Voices from Russia

Monday, 21 March 2011

The “Baltic Tigers”: Can They Make It Without Russia?

Filed under: Baltic states,diplomacy,Dmitri Medvedev,economy,politics,Russian — 01varvara @ 00.00

March glorifying the Nazi Waffen-SS in the Latvian capital of Riga, sponsored by the ruling Neo-Nazi Jaunais Laiks (New Era) Party. Note well that the US Republican Party and the British Conservative Party support the fascist sludge in Latvia and Estonia (and in Croatia and the Ukraine, too).


In the USSR, Latvia, Lithuania, and Estonia always stood apart. The Baltic republics boasted a higher standard of living than other parts of the country, and produced goods that set a standard for quality for the entire nation. However, their citizens never sought to integrate fully into the country’s multi-ethnic community. Rather, they sought independence, first, in their everyday lives, and, then, as nations. This quest for independence was given a powerful boost by the liberal reforms of the perestroika era. Lithuania was the first among the Baltic republics to proclaim its sovereignty in the spring of 1990, replacing the Soviet Constitution with its own document, adopted back in 1938. Latvia followed suit. The Soviet government responded with an economic blockade.

Authorities in Lithuania were forced to raise consumer prices, triggering mass unrest. Trades union leaders called for an anti-parliament protest in the capital, Vilnius. In the early hours of 14 January 1991, Soviet tanks entered the city centre. Clashes with protesters outside the television headquarters killed 15 and left another 600 wounded. It remains unclear to this day who fired first. Tensions soon spilled over into the neighbouring Latvia. Local commandoes, who reported to the Soviet MVD at the time, began disarming police units in Riga on 20 January. They came under fire from the headquarters of Latvia’s MVD, and responded with an assault on the building. There were casualties on both sides, with many bystanders caught in the crossfire.

The Baltic republics finally regained their independence in September 1991, following the failed coup attempt in Moscow. Latvia embarked on a program of sweeping economic reforms, many of them controversial. It began by shutting down large plants, such as the electronics giant VEF and the automaker RAF, leaving their predominantly Russian staffs out of work. The country also had to downsize its fish processing facilities drastically, owing to the loss of the Soviet food market. Latvian authorities singled out the banking sector and cargo transit services as the engines behind their economic reforms. In early post-Soviet years, transit revenues generated as much as 25 percent of Latvia’s GDP. The new policy began to yield results in the mid-1990s when Latvia’s GDP resurged and the country saw an influx of Western investment. In 2008, the average annual salary reached 5,784 Lati (330,403 Roubles 11,598 USD 8,179 Euros 7,150 UK Pounds). Latvia became known as a “Baltic Tiger”. Nevertheless, its prosperity proved short-lived.

The emerging economy suffered a serious blow when Russia diverted its petroleum exports away from Latvian ports to new terminals in the Leningrad Region. Moreover, the global economic downturn brought it to the brink of catastrophe, leading to a huge budget deficit and price hikes. In the twenty years since the fall of the Soviet Union, Latvia’s GDP is just 90 percent of the 1990 level. The average wage dropped 11 percent in 2010, as compared with 2008. The government’s decision to cut social spending and to raise taxes led to price spikes on all categories of goods. Gasoline prices, for instance, reached 1.20 Euros (0.85 Lat 49 Roubles 1.70 USD 1.05 UK Pounds) per litre in January 2011 {for my American readers, that’s 6.44 USD/gallon… mostly, it’s taxes imposed by the ruling rightwing Neo-Nazi nutters, supported wholeheartedly by the US Republican Party: editor}.

Latvian Prime Minister Valdis Dombrovskis {a member of the Neo-Nazi Jaunais Laiks (New Era) Party… a Baltic Dropout Scott Walker: editor} is currently contemplating further budget cuts, “We’ve discussed possible amounts with international creditors, and mapped out an action plan. The amounts set may be reduced in the course of further discussions”. The right-wing government will slash Latvia’s budget by an additional 71 million Euros (50 million Lati 2.869 billion Roubles 100 million USD 62 million UK Pounds). The biggest cuts are planned for social spending, notably in the health sector, where costs will be reduced by commercialising most hospital services.

Joblessness is one of Latvia’s major problems now. According to the country’s National Employment Agency, the unemployment rate hit 14.3 percent last December, with 162,463 people officially registered as unemployed. This has led to a massive outflow of the workforce. Ireland alone has admitted as many as 45,000 Latvian labour migrants. According to official statistics, Latvia’s population has shrunk by 400,000 since the republic proclaimed its independence from the Soviet Union in 1991. The economic crisis has also caused Latvia’s property prices to fall. By December 2010, the average price of housing in Riga fell to 579 Euros (409 Lati 23,390 Roubles 821 USD 506 UK Pounds) per square metre {for my American readers, that’s 76 USD per square foot; to put it another way, a dwelling of 100 square metres (1,076 square feet) with 3 bedrooms and 2 baths would cost 82,100 USD (41,000 Lati 2.339 million Roubles 57,900 Euros 50,600 UK Pounds): editor}.

