The natural development of an economic model for the Baltic countries is an integrated process that is determined by political rather that economic reality. A quarter of a century after these countries gained economic independence (which existed long before August 1991), we can put Baltic economic developments into perspective.

Russian and foreign analysts always hit a wall when trying to view the economic development of Estonia, Latvia and Lithuania from both neo-Keynesian and neoclassical standpoints. Why? Because after 1991, the economy of the Baltics was harshly dictated by political reasons. The basis for the Baltic economic model were separatism and nationalism rather than balance and efficiency.[1]In reality. this European-looking model is not what it seems.

Prior to Perestroyka, the economic situation of the Baltic nations within the Soviet Union used to be as follows: in 1986, the fixed asset value was 5875 rubles for every Soviet citizen. This figure had noticeable disproportion throughout the country: on one hand, it made 8007 rubles in Estonia, 6923 rubles in Latvia, 6111 rubles in Lithuania; on the other hand, there was as low as 5500 rubles per citizen in Belorussia, 4500 rubles in Moldavia, 3823 rubles in Azerbaijan and 2291 rubles in Tajikistan.

The republics found themselves to be divided by a growing salary gap. In 1940, workers and employees’ salaries in different republics saw a maximum dispersion of 10 rubles. Then it reached 21 rubles in 1960, 33 rubles in 1970, and as high as 78 rubles in 1988. The contrasts looked even more striking in agriculture, with the difference between the top and bottom kolkhoz members’ salaries making 74 rubles in 1970 and 159  rubles in 1989.[2]It is worth noting that the Lithuanian, Latvian and Estonian Soviet Republics were holding the lead.

“Production reconstruction and enhancement process in the Baltic countries showed a faster rate than elsewhere in the Soviet Union, mainly due to the fact the Latvia and Estonia were reserves of qualified workforce for the whole Soviet state.  Moreover, infrastructure in the Baltic region was almost intact during the war».[3]

The share of Baltic population with over 300 rubles of total income was the biggest in 1990. The national average for the whole USSR equaled 8.8 percent while reaching 19.8 percent in Estonia, 14.5 percent in Latvia and 13.8 percent in Lithuania. The poverty rate in these republics was also among the lowest, people with 75-ruble income making 1 percent of the whole Estonian and Latvian population and 1.2 percent of Lithuanians, whereas it was republics with the highest poverty headcount that developed into the severest autocracies in post-Soviet era.[4]

Since this region was the most efficient from the investment point of view, Moscow sought to allocate new industrial facilities here.  Compared to other regions, it took less time to master production in the Baltics.

The share of new fixed assets in the Baltic republics was higher that the USSR average, with more up-to-date and less obsolete facilities and technology. Agriculture showed a similar picture: kolkhozes and sovkhozes were distributed fertilizers, machinery, forage, imported elite breeding cattle, etc. on more favorable terms.

In the early 1990s, Vilnius, Riga and Tallinn provided much similar models of economic development in the form of regional cost-accounting plans. The Baltic nations, yet Soviet at the time, viewed the future reforms  based on their nostalgic, and sometimes inadequate, ideas and memories of what the so-called ‘first republics’ used to be. The mythology of their past played a key role in their denial of the present life within the USSR. It was as early as 1991 when we used to point out the importance of the Soviet heritage in the later economic development of the countries.[5] Later this idea was multiply referred to and developed in a number of academic papers.[6]L. Grigoriev and his fellow contributors believe that ‘the Baltic countries boasted the best starting conditions (compared to other post-Soviet states) for building a market economy, with huge innovational potential was accumulated there. The region was more like a laboratory where improved Soviet economic models were tested. The Baltic republics always enjoyed a privileged status among others, as seen from the investment figures of 1970–1980: the investment volume per capita was the highest.‘

The leaders of the Baltic ‘people’s fronts’ were not experts in market laws and could not estimate the real value of the national resources since they all were previously living in a centralized state-controlled planned economy, where one single center was busy allocating funds as well as distributing the product.

