Since the late Middle Ages, Lithuania has not had such a high level of participation in European affairs that it will receive after May 1, 2004. No one doubts that our country is capable of making its own truly creative contribution to the building of a united Europe.

The European Union, which is to open its doors on that day to ten new member states, is entering a markedly different era in its history. Although we have been painstakingly preparing ourselves for the expansion of the EU for a long time, this event signifies a serious challenge to all of Europe – a challenge not only to the current and future members of the EU, but to its neighbors as well, including Russia. Changes that are taking place in the Old World are kind of a flexibility test for all states, a check of their ability to exploit the opportunities provided by the expansion of the European integration zone.

Lithuania is joining the European Union with its own unique heritage: a rich and diverse legacy of good-neighborly relations with Russia, as well as a high level of cooperation with the Russian regions. That is why we intend to actively use our knowledge and experience in helping our EU partners plan and implement initiatives relating to our Eastern neighbors and, above all, to Russia. We have learned from our own experience that by showing respect for each other’s interests and positions, both Lithuania and Russia are capable of finding mutually acceptable answers to questions which are being posed by the rapidly changing global situation. This mutual respect helped our two countries with the negotiation process concerning Russia’s Kaliningrad Region. At that time, we had the opportunity to prove that if the participants are positive and act pragmatically, the goal of the negotiations will surely be attained. Finally, the obligations undertaken at the negotiations were fully met, and Russia secured the right for its citizens to travel freely to Kaliningrad.

This positive experience should be extended further in order for our countries to accomplish other no less significant tasks. It is very important that the negotiations concerning Kaliningrad transit have attracted international attention to problems of the Kaliningrad Region. Today, all interested parties (Lithuania, the EU and Russia) clearly understand that the future of the Kaliningrad Region depends, in the first place, on the rate of its social and economic development. Russia and the European Union should sit down at the negotiating table again in order to reach an agreement on the common long-term strategy for developing the Kaliningrad Region. Such a strategy should provide for the implementation of ecological, infrastructural, economic and social projects that will contribute to overcoming the gap in economic development between this Russian territory and the EU member countries which surround it.

Lithuania is prepared to actively participate in the development and implementation of such a strategy. We have already established the structures needed for interaction on all levels: the Lithuania-Russia Council on long-term cooperation between regional and local authorities of Lithuania and Russia’s Kaliningrad Region, as well as a parliamentary forum. These institutions are to play a major role in solving the practical questions of cooperation, as well as serve to strengthen mutual understanding. The most important aspect of these developments is that the initiative derives from the citizens and non-governmental organizations of both countries. Lithuania is prepared to share its Kaliningrad experience with Russia’s North-West as a whole. We have stated this on the highest level and we hope that Vilnius’ intent will get an appropriate response and support from Moscow. After all, the value of cooperation and mutual understanding will increase many times over after May 1, 2004. At this time, Lithuania, as a full-fledged member of the European Union, will be able to participate in the establishment of a common position of the EU member states, and make decisions concerning its relations with Russia.

The expansion of the European Union provides new opportunities for economic development, and Lithuania has a number of attractive things to offer foreign investors. Its geographic location permits Lithuania to place extra emphasis on its transit services, as there are two international transport corridors running through the country: a well-developed network of highways, as well as the non-freezing port of Klaipeda. Furthermore, there exists a stable macroeconomic environment in Lithuania; its significant industrial potential is augmented by highly qualified and relatively inexpensive human resources. The information technology sector has been rapidly developing over the last few years.

Even before joining the EU, investment by its member states in the Lithuanian economy accounted for 60 percent of all foreign direct investment. As Lithuania’s integration into the EU is proceeding, the interest of Russian investors is also getting stronger. Businesspeople from the two countries enjoy special personal contacts; they understand the mentality of each other and know well the situation in the economic sectors of both countries that are of interest to them. Currently, Russian investment accounts for only 6 percent of foreign direct investment in the Lithuanian economy, but the trend toward greater growth is becoming obvious. And the reason is absolutely clear: by investing in Lithuania, Russian products and services are actually joining the EU single domestic market which boasts some 450 million consumers.

About 1,000 Lithuanian-Russian joint ventures have already been registered in the country. The YUKOS oil company has invested in the Mazeikiu Nafta refinery and the Mazeikiu Elektrine enterprise, Gazprom invests funds in the Lietuvos Dujos and Kauno Elektrine enterprises, the Russian mineral-and-chemical company Eurokhim provides funds to the Kedainiai enterprise of chemical fertilizers Lifosa, while the Russian commercial bank ConversBank invests in the Lithuanian commercial bank Snoras. These are just a few examples of the successful economic cooperation between our respective nations.

