10.08.2004
Baltic «Laboratory» for the Wider Europe
№3 2004 July/September

The spring of 2004 will figure in the history of Russia-EU
relations as a period of major achievements and resolute steps
toward rapprochement. Two consecutive and highly important
documents were signed which symbolize the new quality of Russia-EU
interaction. In late April, a protocol extending the EU-Russia
Partnership and Cooperation Agreement (PCA) to the ten new EU
member states was signed. During the Russia-EU summit in Moscow in
May, the parties signed a protocol on Russia’s accession to the
World Trade Organization (WTO).

The preparation of these documents was difficult: the parties
exchanged tough statements, and at times it looked as if a crisis
was on the horizon. Yet a compromise was eventually reached.
Commenting on the situation, EU Trade Commissioner Pascal Lamy said
that storm clouds were gathering, but now the weather has
improved.

The success of the negotiations and the experience gained from
them inspire hope that the complicated issues that will inevitably
emerge between Moscow and Brussels in the future will be addressed
on a mutually beneficial basis. The ratified documents are proof of
progress on stubborn problems that the parties had been unable to
solve for years. Thus, a line has been drawn under the previously
thorny relationship that stalled progress on a whole range of
essential issues. These obstructed the broadening of ties between
Russia and the European Union.

Clearly, future relations will not be idyllic, but this is
normal where interaction between major players in the global arena,
like Russia and the European Union, is concerned. Today, it is
impossible to fully assess the advantages and disadvantages of the
EU getting closer to Russia’s borders. However, the strategic
benefits of a substantial broadening of economic, political,
cultural and scientific ties on the continent are obvious.

THE ATMOSPHERE IS SHOWING IMPROVEMENT

Russia’s interaction with the Baltic nations of Latvia,
Lithuania and Estonia is an essential element for the creation of a
common European economic and political space. This spring witnessed
a historical moment for the Baltic states as they became
full-fledged members of the European Union and NATO. Accords
between Russia and the EU were good news for the Baltics. Had an
unexpected ‘storm,’ such as a trade war, broken out, Russian-Baltic
relations would have been dealt a heavy blow yet again.

Fortunately, this did not happen. At the same time, a new
cooperation model has yet to be forwarded. Unlike the previous
trade agreements signed with Lithuania and Latvia (but not with
Estonia), the PCA calls for the introduction of most favored nation
regimes in trade, including free access to financial markets,
internal waterways etc. Still, having joined the European Union,
the Baltic nations have isolated themselves from Russia by the
Schengen visa accords, high land transit tariffs, and quotas for
supplies from Russia, which comprise a substantial share of Russian
exports.

Despite Russia’s tenuous relations with the Baltic states (less
noticeable with Lithuania, more so with Latvia), contacts in the
economic, financial and security spheres have intensified over the
past few years in comparison with the previous decade. This is the
result of objective economic and social processes.

It is worth noting that Finland, Sweden and Denmark greatly
promoted those ties when they chaired the European Union (in 1999,
2001 and 2002, respectively). The leadership of these countries
helped to draw the attention of politicians, the world public and
businesses to the potential of Northern Europe, including
north-western Russia. This, in turn, helped consolidate the
foundations for cooperation between the EU and Russia, as well as
settle stubborn problems.

The political atmosphere improved following September 11, 2001
when Russia and the United States initiated the war on terror as
close allies. Anti-NATO rhetoric immediately weakened in Russia,
while anti-Russian nationalistic forces in the Baltic states
alienated part of their Washington supporters. Nevertheless,
tensions continued to intensify for ethnic Russians living in the
Baltic nations. This situation had a particularly negative effect
on relations between Russia and Latvia.

For the current problems not to impair long-term strategic
considerations, Russia and the Baltic nations will have to
reinforce their efforts to promote bilateral and multilateral
partnerships. Unfortunately, the history of bilateral relations can
be of little value. Nevertheless, all of the parties will have to
search for mutually acceptable solutions to their problems.

Kaliningrad has been the focal point of many outstanding issues
related to the whole region’s future. Moscow has made its choice
clear: it wants Kaliningrad to be a flagship of the Russian
economy, as opposed to some sort of a distant military outpost.
Clearly, Kaliningrad has retained a role in Russia’s defense
planning, and this significance has grown more pronounced following
NATO’s enlargement; the Russian enclave serves the unique role in
Russia’s early warning system. Thus, given the current level of
relations between Russia and NATO, maintaining the system and
making it more efficient would be in the interests of both Russia
and the West.

