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: 274 - (27/10/03)
Higher political profile.
The Lithuanians are becoming a force to be reckoned with on the world stage once again, as in 1990-91. They are sending troops to Iraq under Polish command, just as they previously sent troops to the Balkans and Afghanistan.
They are being dubbed the new 'tiger' economy' of Europe. The Economist has recently dubbed it 'the Baltic Tiger.' A few years ago the term would have fitted Estonia better. But not now.
To understand the new prominence of the Lithuanians it helps to look back into their long and interesting past.
The first time Lithuania counted was a long time ago - in the early Middle Ages the Lithuanian state stretched for a while from the Baltic to the Black Sea and included White Russia and Ukraine. It was in effect an empire and was the largest territorial entity in Europe. It was built up by dynastic means, above all marriage alliances, rather than by fighting, although naturally there was an element of warfare involved.
This had a major impact on European history. Russia developed its original Byzantine identity in a contest with this large, backward Lithuanian state, only belatedly converted to Christianity. The distended Lithuanian state was largely Russified in language and customs.
In 1386, however, it allied itself with Poland, and after failure in 1399 against the Mongols the Lithuanians joined the Poles to win the great battle of Tannenburg against the Teutonic Knights in 1410. Lithuania redirected itself westwards towards Poland and came heavily under its influence long before its formal inclusion into Poland with Union of Poland in 1569.
In an uncanny way Lithuania is experiencing something of a repetition of this remarkable history today. In the 1790s Lithuania fell into Russian hands once again, this time along with the last remnant of Poland after its successive partition by Austria, Prussia and above all Russia, which took the lion's share. After a brief stint of 20th century independence for both Lithuania and Poland between the world wars, they both ended up in subjection to Russia again in the new guise of the USSR.
Sovietisation for Lithuania in the postwar period was an echo of its earlier Russification in the early Middle Ages. But the pull of the West remained strong, mediated partly by Poland, with whom its cultural ties are intimate and ramified. It is no accident that Lithuania took the lead in the epoch of glasnost inaugurated by Gorbachev in moving towards independence from Moscow once more. The leader of the Communist Party of Lithuania at the time was none other than, Algirdas Brazauskas, its present premier. With the vital support of Yeltsin, already President of the Russian Federation within the USSR, the Lithuanian communist party declared itself independent of the Soviet one. Lithuania once again came centre stage in world politics.
In March 1990 Lithuania under a new president, the anti-communist Vytautas Landsbergis, declared full independence of Moscow and the USSR. Soviet special forces were called in to put down independence rallies and 15 were killed. The world was appalled and Gorbachev removed them, the sign to all the other Soviet republics that he at least stood out against the use of force to settle disputes internal to the Soviet state, even so momentous a one as a constituent part of it seceding from it. History was on the march and the denouement in August 1991 is well known.
Lithuania was proving to be nothing less than the catalyst of the downfall of the Soviet Union itself, one of the truly great events of world history. Having been the original foil of the rise of Byzantine Russia, it was to be the foe that undermined Communist Russia and precipitated the emergence of the New Russia of Yeltsin and what his triumph portended. Rarely can an act of political generosity as Yeltsin's siding with Brazauskas been so promptly and amply rewarded.
It must have seemed to many that little Lithuania had played a gallant role again in world politics, but that it would now recede from the stage. Prosaic matters of economics would take over its political life now that it was independent. Indeed they did. Estonia, and then Latvia, paved the way to rapid reforms in the 1990s. Lithuania, however, is catching up.
The new sobriquet for Lithuania of 'the Baltic tiger' is proving justified The Lithuanian economy is doing very well, at least on the figures. GDP grew by 7.7% on an annual basis in the first half of the year. GDP rose by 9.4% in the first quarter and 6.1% in the second.
Growth of 6.1% is forecast for the year by the Lithuanian Finance Ministry. The IMF puts its forecast at 5.3% and the European Commission at 4.5%.
These forecasts agree in seeing strong growth in Lithuania, despite poor or zero growth in the wider European economy. The essentials are coming right at last after a delay in introducing reforms that is compared with Estonia. The laggard in reform in the region in the 1990s, setting aside Belarus, has become the leader.
