Freiberga noted the difficulties of overcoming this legacy and developing an open society. She also used the opportunity to meet with other foreign officials attending the conference. In talks with UN General Assembly President Harri Holkeri, Vike-Freiberga agreed that the UN should play a greater role in peacekeeping operations in the Balkans and on the need to reform the Security Council and General Assembly to better serve current needs. She discussed Latvian-U.S. relations with Congresswoman Sheila Jackson Lee, as well as Latvia's efforts to join the European Union and NATO. On 3 September, Vike- Freiberga participated in a seminar in Johannesburg on promoting business contacts with Latvia.

EU REPORTS LATVIA CAN OVERTAKE FIRST ROUND CANDIDATES.
The European Parliament released a progress report on Latvia on 4 September, LETA reported the next day. The report stated that Latvia has made an enormous effort to reduce the gap between it and the first round EU candidate countries, and has realistic opportunities to overtake them if it continues making progress in reforming its administrative and judicial system, as well as fighting corruption. The report asserted that Latvia meets the political criteria for EU membership, but mentions areas where further improvements are needed. Deficiencies in procedural law and unacceptably long pretrial detention periods, especially for minors, were named as the main problems in the human rights sector. The European Parliament also pointed out the need to improve the efficiency, accountability, and transparency of Latvia's public administration system, as well as efforts to combat corruption. The report praised Latvia's successful economic development with a low rate of inflation and decreasing budget deficit. It noted an improvement in the integration of non-citizens, but recommended greater government support for that program as well as the need for free language courses for such adults.

DENMARK PROMISES NO RESTRICTIONS ON FREE LABOR MOVEMENT...
Latvian Prime Minister Andris Berzins announced on 30 August that he has received a letter from his Danish counterpart Poul Nyrup Rasmussen about the decision of the Danish government not to impose any restrictions on the free movement of labor from EU candidate countries after they are formally admitted to the union, BNS reported. In the letter, Rasmussen praised the progress made in the EU membership negotiations and the decision of the EU Gothenburg Summit, confirming the goal to complete negotiations by 2002 with those candidate countries that are sufficiently prepared. Latvia's chief negotiator with the EU, Andris Kesteris, noted that Sweden, Ireland, and the Netherlands had earlier also decided not to impose any restrictions on the movement of labor from new EU member countries.

...DANISH FOREIGN MINISTER PLEDGES CONTINUED SUPPORT.
On the occasion of the 10th anniversary of the reestablishment of diplomatic relations between Denmark and Latvia, Mogens Lykketoft visited Riga on 27 August and reaffirmed Denmark's support for Latvia's membership in the European Union and NATO, LETA reported. He told Prime Minister Andris Berzins that greater investment by Danish businessmen into Latvia could be achieved by adjusting the business environment and fighting corruption. Lykketoft assured his Latvian counterpart Indulis Berzins that in the second half of 2002, when Denmark will hold the presidency of the EU, it will do everything in its power to prepare Latvia for EU membership. The foreign ministers also agreed that Latvia must develop and maintain a constructive relationship with Russia. Parliament Deputy Chairman Rihards Piks noted that there is greater support among Latvia's residents for NATO than the EU because they link state security with integration into NATO and have received too little public information about the benefits EU membership would provide.

VISIT OF BENELUX AMBASSADORS TO NATO.
Ambassadors to NATO Baron Thierry de Gruben (Belgium), Jean-Jacques Kasel (Luxembourg), and Nicolaas Hendrik Biegman (the Netherlands) discussed with Latvian parliament deputies on 4 September attitudes toward and expectations of NATO membership, LETA reported. Foreign Affairs Commission Chairman Gundars Krasts told them that Latvians see NATO membership as a guarantee of security of the state that should also create a safer investment environment for foreign investors. The ambassadors praised Latvia's attempts to increase the defense budget and reform the armed forces in accordance with NATO criteria as well as the good performance of its soldiers in peacekeeping missions in the former Yugoslavia.

KAZAKHSTAN, LATVIA DISCUSS POTENTIAL FOR OIL EXPORTS...
Prime Minister Andris Berzins arrived in Kazakhstan on 5 September on a three-day official visit and met the same day in Astana with President Nursultan Nazarbaev, Russian agencies reported. The two men discussed the prospects for exporting oil from Kazakhstan via Russia and Latvia. Berzins said Latvia could initially ship between 3-5 million tons of Kazakh crude, provided an agreement is reached with Russia on rail and pipeline tariffs. An agreement reached last year on supplying Kazakh crude for refining in Lithuania has been held up by failure to reach such a transit agreement.

