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Area ( 


ethnic groups 
Latvians 52.0%
Russians 34%
Belarusians 4.5%



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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: 269 - (29/05/03)

The Latvian president, Varia Vike-Freiberga, is becoming a leading figure on the world stage. The Baltic states are small in each case, but they make up for that by being intriguing, indeed rather glamorous. They benefit from having been seen as David up against the Russian Goliath. Virtually everyone, including many Russians, have a soft spot for them.
They are generally excellent linguists. But this is causing one serious problem, their assumption that the Russians in their midst, 30% of the population, should all learn Latvian. A current proposal to make Latvian the language of instruction in all schools is provoking a lively opposition from the Russians. If one acquires a second language, or if possible a third one, one does not want it to be spoken by only two million or so people. English, spoken by one billion or so, is rather more useful; and German, by one hundred million, is also rather more useful, with in both cases a world literature to read. Where is the Latvian Shakespeare or Goethe?
A conference of the Equal Rights Party was held in Riga in early April, calling for "No to Deadly Reforms in 2004," the proposed switch to Latvian as the primary language. A protest march for the end of May is planned in Riga with the Latvian Socialist Party, the National Harmony Party, the Latvian Association for Support to Russian schools and the Latvian Russian Community all participating. Quite a few younger Russians are learning Latvian, as it so happens, for the most natural of reasons, to speak to the opposite sex. Mixed marriages used to be rare, but are becoming more common. That should eventually help solve the problem.
The pull of Europe is the really big influence in Latvia, not that of Russia. The Latvian Cabinet has approved the EU accession treaty. The document contains 5.800 pages, with 18 addendums and 10 protocols. EU entry is set for May 2004 and "is in the bag."
The big issue bedevilling the political situation is the Russian attempt to choke off oil supplies to Ventspils, the Latvian port with the largest facilities for oil export on the Baltic shore. Transneft, the Russian carrier is trying to buy it on the cheap, for reasons analysed below in Energy Supplement.

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Latvia to place 400m Euro in bonds

Latvia will issue €300m to €400m in a 10 year Eurobonds in 2003, BNS News Agency reported the Finance ministry as saying. The money raised is to be used to redeem five-year first issue Eurobonds in May 2004, as well as for other purposes. 
The ministry recently sent letters to various international banks, suggesting they submit proposals on participation in organising the bond issue. These proposals will be accepted until May 23rd. 
The current situation is favourable for a Eurobond issue due to low yield rates around the world, which in the future will mean less spending on debt servicing, the ministry said. Latvia placed €150m in five-year Eurobonds in May 1999 and another €75m worth in September. The annual coupon for the Eurobonds is 6.25 per cent.

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Latvia begins talks with LG for refinery in Ventspils

The Latvian government at a meeting recently directed the republic's Development Agency to start talks with South Korea's LG International Corp. to build an oil refinery in Ventspils at a cost of US$650m. Latvian Economic Minister, Juris Lujans, is to send a letter to LG in which he will state Latvia's interest in this project, but will not contain any concrete proposals from the Latvian state, New Europe reports.
Development Agency CEO, Juris Kanels, expressed regret that investment by the South Korean company has become bogged down in the corridors of power for so long, as a letter was received from LG two and a half months ago. The Economics Ministry considers that this project would increase the role of Ventspils and of Latvia on the world oil product market, and would also partially resolve the issue of restarting exports of Russian oil through the Polotsk-Ventspils pipeline. It is planned that the refinery will have a capacity of 1 to 3.5m tonnes of oil per year.

Latvian government permits oil production on dry land

The Latvian government permitted exploration and production of oil to be carried out on dry land recently by confirming changes in a number of regulations governing the holding of tenders for the right to explore and produce hydrocarbons, the Latvian Economics Ministry said, Interfax News Agency has reported.
Previously, exploration and production of hydrocarbon was permitted only offshore. According to ministry information, there may be almost one billion lats worth of oil under Latvia's soil. 
Companies that earlier announced plans to explore for oil onshore in Latvia include HUNT Oil Company, ANDADARCO Petroleum Corp, Calenergy Gas Ltd, EDC Ltd, JKX Oil and Gas, Rockford Energy Ltd, Northern Petroleum Plc, Oljeprospektering AB, GotOil Resources Ltd, GX Technology Ltd, Minijos Nafta, Petrobaltic, OOO Energija, OOO P.L.E and Armstrong Lighting, but due to the absence of regulatory support their attempts to receive licences were unsuccessful, the statement said.
The Economic ministry said that Latvia's onshore fields contain 63 million barrels of oil.

