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Travels in Latvia – The Baltic Tiger Is Feeling Fenced In

Today I was in Riga, Latvia to meet with journalists, parliamentarians, and opinion leaders to discuss Russia issues, and debate the unique position the country finds itself in vis-à-vis its big neighbor. Riga has always been one of my favorite destinations in the Baltics, and in the past seven years it has enjoyed one of the highest rates of economic growth in the EU (nearly 12% last year) and a strong and stable democracy. Like many former Soviet states to join NATO in the 1990s, relations with the Russian Federation have often been punctuated by bitter and even hostile exchanges, especially over the treatment of ethnic Russians, energy issues, and an ongoing border dispute.

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Views of Riga Old Town

However even before arriving for my visit, it was apparent that a major sea change was taking place in regards to Latvian-Russian relations, and that the two countries were rapidly becoming much closer and friendlier. There are a number of factors behind the defrosting of this relationship, one of which is perhaps Latvia’s decision to list Boris Berezovsky as persona non grata, a gesture which delighted the Kremlin leadership. The fruits of the new, cozy relationship were most powerfully demonstrated at the end of last month with the historic signing of a border treaty with Russia, which had been awaiting ratification for about a decade. This was a critical victory for Latvia as it was originally signed before EU membership was granted (and this put them under pressure to enforce the Schengen rules), as well as for Russia, which will now have much looser visa regulations. Most experts doubted that there were sufficient incentives for Latvia and Russia to improve relations, but nevertheless, here we have it. IMGP1450.JPG Views of Riga Old Town But to what extent do these warmer relations translate into preferential treatment? So far it seems that Latvia has succeeded in bringing back smiles to the diplomatic negotiating table, but in substance, especially in energy, things are not quite yet so easygoing. In the eyes of many Latvians, the continued efforts by the Russians to achieve energy hegemony over the country, in gas, oil, and electricity, is extremely grating, and at times compared to the eternal debate of “occupation” vs. “voluntary alliance.” Indeed, one of the country’s critical energy issues with Russia remains unsolved. In 2003, Transneft decided to cut off the pipeline feeding the Baltic port of Ventspils, which painfully reduced exports. There are contending theories as to why the Russians are squeezing Latvia at this point, but it may be simple political leverage or an effort to push the sale of 49% of the transport company Ventspils nafta into Russian ownerships (Grigory Luchansky is said to be interested). I wonder if the oil will start pumping again after such a deal is closed? The Latvians I’ve spoken to are certainly not unaware of what’s at stake here. They know that there are enormous energy security issues in letting a Russian oil exporter (especially a state-owned company) own a majority stake in Ventspils, some believe they aren’t left without any other options. In fact, just as a side note, at one point in 2003, Yukos was considered the leading bidder to take on a stake in Ventspils before the Kremlin’s attack on the company forced the company to withdraw from negotiations, according to media reports. Sometimes it seems that the countries with long historical experiences of Russian bullying are the first to recognize the dangerous political realities of energy dependence on state-owned firms. Just last May, Latvian Foreign Minister Artis Pabriks warned that EU energy dependence could lead to political dependence: “History tells us that economic factors are and have been quite often used to gain political power, therefore the EU countries have to urgently seek to establish a common energy policy.” During my meetings with Latvian government officials, there was a high degree of interest in the North European Gas Pipeline for obvious reasons. I shared my argument with them that the secret agreement struck between Vladimir Putin and Gerhard Schroeder which made the proposal of the NEGP a possibility (at great political cost to Latvia and others), was in many ways similar to the Molotov-Ribbentrop Pact made in 1939 promising non-aggression between the Nazi Germany and the Soviet Union, and leaving the states in between divvied up into “spheres of influence” according to “secret protocols.” Latvia, in many ways, has been sold up the river by its new EU patriarch Germany, discarded as a consolation prize to Russia. Victim of German-Russian realpolitik once, shame on you; victim of German-Russian realoplitik twice, shame on me. It may be too soon to speculate on the meaning of this tactical shift on behalf of the Latvian government to attempt to warm up relations with Russia, but I hope to continue to explore the issue on this blog as I continue my travels in the Baltics.