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latvia

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LATVIA


 

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

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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: 266 - (27/02/03)

Latvia singled out by Bush
The Latvian president, Vaira Vike-Freiberga, has participated in the Presidents' Day events in Washington on February 17th. Bush and Vike-Freiberga took a shine to each other immediately, as was the case with Bush and Condoleezza Rice. He is a particular admirer of the Latvian president's efforts to bring her country forward into the international stage.
The Presidents' Day is a US public holiday, celebrating the birthdays of former President George Washington and Abraham Lincoln. Bush is thinking more about history and his place in it every day. 
One of the achievements he wants to be remembered by is the integration of blacks into US society on better terms, the other is to bring women forward into politics. His heir may be none other than the hawkish Mrs Rice, a masterstroke to undercut the Democrats in 2008, still some time away of course.
Vike-Freiberga was invited to speak about the values of a democratic and civil society, while Condoleezza Rice was the other main speaker, after Bush.

NATO entry
All of this might seem not to matter much. In the highly charged epoch through which we are living this is not true at all. Latvia was invited to join NATO - and so effectively the West - in November at its Prague summit.
The hegemon of the West is of course the US. It is an organisation not without dissensions within its ranks, notably recently over Turkey's invocation of its articles Four and Five concerned with collective self-defence, the cornerstone of the alliance. Germany and France refused immediate deployment of NATO anti-missile equipment, AWACS, and the like, causing its gravest crisis for decades, if not ever.
The US was furious, that is Bush, Cheney and above all Rumsfeld were. Bush is a Protestant, whose core belief in diplomacy is the New Testament principle: "he who is not with me, is against me." Many world leaders will find themselves being treated off-handedly in the aftermath of the crisis for not reiterating this basic Bush precept. Vike-Freiberga, as firm a Protestant as Bush, understands this full well. 
Latvia has been wholly supportive of the US throughout the crisis, as a member of the Vilnius-10 and as a NATO member by 2004. It is not of course a likely combatant in the Gulf conflict, but as a country with Ventspils, the largest oil transit port in the Baltic Sea, is likely to be heavily involved in the consequences.
Indeed, the Latvians were prime movers in an initiative by the Vilnius-10 on February 5th, when they sent a diplomatic note to the US State Department fully supporting Washington in its Iraq policy. This infuriated Chirac as much as it delighted the hawks in Washington. One of its most compelling assertions was that: "Our countries understand the dangers posed by tyranny and the special responsibility of democracies to defend our shared values." The French and the British to their shame forgot this in 1938 at the Munich Pact. The US and the UK are not going to make that mistake again; and the Vilnius-10 appreciate that, even if Chirac doesn't. 

Economy recovers but now a low base
The economy is not doing as well as Lithuania's next door which is showing spectacular near 6% growth in GDP year by year, nor as well as Estonia's, the star turn in the whole former Soviet Union. But growth at over 3% in 2002 was respectable, while inflation was right down to 1.4%.
Latvia was one of the poorest countries in Europe at independence, one of the bottom 10, in 1991. It has done far better than most of them subsequently. But it needs a new boost to join a higher league - and it is going to get it, EU membership in June 2004. By then, with a lower oil price after post-Saddam Iraq emerges on the scene, Latvia will not necessarily fare so badly from it. Indeed its prospects could improve. Transit fees for oil are charged on a flat rate per barrel. The lower the price, the more should be sold and the higher should be total transit fee revenues. That is so long as the world economy picks up on the lower oil price. Things could soon be going Latvia's way.

