Russia is arguably the only country in the post-Soviet space where the veneration for Karlsonas has taken on greater proportions than in Lithuania. There has even been estimated that Astrid Lindgren’s Karlsson-on-the-roof is likely to be the second most common book to be found in the average Russian home next to the Bible. (When Astrid Lindgren herself was told about this by the Russian Ambassador to Sweden, Boris Pankin, she is quoted to have said: “Strange, I had no idea that the Bible was that popular”. And when Ingvar Carlsson, then Swedish Minister of State, visited Russia in the early 1990s, his Russian hosts deplored the fact that he had very little in common with “the real Karlsson”.

However, in Sweden, the homeland of Astrid Lindgren and her vast collection of beloved fairytale characters, children barely rank Karlsonas among the top-ten of Astrid Lindgren’s most appreciated figures. Similar attitudes can be observed among Western European children in general, who are more inclined to embrace the stories about Pippi Longstocking and Emil of Lönneberga.

So, does this imply that the frame of cultural preference varies significantly between Eastern European children as compared to Western European children as far as Astrid Lindgren’s stories are concerned?

No, this is not likely to be the case since the image of Karlsson-on-the-roof which has been conveyed in Lithuania and the post-Soviet space is slightly different in several perspectives compared to how he was depicted in the original Swedish versions of the popular books.

What first should be noted is the fairly haphazard translation of the book from Swedish into Russian (and latter from Russian into Lithuanian) which made the objects and the surroundings in the story appear distinctively Soviet, and thus less reminiscent of bourgeois mid-century Stockholm. Of greater importance is that that the Soviet censorship was contemplating the attitude that Karlsonas communicated – individualism, egocentrism, narcissism and anti-authoritarianism – as potentially dangerous and contradictive to the ideological tenants of official discourse. Consequently, in accordance with the stringent demands from the censors, the ensuing story about Karlsonas that was engineered deliberately saw to reduce the most conspicuous acts and elements of crudeness and delinquent behaviour.

The result, however, seems to have been an equally mischievous and innovative Karlsonas, only less wicked and more warm-hearted, who have managed to surpass the original figure’s capacity to strike a cord with generations of children. This is also the Karlsonas one encounter in the cartoons from 1968 and 1971, artfully illustrated by the famous Boris Stepantsev, which is another reason for his immense popularity in the former Soviet Union.

There are, at any case, more connections between the Baltic States and the world of Astrid Lindgren. Generations of Scandinavian children has, for example, enjoyed the pastoral and idyllic illustrations in Astrid Lindgren’s books with a sense of recognition as the surroundings are reminiscent of the typical rural landscape found in the Scandinavian countryside. However, Ilon Wikland, who contributed with the popular illustrations of many of Astrid Lindgren’s most beloved characters, had her childhood Estonia rather than the Scandinavian countryside in mind when she created images to Lindgren’s texts. Consequently, though Wikland was forced to flee Estonia for Sweden during the World War, her Estonian legacy still lives on in many of Lindgren’s books. In addition, in 2009 Wikland was dedicated her own museum in Hapsal, a small Estonian city to the south of Tallinn.

Karlsonas, then, is actually neither Swedish nor Baltic, but Ilon Wikland found the inspiration to draw him as he is normally illustrated, in books and cartoons alike, when she stumbled upon a chubby, red-haired little man at a market in Paris.

Fredrik Rydström is a distinguished academic from Sweden who graduated Vilnius University in Spring 2010. He has lived for almost two years in Lithuania where he ound true love: the kibinas. Fredrik has held several lectures about and specialized in Baltic-Nordic relations.Other articles by Fredrik Rydström

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BaltoScandia:to have (or not) a laugh at the expense of your neighbours

Polish Infrastructure deputy minister Tadeusz Jarmuziewicz met Lithuania‘s Communication deputy minister Rimvydas Vastakas in Vilnius to sign a mutual agreement on the matter this Thursday.

“We have reached the agreement with Lithuania that we have to start the discussions,” Jarmuziewicz told PAP.

According to Lithuania‘s Transport and Communications Ministry, the two countries will cooperate on accomplishing a study on the possibility to create an air space block . The European Commission is going to finance the study partially.

“This project is a big challenge to the engineers. We hope to finish it by 2012,” Jarmuzievicz said.

He stated that other Baltic countries, Latvia and Estonia, could also join the block later.

The EU members are trying to establish common air zones by mid-2012 in order to manage the air space more efficiently and safely. This initiative gained speed after the Iceland‘s volcano eruption this spring, when Europe‘s air traffic was badly disturbed.

“Tell them that there are no cars and that women can be beaten and exchanged for new ones whenever you want,” he said, echoing similar rumours about Lithuania he had heard in foreign lands.

We were discussing the fact that many people in countries as close as Sweden or Germany had no idea about Lithuania, what its capital is and what language is spoken here and so on.

In fact the knowledge of the country in the world is appalling. On a visit to Belgium a few years ago, I had dinner with two doctors and their little daughter. The girl was just learning to speak, but they had high hopes that she would also become a doctor in future: a highly educated family.

They asked me about what I was doing in Europe and where I live and what my job is. I was halfway through a story about Lithuania when they stopped me and asked “sorry what country do you live in again?”

“Lithuania? Litauen? Lituanie? Lietuva? Litva?” I tried the names of this country in every language I knew. Didn’t ring a bell.

This couple had travelled to every continent on the planet except Antarctica, but they had no idea where Lithuania was, a European Union country already for five years at that time. They had no idea.

Another acquaintance of mine, who came to Lithuania from England also had massive troubles with the country. At first he was afraid to come here because it is in the wild wild east and he might get robbed or stabbed. Or both!

He imagined a land without electricity and without laws (okay, well that part is more or less true). Hard drugs were sold on the street and women carried AK-47s down the street. After all, this country was in the Soviet Union.

Other people I have spoken to think the country is on the Mediterranean sea somewhere near Malta.

So here is an opportunity I suppose. The Lithuanians who emigrate and those who travel could play a big role in the future of this country. The world doesn’t yet know the name of Lithuania. One day they will find out, but until then you have a blank page. Write in it whatever you want!

