Baltic Report: August 28, 2003

NOTE TO READERS:
This issue covers events in the Baltic states from 16 to 22 August 2003.
BALTIC PREMIERS URGE LATVIANS, ESTONIANS TO APPROVE EU REFERENDUMS.
Prime Ministers Juhan Parts of Estonia, Einars Repse of Latvia, and Algirdas Brazauskas of Lithuania made a joint statement on 22 August calling on the citizens of Estonia and Latvia to vote in favor of EU membership in the upcoming referendums in those countries, BNS reported. The appeal said: "The most important reason to vote 'yes' is the future of our young generation. European Union membership will result in far more opportunities for our children. They will be able to get better education and better jobs. Accession in the EU means the stable and safe development of our countries. We will no longer be the gray zone between the East and the West." The three prime ministers also said EU membership will benefit agriculture, rural districts, and business.

TOP OFFICIALS DISCUSS INFORMATION PROGRAM FOR EU REFERENDUM.
President Arnold Ruutel, Prime Minister Juhan Parts, and parliament speaker Ene Ergma decided on 21 August that they should do more to inform the public about the benefits of EU membership before the upcoming referendum on 14 September, BNS reported. Ruutel said the charges that Estonia will lose its independence with EU membership are groundless as the country already belongs to many international organizations that affect its actions. Ergma noted that the Estonian economy is already closely linked with the EU, and rejected the arguments that better membership conditions could be obtained in the future because the EU will have even more members then who would have to agree to any further concessions Estonia sought.

NUMBER OF DRAFTEES IN ARMED FORCES TO BE HALVED.
During a session of the government's NATO Committee on 18 August, Prime Minister Parts expressed support for the Defense Ministry's plan to reduce the number of conscripts by 50 percent, LETA reported the next day, citing the daily "Postimees." Estonia currently drafts about 3,000 soldiers per year, and the plan also calls for increasing the number of professional soldiers. Defense Minister Margus Hanson said Estonia formed its armed forces in the 1990s based on the principle of independent operation, a model that will be irrelevant because of the country's upcoming NATO membership. NATO is advising future members to reduce efforts for the direct defense of their territory and to increase units trained for participation in NATO operations. With little threat of a foreign attack, the military can devote more attention to coping with manmade and natural catastrophes and to supporting the civilian authorities in crisis situations.

DANISH PRIME MINISTER VISITS, TALKS ABOUT EU.
Anders Fogh Rasmussen made a working visit to Estonia on 18 and 19 August, during which he spoke about the advantages that joining the EU will bring Estonia, BNS reported. In talks with his Estonian counterpart, Juhan Parts, Rasmussen noted that the experience of Denmark shows that this small country did not lose its identity in the EU, but saw its awareness of its national and cultural identity increase. The two prime ministers agreed it will take Russia a long time to meet the criteria necessary for a visa-free travel regime with the EU. Rasmussen said there is no reason why the EU should interfere with Estonia's citizenship policy, as Russian-speaking residents have the opportunity to become Estonian citizens by following established regulations. Estonia is also observing the criteria of the protection of its minorities, he noted.

GOVERNMENT FINDS UNIONS' DEMANDS UNREALISTIC.
The cabinet decided during its meeting on 19 August to reject proposals made by the Confederation of Estonian Trade Unions (EAKL) in bilateral and tripartite talks with employers' organizations, BNS reported. Social Affairs Minister Marko Pomerants said demands to raise the monthly unemployment benefit from the current 400 kroons ($28.40) to 1,000 kroons are unrealistic, noting that those receiving such assistance will lose any motivation to look for work. He also rejected the EAKL's request to raise the monthly tax-free minimum, currently 1,200 kroons, to correspond with the minimum wage of 2,160 kroons. The government stands by its coalition agreement to raise the tax-free minimum to 1,400 kroons in 2004 and reduce the income-tax rate from 26 percent to 24 percent.