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IMF predicts high economic growth for Latvia

The International Monetary Fund (IMF), in its latest report, has predicted that Latvia will witness the greatest economic growth among the European Union (EU) candidate nations, LETA News agency has reported. The IMF has brought down economic growth projections worldwide due to the war in Iraq, although in the EU accession countries it is expected that growth in 2003 will exceed 2002 results. This is because domestic demand remains well sustained and there is some modest pickup in foreign demand.
Latvia's growth in GDP is projected at 5.5%, and Bulgaria 5%. Estonia could witness a 4.9% growth this year in GDP, but the Czech Republic will be at the bottom among pending EU member states with a 1.9% result, according to IMF experts.
The GDP growth for Latvia in 2004, the IMF believes, could be 6%, with Lithuania looking at 5.7%, Estonia 5.2%. In both 2003 and 2004, consumer prices could climb in Latvia by 3%, in Estonia 3.6% this year and 2.9% in 2004, but Lithuania 2.1% in 2003 and 2.5% in 2004.
Among the accession nations, Latvia will probably retain one of the biggest current account deficits with a minus 8.5% rate of GDP this year, and a minus 7.1% rate in 2004. In Estonia, the deficit is to be minus 5% this year and minus 5.1% in 2004, in Lithuania 5.8% and 5.4%.
The IMF in its report said that large current account deficits represent an ongoing risk to the outlook and underscore the need for continued progress with medium-term fiscal consolidation, which is facing pressures from rising expenses associated with EU accession and, in some cases, the electoral cycle. These pressures demand a careful review of government spending priorities and tax cut commitments to secure the momentum of fiscal consolidation in 2003-2004 and the credibility of medium-term balanced budget targets, which are key to managing risks to market confidence in the face of very large external deficits.
The agreement reached last December, which paves the way for enlargement of the European Union by 10 new members in May 2004, highlights both the progress made over the past decade in transforming these countries into well-functioning market economies and the challenges ahead as governments look beyond accession to the requirements associated with adoption of the Euro.
Although the nature of required adjustments varies across countries, the need for fiscal restraint is likely to remain a central focus of policy, not only owing to spending pressures from complying with EU environmental standards and absorbing development funds (which require domestic fiscal co-financing), but also because of a range of country-specific factors - including high current account deficits, overly strong exchange rates, demographic pressures, and fragile market sediment. An immediate risk relates to the potential for a protracted war with Iraq, which would affect the central European economies and Bulgaria through higher oil prices and reduced exports to the European Union (given the strong trade linkages). Romania and the Baltics might be less affected owing to local oil production or oil transit receipts, the IMF said.

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Cargo turnover keeps falling at ports

About 13,503,900 tonnes of cargo were handled at Latvian ports overall in the past three months, 5.6 per cent down from the first quarter last year, LETA News Agency has reported, citing Transport Ministry data. Latvia's ports handled 14,301,000 tonnes of cargo in the first three months last year.
Two of Latvia's small ports - Salacgriva and Lielupe, did not operate in the first quarter of this year. As usual Ventspils posted the biggest cargo turnover of all Latvia's ports in the first quarter - 7,429,900 tonnes, 18.6 per cent down from the 9,130,300 tonnes in the first quarter last year. Riga port handled 4,706,600 tonnes of cargo, 15.7 per cent up from the respective period last year.
Only three out of Latvia's 10 ports posted an increase in cargo turnover. Besides Riga, Liepaja and Pavilosta handled respectively, 53.8 per cent and 14.3 per cent more cargo. Cargo turnover at Liepaja amounted to 1,345,400 tonnes and to 800 tonnes at Pavilosta. Cargo turnover at Salacgriva and Lielupe ports fell 100 per cent, Skulte posted a 95 per cent fall, Engure 90 percent, Roja 83.6 per cent, Mersrags 72.2 per cent. Overall, cargo turnover at Latvia's small ports fell 90.3 per cent in the first quarter. 

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