So, its up to you who go abroad. Perhaps you also want to go abroad and play silly games with uneducated people. Or maybe you’d like to go tell the world about the mountains of amber that everyone has in their garage. Tell them about the Seimas and how it was defended by the citizens and tell them about Lithuania’s great beaches on the Black sea.

Hold on is that a game or is that the truth?

This interview with Latvian Foreign Minister Aivis Ronis was published in “Diena” daily on July 23, 2010, provided by the Latvian Insitute.

A rare occasion in the contemporary history of Latvia: a minister has stood up for the people’s interests, saying that Swedish banks should share responsibility for what is going on in Latvia and that the issue should be addressed at the intergovernmental level. What is the idea of your proposal?

I was born and grew up in Kuldīga. As children, our history teacher told us a legend about Karl XII who had briefly taken refuge in the city to nurse his wounded leg. Although being wounded, he nevertheless kept his interest in material things and did some looting in Kuldīga. However in the end, he could not run away fast enough, and one chest with less valuable things was left behind.

Several centuries later we have good relations with Sweden. Karl Bildt’s political support in 1990s helped our peoples to overcome estrangement and all the unpleasant things that had happened during World War II, and the following years of isolation. We are in the EU together and therefore we were surprised when the Swedish Government, the Finance Minister and Prime Minister made not particularly considerate remarks about the crisis in Latvia when it broke out. The Latvian governments have invited Sweden not only to join the IMF loan scheme to Latvia, but also to jointly think and make practical efforts toward the renewal of the economies in the region. We all know now that the shower of credit deformed Latvia’s economic structure. We can’t quite say that Swedish banks had no part in this. Unfortunately, the banks did not bring along with them any other Swedish companies with long term investments. That is how it was. Now the Swedish and Latvian governments should work together in the atmosphere of solidarity on further facilitation of economic integrity, mutual division of labour, and integrity.

Second, our people, just like the Swedish people, deserve to know what mistakes were made by the regulators of financial services before 2008. As far as I have been unofficially informed, the Swedes have already carried out an internal investigation, and criticism of their regulator has been voiced also by the Swedish Parliament. Thus it is extremely important also for our people to get to know and understand what happened here and in Sweden. It would be an excellent example of cooperation, should the parliaments of two countries — the duty of which is also to supervise their regulators — establish a joint commission and have a critical look at all that. This would be in the interests of both our countries and the region as a whole.

An IMF study on credit boom in the EU makes it clear that the countries now unflatteringly called PIIGS and HELL underwent similar processes: the inflow of capital caused two booms – in the real estate market and in private consumption. This was German capital in Spain, Swedish capital in Latvia, etc. Have you any comments on that?

I have not read the document, but versions like this have appeared in our newspapers and expert opinions. In any case, it is important to take stock of errors made in public administration in order not to repeat them, even more so, to do that together with foreign partners.

It seems that in Latvia the foreign bank lobbies are so powerful that they spark off a sharp reaction to anything that contradicts them. This was also the case with the opinion of Prime Minister Valdis Dombrovskis, who said that it should be enough to cede the collateral to settle accounts with a bank. This does not seem to be good basis for further development.

It is normal that the opinions of experts and the government differ. Lobbies exist in all countries and for all industries. Still, I was mostly surprised by the assumption that through such a commission we will scare away investors. First, we are not turning against investors! Second, it seems to me that I am being intentionally misunderstood also in the sense that this would mean turning against banks. By no means! This is a call to realize and eliminate mistakes and then, for both countries, also to work closer together on the integration of their economies. We are a very important country for Sweden geopolitically, and they are no less important for us, and in the rest of the region, much depends on our cooperation.

There is an opinion among the public that our civil servants have not done much to defend our interests in the EU. Has the Foreign Ministry (MFA) clearly defined Latvia’s economic interests in Europe and in the world and is this policy being consistently implemented?

The MFA has always had instructions about attracting investment, for the most part in the areas which we as a country wanted to develop, but for which Latvia lacks both capital and knowledge. In regards to economic interests on the whole, the MFA definitely cannot define those separately from the rest of the government. Therefore we would very much like to see those common interests listed and more clearly defined. The foreign service needs some kind of national commissioning – a political decision of what investments or types of cooperation and in which sectors we seek in which countries. This would definitely be the government’s competence. Our current Prime Minister has this understanding, so does also the Minister of Economics and the Investment and Development Agency of Latvia (LIAA).

I don’t suppose our civil servants and diplomats deserve criticism for the way our interests are being represented in the EU. They have protected those interests according to how they have been defined. The problem was in the quality of the definition. And we at present are working closely together with the Prime Minister, the Minister of Economics and the LIAA, as well as with businessmen and [business] associations to define Latvia’s interests and goals as precisely as possible.

You had indirectly admitted that the influx of Swedish capital has harmed Latvia’s economy. A recent leak of information about Russia’s new foreign policy strategy contains a clear indication that a considerable amount of Russian capital is expected to flow toward the tangible economic sector of Latvia. Has Latvia defined its interests in this respect and how will they be protected?

I would like to highlight: the fact that the coming of the Swedish banks was good. Another thing is that they were obviously operating in an environment that was not very well organised. And it was bad that Swedish investment did not flow into other economic sectors in tangible ways.

Investors’ interest in Latvia is a positive phenomenon as it is. The fact that currently it is stronger from Russia’s side is nothing bad. It is bad that they do not have international competitors who would be interested in our economy, resources, areas for privatisation or cooperation opportunities. I have already said that Latvia, in order to regain its competitiveness and strength, should invite other Baltic Sea countries toward consolidation of strategic resources. Starting with the definition of which those resources are. And they should be kept under the control of our own capital. This would be the best tactic toward those countries and their businesses who at present would like to obtain these strategic resources for a cheap price. In principle, Russia has had its economic interests here for a thousand years. That is nothing new, neither is it bad. It is crucial that we are able to govern our country and to regulate the incoming investment.

What could be the explanation for positive dynamics in the Latvian-Russian relations at this very moment?