CENTER PARTY REAFFIRMS UNITY.
The Center Party's board issued a statement on 15 August declaring that the party has not split and continues to be open to dialogue within its ranks and with other parties, BNS reported. The statement comes in the wake of the party's recent decision to oppose joining the European Union (see "RFE/RL Newsline," 11 August 2003). While this statement was adopted unanimously, the party's three top pro-EU advocates, Peeter Kreitzberg, Sven Mikser, and Robert Lepikson, were not in attendance. Party spokesperson Evelyn Sepp said the three were absent due to work, but expressed confidence they would have backed the statement. The board re-elected Kullo Arjakas as the party's general secretary. In Tallinn on 16 August, a meeting of the leaders of the party's regional chapters expressed support for the board's statement and dismissed the option of holding an extraordinary congress.

* A delegation of World Bank representatives, headed by Managing Director Shengman Zhang, began a tour of the Baltic states in Tallinn on 18 August with talks on further cooperation with Prime Minister Parts, BNS reported. The delegation then traveled to Tartu where they inspected the Tartu University biomedical center which was completed with World Bank funding.

* Front, an organization uniting young Russian speakers in Estonia organized after a violent demonstration in front of the U.S. Embassy in March, sent a public letter to Russian President Vladimir Putin and Estonian Prime Minister Parts calling for improving Estonian-Russian relations and creating an atmosphere permitting the Russian community to lead a dignified life in Estonia, BNS reported on 20 August. The organization's leader, Ilya Petrov, said that it has mainly propagated its ideas on the Internet, but plans to undertake actions in the fall to promote Russian-language education.

* The Estonian Roads Board signed repair-work contracts for the repair of 120 kilometers of highways, LETA reported on 21 August, citing "Parnu Postimees." It signed a contract for 163 million kroons ($11.6 million) with a consortium of four local companies for repairing a 44-kilometer segment of the Tallinn-Parnu highway and other contracts for 312 million kroons for repairs on the Tallinn-Narva highway. The EU will pay for 75 percent of the projects while Estonia plans to pay its 25 percent share by obtaining a loan.

* A working group of seven parliament deputies from all the factions drew up a 32-page report on the possible effects of EU membership on Estonia, BNS reported on 21 August. The report is divided into nine different spheres: EU law, economy, agriculture, fishing, regional policy, social issues, education and culture, environment, and foreign policy. It will serve as the basis for an extraordinary session of parliament on 25 August.

* A poll by the EMOR research company of 500 people at the beginning of August indicated that among people planning to take part in the EU membership referendum on 14 September, 69 percent supported membership, or seven percentage points more than in July, BNS reported. About 70 percent of those interviewed said they would definitely participate in the referendum.

* President Ruutel signed on 21 August decrees officially promulgating the student subsidies and loans act, amendments to the social maintenance act, and amendments to this year's state budget which their passage required, BNS reported. The monthly subsidies given to only some of the students are set at 600 kroons ($41.5) for vocational school students, 800 kroons for university students, and 3,000 kroons for doctoral candidates.

* Vocational Education Reform Foundation head Lea Orro said that rejection of the EU membership referendum would be a major blow to the country's vocational education, BNS reported on 18 August. If Estonia joins the EU, 751 million kroons ($53.3 million) will be invested into vocational schools, study aids, career consultations, and schooling in the next three years with Estonia having to pay only one-fourth of the amount. It is expected that more than 17,000 young people will enroll in vocational schools this year.

* The Estonian Business School (EBS) elected EBS Group President Madis Habakuk as its rector after the previous rector, Jan Andresoo, resigned when the Education Ministry ruled that his academic level was insufficient for the post, LETA reported on 19 August. Andresoo is writing, but has not yet completed, his doctor's thesis which would make him eligible to be rector. He will still take care of much of the everyday management of the university by becoming the managing head of EBS.

* By unanimous vote of 35 deputies, the Tallinn City Council passed a second supplementary budget of some 34.4 million kroons ($2.44 million) on 21 August, BNS reported. The extra funds will be used for street repairs (26.4 million kroons) and higher salaries for teachers (8 million kroons). The budget was for 4.6 billion kroons and 37 million kroons were added to it by the first supplementary budget in April.