The problem of transit to Kaliningrad via Lithuania has yet to
be fully resolved. Now that the passenger transit issue has been
settled more or less successfully, Russia is insisting on the need
to facilitate the clearance of cargoes. It is also looking to
reduce cargo transit tariffs. Since May 1, 2004, the cost for a
long-haul truck to travel to Kaliningrad and back again is $250.
This price far exceeds the cost prior to Lithuania joining the
European Union.
Cooperation in the transit of goods and energy resources via the
Baltic states is a key element of regional integration. The
construction of new ports, the modernization of old ports in Russia
and the commissioning of the Baltic Pipeline System (BPS) will
substantially increase the region’s economic potential. In the near
future, the BPS will reach its planned capacity of 40 million tons
of oil a year, and oil export volumes may further increase.

In the opinion of many Russian analysts, and particularly the
leadership of the Transneft state pipeline monopoly, Russia’s oil
business will not require the services of the Baltic states’
seaports, since its demand will be fully met by Russian pipeline
and transshipment capacities. However, not all of the Baltic and
Russian specialists share the view; they point to the geographic
attractiveness of ports like Ventspils, for example. Regardless,
both the consumers of services and the population at large must
benefit from the fact that more than 20 ports in the region will be
competing with each other.

Presently, there are heated debates concerning Moscow’s
reluctance to use the pipeline running to Ventspils, which is
one-third owned by Transneft. These controversies are rooted in
contradictions between Russia and other countries, including
Europe, in the field of energy. The YUKOS case has clearly
demonstrated that the Kremlin intends to retain strategic control
over the country’s natural riches – above all, its hydrocarbons –
and use them as levers in Russia’s foreign policy.

This position certainly runs counter to the European Union’s
interests: the EU is seeking to create an internal market of energy
consumers, while forcing the energy producers, including those in
Russia, to compete with each other for those consumers. As a result
of these differing approaches, the EU-Russia energy dialog has
stalled, while problems have emerged in Russia’s energy dialog with
the United States. Furthermore, talks on Russia’s accession to the
WTO proceed in a “two steps forward and one step back” fashion.
Therefore, it is obvious that the transit of energy resources
across the Baltic states is just one feature of a much more complex
problem.

SCHOOL OF INSTABILITY

The status of Russian-speaking communities in Latvia and Estonia
remains a serious problem. The legacy of the Soviet period and the
difficult period of the 1990s has not been overcome. The problem
remains and there is the risk of destabilization, even if its
gravity has subsided.

Ethnic Russians in Latvia, Lithuania and Estonia have accepted
the new rules of the game. Their repatriation to Russia has almost
ended. In the early 1990s, 70,000-80,000 individuals annually
arrived in Russia for permanent residence, while in 2000 this
figure dropped to approximately 1,000. There are grounds for saying
that the migration situation has normalized, especially when we
take into account that about 400 Russians migrated to the Baltic
countries during the same period.

The ethnic Russian communities, as well as the native
population, are forced to endure all of the inherent hardships
associated with a nascent democracy. However, unlike Lithuania,
which from the very start of its independence granted citizenship
to all those who lived there, the situation for ethnic Russians in
Estonia and Latvia has been knotty.

Russia is still dissatisfied with the pace of naturalization of
ethnic Russians in Latvia and Estonia, as it is beginning to
noticeably stall. Following some liberalization of tough
legislative requirements concerning citizenship in 1998 due to
pressure from Russia, the OSCE and the Council of Europe, 14,000 to
15,000 individuals acquired Latvian citizenship annually. However,
in 2001, only 8,000 out of 500,000 non-citizens received Latvian
citizenship. Estonian citizenship was granted to just 3,500 out of
220,000 non-citizens in 2000 and 2001. In both countries,
restrictions on permanent residency are still in place.
Furthermore, the violation of social rights, as well as bans on
particular professions for non-citizens, have still not been
removed.

Moscow’s relations with Riga became aggravated last winter in
connection with Latvia’s numerous Russian schools. Latvia’s
educational reform called for teaching exclusively in the Latvian
language from September of this year. In the wake of heated debates
and protests by the Russian-speaking community, Latvia’s Saeima
(parliament) adopted a law which stipulated that 60 percent of all
subjects will be taught in Latvian beginning with the tenth year at
school (Latvia has a 12-year secondary education).

Reaction by Latvia’s Russian-speaking community was flatly
negative. Latvia’s initiative united previously isolated groups and
radicalized them, while young people who are more traditionally
inclined to protest radically set the tone. An additional factor
which helped to stir up tensions in Latvia is that neighboring
Estonia has opted for a more flexible approach to a similar reform.
Estonia has decided to postpone its school transition to the
Estonian language until 2007, and has granted municipalities the
right to decide whether or not a particular school should move to
the new mode.

