Books on Latvia
Update No: 315 - (29/03/07)
Sometimes a whole political landscape can be lit up by one
dramatic event, the downfall of Nixon, the Enron affair, the arrest of
Khodorkovsky. President Vaira Vike-Freiberga, who lived most of her life in the
US, scents something of the sort may be in the wind in Latvia, as she ends her
second and last term. She seems determined to do something about it.
Bribery allegations against Lembergs spark rumours of widespread graft in
The integrity of Latvia's parliament, elected last October, was thrown into
doubt after rumours spread that as many as 31 deputies may have been on the
payroll of Ventspils Mayor, Aivars Lembergs, a very big figure indeed in Latvia,
who was arrested on March 14th on charges of bribery, money laundering and tax
evasion. The allegations, stemming from records that were seized by police
during searches of Lembergs' home and offices, are so serious that they have
thrown the very future of the 9th Saeima (parliament) into doubt.
It is unclear whether the 31 deputies are all part of the current 100-seat
parliament or include members of previous legislatures.
Lembergs, whose Greens and Farmers Union finished second in the election, was
initially detained for questioning, but a court ruled late on March 14th that he
should remain in police custody. Prosecutors successfully argued that the mayor
could influence the ongoing investigation into corruption in Ventspils business
The arrest, punctuated by images of Lembergs in handcuffs, capped off the most
dramatic week in Latvian politics since the paedophile scandal in 2000, and
possibly since independence. Earlier in the week President Vaira Vike-Freiberga
used her constitutional right (Article 72) not to approve amendments to national
security laws and instead hold a referendum on the changes, an unprecedented
move for the head of state.
The prosecutor's office has so far refused to comment on the alleged list of
names, but opposition MPs and influential politicians are calling for immediate
publication prior to the start of the presidential race, which will take place
According to Article 48 of the Constitution, the president may propose
dissolving Parliament, a decision that would have to be supported by at least 50
per cent of the vote in a national referendum. However, should the president
lose the referendum, she would have to resign her position.
It is unlikely that Vike-Freiberga, whose term in office expires in July, is
willing to take such a legacy-altering risk in the waning months of her
Regardless, both the confrontation between the head of state and the government
over the national security laws and the widespread crackdown on high-level
corruption are testing the mettle of Latvia's constitution, law enforcement
agencies and court system.
Latvia versus the Yanks - Vike-Freiberga and Soros?
As Dr Johnson said: "Patriotism is the last refuge of a
scoundrel." Is this true with Lembergs, who has been under investigation
since last July for a separate batch of money-related crimes, denies all charges
against him and says that the bribes to MPs - dubbed "stipends" in the
Latvian media - are a fiction.
"What stipends?" he countered when asked by journalists on March 19 in
a Kuldiga court, where Lembergs is under litigation in a minor abuse of power
case. "This is being done in order to dissolve the Saeima." As
Lembergs explained, the chief forces behind this push to disband parliament are
Vike-Freiberga and political structures backed by U.S. billionaire George Soros.
"What's taking place is reminiscent of American PR methods. A good question
- why does the head of state [Vike-Freiberga] need this?" he said.
Lembergs' arrest was handed down by the Riga Centre District Court. It was
expected that the Riga Regional Court would hear an appeal later in the week.
Lembergs is now residing alone in a two-person cell in Matisa Prison. Shades of
The arrest is being interpreted in Latvian media as a wider campaign against the
country's so-called oligarchs, which primarily refers to Lembergs, former Prime
Minister Andris Skele and current Transport Minister Ainars Slesers.
The leading daily Diena wrote in a front-page article that the noose has
tightened around Skele, whose name is continually brought up in connection to
the ongoing investigation into fraud in a digital TV project.
Slesers, meanwhile, has found himself embroiled in a vote-buying scandal in the
seaside town of Jurmala.
Though the term oligarch has been loosely defined and even dismissed, it
recently gained credibility when Vike-Freiberga used it in her March 10 press
conference, during which she castigated the government and Parliament for
supporting amendments to the national security law.
She said "oligarchic interests" supporting the amendments were
jeopardizing the integrity of Latvia's national security system and throwing
doubt on the country's reliability as a NATO ally.
Lembergs has been mayor of Ventspils since 1988, and Vike-Freiberga president
since 1999. Historically, the two have managed a tenuous relationship, with the
head of state reluctant to publicly criticize the mayor, but in the run-up to
last year's election the president made no qualms about pointing out charges
made against Lembergs and how this has tarnished his credibility as a leader.
Lembergs had been the Greens and Farmers candidate for prime minister.
For his part, Lembergs has become increasingly critical of the president, and
now mentions her name in the same sentence as George Soros with increasing
frequency. Soros, for Lembergs, has become the focal point of supposed nefarious
external influence on Latvia's domestic affairs, as has the government of the
The Neatkariga Rita Avize paper, which is owned by Preses Nams and is part of
Lembergs' business empire, is on a daily basis filled with numerous attacks on
The March 20 issue contains a front-page headline proclaiming "the U.S.
Embassy wants its Latvian government." The article goes on to claim that
U.S. Embassy officials are conducting "intensive consultations" with
political forces about a new coalition government in Latvia.
Unofficially, there are reports that the United States is indeed displeased with
the amendments to the national security laws, as the changes, if implemented,
would essentially strengthen parliamentary control over law enforcement
structures and widen the sphere of persons with access to vital national
security data and secrets.
As Latvia is a member of NATO and neighbour to Russia, leaks in the country's
national security arena could do substantial harm to the military alliance
The last stand of the Latvian oligarchs?