After having seized power, the newly formed elite had to deal with the opposition which was all concentrated around key Soviet industrial facilities. Such factories and plants as Latvian VEF, RAF, Alfa or Estonian Dvigatel, Eesti Kabel, Kreenholm comprised the core and the basis of the opposition. Disrupting these would put an end to opposition. Low competitiveness of these firms was another pretext for de-industrialization. This process would also result in weaker trade union movement and potentially less social packages. However, Estonian and Latvian reformers (and their congenial Russian counterparts) acted in a different way, saying that “the destruction of what is unsustainable is not an argument against, but in support of the transformation”.[7]

Despite these facts, the biggest companies in the Baltics states were still those of the Soviet heritage as late as in 1997.

Table 1.  The Biggest Latvian Industrial Companies (according to the number of employed)[8]

Table 2. The Biggest Lithuanian Industrial Companies (according to the number of employed).

Table 3. The Biggest Estonain Industrial Companies (according to the number of employed).

The privatization of the Soviet heritage was greatly positive for the Baltic economies, encouraging progressive growth all through the most troublesome period of early 1990s.

At that very time, financial and monetary reforms took place in Estonia, Latvia and Lithuania. A strong and stable national currency safeguards a nation’s independence and economic stability. In the Baltic nations, deficit-free budget has become the strategic goal one was desperately trying to achieve. This cost the countries a lot, with serious budget limitations introduced especially affecting the social sphere. Borrowing was not even taken to account as a possible solution, until in recent years. By this time, however, the national financial systems have de jure seized to exist. One fact is worth noting in relation to this circumstances: when visiting Vilnius on Jan 14, 2015, Donald Tusk, Chairman of the European Council (Poland’s ex-Prime Minister) called euro adoption in Latvia ‘a historic moment’[9]. No one was curious then, though,  why Mr. Tusk had done his best in his country for this ‘historic moment’ to be avoided there.

The fact is that joining the European Union had a relatively narrow effect on Baltic nations, since these countries already had the right to sell 60- to 65 percent of its commodities on a duty-free basis while being associated partners of the EU. Moreover, since 2001 industrial commodity trade there has been totally duty-free.[10]

Liberalism can be called the second cornerstone of the Estonian economic policy, meaning renunciation of protectionism, free and toll-free trade with neighbors (alcohol, tobacco and some other goods excluded), and relatively low taxes (business tax rate is 26%). This kind of approach encourages saturation of inner market and comparatively low prices, as well as foreign investment and cargo flow growth, which are per capita higher than in Russia. However, this approach creates certain obstacles. Taking into account the protectionist and discriminating fee policy currently maintained by other countries, the inner market stays vulnerable as Estonian-made goods are not competitive enough. This leads to the domination of imported goods, making it harder for its own producers to develop, especially in agriculture.

The third important point is fast, successful reforms in agrarian and  municipal sphere, as well as housing and utilities.

The economic recession during the transformation crisis was deep in the Baltic nations: the economy fell –35% in Estonia, –49% in Lithuania and –52% in Latvia. IEstonia was the first to cope with its consequences in 2001 and reach the pre-crisis level of 1989. The result was its GDP growing 158 percent of this base. Economic progress of Latvia and Lithuania was not that impressive: 115 and 111% respectively.[11]

The comprehension of the complicated development processes and the acknowledgement of initial mistakes in reforming become (though still not frequently) the subject for discussions among the economists in the Baltic counries.[12]Before 2008, such discussions were yet not acceptable in the ‘Baltic tiger’ countries that showed 7 to 9 percent growth each year. There was not much talk of the 12 to 19 percent decrease at the time. Instead, the fact that the country survived the 2008-2009 crisis was treated as a true success story.[13]

Table 4. GDP Growth, %.