Not surprisingly Standard and Poor's (S&P) have upgraded their credit rating for Lithuania from stable to positive. Its long-term foreign currency debt rating is now put at BBB+, with short-term foreign currency debt rating at A-2 and long-term national currency debt rating at A-. S&P note that their review of the rating reflects expectations of rapid growth and small and stable debt.
New programme to 2006 and EU entry
The government has approved a new programme for economic development until 2006. Lithuania is expected to join the EU in spring 2004. The government expects growth to remain around 6% per annum for the coming period. This would allow government debt to be reduced from 25.6% of GDP to 24.4% by 2006, well below the threshold for joining Euroland. The programme is to be submitted to the EU Commission and other EU bodies. Clearly Lithuania is on track to join Euroland, if it wants to. That is the rub.
It is not quite such a foregone conclusion that the population will support EU accession as outsiders might suppose, although still a strong probability. What happens to Poland when it joins next year will be keenly watched in Vilnius. Foreigners are apt to put Lithuania in with Estonia and Latvia as a Baltic state. That it is, but it recollects its long ties with Poland, a fellow Catholic country that was once joined to it in the Union of Lublin of 1569, an important event in the Counter-Reformation that saw both countries won back for Catholicism. It is just possible that they will be contrary once again, going against the current of history.
The Lithuanians have no common border with Russia, except the Russian enclave, Kaliningrad, between themselves and Poland. The local Russians are only 11% of the population, much less than in the other Baltic States. Anti-Russian sentiment is not such a prime factor. Nevertheless becoming an EU member is still a way of asserting one's Western identity. That is why Lithuania is likely to join.
Gazprom poised to buy Lietuvos dujos shares
The Lithuanian government has put an end to months of haggling by accepting the latest, improved offer from Russia's Gazprom to buy 34% of the gas utility Lietuvos dujos, Interfax News Agency reported. The sale, which should be completed by the end of this year, ought to guarantee gas supplies to Lithuania at stable prices for at least 10 years to come, local observers said.
The Russian gas monopoly has offered to pay an immediate 91m litas plus another nine million litas after January 1st, 2004, providing the Lithuanian government agrees to stop regulating the price of gas supplied to the country's major consumers.
Gazprom earlier offered 80m litas for the shares, but Lithuania wanted more seeing as Germany's E.ON Energie and Ruhrgas had paid 116m litas for another 34% of Lietuvos dujos.
The German companies currently own 35.49% and the Lithuanian government 58.36% of the gas utilities shares.
Lithuanian President, Algirdas Brazauskas, recently described the sale as rational and justified and said the 34% interest in Lietuvos dujos would soon be signed over to Gazprom.
Mazeikiu nafta to sign overdraft deal with Citibank
Lithuanian oil concern Mazeikiu nafta (MN), plans to sign a US$15m overdraft deal with the London branch of Citibank.
The Mazeikiu nafta board authorised company Director General, Paul Nelson English, to sign a credit limit agreement with Citibank in London, MN spokesman, Giedrius Karsokas said, Interfax News Agency reported.
"The money will only be used if MN needs it urgently, for example if somebody fails to settle with the company on time," he said.
Mazeikiu nafta completed the first phase of refinery modernisation, at the beginning of September. It invested US$17m on equipment reconstruction and US$62.5m on new equipment.
Shareholders of the oil concern will be asked in November to decide on further upgrade, in which about US$400m to US$600m could be invested.
Net profit to US GAAP amounted to 74.068m litas in the first half of 2003, compared with a net loss of 135.7m litas in the same period for 2002.
Russian oil major, YUKOS, owns 53.7% of MN and the Lithuanian government owns 40.66%. MN includes Butinges nafta refinery, the only refinery in the Baltic States and Naftotiekis (oil pipeline).
7 potential bidders for Lithuania power utilities
Seven potential bidders have passed the qualifying round to participate in the privatisation of Lithuanian power utilities. Vakara skirtomieji tinklai (VST) and Rytu skirstomieji tinklai (RST), Lieuvos rytas said in a recent report.