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BANKING

Latvian government decides to sell major holding in Latvian Savings Bank


The majority shareholding in the Latvijas Krajbanka [Latvian Savings Bank] belonging to the state is to be sold as a single package by open auction at an initial price of 1.81 lats a share. This was decided on 4th February when the government agreed on the basic regulations for the second round of privatisation of the bank, Latvian Radio has reported. 
The Radio correspondent said that the Privatisation Agency had prepared seven options for the second round of the privatisation of the Latvijas Krajbanka. The Ministry of Economics chose one of them, which the Cabinet of Ministers has now basically approved. The state currently holds almost 3m shares in the bank. It was decided that of those, 2,277,500 shares, which make up 25.01 per cent of the bank's basic capital, will be sold as a single package. A sum equivalent to the initial auction price must be paid by the start of the auction, and the remainder within ten days of the confirmation of the result of the auction; 6.6 per cent of the bank's basic capital in shares will be sold for [privatisation] certificates to the current and retired staff of the bank. According to the law, the price of these shares is 1 lats each. The privatisation reserve will retain 0.51 per cent of the shares from the bank's basic capital. It must be said that none of the seven options envisaged the public auction of the bank's shares. So the public will not be able to use certificates for the privatisation of the savings bank - the exception being, of course, the current and retired staff of the bank.
This was Economics Minister Juris Lujans's explanation of the position: "I explain it by saying that we believe it is more beneficial to the state to sell this share of the capital in a state enterprise for cash, thus earning considerable funds for the state budget. We link this to the fact that, in my opinion, we can thus clearly see when there is a wealthy investor - this is a bank, after all, and thirdly, I would like to remind you that this bank did have a first round of privatisation, in which more than eight thousand people got shares in the bank for certificates." 
The Radio report continued: "The Cabinet of Ministers is going to decide on the possible use of the certificates at another session. Speaking about the privatisation of the savings bank, the biggest debates at the cabinet meeting were caused by the initial price of the share package at auction. The Ministry of Economics believed that it must be 1.21 lats a share. It took as the basis the relation between bank's own capital and the basic capital in the current balance sheet - in other words, how much profit will one share bring at the moment. Since the savings bank's shares are not quoted on the stock exchange, the market value of the shares is not known in practice. On the one occasion of their sale this year, 2.70 lats were paid for a share. After long debates, the ministers took the decision that the initial share price for the package to be sold must be determined from the price recommended by the Economics Ministry, using the coefficient of 1.5: so, 1.81 lats a share. Twelve ministers voted in favour of these basic conditions for privatising the savings bank, but five ministers from For the Fatherland and Freedom - LNNK and the Alliance of Greens and Farmers Union abstained.

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ENERGY

Baltics energy grids to cooperate in telecommunications

Three Baltic state electricity companies, Latvenergo, Lietuvos Energija and Eesti Energia's subsidiary Televorgu, have signed a cooperation agreement for the telecommunications sphere, Latvenergo reported. The agreement signed between the three national power utilities last year, provides support for telecommunications services in all three Baltic states. The three companies also intend to offer joint international data transmission services from Scandinavia to Russia and Poland.
Latvenergo reported that the trilateral agreement foresees that a contract for telecommunications services in any of the three countries will be binding for all three power grids. The Baltic electricity company telecommunications services include local data transmission and international data transmission.
Kommersant Baltic Daily quoted Latvenergo board member, Aigars Milko, as saying in an interview that Latvenergo is actively working towards developing cooperation with the neighbouring power grids in telecommunications, which will in future allow for using the fibre-optic cables for data transmission between the Baltic states. Melko said that cooperating with other Baltic energy companies, Latvenergo will be able to form a solid competition to Baltic state telecommunications companies, including local former monopoly Lattelekom.
Late last year the Latvian public services regulator issued a licence to Latvenergo for voice telephony services, data transmission and Internet services. Today Latvenergo offers telecommunications services to the DC Baltija dispatcher centre, while voice services for household clients are not yet planned, as this would require too much investment. The daily reported that last year Latvenergo invested around €3.2m towards its fibre-optic cable network.
Latvenergo is among a number of companies bidding for the telecommunications market in Latvia since Lattelekom lost its monopoly status as of January 1, 2003.

Latvian tycoon urges Russia to clarify position on oil transit

The president of the Latvian Association of Transit Business and the mayor of Ventspils, Aivars Lembergs, on 30th January called on Russia "to state openly if it will be using the Latvian port of Ventspils for the transit of its oil," ITAR-TASS News Agency has reported.
Late in 2002 the Russian government decided to discontinue the pumping of oil via Latvia in view of the Russian export pipeline system being fully loaded.
The mayor of Ventspils told TASS this decision was political and, to confirm his view, mentioned the letter that a number of Russian oil companies, according to him, addressed to Russian Prime Minister Mikhail Kasyanov. The mayor said the letter, specifically, mentioned "artificial limitation of the capacity of Polatsk (Belarus) - Ventspils (Latvia) oil pipeline."
Lembergs believes the port of Ventspils has to operate in conditions of uncertainty. He also said Russia would "act humanely" if it made it known to workers of Latvian oil transit companies whether they would have employment in future. He noted that over 65 per cent of the personnel of the company, Ventspils Nafta, and over 95 per cent of those of LatRosTrans are Russians.
Russian Deputy Premier Viktor Khristenko said recently that the question of resuming the oil exports via Ventspils would be discussed in March. "The pipeline system now operates to capacity, and the Ventspils terminal can be loaded only if the load in other directions is lessened," he said.

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