RUSSIAN MILITARY HARDWARE BOUND FOR IRAN INTERCEPTED.
Latvian customs officials in Riga on 18 August intercepted 28 tons of Russian-made military equipment that were reportedly bound for Iran, gazeta.ru and other Russian media reported on 21 August. The equipment reportedly included spare parts for tanks and night-vision equipment and was being shipped as agricultural hardware on a Russian plane from Yekaterinburg. Latvian officials have opened a criminal case on suspicion of smuggling strategic goods. The incident could further inflame tensions between Russia and the United States over Russian military cooperation with Teheran.

CONSTRUCTION COMPANIES ESTABLISH PARTNERSHIP FOR COOPERATION ABROAD.
Five Latvian construction companies -- Kalnozols Celtnieciba, Latvijas Energoceltnieks, RBS Skals, Re&Re, and Skonto Buve -- have established a joint venture called Latvijas buvnieku strategiska partneriba (Strategic Partnership of Latvia's Construction Companies) to improve their opportunities to win foreign contracts, LETA reported on 19 August. The companies had a total turnover of approximately 90 million lats ($158 million) last year. The new company's board chairman, Valdis Birkavs, said the main focus of its future operations will be participation in the reconstruction of Iraq, in EU tenders after Latvia joins the EU in May 2004, and in construction projects in the CIS countries, especially Russia and Ukraine.

EQUIPMENT DONATED TO GEORGIA'S DEFENSE SYSTEM.
The government decided on 18 August to donate communications equipment to the Georgian defense system as part of a cooperation agreement signed last year by the Latvian Defense Ministry and the Georgian Foreign Ministry, LETA reported. Latvia will deliver to Tbilisi 188 SEM-70 radio transmitters and receivers, 240 Ni-HM batteries with 30 battery-charging systems, and seven frequency-programming and copying machines. Latvia received the equipment in 2000 as a gift from the United States, which has agreed that it can be given to Georgia. With the donation, Latvia wants to show that its defense system has reached a level of development at which it is able to provide assistance to other countries with similar foreign-policy goals.

POSTPONEMENT OF NUCLEAR-REACTOR LIQUIDATION QUESTIONED.
U.S. Ambassador to Latvia Brian Carlson has expressed concern about the postponement of plans to liquidate the research nuclear reactor at Salaspils, BNS reported on 21 August. The reactor, which was built in 1961 and shut down in 1998, was to be decommissioned completely by 2008 with financial assistance from the United States (see "RFE/RL Newsline," 4 August 2003). The Latvian Environment Ministry, however, recently put off the transportation of spent nuclear fuel out of Latvia for an unspecified term for financial reasons. Carlson planned to visit Salaspils with Environment Minister Raimonds Vejonis on 22 August, but that trip was postponed.

LATVENERGO OBTAINS ANOTHER LOAN FROM NORDIC INVESTMENT BANK.
Karlis Mikelsons, chairman of the board of the Latvian energy utility Latvenergo, signed a $57 million loan agreement with the Nordic Investment Bank (NIB) on 19 August, BNS reported. The loan, with a maturity of 15 years and a grace period of seven years, will be used to improve the company's efficiency and competitiveness. Latvenergo borrowed $36.5 million from NIB in May 2002, but intends to spend $133 million-$167 million over the next 10 years to increase the reliability of the hydroelectric power plants on the Dauguva River, the electricity-distribution system, and one of Latvenergo's combined heat and power plants in Riga.

* A World Bank delegation, headed by Managing Director Shengman Zhang, visited Liepaja on 20 August to become better-acquainted with projects which the World Bank had helped finance, LETA reported. They inspected the Grobina and Nica waste-disposal sites and the water de-ironization equipment in Liepaja. Zhang also held talks on further cooperation with Liepaja Mayor Uldis Sesks.

* Welfare Ministry Parliamentary Secretary Ilze Stobova told a seminar on EU structural funds in Riga on 19 August that Latvia will have access to 113 million euros ($125 million) from the European Social Fund in 2004-06 for various projects aimed at developing human resources and improving the labor market, BNS reported. Latvia will have to provide 37.7 million euros for co-financing the projects, which will primarily be aimed at the unemployed, youth, pre-pension workers, laborers with low qualifications, socially rejected groups like former prisoners, and the disabled.