As a result, Latvia is on the verge of a very real ethnic
conflict, which adversely affects its relations with Russia. A
moratorium on reform could ease tensions: a postponement on this
decision will provide the necessary time to conduct serious talks
with the biggest organizations of students and teachers. This point
of view is shared by the OSCE and the Council of Europe. It should
be realized that the school reform aimed at the integration of
ethnic minorities into Latvian society was perceived by Latvia’s
ethnic Russians as an integral part of the government’s
discriminatory policy. They regard the restrictions on the use of
their mother tongue as a problem equal to the loss of
citizenship.

Both Riga and Brussels will have to look for answers to these
intricate questions, especially given that similar problems have
also emerged in Estonia and Lithuania, however less pronounced. It
is to their own benefit that the Baltic nations find civilized
solutions to the problems faced by their Russian-speaking
minorities. Yet Riga and Tallinn have done little so far to make
the non-citizens believe that the authorities are capable of
protecting them, as opposed to infringing upon their rights. Latvia
and Estonia have done far too little to turn Russian ethnics into
patriots of their countries. The risk remains that Latvia and
Estonia will develop into countries split into two ethnic
communities, with each of those communities voting on ethnic
grounds.

‘NORTHERN DIMENSION’

Multilateral cooperation could make its weighty contribution to
the strengthening of stability in the region, including the
development of Russian-Baltic relations. It took the European
Union’s Northern Dimension program rather long to take off, but it
got off the ground at last. Today, eleven countries in the Baltic
Sea region are within its sphere of activities.

According to the Nordic Council of Ministers, which deals with
the Northern Dimension on a permanent basis, the program has
substantial economic and political potential. In some form or
other, integration processes in the region – which includes
north-western Russia – have been underway for 12 years, that is,
since the time the Nordic Council opened its information offices in
the Baltic nations and Russia. At that time, around 40 specialists
got engaged in creating networks for establishing ties with
governmental and public organizations. The Nordic Council began
financing projects involving small and mid-sized enterprises, as
well as exchanges between nongovernmental organizations. The
project’s annual budget is around 100 million euros, 20 percent of
that sum has been spent on north-western Russia and the Baltic
states.

Between the years 2004-2006, the Northern Dimension plan of
activities calls for the implementation of initiatives that are
aimed at advancements in the economic, social and environmental
spheres of the Baltic region.

In the economic sphere, priority has been given to improving the
proficiency of the specialists, stepping up financial assistance
for research and development projects and creating modern
infrastructures. The activities of the Baltic Sea Region Energy
Cooperation (BASREC) association are aimed at bringing Russia into
the energy chains of the EU and the Nordic nations, broadening the
EU-Russia energy dialog and exploring the opportunities for further
integration of power supply systems in the region.

The Northern Dimension Environmental Partnership (NDEP) projects
are particularly topical for Russia. The European Council fully
supported NDEP during the Gцteborg summit in June 2001, and NDEP
has accumulated more than a billion euros for its projects. The
Nordic Investment Bank established by the Nordic Council of
Ministers, the European Bank for Reconstruction and Development,
the World Bank, the European Investment Bank and the governments of
Sweden and Finland have also made their contributions. In 2003,
Russia also agreed to finance NDEP programs.

Water purification, energy-saving and other NDEP projects have
been drawn up. The implementation of some of these proposals has
already started in Arkhangelsk, Kaliningrad, Murmansk, St.
Petersburg, the Leningrad Region, Novgorod and the Komi Republic.
The biggest funds are to be spent on completing the construction of
a protective dam in St. Petersburg (more than 400 million euros)
and water treatment facilities in the city and its region (around
200 million euros).

While pooling the efforts of countries in the region for
addressing particular problems, the Northern Dimension promotes
understanding among politicians, businesspeople and public figures.
On a small stretch of Europe, they have been testing methods for
the creation of four common spaces – economic, humanitarian,
internal and external security. Those four spaces will constitute
Wider Europe in the future, and Russia will be a part of it. The
significance of this regional ‘laboratory’ can hardly be
overestimated: this is where the compatibility of culture, history,
traditions, climatic and natural specifics, educational and
economic development levels creates unique chances for real
integration.

For this approach to be successful, it is necessary for us to
persistently work for the future, while reducing the risks of
political conflicts that have their roots in the past.