...PLAN TO EXPAND ECONOMIC COOPERATION.
Berzins' visit coincided with the first session of the Kazakhstan-Latvia intergovernmental commission for trade and economic cooperation, which opened in Astana on 5 September and is being jointly chaired by Latvian Economics Minister Aigars Kalvitis and Kazakh Trade and Economics Minister Zhaqsybek Kulekeev, ITAR-TASS and the Caspian News Agency reported. The two sides noted that bilateral trade turnover last year increased by 50 percent to reach $74 million. Much of that increase was due to exports of cotton from Kazakhstan to Latvian textile plants. The next day Kazakh Prime Minister Kasymzhomart Tokaev told Berzins that Latvia will become an even more "interesting" cooperation partner after it joins the EU and NATO, BNS reported. The two premiers signed a declaration on political relations and greater economic cooperation in such issues as protection of investments, cooperation in tackling customs issues, and cooperation in curbing organized crime and illegal drugs.

RUSSIA IGNORES REQUEST FOR CONSULAR OFFICE IN KALININGRAD.
The Latvian Foreign Ministry announced on 25 August that it has still not received a reply from the Russian government about its March request to open a Latvian Consulate in Kaliningrad, LETA reported. In addition to its embassy in Moscow, Latvia has a general consulate in St. Petersburg and a consulate in Pskov. Although Latvia has repeatedly asked Russia to respond to its request, it has not received any explanations about the matter. Latvian Prime Minister Andris Berzins also raised the issue during talks on 15 August with Russian Ambassador to Latvia Igor Studennikov. The Latvian Transportation Ministry has promised to provide part of the required funds for the operation of the consulate as it would benefit the handling of transit cargoes. The Environment Protection and Regional Development Ministry supports the opening of the consulate in order to promote tourism, while the Economy Ministry expects that it would result in greater economic and trade contacts with Kaliningrad.

BANK OF LATVIA PRESIDENT URGED TO RESIGN.
Kristiana Libane, the head of the ruling coalition's Latvia's Way faction in the parliament, called on Einars Repse to resign as Central Bank president on 6 September because he is involved in the formation of a new political party, LETA reported. Repse, who has headed the bank since September 1991, agreed that the large amount of work and the political neutrality of the bank make it impossible for him to hold the two positions at the same time, and that he would resign in one month, according to the daily "Diena." Leaders of the opposition parties, however, are insisting that Repse resign from the bank immediately. People's Party Chairman Andris Skele also said that Repse should have resigned immediately after making the decision to return to politics and asserted that the next Bank of Latvia president should not be a political figure.

CHIEF PROSECUTOR CALLS FOR LAW GOVERNING POLITICAL LOBBYING.
In an interview with Latvian Radio on 28 August, Prosecutor-General Janis Maizitis asserted that laws should be passed governing political lobbying, BNS reported. He noted that such lobbying indeed exists, and that it should be "regulated by the law so that the public can reckon with it and follow these processes openly." Maizitis pointed out that the existing law relating to party funds is "declarative and does not provide for any real liability of black cash boxes" or unregistered funding exists. In a televised debate about the influence of private business on politics, businessman Viesturs Koziols, who was an unsuccessful candidate of Latvia's Way in the Riga city elections, said that all the political parties in Latvia have received secret contributions from companies or other backers.

GOVERNMENT APPROVES DIFFERENTIATED VAT RATES.
In an effort to bring Latvian tax laws in line with EU directives, the cabinet decided to apply a 9 percent value added tax (VAT) on pharmaceuticals and medical goods; educational, scientific, and children's books; the mass media; special baby food; hotel services; water supplies; sewage and waste disposal; and funeral services beginning in 2003, LETA reported on 29 August. Those products and services had been exempt from VAT, but will have a rate of half the full VAT rate of 18 percent. The Finance Ministry estimates that the new taxes will add about 2.65 million lats ($4.25 million) to the budget annually.

* U.S. Senator Richard Lugar (R-Indiana) expressed to President Vaira Vike-Freiberga at her residence in Jurmala on 25 August his full support for the membership of the Baltic states in NATO at the Prague summit in November 2002, LETA reported. After a meeting with Prime Minister Andris Berzins, he told a press conference that President George W. Bush could count on Senate support for inviting the Baltic states to NATO.

* U.S. Senator John McCain (R-Arizona) told Vike-Freiberga at her residence in Jurmala on 26 August that he is impressed by the rapid development made in Latvia since his previous visit in 1993, LETA reported the next day. The two agreed that accession of the Baltic states to NATO can only improve relations with Russia.