It would be an overstatement to call this extremely active dynamics, but it certainly is positive. Latvia’s foreign policy rests on three pillars: security guaranteed by NATO and the link with America; membership in the EU; and relations with neighbours which do not belong to those major alliances. The impact of the economic crisis also brings change to Russia. We have heard President Medvedev appeal to the Russians themselves for modernization of their country, which is a commendable move. The EU supports and engages in this modernization. It is in our interests that Russia, in compliance with standards, international norms and the EU interests, enters the World Trade Organisation. That would also mean the removal of protectionist barriers sometimes artificially imposed on trade with Russia, and make Russia a trustworthy business partner.

And not only that. We have also common interests with Russia not only in bilateral relations but also in the international arena. We share an identical understanding that Iran should not be allowed to obtain nuclear weapons. At the same time we have a totally different understanding about Georgia’s territorial integrity. And these similarities and differences cover a wide spectrum. It is unthinkable that the EU could cooperate increasingly less with Russia, and we are part of the EU. Economics, security, stability and peace in various regions are our common interests.

The same concerns NATO. Our soldiers serving in Afghanistan now also benefit from the cooperation between Russia and the Alliance. Non-military transit that unites us with Russia in relations with NATO is a totally new phenomenon in history. And this is good, because we are allies in combating terrorism. Similarly, our joint interest and cooperation might be in the fight against smuggling if Russia fought against it on its own side of the border and we on ours. This would require cooperation and coordination.

Our archives are fully accessible for Russian researchers. We have no access to Russian archives. We know in general what happened to the deportees and other citizens who suffered from Stalinism, but the work in archives and cooperation between our countries is required for a full understanding. Reconciliation within people’s hearts is a lengthy process and needs openness.

Doesn’t the focus of the public on the heavy historical legacy also hinder the relations with Russia? Whenever Russia is mentioned, most people immediately think of 9 May, and Molotov and Ribbentrop; moreover, among the public there is a lack of a common understanding about those dates and processes.

I have defined three priorities for myself, for those few months of my time in office in the MFA: attracting resources from abroad to our economy, removing obstacles on the path to attracting those resources, and third, the dignity of our state and community. In Riga, for some reason or other, Ribbentrop and Molotov still confront each other through monuments and on websites. They are long since dead, one of them, thank God, was also executed. The regimes and countries they represented have perished, which has only been to our benefit. They divided our country and society, and even today unfortunately their goals and propaganda seem to resurface now and again. Let us finally bury them both! It is Meierovics’ beliefs that should be alive here! We have our national days of commemoration. On other days people have the rights and freedoms guaranteed by the Constitution to do whatever they like and commemorate whomever they like, within the limits of the law.

You are working with the creation of new NATO strategies. How will our national interests be incorporated? In relation to the renewed relations between America and Russia, publically the view has emerged that the U.S. support for the Baltics is no longer at its previous level.

I worked in Madeline Albright’s group, which wrote the proposals for the NATO Member States and the General Secretary. Currently, the General Secretary, hopefully, based on that, is writing his draft concept, which will be up for discussion in September, so that the new strategic concept can be accepted at the NATO summit in November. At least in Albright’s group, the views of the Baltic countries were very much so taken into account – not less so than the views of other Member States. Before this, I, and many others, felt that the diversity of interests between the Member States would be much larger than it turned out to be in reality. The NATO cornerstone remains the principle of Article 5: One for all, all for one, and that is important to all. Not only did no one object to that, but indeed everyone stressed its importance.

The second message: NATO must engage in more political consultations with the EU. Third, new threats must be taken into account – cyber security, energy security, the fight for resources, climate change, the not-so-new terrorist threat, etc. That is in everyone’s interest, and it is clear that forces must be combined for the challenge ahead. While priorities may be laid out slightly differently, the interests of the Member States are the same.

Also because of that, I don’t agree with those that say Americans have lost interest in us here. This year, we have already had two joint military exercises, the United States has continued its presence and involvement in the region, and is a very good, reliable partner in Latvia’s security concerns. They say the same thing about us, and that has been shown with our soldiers’ involvement in NATO missions. We also invite the U.S. to not lose interest in the regions that we believe are important to us: the South Caucasus, Moldova’s territorial integrity, cooperation with Ukraine, etc.

In that regard, also concerning U.S. and Russian relations, it is in Latvia’s interest that those would be good relations, because we gain security from that. If these are friendly relations, and the U.S. has a bigger influence in Moscow, Russia’s neighbours will only benefit from that. Similarly, we can benefit if there is more practical cooperation between the U.S. and Russia, particularly in combating terrorism and in exchanging intelligence. Afghanistan is just as painful a problem to Russia as it is to NATO.

We also must mention France’s return to NATO and the importance of Germany’s increased role in the Alliance, from which we have benefited. Particularly important to our interests is Germany’s greater economic engagement in our region. The presence of Germany’s capital here is negligible in comparison to what it could be.

Not always does the general public see military cooperation as something positive. For instance, building in the dunes during a recent military exercise.

The training assignment was to attempt a landing operation on an undeveloped shore, which is important in a crisis situation if ports are not accessible. Still, Latvia may need allied assistance, military or humanitarian, it does not matter. Building the road you mentioned was an element of the exercise. The exercise proved that the Allies are able to set up their operation headquarters in the middle of the forest in three hours’ time. That is truly impressive. And this awareness makes us feel more secure.

At present, there is an ongoing dynamic activity in ND8 project about the so called Northern Dimension in order to raise the cooperation between the countries in our region to a new level. Why now, and what is the idea of the project?

The initiative was launched during the previous minister’s time. I am glad that our former Foreign Minister Valdis Birkavs together with former Danish Minister of Defence Søren Gade agreed to work on a study about what changes should be made to the Baltic-Nordic cooperation. The background for the initiative is Latvia’s current presidency within the framework of the Baltic states’ cooperation and the Danish presidency among the Nordic countries [Nordic Council of Ministers]. Both Foreign Ministries understood they have to take advantage of the situation. Currently we have a great many cooperation formats within various organisations and the purpose of the study was to assess whether all that could be rationalised, simplified and perhaps replenished with advanced ideas of what we should do together.

