13.04.2004
The Birth of New Europe
№2 2004 April/June

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.