* Mayor Gundars Bojars and Moscow Mayor Yurii Luzhkov signed a memorandum of cooperation between the capitals in Moscow on 30 August, LETA reported The signing of the memorandum had been planned in Riga during the celebrations of Riga's 800th anniversary, but the Moscow delegation canceled the visit when the Latvian Foreign Ministry refused to grant a visa to its leader, Aleksandr Perelygin. Riga has suggested that Perelygin be replaced by Leonid Belov, a Moscow official who had lived in Riga for more than 20 year and speaks Latvian. Bojars expressed satisfaction with the great attention he received during the visit and the possibilities for greater cooperation in tourism and various fields of business.

* Former Latvian President Guntis Ulmanis ended his long-standing membership in the Latvian Farmers' Union on 6 September by formally withdrawing from the party and relinquishing his title of being the party's honorary chairman, BNS reported. Riga dailies reported that Ulmanis made the move to support the new Repse-led pro-market party.

* A delegation from Schleswig-Holstein, headed by Prime Minister Heide Simonis, on a three day visit to Latvia on 4-6 September, discussed cooperation between the German state and Latvia. At a working dinner with Prime Minister Andris Berzins on 4 September, she also talked about Latvia's integration into the EU and NATO. In talks with Riga Mayor Gundars Bojars, Simonis agreed to accept representatives chosen by Riga to work for 3-6 months in Germany on city planning, rehabilitation, heat supply, and other urban matters.

* The council of the Latvian Social Democratic Workers Party on 25 August voted 36 to 16 with 11 abstentions to expel parliament deputy Imants Burvis from the party, but failed in the effort since it lacked the needed two-thirds majority (42 votes), LETA reported. Burvis was accused of misappropriating a 15,000 lats ($24,000) campaign contribution from the company Vudisona Terminals, but he stated that he properly turned over the money to the Northern Vidzeme Cultural Education Support Fund, for which it was intended.

* At the invitation of Haifa City Mayor Amram Mitzna, Riga Mayor Gundars Bojars made a business trip to Israel on 26-29 August, LETA reported. Along with parliament deputies Edvins Inkens and Imants Stirans, Bojars also visited Jerusalem for meetings with Israeli Foreign Ministry officials.

AMBER HOPE 2001 MILITARY EXERCISES.
President Valdas Adamkus, armed forces chief Major General Jonas Kronkaitis, and generals from the U.S. and other European countries officially opened the Amber Hope 2001 international military exercise at the Gaiziunai military base in Rukla on 29 August, ELTA reported. With a total of 2,800 troops from 14 countries -- Canada, the Czech Republic, Denmark, Estonia, Finland, Germany, Great Britain, Italy, Latvia, Lithuania, the Netherlands, Poland, Sweden, and the United States -- the exercises are the Baltic states' largest this year and lasted through 6 September. They were conducted at two sites, Rukla and Pabrade, which are 150 kilometers apart. The international battalions BALTBAT and LITPOLBAT were together in one exercise for the first time and was joined by an international battalion of servicemen from Lithuania, Italy, Great Britain, and the U.S. Since the main emphasis of the exercises is preparation for peacekeeping operations, considerable attention was devoted to cooperation with the media and civilian organizations such as the International Red Cross, the Office of the United Nations High Commissioner on Refugee Affairs, and the International Migration Organization.

WORLD LITVAKS HOLD CONGRESS IN VILNIUS.
Three hundred participants from 12 countries, including Canada, France, Germany, Great Britain, Israel, Lithuania, Mexico, the Netherlands, and the United States, gathered in the Vilnius City Hall on 24 August for the opening of the first congress of World Litvaks, Jews who consider themselves of Lithuanian origin, ELTA reported. The chairman of the Jewish community in Lithuania, Simonas Alperavicius, said the purpose of the congress was to maintain contacts among Litvaks and help them retain ties with the land of their ancestors, as well as to deal with restitution issues, the prosecution of war criminals, and the conservation of their cultural heritage. President Valdas Adamkus told the congress that the "present-day generation of Lithuanian nationals both waits for and meets you and your children not as guests but as fellow nationals and people with the same historical experience." He noted that the Holocaust is not forgotten in Lithuania, which has an international commission established several years ago to assess the crimes of the Nazi and Soviet occupations. The congress approved an appeal supporting the admission of Lithuania into NATO and the European Union on 28 August.