In August the other seven foreign ministers will visit Latvia and we will review the draft produced by Valdis Birkavs and the former Danish Minister of Defence, and will decide on further action. It is good that the draft is being written by experts not actively involved in politics, and there are already various ideas about future cooperation among our eight countries. Together we are one of the strongest regions in the EU. We were once even leaders as to economic growth. Together we are a considerable power and entity, and as we talked about the case of Sweden, the most important thing is that we have a great potential. It is vital for this potential to be supported by political will.

In my opinion, however, the goal of Nordic and Baltic cooperation should not be to turn us into Scandinavians. We needn’t wake up every morning with an inferiority complex because of not being, for instance, Swedish. Riga and our history gives Latvians a unique identity and potential.

The EU foreign ministers also discussed the EU’s actions following the publication of the advisory opinion by the International Court of Justice on the declaration of Kosovo’s independence. On 22 July, the Court ruled that the declaration of Kosovo’s independence was not a violation of international law.

Minister A.Ažubalis welcomed the publication of the advisory opinion of the Court and highlighted that in the Western Balkans key attention had to be dedicated to regional cooperation, stability and closer relations with the EU. According to the Minister, the EU had to send a strong signal to Kosovo and Serbia, inviting these countries to open a dialogue with each other.

According to the head of Lithuania’s diplomacy, facts and arguments based on the international law showed that Kosovo was a unique case and, therefore, it was not a precedent for solving conflicts in other regions of the world.

Before the Foreign Affairs Council and the General Affairs Council in Brussels, the foreign ministers from the Baltic States and Nordic EU countries had a separate meeting to discuss the situation in Central Asia. Minister A.Ažubalis presented to his counterparts the results of his meetings with ministers of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

“We are going to visit these countries in spring 2011, during Lithuania’s chairmanship of the Organization for Security and Co-operation in Europe,” Minister A.Ažubalis said.

The Minister stressed that Central Asia faced numerous challenges, such as water and energy resources management.

The crisis in Kyrgyzstan was also discussed. Lithuania’s Minister of Foreign Affairs said that he valued the decision of the OSCE Permanent Council to send a Police Advisory Group to this country. According to Minister A.Ažubalis, Lithuania’s OSCE chairmanship will pay considerable attention to this region.

On 25 July, the eve of the EU foreign ministers’ meeting, the political directors from the Ministries of Foreign Affairs of the Baltic and Benelux states (Belgium, Luxembourg and the Netherlands) held an informal meeting, during which the EU’s relations with strategic partners, the European Neighbourhood Policy and activities of the European External Action Service were discussed, and an agreement was reached to hold the Baltic and Benelux foreign ministers’ meeting this autumn.

Former members of the George W. Bush administration and critics of President Barack Obama have endorsed this narrative. It also contends that Obama’s foreign policy advisers are amateurs and beyond their depth. Among other things, they moved too quickly in withdrawing support for expanding NATO to Georgia and Ukraine, and in addition to their scrapping Bush’s anti-missile defense system in Europe, they have engaged in risky arms control agreements with Russia. And there is more: Obama has not staunchly resisted Kremlin claims that Russia enjoys a “special sphere of influence” throughout the former Soviet space. After the 2008 Georgian-Russian War, all of these accusations caused alarm in Central and Eastern Europe.

Lucas, the author of a book that pillories the Kremlin leadership—The New Cold War—has been a resolute supporter of the Baltic countries in their confrontations with Kremlin hard-liners. This year for his commitment to Lithuania’s security he was awarded the “National Defense System Medal.” His commentary on the charges leveled at Obama then are of special interest to anyone living in the East Baltic Sea region.

In commenting upon the claim that Obama has betrayed the Baltics, Lucas has observed. This “is a potent and poignant narrative. It is popular among Republican critics of the administration. If it were true, it would be a scandalous story. But in reality, (in) almost every element (it) is untrue.”

To provide perspective, one must acknowledge that Obama inherited a poisoned legacy from Bush including two wars and the worst economic recession since the Great Depression. It is especially noteworthy that the invasion of Iraq, and subsequent abuses associated with it, represented a monumental savaging of the very Western values that Bush and his associates had celebrated. “It was not just that western values and credibility were shredded, first by the contempt for international law, second by the failure to find the weapons of mass destruction, thirdly by the incredible incompetence of the American occupying forces, and finally by the scandalous abuses at Abu Ghraib and Guantanamo Bay.” Worse yet, all of these things were done “under the guise of a common cause: freedom.” Consequently, when members of the Bush administration correctly cited human rights violations in Chechnya, the Kremlin leaders responded that the Americans were engaging in double standards. “The final ignominy came during the Georgia war, when America’s impotence was starkly exposed. It was neither able to restrain Mr. Saakashvili, nor to deter Russia.” Lucas might have added: Had there been no Iraq War, Russia probably would not have risked one with Georgia.

Lucas concludes, when one considers the legacy that it inherited from Bush: “…it is actually rather surprising how much the Obama administration has achieved. The single most important decision has been the president’s personal decision to push through full NATO contingency planning for the Baltic states.” Furthermore, Obama has pledged to employ U.S. power to protect all three of them. “This year sees no fewer than four American military exercises in the Baltic states, involving thousands of troops, dozens of aircraft and ships, and intense involvement of everything from electronic intelligence to special forces.” Consequently, “Russian military planners are in no doubt now that America has serious plans and capabilities to defend its weakest allies.”

Lucas finds the Obama administration guilty of some mistakes in the former communist space in Europe, including: its failure to forewarn the Poles and Czechs that he was scrapping Bush’s anti-missile system; personnel limitations among U.S. diplomats in the area; and not inviting Azerbaijan’s leader to the recent Nuclear Security Summit, but when considering the charges against Obama—well, he finds them bogus.