Bidders for RST are Fortum of Finland, E.ON Energie of Germany (currently owns 20.28% of RST), Eesti Energia of Estonia, Elektrownie Szczytowo-pompowe, a subsidiary of Polskie sieci Elektroenergeetyczne (PSE), and a consortium of individuals involved with the Vilniaus prekyba trading network. The Lithuanian property fund excluded Dutch group VS Energy International and US corporation AES from the running.
E.ON Energie (owns 14.62% of VST) and Fortum are not allowed to bid for VST.
The bidders for this company are Achemos group of Lithuania, the group of individuals linked with Vilniaus prekyba, and a consortium that includes the Snaige refrigerator plant, Ekranas television tube maker, Vilniaus Vingis electronics plant, and wholesaler trader Sanitex and Telivesta. The privatisation tenders for RST and VST will have one phase without the need for initial offers. Final offers should be made by November 7th. The Lithuanian government hopes to complete the privatisation in 2003. The starting prices are 421.579m litas for 71.39% of RST, and 358.857m litas for 77% of
EU Commission President backs railway plan
European Commission President Romano Prodi has reportedly backed a plan to build a major railway service running from Tallinn, through Riga and Vilnius to Berlin in a bid to provide an efficient land-link from the Baltics to the EU. The Baltic states, which are slated to join the EU in May, currently have no single train connection from Europe or, for that matter, one that runs regularly between the three Baltic capitals, Vilnius City Paper has reported. "The construction of this railway branch will become an accomplishment for the entire Baltic Sea region and will help reduce the gap in the region's economic development," Lithuania's President Rolandas Paksas was quoted as saying after speaking with Prodi.
Earlier, the long-dreamed-about line, dubbed Rail Baltica, was not on the EU list of priority transportation projects, and Prodi reportedly said he will now lobby for its inclusion. The EU is expected to make a final decision around the end of this year.
The plan, which Baltic leaders have widely signed on to, involves replacing Soviet-era tracks, then installing modern electric trains that can travel 200 kilometres per hour from Estonia's capital to Berlin in just seven hours.
While these sea-coast nations have all now approved referendums on joining the EU, travelling from what will be the outer northeastern edge of the European bloc to the centre of business and cultural life on the continent remains cumbersome, time consuming and costly - leading many people here to feel isolated. Advocates say the new line could foster EU goals of bringing Europe together-economically and culturally.
There is no regular passenger or freight train traffic from the Baltic countries to Western Europe, and car or bus travel from Tallinn to Berlin via the mostly single-lane, poorly lit Baltic highways can take 20 hours or more. Many locals also consider flights prohibitively expensive. A plane from Tallinn to Berlin can cost over US$500 - more than average monthly wages here. Officials said tickets on the new train would cost half that.
Rail Baltica would run some 1,500 kilometres from Tallinn to Berlin. The project, five years in the planning by Lithuanians, Latvians and Estonians, has also been introduced to officials in Poland, through which the train would also have to run. Poland reportedly reacted favourably. (Finland, which could also put the new route to good use, has also been involved in talks.)
Officials say they hope the project could be completed in 12 years. It would take a decade to lay the EU-standard, 1435-millimetre-wide track which would replace the wider, 1520-millimetre track favoured by Soviet engineers.
Proponents say the potential economic benefits are clear, arguing that it would increase cargo traffic and tourism. Tourism officials, especially in Latvia and Lithuania, have complained for years that there were not enough cost-effective ways for tourists to get here; the vast majority of visitors to Estonia arrive by ferry from Finland.
Most Baltic trade with Western Europe including of Russian oil en route through the Baltic states to Western markets is done through seaports. Because of a lack of lines, there is little trade with the West by rail. (A large amount of Baltic trade with Russia is conducted by rail, thanks to the Soviet-built networks that run east.)
The price tag, a whopping 1 million dollars per kilometre of track, would be beyond the means of Baltic governments. Without the EU's help in constructing the 1-billion-euro plus line, it will almost certainly not be completed.
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