The Baltic countries’ dependency on Russian oil and gas and energy supply was a serious challenge for Latvia, Lithuania and Estonia, as well as the fact that the three were included in the Soviet-era cargo transportation system in which cargo flows from their sea ports were eastbound. The result was that the Baltic region obtained a predominant status of a  transitional, by-pass cargo hub. Russia is Latvia’s third largest trade partner, with 10 percent of its trade operations, and Estonia’s fourth biggest trade partner (with 8.4%). Speaking of Lithuania, Russia is number one partner for the country, holding 25% of all trade volume, which is three times higher than with Lithuania’s second biggest partner, Germany (8.4%).[17]However, a shrinking trade volume with Russia has also tended to cause macroeconomic decrease. Unlike in 2013, in 2014 Estonia was the third among the Baltic states as far as GDP growth is concerned. Annual GDP growth was 2.4% in Latvia, 2,9% in Lithuania and 1,8% in Estonia[18]. These figures may look optimistic in present-day Europe, but they will never allow, as people used to say in the USSR, ‘to catch up and overtake’ any other EU country – except for Greece, perhaps.

Expert say that the total exports from the Baltic countries to Russia may fall 18 to 25 percent in 2015, resulting in $780 million deficit for Lithuania, Latvia and Estonia, however, their growth is expected to lose 1.3 to 1.7 percent less that last year. In terms of money, the countries are about to lose $1.58 billion[19]. Isthissum critical? Let’s see: the estimated budget revenue in 2015 is about 7.25 billion euros for Latvia[20], same for Estonia and a little more for Lithuania. Apparently, 250 million euros for each country is big money.

To summarize the above, the economic model that was built in the Baltic countries is economically viable, at least on the mid-term horizon. IF the outer conditions are relatively stable, one can predict a 1.5 to 2.0 GDP growth. In case military and infrastructural expenditures grow, the real income growth will be close to zero. Stagnation of exports and decrease in transit will contribute to destabilization of the economies in the region.

However, the real problem lies elsewhere. The fact that real historical problems of the past are constantly emphasized helps to preserve anti-Russian sentiments on the level of the elite, that tends to capitalize, politically and even financially while encouraging and practicing Russophobic rhetoric. The window of opportunities for co-operation with Russia is constantly shrinking. The Baltic elites preferred to stay away from consistent solution-seeking process and take part in political, rather than economic, discussions. One of the reasons for this (which has never mentioned before, nor will be in the foreseeable future) is that no elite in the Baltics is free to choose its political agenda. In this context, the Baltic countries are quite similar to Belarus rather than Poland or Russia.

There is an opinion that is often heard in the economist community, that European economic development has been derailed. In the past, we knew that politics and economy interact dialectically; nowadays, economy simply becomes a tool for policy to achieve its goals. The golden age of the European economy that lasted from the 1950s till about 2007, has come to an end. European growth will no longer be 3-5 percent, and this situation will take place until the whole political and economic paradigm is changed.

The brilliant success of European integration is obvious. Europeanist ideas that resurrected after WWII have proved to be robust and viable. However, new challenges of 2008-2015 put an end to the  model of development which our European home had. This is true for the Baltic nations which are fully dependent on both European and their own model of development.

[1] Шадрин А. Экономический фактор политики сепаратизма в республиках Советской Прибалтики // КМЦ Прикладной этнографии Института этнологии и антропологии РАН Москва, 1996.

[2] Агафонов Н.Т, Литовка О.П, Исляев Р.А. Государственная стратегия регионального развития России: смена парадигмы территориальной организации общества СПб 1998 с.39

[3]Misiunas R. Taagepera R. The Baltic States: Year of dependence 1940-1980 L. 1983 р.104

[4] Гареева Н. Э.,  Шкель С. Н. Теория модернизации и социально-экономические факторы демократизации в контексте политических трансформаций на постсоветском пространстве
http://gisap.eu/ru/teoriya-modernizatsii-i-sotsialno-ekonomicheskie-faktory-demokratizatsii-v-kontekste-politicheskikh

[5] Межевич Н.М. Геополитическое положение Эстонской ССР: мифы и реальность // Политическая география и современность. Региональные и прикладные аспекты: Л.ЛГУ, 1991

[6] Самонис В. Трансформация литовской экономики: от Москвы к Вильнюсу и от плана

к рынку. Варшава: CASE, 1995; Григорьев, Л.М. Конкуренция и сотрудничество: экономические перспективы Восточной Балтики Москва 2005.