* The appeal by Latvia's Way to other political parties to sign a joint communique backing the country's membership in the EU and putting all disputes on hold until the referendum is held on 20 September was met with skepticism, LETA reported on 18 August. Party leaders agreed with the idea, but felt that there was no need to sign a communique and affirmed that Latvia's Way had made the proposal only to attract attention.

* The daily "Diena" wrote on 19 August that ministries will need to hire some 600 more civil servants to administer the EU funds they expect to receive in the next three years, LETA reported. It estimated that about 7 million lats ($12 million) of the 50 million lats allocated in the 2004 budget toward the absorption of EU funds would be spent on hiring the new employees and related expenses.

* The Agricultural Organizations' Cooperation Council decided on 20 August to postpone a farmers' strike planned in early September to protest the government's decision to grant only 4.38 million lats ($7.52 million) instead of expected 6.6 million lats in additional subsidies to farmers, LETA reported. They made the decision so as not to create conflict before the referendum on Latvia's entry into the EU which they support.

* The Riga City Council has repeatedly requested the government appoint new representatives to the board of the Riga Free Port in place of those which it had removed earlier in the month (see "RFE/RL Newsline," 7 August 2003). Riga Mayor Gundars Bojars, who is also the board chairman of the Riga Free Port, complained that the suspension of the board's work has severely reduced the port's operations and it is losing transit business to Estonian ports, LETA reported on 18 August.

* The commission headed by Prime Minister Einars Repse for selecting the next Corruption Prevention Bureau chief announced on 19 August that it had reduced the number of candidates for the position from 58 to 11, BNS reported. They will have to present their opinions on problems with corruption in Latvia, the organization of the bureau's work, and its future priorities. The commission will interview them on 2-3 September.

* The Foreign Ministry has submitted a proposal to the government calling for the establishment of eight new embassies in the next four years, LETA reported on 20 August. The plan envisages opening embassies in Turkey and Hungary in 2004, in Japan and Kazakhstan in 2005, in Slovenia and Slovakia in 2006, and in Romania and Bulgaria in 2007. The ministry is also seeking funds to buy or build embassy buildings in Austria, Poland, Ukraine, and other countries.

* The board of Latvia's First Party (LPP) gave State Minister for Society Integration Affairs Nils Muiznieks a party membership card at its meeting on 20 August, LETA reported the next day. The party had chosen Muiznieks as its choice for minister even though he was not a member of the party. Granting party membership was a sign that the board supports the minister whose work was recently severely criticized by the leaders of four parliamentary committees.

* After completing an analysis of economic development in Latvia, Finance Minister Valdis Dombrovskis proposed on 21 August that the revenue projections for the 2004 budget be increased by 25 million lats ($43 million), LETA reported. He said that the increase would come from higher collections of social-insurance payments, corporate tax, and other taxes.

* The Latvian Social Democratic Workers Party (LSDSP) Council agreed on 16 August to sign the memorandum on cooperation of left-wing and center parties which the National Harmony Party (TSP) had proposed in May, LETA reported. LSDSP General Secretary Janis Dinevics noted that the party will suggest that the document be named a "statement." He expected that the Latvian Democratic Party would sign the document, but doubted that the three other parties -- the Latvian Democratic Union, Labor Party, and Social Democratic Welfare Party -- whom the TSP had invited to sign would do so.

* The Finnish forestry industry corporation UPM-Kymmene is planning to launch a subsidiary in Latvia in order to acquire raw materials for cellulose plants in Finland, LETA reported on 21 August, citing the newspaper "Dienas Bizness." The company recently launched a subsidiary in Estonia so that it is clearly expanding its operations in the Baltic states.

INTERNATIONAL PEACEKEEPING MISSIONS MAY BE REDUCED.
After a meeting with President Rolandas Paksas on 19 August, Defense Minister Linas Linkevicius said Lithuania will soon decide whether to continue or terminate its various international peacekeeping missions, the daily "Lietuvos zinios" reported on 20 August. The country now has 270 soldiers serving in Iraq, Afghanistan, Bosnia and Herzegovina, Macedonia, and Kosova, and an officer participating in the Organization for Security and Cooperation in Europe (OSCE) monitoring mission in Georgia. Linkevicius informed the president about plans to simplify procedures for sending Lithuanian troops to international missions and of meetings held to assess the strategy of the country's participation in such missions and to determine which of the missions are the most important. Presidential spokesman Rosvaldas Gorbaciovas mentioned that "the mission in Kosovo might be terminated, and a decision should be made concerning the mission in Afghanistan."

