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LATVIA


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 8,406 7,500 7,200 93
         
GNI per capita
 US $ 3,480 3,230 2,920 86
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km) 
64,589

Population
2,385,231

Principal 
ethnic groups 
Latvians 52.0%
Russians 34%
Belarusians 4.5%

Capital 
Riga

Currency 
Lats

President
Mrs Vaira 
Vike-Freiberga

  

Background:
After a brief period of independence between the two World Wars, Latvia was annexed by the USSR in 1940. It reestablished its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 30% of the population) remains of concern to Moscow. Latvia continues to revamp its economy for eventual integration into various Western European political and economic institutions.

Update No: 275- (01/12/03)

Latvia in Iraq
The Latvians were among those who generally supported the war in Iraq. Their foreign minister, Sandra Kalniete, explained why in a recent article in the Wall Street Journal Europe, called 'Freedom cannot be taken for granted.'
"Latvia recently celebrated her 85th anniversary. Fifty of those years were spent living under Soviet and Nazi totalitarian regimes. Latvia lost its independence in 1940 because its proclaimed neutrality was not effective and Western countries were not able to take a common line against two evil empires. Our people suffered under the rule of totalitarianism. This is why Latvia decided to support coalition forces in Iraq."
She added: "This is why Latvia has sent more peacekeeping forces than anywhere ever before to Iraq. Latvia has committed itself to this process by sending its soldiers as part of the stabilization forces in Iraq and offering technical assistance, as well as sharing our transformation experience."

Latvia in the EU
Another woman at the top in Latvian politics is the president, Vaira Vike-Freiberga. She is keen to steer Latvia into the EU as soon and as smoothly as possible, not least to exclude for ever the possibility of a return to totalitarianism. It is not that even the newly authoritarian Russia of Putin makes Latvians afraid of a new Russian invasion, but that one cannot be sure what Russia might be like in 30 or 50 years' time.
Latvia is in fact due to join in May next year.Vike-Freiberga met with President Roman Prodi of the European Commission (EC) in Brussels on October 10th. These type of meetings are usually the occasion for a bland exchange of platitudes. The leaders merely ratify decisions taken by hard-nosed officials out of the public eye. This was no exception.
But this itself was significant. Previously the EU has objected to Latvia's policy on citizenship, denying it in effect to the large Russian minority, which predominates in the six largest conurbations, including the capital. Riga. The requirement of fluency in Latvian has been too daunting for Russian Latvians of a certain age. The EC, however, supports Latvia's society integration policy, says the commission president, which is on the right track, he avers. 
Such is not the view of the Council of Europe; whose head on human rights, Alvaro Gil-Robles, told a Latvian parliamentary delegation recently that the naturalisation process in the country is too complicated. The language politics in the republic is aimed more at assimilation than integration, he said. "Even if someone were just thinking about assimilation, it would be a big mistake; it is more important to convince the society than it is to coerce them. Otherwise you could have problems in the future."
The problems are already present in Russia's view, which cancelled a planned meeting of the Latvian-Russian Intergovernmental Commission for October 27th. The commission has never met at the highest level since its formation in 1997. The Russians are taking revenge on Latvia by cutting their supplies to Ventspils, the oil terminal and port on the Baltic. Oil transhipment by pipeline has been halted and is only by rail from Russia. This has risen by 143% year-on-year, not enough to offset a 22.9% drop in total from 11.8 million tonnes in the first nine months of 2002 to 9.1 million tonnes in the same period of 2003.
Actually the problem of integrating the Russia minority is likely to disappear in the future, as young Russians take to learning Latvian at school as well as even marrying into the Latvian population. The future lies with harmony. 
This is for largely economic reasons. Latvia is doing well economically in a way that is not captured by statistics. Some 40% of economic activity is in the black economy, unreported by official statistics. Even on these the economy is vibrant, GDP growing by over 5% annually in this decade. Russian Latvians want to be part of the success story and members of the EU to boot.