[7] Путь в Европу // Под. общ. ред. И. М. Клямкина и Л. Ф. Шевцовой. М.: Новое издательство. 2008. С. 39.

[8] Берзиньш Ингус Они дают нам работу[8] http://www.baltic-course.com/archive/rus/13/reyting.htm Дата обращения 11.03.2015

[9] Руководство ЕС приветствовало вступление Литвы в еврозону http://dw.de/p/1EKhU

15.01.2015

[10] Бройсс Ф. Макроэкономические последствия расширения ЕС для его старых и новых членов // Проблемы теории и практики управления. 2003. № 5. С. 29.

[11] Актуальные вопросы мировой экономики: 2010 – 2012. Под общей редакцией Григорьева Л.М., Иващенко А.С. Балтийский форум 2012 с.53

[12]Grigas A., Kasekamp A., Maslauskaite K., Zorgenfreija L., “The Baltic states in the EU: yesterday, today and tomorrow” // Studies & Reports No 98, Notre Europe – Jacques Delors Institute, July 2013.

[13]Dudzińska Kinga  The Baltic States’ Success Story in Combating the Economic Crisis: Consequences for Regional Cooperation within the EU and with Russia // POLICY PAPER

No. 6 (54), POLSKI INSTYTUT SPRAW MIEDZYNARODOWYCH March 2013

[14] RAA012: SISEMAJANDUSE KOGUPRODUKT JA KOGURAHVATULU (KVARTALID) // Eesti Statistika andmebaas. URL: http://pub.stat.ee/px-web.2001/dialog/varval.asp?ma=RAA012&ti=SISEMAJANDUSE+KOGUPRODUKT+JA+KOGURAHVATULU+%28KVARTALID%29&path=../database/Majandus/15Rahvamajanduse_arvepidamine/06Sisemajanduse_koguprodukt_%28SKP%29/02Pehilised_rahvamajanduse_arvepidamise_naitajad/&search=SISEMAJANDUSE+KOGUPRODUKT+JA+KOGURAHVATULU&lang=2. Дата обновления: 11.03.2013.

[15]Eurostat http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tec00115

[16] Statistical Yearbook of Lithuania, 2012 http://web.stat.gov.lt/uploads/metrastis/1_LSM_2012.pdf

[17] Зельценберг В. Легче застрелиться: страны Балтии подсчитывают убытки от девальвации рубля http://bb.lv/rinki-i-kompanii/item/9160776-legche-zastrelitsya-strany-baltii-podschityvayut-ubytki-ot-devalvatsii-rublya  22.12.2014

[18] По росту ВВП Эстония заметно отстает от остальных стран Балтии http://rup.ee/rus/novosti/ekonomika-i-biznes/po-rostu-vvp-estoniia-zametno-otstaet-ot-ostalnykh-stran-baltii 27.03.2015

[19] Как российский кризис скажется на экономиках стран Балтии http://rup.ee/rus/novosti/mirovaia-ekonomika/kak-rossiiskii-krizis-skazhetsia-na-ekonomikakh-stran-baltii 25.03.2015

[20] Доходы госбюджета Латвии в 2015 году составят 7,25 млрд. евро http://www.baltic-course.com/rus/finansi/?doc=99880 БК, Рига, 09.12.2014.

The Russian-Estonian border still lacks proper legal demarcation. That the two countries are headed for a likely solution became obvious in April as a delegation of Estonian parliament (Riigikogu) visited Russia. The intensive program schedule was compensated by a friendly spring atmosphere at Moscow meetings.

The upper chamber of Russian parliament hosted a joint meeting of the Federation Council committee on international affairs and foreign affairs commission of Riigikogu. “The meeting continues the work to resume and revive permanent consultations between us which testifies to the importance of parliamentary ties between neighboring countries”, said committee chairman Mikhail Margelov who represents Pskov region that borders on Estonia. His Estonian counterpart Marko Mihkelson agreed and was pleased to say that such meetings have become traditional and allow parliamentarians to frankly discuss all vital issues.