In its turn, Lithuania is implementing various investment projects in the Kaliningrad Region. For example, a plant to manufacture Lithuanian refrigerators with an annual output capacity of 350,000 was commissioned on March 9, 2004. Over 500 enterprises with the Lithuanian capital have been set up and are in operation now in the Kaliningrad Region. These facts prove that the region as a special economic zone is attractive to foreign investors. The proximity of the European Union should result in providing more incentives for these processes. The decision on the future of the special economic zone should be made, of course, by Russia itself with all things considered. But it is worth remembering that any significant change of business terms in the region may adversely affect the inflow of foreign investment.

The trade turnover between Russia and Lithuania has been constantly on the rise and its annual volume has exceeded ?2 billion. But the potential of the economic relations will not be fully reached until important regulation norms are introduced. These must include agreements on avoiding double taxation, and stimulating and protecting investments, which Russia has not yet ratified. We hope that those issues will be settled in the nearest future.

The expansion of the European Union will in no way significantly change the conditions of trade between Lithuania and Russia. The price of imports from Russia to Lithuania will increase by only 1.7 percent on average. On the other hand, the price of Russia’s exports to the new EU member states will fall by 4.0 percent on average, since countries such as Poland, the Czech Republic, Hungary now levy higher import taxes than the European Union. According to the estimates of the European Commission, the overall cutback will total about 300 million euros. The EU expansion will make the single European market more accessible to Russian exporters and investors. Common rules of trade, uniform customs tariffs and procedures will be applied to Russian exports in all 25 countries.

I can guarantee that Lithuania will be one of the most active supporters and initiators of developing trade and economic relations between the EU and Russia. Even before its final entry into the Union, Lithuania supported negotiations on free trade between the EU and Russia immediately after it joins the WTO. I think that all the other new members of the European Union will take a similar stand as well.

I would like to make a few separate remarks on Lithuania’s prospects in the expanded European Union. There is no doubt that its membership in the EU will reveal noncompetitive sectors of its economy. Some people are bound to be disappointed. As it exists in any business, those who are able to adapt to new conditions, and seize new opportunities for competition in the large and free market, will have more to gain. And Lithuania is ready for the challenges involved in its membership in the EU.

The European Union is a vast, multi-level organization with an elaborate structure. That is why it is only natural to ask the question: Will the voice of such a small state as Lithuania be heard? The differences in interests of the large and small members of the European Union become especially acute when questions concerning the future institutional structure of the EU are being discussed. As a participant in the Intergovernmental Conference, Lithuania is trying to find a compromise on the future model of the EU. Looking back on history, we may conclude that the worries of the small states are groundless. The very concept of the European Union repudiates the domination of any country, while providing the conditions for an indispensable mutual consent. The spirit of compromise which permeates the entire decision-making process inside the European Union, combined with the high degree of independence of the European Commission, creates the necessary prerequisites for the protection of the interests of the EU small member states on an all-European level. Besides, the economic and political life of the EU is so diverse that various coalitions of interests constantly continue to emerge. No one is surprised, for example, when states of the South form a coalition with countries of the North on some question, and donors reach a consensus with aid recipients. The classical model of “the big against the small” just does not work in the EU. And precisely because of the close integration within the European Union, its small member states have been able to raise the level of their influence and made up for the political and economic might of Europe’s great powers.

Lithuania’s immediate task is to use the successful experience of others and to learn “the EU’s navigational skills.” The process of preparing for its membership was not easy for Lithuania but, nevertheless, it succeeded in coordinating its actions with the European Commission so that they agree with the criteria of the European Union. I have no doubt that henceforth we will be able to assert our interests even more effectively.

The so called ‘Euroskeptics,’ of whom there are plenty in Lithuania as well, often express concern that membership in the EU may destroy the country’s national identity and turn it into a faceless eastern province of the European Union. A thorough analysis of other states’ experience proves otherwise: the membership will provide us with new opportunities for preserving the original authenticity of our people, their culture and language. Incidentally, starting May 1, Lithuanian will become one of the official languages of the European Union. At present, not a single member of the European Union is threatened with the loss of national self-consciousness. A rapid economic development, together with the growth of wellbeing in all the EU states, creates the favorable conditions for strengthening our individual national cultures.

By accepting ten new members, the European Union launches upon a new political era. Europe’s life will become more diversified. We will have to coordinate the interests of the states with different degrees of economic development and reach agreements on the EU’s further advancement in various directions. Serious challenges to the new members will include problems of integration into a single domestic market, effective use of the EU assistance, and the growth of competition. It is important that we determine priority spheres for financing within the new long-term budget of the European Union for 2007 to 2013. If we fail to provide financial support to such ambitious projects as the Lisbon strategy, which is intended to raise the competitiveness of the EU, or fail to invest in linking the energy, transport and communications networks of Eastern and Western Europe, then we will not be able to completely capitalize upon the opportunities provided by European integration.

My experience as a politician has convinced me that a successful economy is the key to positive political processes. Europe is no exception to this rule. And I am absolutely certain that today’s efforts by the EU member states to stimulate economic development will inevitably gain all of us political dividends in the future. And the role of the EU within the international arena will increase proportionally to the growth of its economic strength.