Russia-Latvia relations hurt by spat
The relations between Russia and Latvia have not been helped by some recent comments by two Russian deputies, one of whom is regarded as an incendiary by all those cherishing Western values, namely Vladimir Zhirinovsky. He is the head of the Liberal Democratic Party of Russia, which is anything but liberal, and not notably democratic, in its ardent Russophile nationalist viewpoint. The thought of him ever coming to power in Moscow is certainly something to alarm the Latvians.
The Latvian Foreign Ministry recently expressed its protest regarding remarks made by Russian State Duma Deputy Speaker, Vladimir Zhirinovsk,y and chief of the State Duma's international relations committee, Dmitry Rogozin. 
The ministry has called these remarks "insulting, provocative and aimed at straining bilateral relations." In an interview with Latvian television recently Zhirinovsky called the Latvians aboriginals and said that the Latvian president should be tried by The Hague court together with Former Yugoslav President Slobodon Milosevic, who is charged with war crimes. Rogosin said that pro-Nazi forces have come to power in Latvia and called Latvia a country of thugs when commenting on the opening of a cemetery where Latvian citizens who fought alongside Nazi troops during World War II are buried and a five-year prison sentence issued to former Soviet specials services officer, Nikolay Larionov.
Foreign Ministry State Secretary Maris Riekstins told the Russian ambassador at Riga, Igor Studennikov, that these remarks regarding the country's democratically elected parliament and government and other high-ranking officials are insulting. "These statements are seen as an inappropriate response of this neighbouring country's relations in the interests of the two countries' citizens," Riekstins added. 

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CREDIT RATINGS

Fitch Ratings upgrades Latvia rating

The international credit rating agency, Fitch Ratings, has upgraded Latvia's future prospects rating for long-term loans in foreign currency from a stable outlook to a positive outlook, the finance ministry's press secretary, Baiba Melnace, said recently, LETA News Agency reported.
Fitch Ratings has raised the future outlook rating for 10 European Union candidate countries simultaneously. The agency stressed that increase of ratings was guaranteed by their integration into EU and increasing potential of their joining the European Monetary Union (EMU), by introduction of the Euro, initially pegging the national currency to the Euro and observing the Maastricht criteria, for instance, keeping the budget deficit with 3.0% of GDP and others.
The agency pointed out that the Baltic countries and Slovenia are the only EU candidate countries which observe all of the Maastricht criteria.
Fitch Ratings predicted the rating of countries, including Latvia, could be upgraded by two to three grades after the introduction of the Euro because the integration in EU and joining the EMU would lessen the insolvency risks.
In July, Fitch Ratings upgraded Latvia's rating for long-term loans in foreign currency from BBB to BBB+, and affirmed long-term loans in foreign currency rating at BBB+, long-term loans in local currency - A, short-term loans in foreign currency - F3.

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ENERGY

Ventspils nafta looks to start using new railway overpass in 2004 

Latvian oil company, Ventspils nafta, plans to put a new railway overpass that can handle 4.5 million tonnes per year to use in 2004, a top company official has said, Interfax News Agency has reported. 
Company board chairman, Pumpurs Uldis, was speaking at a conference in Moscow concerning prospects for the independent oil business in the Commonwealth of Independent States and the Baltics. 
He noted that his company plans to invest US$17m in the Ventspils terminal's infrastructure before year-end. 
"Even though Russian oil has stopped moving in the direction of Ventspils, all the terminal infrastructure is in working order and ready to receive oil," Uldis said. 
The people at Transneft, Russia's pipeline operator, take the view that US$150m has to be put into expanding Transneft's handling capacity in order for oil to resume flowing to the terminal, Uldis said. "However, we think there is no need for that, as it is possible to use existing capacity. The transportation issue is political, not technical," he said. 

Latvijas gaze shareholders offer to buy out minorities 

More than a month after the official deadline, majority shareholders in Latvian gas utility, Latvijas gaze, have applied for permission to buy out minority holders, as per commitments undertaken back in 1997, BNS News Agency has reported. 
E.ON Energie, which currently owns 18.06% of the shares, Ruhrgas (28.66%) and Russia's Gazprom (25%), which signed a 20-year deal in April 1997 to offer to buy shares from minorities, applied or are applying to the State Commission for the Financial and Capital Markets for permission to buy the shares, a commission representative told BNS. 
The Latvian economics ministry also signed the deal, but now owns just a small block of shares. Gazprom's application has not yet been received, but it is in the post, the representative said. 
The shareholders' agreement signed back in 1997 states that shareholders do not have the right to sell their stakes without the consent of the other shareholders. 
Itera Latvija, which owns 25% of the utility's shares, did not sign the agreement. 
The commission representative did not say at what price the majority holders would offer to buy the shares. 
The state commission on October 9th warned the majority holders that they were bound by law to make a formal offer to buy the shares from the minorities. Companies that became owners of Latvian enterprises before September 25th, 1999 or which collectively own more than 50% are required within four years of that date (by September 26th, 2003) to offer to buy minorities out. That date has passed, and the commission said on October 9th that majorities would be fined 5,000 lati (0.561 lati/US$1 on November 11th) if they do not make the offer within a month. 

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