Margelov specified that consultations have been held for over ten years and interlocutors know well how to discuss relationship “regardless of the acuteness”. Only last year three meetings were held on various platforms in Estonia and Pskov. “Now we know the more practical the discussed issues are the better it is for general relations between peoples,” he told Amber Bridge. The senator admitted that numerous unresolved issues have accumulated related to various agreements that have not yet become documents. Border treaties are the main ones.

The Russian-Estonian state border line was established in 2005 after nearly eleven years of negotiations. Treaties on land and water borders were signed. However during ratification Estonian parliament introduced in the preamble a reference to 1920 Tartu peace treaty in a context which preserved the possibility of territorial claims to Russia. In response Moscow recalled its signature and the border issue remained legally unresolved. Consultations resumed in 2012.

Margelov refused to elaborate on textual details. “Diplomats discuss them. We should not interfere. It is important that lawmakers are ready to do their job.”

The main thesis of the talks in April was that life demands to finally resolve the issue. Cooperation is to build up on the basis. The four “M”, like journalists dub Margelov and Mihkelson by the first letters in the names and surnames, assured that both sides are interested in constructive and good-neighborly relations. Therefore, the dialogue has resumed on three levels – foreign ministry, parliaments, and prime ministers.

Margelov recalled the wellknown Marxist postulate saying that “politics are concentrated expression of economy” and recalled that Russia occupies the first place in Estonian exports. The flow of Russian tourists is growing and cross-border cooperation is expanding. His Estonian counterpart agreed: “Good-neighborly relations with Russia are very important important to us. Many projects which we discussed in July in southern Estonia and Pskov region are being implemented. They prompted us to again discuss the border treaty.” Asked about a possible “reset” in the sphere the lawmakers were unanimous in saying the political and economic situation has changed. Mihkelson expressed hope the problem may be resolved this time in the interests of both parties. Parliament has issued a clear mandate to the government regarding negotiations. For Tallinn the legal regulation of the border and the principle of legal succession are important.

Speaking about changing relationship Margelov cited an important fact: when Federation Council members were in southern Estonia in July they for the first time visited Estonian military base – Kuperjanov Battalion, and then Estonian colleagues visited the 76th airborne division in Pskov. After a meeting in Estonian Otepe they also visited Barclay de Tolli Mausoleum in JЫgeveste. The level of trust at negotiations is high enough for parliamentarians “not to argue what we can cede or not, but tell each pragmatic, and aimed at future.” Moscow and Tallinn have to dismantle artificial mistrust to each other. Reciprocal visits by politicians to military units on both sides of the border promote it. It is a political signal. Russia and Estonia are and will remain neighbors forever. We have to help each other live together in united Europe specifically when the global financial system and economy are facing serious challenges.”

After the signing of border agreements it will be necessary to make an inventory of joint projects. The talk is about the abolition of double taxation and renovation of border infrastructure in the area of Narva-Ivangorod. In summer lawmakers inspected operations of border checkpoints and got acquainted in detail with Koidula checkpoint. Margelov believes upgraded railway communications are a vital issue. Why is there no shuttle train between Pskov and Tartu? For many residents of Pskov and Novgorod regions it would become a convenient and cheap route to EU border space. Margelov also recalled the initiative of the colleagues to create in Pskov region a partner of Estonian research project Julemiste City or a smart business city .

Jointly with Singapore a big business incubator is being built in Pskov region. It is a technopark with a free economic zone which can be of interest for neighbors. Estonian seaports are unique and can be successfully used by Russia. For example, handling of some types of chemical products is still impossible at Russian terminals. Therefore, the port of Sillamae operates like a docking unit for Russian companies.

Cooperation could progress better on all guidelines had the issue of border treaties been finally dropped, Margelov said. Their signing would give an impulse to active development of mutually beneficial relations and enhanced trust. The senator said he is optimistic that discussions now focus on technical details as political issues have been resolved to a major extent.