In this connection, a few words should be said about Georgia since its summer war with Russia is responsible for fears about Russian aggression throughout much of the former Soviet space. It is significant that many Georgians take issue with the anti-Obama-pro-Bush narrative. According to Giga Zedania at IliaUniversity in Tbilisi, “One of the problems of the Bush administration was that it had no leverage over Russia, because there was no cooperation” between Washington and Moscow. “When these links are established that mutually benefit Russia and the United States, Russia will have more incentive to think twice before it does something like it did in 2008.” Or listen to Irakli Alasania, Georgia’s former Ambassador to the UN. “I strongly believe that if the U.S.-Russian relationship expands and grows closer, it will only benefit Georgia.”

Furthermore, recent trips to Georgia by Vice-President Joe Biden and Secretary of State Hillary Clinton have been applauded by the Georgia government; in particular, their pledge to protect the country against foreign aggression. In her visit to Georgia, Clinton demanded Moscow end its occupation of Abkhazia and South Ossetia. Because both President Dmitry Medvedev and Prime Minister Vladimir Putin have clearly stated that they welcome close relations with Obama, such pledges take on more meaning than similar ones that were made by the Bush administration but never acted upon. Indeed, many Georgians recall that under the Bush administration there was lots of tough talk when it came to Washington’s protecting Georgia but no concrete actions when it clashed with Russia in the summer of 2008.

Finally, Obama’s critics chastise him for caving into Russian pressure when he scrapped Bush’s plans for an anti-missile system in the Czech Republic and Poland. Last year, this development prompted prominent statesmen from the region to express their fears that their countries would be harmed by Washington’s re-setting relations with Moscow. But these noble dignitaries, all of whom played a vital role in bringing their countries into the democratic camp, ignored some important facts:

As Bush indicated, his anti-missile program had nothing to do with Russia’s awesome nuclear-missile strike capability. Conversely, the same holds true for not deploying it.

During his race for the White House, Obama indicated that he saw no reason to deploy a missile defense system in Europe that did not work to address a threat that had not yet materialized—namely, an Iran nuclear arsenal.

As U.S. Secretary of Defense Robert Gates has indicated the new system championed by Obama is far more sophisticated than that which the Bush administration favored.

Consequently, Radek Sikorski, Poland’s Foreign Minister has indicated, he is quite happy with the Patriot anti-missile system that the Americans have begun to deploy in his country. Indeed, he has invited Russian observers to visit the project when it is completed. Such transparency is consistent with a re-set in relations between Russia and all members of the Western alliance.

Consequently, Lithuanians should welcome the Americans and Russians finding ways to address common security problems—assuming the Obama administration does not remain silent in face of actions from those hapless hard-liners in Moscow who remain mired in the cold war.

And one more thing: listen to Lucas’s message to all EU citizens. “So the grand narrative of betrayal by a cynical, weak and distracted superpower is phony. The real betrayal is different one: it is the betrayal of national and European interests by the politicians charged with promoting them. If Ukraine’s security is in trouble, it is not America’s fault, but Ukraine’s politicians. If Europe fails to gain American respect and attention, then it is because Europe’s leaders are weak, distracted and cynical.”

Perhaps Lucas is being too harsh here but no one can argue with the observation that as Washington’s influence in world affairs diminishes, Europe must help fill those spaces of instability left vacant by the Americans. But is Europe ready to re-set relations with a world in turmoil or will it choose to be a mere bystander?

Dick Krickus is professor emeritus at the University of Mary Washington and has held the H. L. Oppenheimer Chair for Warfighting Strategy at the U.S. Marine Corps University.

***In the fall, Dick Krickus will be serving as visiting professor of international affairs at Vytautas Magnus University.

The U.S. Department of Defence did not identify the detainees under the arrangements made with the Latvian government.

State Secretary of the Interior Ministry Ilze Pētersone said: “The former Guantanamo inmate had already arrived in Latvia. Latvian authorities will do everything in their power to integrate this person in society and make sure he does not pose a threat.”

The number of prisoners remaining at Guantanamo is 176. Two others were transferred last week to Algeria and Cape Verde

“The United States is grateful to the government of Latvia for its willingness to support U.S. efforts to close the Guantanamo Bay detention facility,” the Pentagon said.

After U.S. President Barack Obama decided to shut down the Guantanamo prison, other EU countries, including Germany, Spain, France, Ireland, Portugal and Hungary, have already admitted former prisoners of this military facility.

In recent months Prime Minister Dombrovskis has been invited to speak to numerous international audiences about the measures Latvia has undertaken to overcome the economic downturn. As can be seen from the attached overview of economic trends in Latvia in July 2010, there are clear indications that Latvia’s efforts are paying off.

Prime Minister Dombrovskis has noted that Latvia’s experience shows that internal devaluation and disciplined fiscal consolidation in small open economies like Latvia’s, although socially painful, can be successful in helping a country overcome economic turbulence “It allows within a short time span to regain the confidence of international financial markets and thus to stabilize the situation promptly. It grants the enterprises much needed access to financing which, in turn, is a pre-condition for revitalizing the economy, restart exports and get out of crisis”.

Increasingly, international observers are praising Latvia’s ongoing reform agenda as a leading example for the reform process in Europe, especially in euro zone countries. Dombrovskis has stressed: “This means that they are following the Latvian example and at some point we may bring some valuable experience to our European partners”.

The Prime Minister has underlined: “I have a large collection of news headlines from last year predicting total economic and financial collapse for Latvia. There were also large speculations against the Lats and I am glad to say that those predictions were wrong, and Latvia not only survived, but is recovering well.”

As the Wall Street Journal noted on April 10 this year “the case of Latvia shows that with enough political will, it is possible to slash a fiscal deficit even when an economy is collapsing”. Prime Minister Dombrovskis admits: “The case of Latvia also shows that it is very difficult to apply a “one size fits all” approach to economic problems, due to local conditions and culture. There is no magic remedy.”

On July 20, the Commissioner for Economic and Monetary Affairs of the European Commission Olli Rehn signed the new Supplemental Memorandum of Understanding between the European Union and Republic of Latvia. According to Commissioner Rehn, “The program is on track, financial conditions have largely stabilized and the economic situation is showing signs of improvement. ” Rehn also stated that the Memorandum “puts strong emphasis on steps to improve the business environment, competitiveness, public procurement, public sector efficiency, EU funds absorption and other elements important for Latvia’s economy to be efficient and competitive.” 