PROSECUTOR PLANS CRIMINAL CASE AGAINST U.S. MANAGERS.
After a meeting with President Paksas and Mazeikiai District Senior Prosecutor Jurijus Malininas on 19 August, Prosecutor-General Antanas Klimavicius told reporters that 20 persons will be arraigned on charges of squandering money at Mazeikiai Nafta and causing harm to the country's economy, BNS reported. He said that the partially state-owned company had suffered losses of 1.5 billion litas ($500 million) of which some 800 million litas was caused by criminal actions. Among the persons to be indicted are two former ministers, a deputy minister, and three U.S. citizens who worked for Williams International, one of the owners and managing partner of the oil complex. Klimavicius did not name any date for a trial, noting that all suspects had the right to read the over 200 volumes of case material. He did not mention the names of the former ministers, but the press has indicated that they are Conservative Party members Sigitas Kaktys and Rimantas Didziokas.

RUSSIA CONDUCTS FIRST ARMS INSPECTION.
Arms inspectors from Russia began their first inspection in Lithuania under the so-called Vienna document of 1999 granting every member of the OSCE the right to check if another member is conducting undeclared military activities or has undeclared military capabilities, the daily "Lietuvos zinios" reported on 18 August. The Russian inspectors visited the Motorized Infantry Brigade Gelezinis Vilkas (Iron Wolf) on 18-19 August to verify the accuracy of data presented by Lithuania about its military capabilities, ammunition, and deployments. Lithuanian arms inspectors conducted similar inspection missions in Russia's Kaliningrad Oblast in 1999 and 2003. Lieutenant Colonel Ruslan Shishin told reporters after the inspection: "The general evaluation is positive. The inspection process was carried out in the spirit of mutual understanding; we give a positive, or a perfect evaluation," BNS reported.

FOUNDING OF LITHUANIAN-BELARUSIAN ECONOMIC ASSOCIATION DISCUSSED.
A Belarusian delegation headed by Deputy Prime Minister Anatol Tsyutsyunou held talks in Vilnius on 20 August with representatives of the Lithuanian Industrialists Confederation (LPK), ELTA reported. They discussed the need for greater economic cooperation between their countries and establishing a Lithuanian-Belarusian economic association to promote it. It was suggested that a Belarusian trade fair could be held in Vilnius to exhibit Belarusian exports. LPK Vice President Mykolas Aleliunas said Lithuanian builders want to participate in construction projects in Belarus and that other large businesses are considering investments there. An area of successful cooperation is the transit of Belarusian goods through the Port of Klaipeda, which currently accounts for about a fourth of the port's total turnover. Tsyutsyunou visited Klaipeda on 21 August and promised to increase Belarusian transport through the port, BNS reported.

CONSTRUCTION MARKET GROWS RAPIDLY.
The Statistics Department released data on 18 August indicating that builders in Lithuania carried out construction work worth 992 million litas ($330 million) in the second quarter of the year, up 28 percent over the same period last year, ELTA reported. The greatest share of the work, 38 percent, was for the construction of new buildings. Thirty percent of the work was renovations, 27 percent was reconstruction, and 5 percent was other jobs. The construction was carried out primarily -- 69 percent -- in the districts of Vilnius, Kaunas, and Klaipeda. The department also announced that investments in the construction sector during the period totaled 2.07 billion litas. Only 178 million litas of this sum, or 8.6 percent, was for residential buildings, with 1.3 billion litas, or 62.7 percent, for engineering structures and reconstruction.

