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Independent between the two World Wars, Lithuania was annexed by the USSR in 1940. On 11 March 1990, Lithuania became the first of the Soviet republics to declare its independence, but this proclamation was not generally recognized until September of 1991 (following the abortive coup in Moscow). The last Russian troops withdrew in 1993. Lithuania subsequently has restructured its economy for eventual integration into Western European institutions.
Update No: 266 - (27/02/03)
Lithuania is going through a profound experience; it is definitively joining the West. So of course are Estonia and Latvia, the Protestant Baltic states. But for Catholic Lithuania to be welcomed into the fold puts the capstone on the affair. For one of the essential principles of the West is secularism, not necessarily of society, but of the state, something achieved far sooner by Protestant than Catholic powers.
The key institutions of the West are the UN, NATO and the EU. The latter two are the more important from being exclusive. Lithuania is to be a member of both by 2004
First came the invitation to join NATO at the summit in Prague. The spirit of the invitation was aptly put into words by the US President George W Bush who said in Vilnius, the capital of Lithuania, "The long night of fear, uncertainty, and loneliness is over. Joining the strong and growing family of NATO, our alliance has made a solemn pledge of protection and anyone who would choose Lithuania as an enemy has also made an enemy of the United States of America. In the face of aggression, the brave people of Lithuania, Latvia and Estonia will never again stand alone."
Actually nobody with any common sense really thinks that the only conceivable aggressor, Russia, harbours or is ever again likely to harbour hostile intent towards the Baltic states, and Lithuania least of all where the Russian minority is only 11% of the population and is well on the way to being integrated. Warfare is no longer the fashionable way of resolving disputes within the West; indeed it is explicitly proscribed by NATO.
But war against a non-ANTO aggressor is within the rules. It is thoroughly appropriate that Lithuania and the other two Baltic states are joining up as the latest war in the Gulf unfolds. The heart-felt support of the bulk of the population for whatever the US deems necessary is for sure. There were no massed ranks of protesters against the conflict marching through Vilnius on February 15th, any more than in any other capital of a country recently released from totalitarianism.
Lithuania is the original host country of the Vilnius-10, hence its name, a congerie of states, NATO partners for peace, aiming to join NATO, some which are now on track for full membership. The war against terrorism and the latest war in the Gulf are their great opportunity; they have signed up for both.
The Lithuanians were right behind one bold initiative on February 5th, when the Vilnius-10, so-called because their first meeting was in the Lithuanian capital, signed a communiqué supporting the US over the Iraqi crisis. The idea was thought up in the Slovak embassy in Washington at a dinner where diplomats from the Vilnius-10 were congregating to discuss the implications of the crisis.
One of those present was Bruce Jackson, a former US Defence Department official. Jackson heads The Committee for the Liberation of Iraq. He helped draft a text supporting the US position on Iraq and was responsible for one telling sentence in particular: "Our countries understand the dangers posed by tyranny and the special responsibility of democracies to defend our shared values."
Jackson's key role was attested by Lithuania's Kestutis Jaukauskas, the deputy chief of mission at the Lithuanian Embassy in Washington. He said that Jackson played "a considerable role" and helped "initiate the text." But the Lithuanians subscribe to its liberationist sentiments every bit as much as the other Vilnius-10 countries with a very practical experience of tyranny, and what it means for the population at large.
The EU at last
For all the symbolic importance of joining NATO - and it is huge - the really important departure is joining the EU. For this is likely to change nearly everything in Lithuania, as in the other Baltic states. Indeed, the irony for Lithuania is that EU membership is more important even for its security than NATO. Its one outstanding security problem is Kaliningrad, the Russian enclave between itself and Poland, which is a naval base. If there is the slightest chance of a Russian government of the future turning nasty in the Baltic region it is over Kaliningrad.
Vilnius is pushing for the EU to provide the Kaliningrad region with the equivalent amount to make up equal financing for a whole series of joint projects with Kaliningrad. A list of projects has been unveiled at the Lithuanian consulate in Kaliningrad. The most important of them deal with moving forward the Nida initiatives on works in the Neiman River delta, the development of waterways and tourism, the construction of the Via Hanseatica road and preservation of the Kursiu Nerija National Park.
This is a masterstroke of premier Algirdas Brasauskas, the ex-communist leader of the country. He knows that the Russians would like a backdoor into the EU, knowing full well that the front door is not going to be open to them, even less than is the case for Turkey. The development of joint projects between Lithuania as an EU member after June 1st 2004 and the EU itself on the one hand and the enclave on the other will remove any small temptation for the Russians to play the Kaliningrad card other than in a pacific manner, and even open up the prospect of it joining the union - ahead of Russia itself. Brazauskas knows that the Russians are chess-players and relish the long term, even the very long term in this case, which is just as well.
Economy doing well
Under the experienced helmsmanship of Brazauskas, the economy is faring well. GDP expanded 5.9% in 2002, just as in 2001. The Central Bank of Lithuania forecasts growth of 4.9% in 2003, 5.4% in 2004 and 5.6% in 2005. Inflation of consumer prices was actually zero in 2002.