Dapkus Mr Prime Minister, the political season has ended together with the end of the Seimas spring session. What has the ruling coalition and the government managed and not managed to achieve during this political season? Which of the tasks that you assigned to the government and the ruling coalition at the beginning of the session would you like to mention?

Kubilius Indeed, even though the Seimas and the government are not the same institution, when a parliamentary sessions ends, we assess the work we have done. The government has very clearly defined the most important priorities for this year and it has been making every effort to implement them.

One of the most important priorities has been the same everywhere in the world and in Europe – to deal with the aftermath of the crisis and to ensure economic revival. I am happy that even though it was difficult to make the decisions, and even though these decisions were painful to the people, we managed to make them, and we continued cutting some expenses, including social expenses. Because we have done that we can now be more optimistic about our future and say that because we were responsible enough, our generation will not burden Lithuania with debt, which means that we feel responsibility for the future of our children.

Another thing that I would like to emphasize, and this was an important issue during this session, we have adopted the legal acts that would help us cope with unemployment. I have in mind the amendments to the Labour Code that will encourage businesses to create new jobs, which sometimes can be temporary jobs, and to employ new workers.

And the third thing I would like to mention is that we will continue looking for ways to help businesses. We see certain signs that some businesses are recovering from the economic crisis.

It is very important that there are first signs that our policy of inviting IT companies, big global companies, to open their businesses in Lithuania, has started showing results. Barclays has established its global computer-engineering centre in Lithuania. We are in the process of signing an agreement with Western Union, which will also set up a similar centre. We are about to sign an agreement with IBM. All this is very important if we consider our long-term perspective.

What other strategic economic issues could I mention? Perhaps changes in the energy market. I would like to remind you that we have been living without the nuclear power plant since 1 January. We had to quickly adjust to the new situation. An open electric power trading market was launched. We have been successfully creating a common Baltic electric power market. We are going to have changes in the gas sector. I would also like to mention the administrative reform. By reforming the system of regional governments we were seeking to bring local government decisions closer to the people. We have not yet managed to ensure that all local governments take over or seek to take over as many duties of regional governments as possible, but we will keep moving in that direction.

As you have mentioned, Lithuania has been living without the Ignalina nuclear power plant since 1 January. What are the government’s plans regarding a new nuclear power plant or regarding other ways that could be employed to ensure electric power supply?

First, I would like to note the fact that the price of electricity went up a little after we closed the Ignalina nuclear power plant, but it did not go up as much as it was forecasted in 2008. They were saying that the price of electricity could reach 0.80 Litas or even 1.00 Litas per kilowatt-hour. But this did not happen. The price of electricity went up by 15-20 per cent (to 0.42 Litas). We certainly have managed to protect Lithuania from bigger problems. And we have started getting ready for further developments.

During this political season we announced an international tender for a strategic investor. I believe we will have such an investor by the end of this year. And then together with our neighbours Latvians, Estonians, and Poles we will move on to concrete preparation for the construction. We are in contact with our neighbour Belarus. I think that through such cooperation we will perhaps manage to persuade the Belarusians that it is not very wise of them to build a nuclear power plant near the Lithuanian border. But these issues will be discussed in the future.

You have mentioned that nuclear power plants in Belarus and Kaliningrad may be built. What will happen with our own construction project if so many nuclear power plants are planned to be built in our neighbourhood?

I think that if we coordinate our plans with our neighbours, if we implement them, if we do not get distracted, and if we adhere to our plan, perhaps some of our neighbours will change their minds. But to achieve that we should ensure that our plans are not misunderstood. And I think that there is more and more understanding as far as our plans are concerned.

I am pleased that, not so long ago, perhaps at the beginning of May, there was a meeting of the four energy ministers or economy ministers responsible for energy issues in Brussels. The meeting was organized at our initiative and the initiative of EU Energy Commissioner Guenther Oettinger. This was a meeting of the Lithuanian, Latvian, Estonian, and Polish ministers, and Oettinger also participated in the meeting. They signed a very important document, a declaration on the regional importance of the Visaginas nuclear power plant. The document includes the EU’s involvement in the implementation of this project.

The government has decided to merge the electric power networks and to establish a new electric power group. Does it have anything to do with the strategic investor? Besides the construction plans, what are you going to do to restructure the electric power sector?

The restructuring plans are also based on the European Commission’s directives on the separation of the electric power transmission, distribution, and production networks. However, at the same time, the state will remain the owner of all these companies. We will seek to manage all the assets that belong to the state in a proper and effective way. I would like to draw your attention to the wider context here.

We are about to prepare the first public report, which we will publish next week. The report is being prepared in accordance with international standards. It will show how the state is coping with the management of its assets, and the value of these assets is really high – about 18 billion litas. This constitutes about 25 per cent of all the assets existing in our country. For the first time we will announce the results of the management of these assets. The results will be calculated in accordance with international standards.

I have to admit that the results do not look very good. If, for example, such assets were managed by Sweden, the state budget would have received additional 1.5 billion Litas. This is how much profit we could generate from the management of the state-owned assets. This includes the energy and transport sectors, railways, the national mail service, the state-owned woods, and the state-owned buildings where various bureaucratic organizations have their offices.

This leads us to an obvious conclusion that we should reform the management of our assets so that it is done in accordance with internationally accepted principles. There are three key principles. First one is transparency: Reports on the state’s management of the assets should be made public quarterly and the main report should be made public yearly. This will allow the public, our electorate, and international markets to evaluate our success.

This will allow us to show clearly and in accordance with international standards how we are managing our assets. We have not been doing that for 20 years. Nobody has tried to do that; there was just talk about our assets in general terms. Some were saying that we were managing them well, others that we were doing not so well. Now, however, we have clearly shown what the real situation is. The second principle is that we should formulate our goals in a very clear way; we should define what is it that the state is seeking by managing its assets. As we can see from the experience of other countries, one clear goal should be the increase of value of such assets. And the third one, a very clear principle, is to depoliticize the management of state-owned companies.

We are going to base our work on the aforementioned principles. There will be very important reorganizations and changes that should bring benefits to all people of Lithuania.

