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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: 268 - (25/04/03)
Latvia is entering a testing time for more reasons than one. It is facing presidential elections in July. The incumbent, Vaira Vike-Freiberga, has taken a high profile stance, in favour of the US-led coalition over Iraq, which has not gone down well in Moscow. Indeed, an undercurrent of hostility between Riga and Moscow is evident today, the Russians having blocked oil exports via Ventspils, Latvia's main port with the largest oil terminal on the eastern shore of the Baltic Sea formerly inside the USSR. Vike-Freiberga is still likely to be re-elected, although the defeat of Valdas Adamkus in recent presidential elections in Lithuania after hosting a Bush visit to Vilnius should enjoin a caution here.
The oil crisis
Russia's new obstreperousness over its oil exports is the more curious because of its massive oil boom in recent years. In the 2000s its oil output has been surging by 10% per annum and it has been running out of outlets for exports of oil, which has been its prime source of domestic growth. Bottlenecks are already apparent, restricting sales to Western markers. Hardly the moment to cut off supplies via Latvia.
Transneft, the Russian monopoly carrier, is a state-owned concern. Its marketing strategy reflects geopolitical as well as commercial considerations. The Russians may be motivated by a long-term investment strategy. By squeezing the Ventspils terminal they may well be hoping to secure its shares at rock bottom prices, now part owned by the Latvian government and part by private Latvian investors.
Ventspils is the only outlet for Russian oil which can operate around the clock all of the year. Primorsk on the Russian Baltic shore is ice-bound in winter and Novorossysk on the Black Sea shore faces rough waves and high winds for months at a time. Yet in 2002 Russia reduced exports of oil via Ventspils to a trickle and in February 2003 to zero.
An oil glut is already in evidence and growing within Russia, seeking outlets to international markets. Thus, the Russian government's moves against the Latvian export terminal hurt not only Latvia, but Western interests, and indeed the interests of Russian oil-producing companies, most of which are private by now.
Earlier, five of Russia's largest oil producing companies - LUKoil, Yukos, Surgutneftegaz, Tyumen and Rosneft - petitioned Prime Minister Mikhail Kasyanov to authorise them to resume exports of oil and oil products through Ventspils, using Transneft's pipeline. Kasyanov demonstratively ignored the petition; while Deputy Prime Minister Viktor Khristenko, who is responsible for the energy sector, turned down the request. Russian government officials indicated that the Kremlin backed Transneft and so authorised the government's negative response to the producer companies.
To be sure, Ventspils can only handle a relatively small part of Russia's total exportable oil volume. But it can at least alleviate the situation in the short term, enabling Russian producer companies to increase exports in keeping with the recently assumed commitments.
Russia also blocked Kazak oil from going via Ventspils. It is clearly aspiring to a full control over Latvia's energy supply, something which Riga will forcefully resist. The EU needs to play a helpful role here.
Moreover, while the EU's Western members are in a position to diversify their energy supply sources, Russia enjoys a near-monopoly as energy supplier to prospective EU members such as the Baltic states. This economic clout seems to be growing, and can potentially be misused for gaining political influence.
The EU must forestall any trend toward a division of EU territory into two zones - western and eastern - that do not enjoy the same level of energy security and immunity to political misuse of energy deliveries. The answer should be a programme of targeted investment by the EU in the energy sector of the Baltic states and other prospective member countries.
Russia says won't export oil via Latvian port in Q2
A Russian draft oil export schedule for the second quarter of the year does not involve the transport of any oil via the Baltic port of Ventspils in Latvia, sources close to the government trunk pipeline commission have said.
Transport via Ventspils was reduced in 2002, and no schedule to use the route has been drafted for the first quarter of 2003. Commission Chairman, Deputy prime minister, Viktor Khristenko, said the government would consider whether Russia would use the Ventspils terminal.
Early in January, large Russian oil companies urged the government to take measures to make full use of Russia's export pipeline capacity. They complained that, in the first quarter of last year, Russian companies exported 3.7m tonnes of oil to Ventspils, which meant that 5% of the capacity of the Polotsk-Ventspils pipeline remained unused. In the fourth quarter, only one million tonnes went to Ventspils, merely 27% of the pipeline's capacity, Interfax News Agency reported.
A top figure in Transneft, Russia's pipeline monopoly company, said Transneft did not plan to export any oil via Ventspils because there were no technical resources for this. "Such resources won't suddenly come out of nowhere, they can only come to the detriment of the Baltic Pipeline System, but a political decision is needed for this," Transneft Vice President, Sergei Grigoryev, said.
Latvia meanwhile presented Russia with a diplomatic note accusing Moscow of failing to honour a Latvian-Russian agreement on the joint use of pipelines crossing Latvia. The pipeline commission has put off the meeting to consider the second quarter export schedule and oil balance from March 19th to March 25th.
Latvian parliament rules to restrict land sales to foreigners
Noncitizens will continue not to be able to acquire land in the future in Latvia, but restrictions are placed on European Union citizens buying land until 2011. This was determined by the Saeima [parliament] on 3rd April in amendments to legislation that it approved, Latvian Radio has reported.
Ginta Bartkevica, the radio's Correspondent added: "Considering that in Latvia land market prices are much lower than elsewhere in Europe, and combining this with the population's purchasing power, there are fears that foreigners may start buying up large amounts of land in our country for these reasons. So the Saeima has determined restrictions, applying to citizens of the European Union."
Deputy Indulis Emsis of the Greens and Farmers Union, chairman of the commission
on the national economy, explained: "Up to 2011 we will be able to admit onto the land market basically only juridical and physical persons registered in Latvia, and that means we will be able to protect our agricultural land from rapid purchase by citizens of other countries."
The Correspondent continued: "It must be said that in the transition period from 2004 to May 2011, citizens of the European Union will be able to acquire farmland if they have lived continuously in Latvia for at least three years and are actively engaged in agriculture. Meanwhile noncitizens and residents of countries with which Latvia has not concluded an agreement on protection of investment will, as before, be unable to acquire land in Latvia at all; they will only be able to acquire building land with local authority permission. This decision raised protest from the leftist forces, but without results."
This law on restrictions of land sales takes effect on 15th April; it is necessary so that that Latvia can concluded the entry agreement with the European Union, but the restrictions only come into effect on 1st May 2004. Market specialists predict that the restrictions may hamper competitiveness and reduce land market prices.
Latvia - Latvenergo to launch voice phone services
Latvenergo (Latvia), state electricity firm, aims to launch voice phone services in 2004, according to Janis Kenins, technical director, the Financial Times has reported.
The company aims to supply telecoms services to corporate clients, and also aims to move into the private sector telecoms market, according to Kenins. Latvenergo will offer its telecoms infrastructure for links with Europe and Russia in 2003. The company will not offer data or Internet services for general use, but will stay as a network operator.
In future, Latvenergo will supply telecoms and data transmission services in the three Baltic states.
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