Hardly surprisingly, with these rosy results and prospects, Lithuania's credit rating is soaring in international financial markets. Foreign banks are vying for the right to organise an issue of Lithuanian Eurobonds of 400m Euro, after a successful issue of Eurobonds in April 2002.
Ministry to decide on Eurobond organiser in January-February
The Lithuanian Finance Ministry will appoint an organiser for a Eurobond issue of €400m (1.381bn litas) in January-February, BNS News Agency quoted Finance Ministry Secretary, Asta Ungulaitiene, as saying. She said that with this aim in mind the ministry has started to speak to foreign financial organisations. Information on the planned issue has been sent to 18 financial institutions. The ministry hopes to receive an answer from these by January 23rd.
Lithuania's improving reputation in recent year on international markets has increased the interest of foreign investors in Lithuanian securities. It is planned to place the Eurobonds in the first quarter 2003. The funds received from the issue will be used to buy up securities placed earlier, to refinance credits and to cover the budget deficit. Lithuania plans to place €400m in Eurobonds in 2003 and to attract two billion litas on the domestic market. As a result, total planned borrowing for the year amounts to 3.4bn litas.
In 2002 Lithuania borrowed 3.01bn litas by placing securities on the domestic and foreign markets, including a Eurobond issue for €400m with maturity in 10 years, the news agency reported. A total of 45 auctions were held to place government securities on the domestic market, at which 1.63bn litas in securities were sold.
Eurobonds from five Lithuanian issues are currently quoted on foreign exchanges, totalling €1.425bn.
E.ON to expand stake in Lithuanian power grid
Germany's E.ON Energie plans to increase its stakes in Lithuanian electricity utilities, RST and VST, in which the government plans to sell shares later this year. E.ON executive, Walter Hohlefelder, discussed the acquisitions at a meeting with Lithuanian prime minister, Algirdas Brazauskas, who has asked the economics ministry to continue talks with the German energy company, a government spokesman said.
E.ON already owns 10.9% of both Rytu skirstomijei tinklai (RST) and Vakaru skirstomijei tinklai (VST) after Lietuvos energija, the national electricity company, was recognised at the beginning of 2002. A consortium of E.ON Energie and Germany's Ruhrgas owns 35.49% of Lithuanian gas concern, Lietuvos dujos. The RST and VST privatisation's are due to begin in the second half of 2003, New Europe reported recently.
Direct foreign investment climbs
Direct foreign investment in Lithuania totalled about 13bn litas in 2002, up 21.9% year-on-year, according to preliminary figures, said Algirdas Semeta, the director of the state statistics department.
The biggest investors last year were Sweden, Denmark, Estonia, Germany and the United States. Most investment went into the manufacturing industry, finance sector, trade, postal and other services.
Lithuanian paper notes soaring Russian investment
In 2002, Russian investment in the Lithuanian economy grew at an unprecedented rate - by a factor of 4.5. As it virtually took control of the energy sector, Russian capital also started targeting other spheres, Verslo Zinios web site has reported.
Market analysts say that Russian investment has also reached other Central and Eastern European countries. With pending EU membership, there is significant enthusiasm from Russian companies that are buying shares in strategic Lithuanian companies. "Because of increasing Russian investment, various European countries are worried about their energy sectors," Kestutis Kudzmanas, minister counsellor of the Lithuanian embassy in Russia, said.
According to nine-month results, Russia occupies seventh place among direct foreign investors. Last spring, it occupied 18th place. The Lithuanian Statistics Department said that Russian investment as of 1st January 2002 stood at 167m litas [US$48m] and by 1st October it totalled 763m litas. "Russian investment has increased at the fastest pace among all investors," said Ernesta Dapkiene, representative of the Lithuanian Economic Development Agency. The Russian trade mission in Lithuania said Russian investment in the country reached US$276m. Of this sum, US$20.65m were invested in joint ventures, of which there are 857. In total, Russian capital has been put into 1,170 Lithuanian companies. Russians have a 100 per cent share in 313 Lithuanian companies.
Igor Zotov, manager of the Russian trade mission, says the biggest Russian investment has been the purchase of the controlling share in Mazeikiu Nafta [oil company] by the Russian concern Yukos. The price paid for shares of a new issue was US$75m and a similar amount was allocated for the modernization of the company as a loan.
"This way, Yukos increased its share in the subscribed capital of Mazeikiu Nafta to 53.7 per cent and guaranteed the supply of at least 5m tonnes of oil annually for a 10-year period," Zotov said.
Baltic Fleet to transport rocket fuel components
The Baltic Fleet has obtained basic consent from the government of Lithuania to transport expired rocket fuel components from Kaliningrad region. "A basic agreement was reached at the meeting between representatives of the Transportation Ministries of Lithuania and Russia, in which the command of the Baltic Fleet also took part.
Lithuania made 11 safety requirements for international transit of dangerous cargo. The special engineering and chemical divisions of the Baltic Fleet will be able to fully fulfil these requirements," Admiral, Vladimir Valuyev, commander of the Baltic Fleet, told a briefing in Kaliningrad, reports New Europe.
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