We should do the same in the energy sector. The assets controlled by the energy companies should be used to implement important energy goals, including the construction of the new nuclear power plant. The same goes for the construction of the electric power bridges, and we have made progress in both projects, with Sweden and Poland. As you can see, we have a lot of important work to do here. As for the gas sector, we are methodically seeking to correct the really big strategic mistakes that had been made in the past when the entire Lithuanian gas sector was privatized and when the distribution and transfer pipelines were not separated. And now we are prepared to implement the EU directives without any exceptions and reservations and to separate these two functions.

Without a doubt, the owners of the Lithuanian gas sector, be it Gazprom or somebody else, are not happy and will never be happy with the changes. But we are seeking to carry out this reorganization because this is the only way to ensure that Lithuanian gas users – individual users and businesses – could finally get the possibility of an alternative gas supply. This is why our next step, which we are going to make, is the construction of a liquefied gas terminal.

As for the gas sector, the separation of the functions and the implementation of the EU directive may lead us to the deterioration of relations with Gazprom. What would be the consequences? How would the owners of Gazprom and Lithuanian Gas react to these initiatives? For a long, time they have been successfully opposing the plans, such as the construction of the liquefied gas terminal.

I do not know what attitude Gazprom has towards the package of measures approved by the EU. If it does not like these measures, it could discuss this with the European Commission. We see the implementation of this directive as a huge strategic benefit to Lithuania, because it is absolutely obvious that our gas sector will not be interested in any alternative pipelines, links with Poland, or the construction of the liquefied gas terminal as long as it is controlled by Gazprom. This is a natural reaction if you are a monopolist, and this is what is today…

It is not important whether this monopolist is Gazprom or some Western company. It would be insane to ask them to allow others to enter the market. We should make it very clear that perhaps we overlooked something, or, if we want to be more precise, perhaps we made a mistake when we allowed one monopolist to privatize the entire Lithuanian gas sector. Seven or eight years have passed since the privatization, and despite all the declarations that alternatives would be created, nothing is happening. This is because, and I will repeat my words again, a monopolist would never agree to such things. And we should understand that very clearly.

Coming back to the liquefied gas terminal, what are the plans, with whom the government is going to build it, and which investors is the go averment going to invite?

We want to move fast forward, the time for discussions is over. If we look at the situation in the world market, international markets, it is absolutely obvious that we are painfully losing because we do not have any alternative to the monopolistic gas supply. In a situation like ours, the monopolist can set his own price that is about $100 higher than Gazprom’s price in the European market. Or the price for 1,000 cubic meters is $150 higher than the price of liquefied gas sold on the world market.

Big changes have taken place in the world when the Americans discovered the technology of extracting shale gas. The United States has got the possibility of having its own gas resources thanks to that. This is why there is a huge oversupply of gas right now in the market. The price of gas extracted in various Middle Eastern countries, such as Qatar and other countries, has fallen drastically, which means that we do not have much time to consider and discuss things.

But are these countries interested in investing in Lithuania, in coming to Lithuania with their capital?

Without a doubt, they are willing to do that. We see a possibility of negotiating with the countries that produce liquefied gas, be it Qatar or some other country; that is an object of discussion. But it is clear that if the state is building such a terminal, it should maintain its leading role in the project.

When will negotiations with an investor and the actual construction be launched?

I certainly would like the process to be as speedy as possible. I think that we should agree on certain organizational issues this summer and after that we will move forward.

But there were plans for you and your delegation to visit one of such countries, and the visit did not take place.

It has been postponed a little, but that is not a problem. We want to have a very clear vision of our actions and our plans. And I hope we will have a plan in the near future. According to our calculations, Lithuania may need about 1.5-2 billion cubic meters of liquefied gas per year. This will give us a very important alternative, because Lithuania uses about 3 billion cubic meters of gas per year. I would like to mention here another new initiative. As you know, during my recent visit to Belarus I had meetings with the Belarusian prime minister and president, the Belarusian representatives expressed their very clearly-formulated strategic interest and asked Lithuania for a certain help or cooperation so that Belarus could also have alternative gas supplies…

… Because they are tired of the constant pressure…

… Yes, they are tired of that; they also went through the so-called gas war. I had an impression that their interest was not melodramatic; it was a very real interest. Without a doubt, their needs are much bigger; they would like to have a liquefied gas terminal for the capacity of up to 8-10 billion cubic meters of liquefied gas, which would clearly change the nature of such a terminal. This is another reason why we need to make swift decisions.

Does this mean that there is a possibility of Belarus participating in the project in one way or another; is it really interested in that?

Belarus is interested, we just need to quickly consider all the possibilities, whether we start with a small terminal, the one we have already planned and which would suit our needs, and then think about how to expand it, or whether we should consider some other options. But I think that the fact the Belarus is looking for alternative sources of gas supply is a very important new tendency.

There have already been attempts to build a terminal in Vilnius, but interest groups had ruined the plans with the help of the legal system. Do you think this time the project will succeed?

All I can say is that our strategic priority is to transform our energy sector into an independent, autonomous, and integrated into the EU energy system. This does not mean that we will stop buying gas from the countries like Russia if the price seems competitive to us. But our strategic priority is an autonomous and independent energy system, and it should be integrated into the EU network.

Over the year and a half that we have been in power, we have demonstrated very clearly that in the areas where we see our most important strategic goals, we manage to achieve the results we need. We manage to implement our decisions even when our coalition is not stable, when it engages in discussions, or when it is chaotic, despite all the discussions and other political peculiarities we manage to achieve our goals. Therefore I do not see any reason why we should doubt whether we will be able to make decisions on such an important strategic issue.

How will this influence the price? Now we are paying a very high price for gas…

As I have already mentioned, the current price of 1,000 cubic meters of liquefied gas on the international market is about $150 less than the price we are paying Gazprom, the monopolist that provides gas to Lithuania. I have discussed this with Russian Prime Minister Vladimir Putin. I told him that Gazprom’s representatives should themselves realize that they have to analyse their price policy and they have to make it more flexible. Otherwise the price will only motivate us to seek alternative supplies. Actually, we find alternative supplies important and necessary to us in any case.