LIBERAL UNION CHAIRMAN RESIGNS.
Former Prime Minister Rolandas Paksas resigned from the post of chairman of the Liberal Union on 5 September, ELTA reported. The other members of the executive council also resigned. Paksas made the decision when it became clear at the meeting of the party's council in Anyksciai that he no longer had the support of the majority of the council's members. Former Klaipeda Mayor Eugenijus Gentvilas, whom Paksas replaced as Liberal Union Chairman in 1999, was appointed acting chairman. The Liberal Union will hold an extraordinary congress on 27 October to elect its new leadership.

LITHUANIA HOPES TO JOIN EU DURING DANISH PRESIDENCY.
President Valdas Adamkus told visiting Danish Foreign Minister Mogens Lykketoft in Vilnius on 30 August that Lithuania would like to end its EU membership negotiations in the second half of next year when Denmark heads the organization, BNS reported. Adamkus declared that would be symbolically appropriate since Denmark has been one of the greatest supporters of Lithuania's membership in the EU and is a major foreign investor in the country. The previous day, Lykketoft began his visit to Vilnius to mark the 10th anniversary of the restoration of diplomatic relations between the two countries with talks and a joint press conference with his Lithuanian counterpart Antanas Valionis. He informed Prime Minister Algirdas Brazauskas that Denmark will contribute $2.4 million for decommissioning the nuclear power plant at Ignalina and $24 million for restructuring Lithuania's energy sector in the next two years. Lykketoft also held talks with parliament Chairman Arturas Paulauskas.

INTEREST IN POLAND'S GAS DEAL WITH DENMARK EXPRESSED.
Prime Minister Algirdas Brazauskas said in Warsaw on 5 August that Lithuania wants to join a Polish-Danish agreement on building a gas pipeline, PAP reported. In July, Poland and Denmark agreed to build a 230-kilometer pipeline at an estimated cost of $300 million to deliver North Sea gas to Poland. Brazauskas noted that Latvia and Estonia are also interested in the Polish-Danish pipeline project. Brazauskas and President Valdas Adamkus met in Warsaw with their Polish counterparts, Jerzy Buzek and Aleksander Kwasniewski, to celebrate the 10th anniversary of the re-establishment of diplomatic ties between the countries.

AUSTRIAN VICE CHANCELLOR VISITS LITHUANIA.
Susanne Riess-Passer discussed European Union enlargement matters with Deputy Foreign Minister Rytis Martikonis on 6 September in Vilnius, ELTA reported. She noted that Austria is particularly concerned with the possible expansion because it borders directly with four candidate countries. Austria thus is supporting a seven-year transition period for the free movement of labor from newly admitted candidate countries. Riess-Passer told Finance Minister Dalia Grybauskaite about the interests of leading Austrian banks in the privatization of the state-owned Agricultural Bank and the need for Lithuania to set a date for the closing of the second reactor at the nuclear power plant in Ignalina. The previous day, Riess-Passer assured Interior Minister Jonas Bernatonis that Austria is ready to assist Lithuania by providing information on its reforms in public administration and advice on the control of external state borders.

ENERGY BOARD APPROVES RESTRUCTURING PLAN.
The board of Lietuvos Energija (Lithuanian Energy) on 27 August approved a draft restructuring plan that would split the power utility, 86 percent of which is owned by the state, into five separate economic entities, ELTA reported. The project, drafted by a consortium led by CIBC World Markets, foresees Lithuanian Energy remaining responsible only for the transmission of energy, while its other functions would be given to two newly formed electricity distribution companies, Western Distribution System and Eastern Distribution System, as well as to two power generating facilities in Elektrenai and Mazeikiai. The newly formed companies should begin operation on 31 December, with the distribution companies scheduled for privatization next year and the power plants subsequently. The plan still has to be accepted by the government and the shareholders of the company while the parliament must approve a document distributing the capital and liabilities of Lithuanian Energy among the five companies.

PRESIDENT CALLS FOR TRANSPARENT PRIVATIZATION OF LITHUANIAN GAS.
Valdas Adamkus told BNS on 28 August that the privatization of Lietuvos Dujos (Lithuanian Gas) should be competitive and transparent. He expressed support for the agreement of 12 Lithuanian political parties in June that provides for a strategic Western investor to purchase 34 percent of the company, and for a separate gas supplier to buy a 25 percent share. Adamkus asserted that the unsuccessful long-term negotiations that took place between Mazeikiai Oil and Russia's LUKoil should not be repeated with Lithuanian Gas. He added that it is clearly unacceptable for Russia's Gazprom, the most likely supplier to win the tender, to be given a 51-percent stake, which the Russian gas giant is reportedly seeking. The most likely Western investor is Germany's Ruhrgas, which already has investments in the gas companies of Latvia and Estonia as well as a 5 percent share of Gazprom. Ruhrgas and Gazprom control the Latvian gas company Latvijas Gaze and manage the large underground gas storage facilities near Riga, which Lithuanian Gas also uses.