The Latvian president's decision to freeze changes to the security services
is the first shot in what could be the last stand of the country's oligarchs,
experts agreed. "The oligarchs are fighting for their survival. Before
Latvia joined the EU in 2004, the security and justice systems were greatly
strengthened - now they're a real threat to the oligarchs," said Lolita
Cigane, public policy researcher at the NGO Providus. Recently Vike-Freiberga
invoked her constitutional right to freeze the promulgation of two legal
amendments greatly increasing government control over the security services.
It was the first time in her eight-year rule that Vike-Freiberga had invoked
this right, and the first time she had drawn a direct link between the
amendments and Latvia's so-called oligarchs. The amendments "open the door
to very serious political manipulation... and, ultimately, influenced by the
so-called oligarchs, which would be very dangerous," she told journalists
in a speech of unprecedented severity. "I am ready to make my fears known -
namely, that there could be inappropriate interference in those of our
investigations which could touch either certain political groups, or the people
who support them financially and stand behind them," she added.
The amendments, passed by government as emergency legislation during
parliament's Christmas break, greatly increase governmental control over the
security services, allowing ministers and their delegates to launch
investigations into security operations. Ministers said they were needed to
improve security coordination in times of danger. Vike-Freiberga vetoed the
amendments on February 9, but parliament forced the changes through on March 1.
Many local commentators believe that the changes were provoked by politicians'
desire to tame a security apparatus which has already launched a series of
investigations into the "oligarchs".
"The anti-corruption bureau and the prosecutor-general are a threat to one
or all of the oligarchs, who are frantically trying to get access to information
on ongoing investigations," said Nils Muiznieks, head of political science
at the University of Latvia. Three men are most often referred to as Latvia's
"oligarchs:" the mayor of the oil port of Ventspils, Aivars Lembergs,
former Prime Minister Andris Skele, and Transport Minister Ainars Slesers.
"Lembergs is Latvia's only true oligarch in the Russian sense, since he has
political, economic and media power. Skele and Slesers are very weak in terms of
media power," Muiznieks said.
Each is closely linked with one of the parties in Latvia's four- party ruling
coalition, and each has been accused in the past of influencing political
processes for personal gain. Last March Slesers and Skele were implicated in a
vote-buying scandal after a leading TV journalist published recorded phone
messages which allegedly showed them coordinating the transaction. And in July
prosecutors accused Lembergs of bribery, money- laundering and exceeding his
powers. "The noose is tightest around Lembergs' neck. Skele and Slesers
don't mind seeing him squirm, but they don't want to see him behind bars because
it could be them next," Muiznieks said.
Last Monday, government figures hit back strongly at the president's
allegations. Prime Minister Aigars Kalvitis flatly denied any oligarch influence
on his government, while Lembergs accused the president of attempting to "destabilise"
the country. She "has not read the amendments" and is "hand in
hand with the Soros political association," Lembergs told the Leta news
agency. The international pro-democracy fund established by billionaire George
Soros is the sponsor of both Providus and anti-corruption watchdog Delna, which
have often criticized Lembergs.
According to the constitution, if one-tenth of Latvia's 1.49 million voters sign
a petition within the next two months, the amendments will become subject to a
national referendum. And on Monday electoral officials told Leta they will meet
this week to discuss launching the petition process - potentially leaving the
fate of the amendments and the oligarchs in voters' hands. "There is enough
disillusionment with the political elite in Latvia, but it will all depend on
how society can mobilize. That will depend on the media and on civil
groups," Cigane said.
Economists warn of slow-down in Latvia's property boom too
The property boom which has gripped Latvia since the small Baltic state joined
the EU in 2004 is unsustainable and likely to slow in the near future, experts
warned on February 28th. "The current growth rates in prices for Soviet-era
apartments are not sustainable even in the short term, and prices in this
segment are likely to stabilize during 2007," said Kristine Vitola, a
senior economic analyst at the Bank of Latvia. "New-built properties will
continue to go up in price under the influence of inflation, however," she
added, Deutsche-Presse-Agentur (dpa) reported.
Latvia's property market has seen meteoric growth since EU accession in May
2004. The former Soviet state has one of the EU's lowest levels of living space
per person, creating an apparently inexhaustible demand for more housing stock.
In the last seven months alone, property prices have risen 32 per cent, and
could hit a year-on-year growth rate of 58 per cent by June, Vitola said. The
expectation of further rapid growth to come has fuelled the housing market,
experts agree. "Recent price rises have been based on a very large degree
of optimism concerning future incomes among builders and buyers ... But if they
think prices will keep rising long-term, they're wrong," said Martins
Kazaks, senior economist at Hansabank Latvia. Despite double-figure GDP growth,
Latvia remains one of the EU's poorest countries. Over the last seven months,
wages are reckoned to have grown by around 13 percent - an exhilarating pace,
but well short of the rise in property prices. "In 2001, a worker could buy
one square metre of living space in Riga for one average net monthly salary. In
the third quarter of 2006, the same square metre would cost three monthly
salaries," Vitola pointed out. And the market's further expansion is being
largely driven by optimism that the meteoric price rises of the past will
continue, experts believe - leaving the market vulnerable to sudden shocks.
"This is the classic form of an economic bubble. There's a Chinese curse
which says, 'May you live in interesting times,' and 2007 promises to be very
interesting," said Andris Strazds, lecturer in economics at the Stockholm
School of Economics in Riga.
The predictions come at a time when concerns over Latvia's headlong economic
development are increasing. Experts predict that GDP growth in 2006 will
approach 12 per cent, while inflation is expected to top six percent - both
among the EU's highest. And a current-account deficit of over 20 per cent has
set alarm bells ringing, with senior economists warning that Latvia's economy is
now more precariously balanced than Asian economies before the great crashes of
the mid-1990s. Latvia's Baltic neighbours, Estonia and Lithuania, have also seen
property surges and economic booms. However, their property markets began to
slow down gradually in late 2006, with Soviet-era properties leading the