What has the Russian prime minister said about the prices of gas and Gazprom’s activities in Lithuania in general? As far as I remember, there had been cases of politicking and meddling in our domestic policy.

We dedicated a lot of time, perhaps half an hour, to the discussion of the tendencies in the global gas market. Perhaps the Russian prime minister thought that we did not know and did not see what was going on, so he was trying to explain to me that the Americans had discovered shale gas. I told him that we knew that and that the Poles could do the same. In other words, we exchanged the information we had. I think that the times when Gazprom could be a monopolist and could dictate its conditions in Europe will soon be over. When during the meeting with the Russian prime minister I said that we were planning to build a liquefied gas terminal, he repeated three or four times that Russia was not against such plans.

Mr Kubilius, what can you say about the rumour that after the electricity distribution networks are merged, they will be privatized?

This interpretation is again not exactly correct… We are speaking about the management of all state assets; which is about 17 billion Litas, including the electricity networks. After we deal with the initial arrangements, that is after there is the initial transparency and order, and after we announce all the data, and after we organize the management process, then we will allow private capital to contribute partially to the state companies, but this part will be very small, we will certainly not give away the entire state portfolio. And we are going to do that not the way we used to do such things in the past when privatizing objects, but we will distribute part of the shares in the market, at the same time we will strengthen capital markets and create new financial instruments. In any case, when the partially private capital enters the management of such assets, it brings positive changes. Private capital always seeks to reduce all expenses and stop all types of squandering. If this is done, state-owned assets could generate profit.

You have mentioned that there has been progress made in the construction of the electricity bridge to Sweden. What have we achieved?

Last year, we achieved crucial political agreements. We had to persuade our neighbours Latvians. Without any doubt, we had to work very consistently to do that. We also had to do a lot of work to persuade the Swedes that we were really ready to build not just some line between a Lithuanian and a Swedish business, but a real infrastructure line that the entire Baltic electric power market will be able to use. The Baltic electric power market will be connected to the Scandinavian electric power market.

In the past, the owners of our energy companies, including the owners of LEO LT, did not manage to persuade the Swedes. Perhaps they had some other plans. We have managed to reach an agreement and to ensure that this project is partially financed by the EU. Now we are doing the concrete practical work. According to the Swedish standards, and according to all international standards, such work cannot be done in one day. We have been urging our neighbours Swedes to accelerate the work, because according to the initial plan of the Swedish energy sector, such a line could start working in 2016.

You have mentioned that the price of electricity after the Ignalina nuclear power plant was closed did not go up as much as it was expected. You have said that this was because of the open electric power market? However, others are saying that we could have made agreements with Russian monopolies and receive electricity for an even lower price.

We think that the situation with the prices was exactly what it was because we created a possibility for the market to function, and the market is operating in accordance with the established Scandinavian model, we applied the same rules. And this is why we managed to avoid the rapid growth of prices that was predicted in all the reports that were used to try to convince [the EU] that the closure of the Ignalina nuclear power plant would be catastrophic for Lithuania. The previous government made an official statement that the price would double after the Ignalina nuclear power plant is decommissioned.

Does this mean that an agreement with RAO (Russian electricity company) was not needed?

It was not needed, that is for sure. And, in my opinion, the fact that the Scandinavian model is working is one of the key reasons why we have a competitive electricity price.

But don’t take my word for it. EU Economic and Monetary Affairs Commissioner Olli Rehn said as much when the EU member states approved the latest tranche in loans to the Latvian government: “The program is on track, financial conditions have largely stabilized and the economic situation is showing signs of improvement”.

Yesterday in an analysis of the International Monetary Fund, Martin Hutchinson wrote in SIFY FINANCE: “Nor is the IMF’s track record by any means perfect. On the positive side, its loans to Latvia appear to have had the desired effect in encouraging the government’s austerity program, allowing Latvia to maintain its exchange rate parity and to generate the beginnings of economic recovery. Industrial production, for instance, rose 10.9 per cent in the year to May.”

The Bank of Latvia President Ilmārs Rimšēvičs agrees. He points out that Latvia’s growing current account surplus “…confirms the assumption that the lowest point in the economic decline is already in the past, which is vital both for the real economy and psychologically. We expect positive GDP growth also in the second quarter as suggested by the results in May, and the manufacturing industry will make the greatest contribution to positive growth.”

BBC is equally positive in its outlook for the Latvian economy. In a country-by-country review of “The Eurozone in Crisis”, BBC passed the following “verdict” on Latvia:

Experienced one of EU’s deepest recessions, but confidence is returning;

iscal measures having encouraging impact, but still much work ahead;

Exports now expected to grow at healthy pace;

Property market recovering and consumer spending growing;

But fragile economy could still be hit by any threat to confidence.

Pēteris Strautiņš, an economic expert for DnB NORD bank, describes what happened from an insider’s point of view: “Almost everything that was fragile in our economy has been broken, and the explosive potential that accrued during the beginning of the crisis has already exploded. Now the rubble is being cleared and things are turning forward.” Strautiņš agrees with other more optimistically inclined observers that the Latvian economic recovery „will be slow, but steady”.

Actually there’s a lot of good news coming out of Latvia these days. Latvia’s national airline airBaltic just announced that that it carried 1.472 million passengers during the first six months of 2010 at a 22% rise from the same period a year ago. Many of those passengers may be flocking to our beaches, because Latvia has been experiencing a record high heat wave in July, and more unbelievably hot Nordic weather is expected through August.

Economic recovery is a product of many complex factors, including perceptions, regardless of whether they are all true or not. Latvia’s sudden popularity is evident in a very hot new ad campaign by Old Spice, where the “Old Spice Guy” boasts that his products are so popular in Eastern Latvia “that they made me king”.  He adds ”that’s great, because I love grapes”. And if you don’t believe me, you can see it at:

http://www.youtube.com/user/oldspice#p/p/484F058C3EAF7FA6/0/0Cs95FmimP0

Like the improving economy, the blue cows and flying people are really real, although I hope those airBaltic passengers don’t start coming here for the grapes
The Latvian Institute