DIPLOMATS SEEK TO TAKE BACK RESIGNATIONS.
Four of the seven diplomats working in Russia and Belarus who submitted letters of resignation on 25 July (see "RFE/RL Newsline," 28 July 2003) have appealed to the Vilnius District Administrative Court for reinstatement, alleging that psychological pressure was used against them, "Kauno diena" reported on 22 August. Foreign Minister Antanas Valionis explained that he had shown them information received from the State Security Department indicating that they had received payments from Russian tourist agencies in exchange for issuing visas, and asked them to resign. They did so and Valionis later signed a decree rescinding their access to classified information. The newspaper suggests that the diplomats began their court actions when it became clear that the prosecutor's office was having difficulty gathering enough evidence against them.

PROTEST IN FRONT OF RUSSIAN EMBASSY.
Approximately 50 people gathered at the Russian Embassy in Vilnius on 22 August for a protest organized by the Sajudis movement and other public organizations, BNS reported. The protesters' main demands were that Russia pay some 80 billion litas ($28 billion) for damages inflicted on Lithuania during the Soviet occupation from 1940-90 and that Russia halt LUKoil's plans to extract oil from under the Baltic Sea near the Curonian Spit, because the danger of ecological damage is too great. Rytis Kupcinskas, the leader of Sajudis, also told reporters that the Russian Army and civilian administration should leave Chechnya and allow a UN caretaker administration to be established.

* U.S. Senator Carl Levin (Democrat-Michigan) had an informal meeting with President Paksas in Vilnius on 21 August, ELTA reported. Accompanied by his wife and three daughters, Levin was making a private visit to Lithuania and had already visited the area in the Plunge District where his ancestors lived.

* World Bank Managing Director Shengman Zhang arrived in Klaipeda on 21 August and visited the drinking water company AB Klaipedos Vanduo with which the bank had financed an environmental project, ELTA reported. On 22 August Zhang discussed further cooperation projects with Prime Minister Brazauskas in Vilnius.

* Financial Crime Investigation Service (FNTT) Chief Commissioner Romualdas Boreika held talks with U.S. Federal Bureau of Investigation (FBI) Baltic states liaison officer James Nixon in Vilnius on 19 August, ELTA reported. The meeting addressed the results and prospects of cooperation between the two institutions, especially in the fields of money laundering and funding terrorism. FNTT officials are working on draft amendments to a money-laundering-prevention bill which will expand the list of institutions responsible for preventing money laundering and implementing measures to prevent the financing of terrorism.

* President Paksas signed a decree on 21 August submitting Lithuania's EU Accession Treaty to the parliament for ratification, BNS reported. The more-than-5,000-page document, signed in Athens on 16 April by 15 EU member and 10 candidate countries, will enter into force after all 25 parliaments ratify it. So far it has been ratified by EU members Denmark and Germany, and candidates Cyprus, Malta, the Czech Republic, and Poland.

* Parliament Chairman Arturas Paulauskas announced on 21 August that, fulfilling the request of 52 parliament deputies, the parliament will hold extraordinary sessions on 2, 4, and 9 September, BNS reported. The sessions will discuss three laws that were vetoed by the president, the ratification of several international agreements, and a few bills related to European integration. The regular fall session will begin on 10 September and is expected to last until 23 December.

* The Court of Appeals ruled on 20 August to commute the five-year prison sentence imposed in 2002 by a Kaunas court on Latvian cyclist Juris Silovs, ELTA reported. Silovs was arrested in October 2001 for transporting large sums of money (about $75,000) across the border without declaring them. Even though Silovs showed that the money was legally earned, the court upheld its confiscation and fined him 25,000 litas. Silovs will appeal the case to the Lithuanian Supreme Court and maybe the European Court of Human Rights in Strasbourg.

* The Finance Ministry announced on 20 August that in the first seven months of this year the national budget (central and local) had gathered 6.1 billion litas ($2 billion), an increase of 138 million litas or 2.3 percent compared to the same period last year and 24 million litas more than forecast, BNS reported. Central revenues were 5.2 billion litas or 124 million litas more than last year and 10 million litas more than forecast. Local revenues were 900 million or 14 million litas more in both cases.

* The Statistics Department announced on 18 August that in the first half of the year retail sales amounted to 8.14 billion litas ($2.7 billion) or 10.2 percent greater than in same period in 2002, ELTA reported. Among items showing the greatest increases were the sales of automobiles and motorcycles (15.1 percent).