IMF APPROVES STANDBY AGREEMENT.
The Executive Board of the International Monetary Fund (IMF) endorsed on 30 August a 19-month standby agreement of $111 million intended to support Lithuania's economic reform program, ELTA reported the next day. The agreement will enable Lithuania to draw $16 million from the IMF immediately. Under the document, Lithuania pledged to keep the currency board model at least until the end of 2002, to maintain a low inflation rate (around 1 percent in 2001 and 3 percent in 2002), and to cut the fiscal deficit to 1.4 percent of GDP this year and to 1.3 percent in 2002. GDP growth in 2001 is projected at 6.6 percent and at 4.7 percent in 2002. The current account deficit in 2001 should not exceed 6.7 percent of GDP and 6.6 percent in 2002. Lithuania also made a commitment to privatize Lietuvos Energija (Lithuanian Energy) and Lietuvos Dujos (Lithuanian Gas). Finance Minister Dalia Grybauskaite noted that this agreement with the IMF outlines a more moderate tax reduction program than the previous government had planned.

SCOTLAND NOT TO EXTRADITE AILING WAR CRIMES SUSPECT.
The Scottish Executive replied on 4 September to a March Lithuanian request (see "RFE/RL Newsline," 27 March 2001) for the extradition of Nazi war criminal suspect Antanas Gecevicius (Gecas), BNS reported. Gecas is accused of participating in the genocide of Jews and other minorities in Lithuania and Belarus during World War II when he headed a squad in the Lithuanian Auxiliary Police Battalion, set up by German occupation authorities. The Scottish reply noted that the 85-year-old Gecas has been hospitalized in Edinburgh as his health has deteriorated and according to a medical panel is unfit to stand trial because of two heart attacks and chronic diseases. When asked about what further steps the Prosecutor General's Office is intending, the spokesperson said the institution is studying the case documents.

* The European Parliament's progress report rated Lithuania as a country which has maintained a high pace in EU entrance talks, but urged it to speed up progress in such areas as reducing unemployment and solving related social problems, administrative capacity, police work, and legal reforms, ELTA reported on 6 September. It also called on Lithuania to prepare for the closing of the second unit of the nuclear power plant at Ignalina.

* The commander of the Russian Baltic Fleet, Vice-Admiral Vladimir Valuev, told Defense Minister Linas Linkevicius in Vilnius on 6 September that Lithuania's goal of membership in NATO is not an obstacle to friendly relations with Russia, ELTA reported.

* The deputy director of the European Commission's Environment Directorate, Jean Francois Verstrynge, told a press conference in Vilnius on 5 September that Lithuania is providing insufficient funds for protecting the environment, BNS reported. He noted that such spending had fallen from 0.6 percent of GDP several years ago to 0.2 percent of GDP this year and should be 2 to 3 percent of GDP. Verstrynge also complained that Lithuania was not using funding for environmental protection from the EU and other sources in a satisfactory manner.

* Swedish Defense Minister Bjorn von Sydow presented on 3 September in Klaipeda the first batch of a $200 million donation, consisting of servicemen, equipment, arms, field kitchens, vehicles, and ordnance, ELTA reported. Defense Minister Linas Linkevicius and army commander Major General Jonas Kronkaitis thanked Sweden for the gift which will be used to equip three infantry battalions.

* Russia's Commissioner for Human Rights Oleg Mironov told President Valdas Adamkus in Vilnius on 4 September that his organization receives very few complaints from Russian-speakers in Lithuania, ELTA reported. The next day he told Arturas Paulauskas: "Lithuania treats human rights at the highest European level."

* Sampo Bank and the German bank Kreditanstalt fur Wiederaufbau signed an agreement on 4 September establishing a 5 million euro ($4.5 million) credit line which will be used to grant loans to small and medium-scale companies, ELTA reported.

* Lithuanian parliament deputy Waldemar Tomaszewski caused a scandal during the celebrations in Warsaw on 5 September when he refused to accept the order of Officer of the Cross in Service to the Republic of Poland from Polish President Aleksander Kwasniewski, BNS reported. He later explained that the handing out of such awards was a "Soviet holdover" and that they should be given out only during times of war.