Today, sensible Latvian politicians see the restoration of neighbourly relations with Russia as a foreign policy priority for their country. President Valdis Zatlers made an important step in that direction last December when he came to Moscow for an official visit, the first by a Latvian head of state since Latvia regained its sovereignty in the 1990s. While in Moscow, Zatlers met with his Russian counterpart, Dmitri Medvedev, and invited him to visit Riga. “They invited me with an open heart”, President Medvedev said. “I’ve never been to Riga or anywhere else in Latvia, and I’m curious to go. There are things to discuss and things to see out there”.

Unfortunately, any steps, however cautious, toward normalising relations with Russia cause uproars in Latvia’s ruling right-wing Unity coalition. “It’s highly unlikely that President Zatlers will remain in his post for another four years”, said Dzintars Zaķis, the chairman of the Unity parliamentary faction {a member of the Neo-Nazi Jaunais Laiks (New Era) Party: editor}. Latvia’s next presidential election is set for the summer of 2011. By that time, it should become clear how the nation would approach relations with Russia.

The global economic downturn has also battered Lithuania’s economy. Its GDP, according to The Economist, has dropped by a record 3.5 percent. The Lithuanian government claims the economy is picking up, but the numbers suggest otherwise. The unemployment rate hit 14 percent by the end of 2010. The average wage fell by 3.2 percent, as compared with the last few years. The nation’s foreign debt keeps growing. It stood at 17.37 billion Litas (203 billion Roubles 7.13 billion USD 5 billion Euros 4.4 billion UK Pounds) in 2008, but doubled in 2010, and experts expect it to reach 40.44 Litas (473 billion Roubles 16.6 billion USD 11.7 billion Euros 10.2 billion UK Pounds) this year. Vilnius was planning to join the Euro zone in 2011, but its accession was postponed until 2014, owing to the unfavourable macroeconomic situation in the country (mainly due to an inflation rate of 11 percent per annum: editor}.

As in neighbouring Latvia, the economic crisis in Lithuania knocked the legs out of real estate prices. The current price is 1,100 Euros per square metre (3,798 Litas 44,400 Roubles 1,559 USD 961 UK Pounds) in Vilnius and 870 Euros (3,004 Litas 35,100 Roubles 1,233 USD 760 UK Pounds) in Kaunas {for my American readers, that’s 145 USD per square foot in Vilnius and 115 USD in Kaunas; to put it another way, a dwelling of 100 square metres (1,076 square feet) with 3 bedrooms and 2 baths would cost 155,900 USD (380,000 Litas 4.44 million Roubles 110,000 Euros 96,100 UK Pounds) in Vilnius and 123,300 USD (300,000 Litas 3.51 million Roubles 87,000 Euros 76,000 UK Pounds) in Kaunas: editor}. According to the National Statistics Department, the country’s population shrank to 3.261 million by the end of 2010, down from 3.335 million in 2009. Lithuania’s economic relations with Russia soured in 2010 when the Lithuanian government considered dividing the national gas corporation Lietuvos Dujos into two separate companies (a trader and a pipeline operator) by March 2012. The idea originated in the Third EU Energy Package, aimed at stimulating competition on European energy markets. Russia’s Gazprom, which owns roughly 37 percent of Lietuvos Dujos, has threatened to impose sanctions on Lithuania if it goes ahead without consultations. Already the Russian energy giant has refused to give Lithuania a discount on the contract price of natural gas, whereas Estonia and Latvia have each received a 15 percent price reduction. Lithuania’s government tried to distract the public from its current economic woes by revisiting the tragic events of January 1991 and by suggesting that it should sue Russia for damages.

The “Baltic Tigers” can hardly expect any massive economic aid from the EU this year, with Brussels already struggling to bail out Ireland, Greece, and Spain. Therefore, perhaps, it’s time the former Soviet states restored economic ties with Russia.

10 February 2011

Ivan Savelyev



Editor’s Note:

What the Neo-Nazis are doing in the Baltics, the Republican Party wants to do in the USA (the GOP supports these SS-lovers unreservedly). It would have the same effect… depressing the economy, destroying the housing market, hiking up inflation, and driving unemployment up into the stratosphere. By the way… in Latvia and Estonia, the Neo-Nazis stay in power by disenfranchising the Russian population (34 percent in Latvia, 28.9 percent in Estonia). No doubt, the GOP would LOVE to pull the same stunt with blacks and Hispanics. In any case, the Neoliberal (“conservative”) Republican economic nostrums are a failure in the Baltics, just as they are in the USA. See how they have to come crawling to Russia for aid… whose economy is stronger due to it’s adoption of the Social Market (not the “Free” Market).

That’s a lesson for us, no? The Social Market (New Deal) or the “Free” Market (Robber Baron Capitalism)… which one do YOU prefer?


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