The head of the Estonian delegation quoted Prime Minister Andrus Ansip as saying that the signing of border treaties will positively influence economy. After the conference of heads of government of the Baltic Sea region held in St. Petersburg on April 5-6 and a meeting on its sidelines with Russian Prime Minister Dmitry Medvedev Ansip said in an interview: “We have an operating border but we would like to settle relations in the issue. When border agreements come into force. . . Russia will invest into simplified border crossing.” As a result the “agreement will render positive longterm influence on the economy.” The prime minister also said that Tallinn and Moscow “have come very close to the signing of a border document however there is no final solution yet.” Ansip expressed hope the sides will find it.

A vital issue for both countries is the introduction of a visa-free regime. There are no major contradictions between parliamentarians on it. Estonia sees no political obstacles for signing an agreement with Russia on visa-free travel. Marko Mihkelson said: “We have been discussing the idea with our colleagues in Brussels for long. Not only we but also the EU is interested in visa-free regime.” The introduction of the regime will considerably increase the flow of Russian tourists and business activity .

Despite positive dynamic in negotiations it is impossible to claim that “everything around is blue and green.” Dmitry Medvedev admitted that for the given moment the bilateral relationship “unfortunately, is not on the highest level by many parameters.” ” If we abandon the schemes which are often ideological, we can give a good impulse to economic cooperation and people-to-people contacts.” This is the main recipe for normalization of relations.

The delegation of the foreign affairs commission of Riigikogu also met Federation Council Deputy Chairman Alexander Torshin who represents the Republic of Mary El in the upper house. He called on Estonian lawmakers to visit not only Moscow but also Russian regions and shared his positive impressions of a recent tourist trip with his wife to Estonia. In response Marko Mihkelson said it would be good if womenspeakers of both chambers meet – Valentina Matviyenko and Ene Ergma – to discuss parliamentary cooperation of both countries.

After the talks in the Federation Council the guests noticed a piano of Estonia brand in the lounge. Riigikogu lawmakers checked its sound and remained satisfied.

The next item of the program was lunch with Vladimir Titov, Russian deputy (now first deputy) minister of foreign affairs. The meeting took place in the Reception House of the Russian foreign ministry in Spiridonovka Street. According to Mihkelson, they discussed border negotiations. The talks exposed no obstacles to further work on the text of the agreement. However the time of the third meeting of delegations from both countries was not agreed. An agreement on avoiding double taxation was also discussed, as well as agreements on higher education and interaction in case of emergencies.

The Riigikogu delegation also met Chairman of the State Duma committee on international affairs Alexei Pushkov and President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin.

The finishing stroke of the Moscow visit by Riigikogu delegation was a meeting with lecturers and students of MGIMO. Together with lawmakers the institute was visited by Ambassador Extraordinary and Plenipotentiary of the Republic of Estonia to the Russian Federation Juri Luik. Guests were welcomed by MGIMO Director for international cooperation and public relations Andrei Silantyev and Director of MGIMO Institute of International Research Alexander Orlov .

Summing up the results of the Moscow visit Marko Mihkelson said State Duma lawmakers plan to visit Tallinn (by the end of the year) while colleagues from Federation Council will meet on the river, i.e. in Narva and Ivangorod to discuss border infrastructure.

Alexander Orlov told the guests about MGIMO which is one of the biggest scientific and educational centers in Russia. He said there is major interest in MGIMO in Estonia. He expressed hope relations will mount in future to cap a shortage of creative contacts between scientists and experts of Russia and Estonia. Professor Lev Voronkov called on Estonian guests to pay major attention to students present in the hall. Many of them will work in the Russian embassy in Tallinn in the near future and will do everything possible to enhance our relationship. Speaking about cross-border cooperation lawmaker from Ida-Vyrumaa Yevgeny Osinovsky said the absence of a border agreement does not create obstacles for cooperation and it develops fruitfully. However he recalled bureaucratic problems existing in the current fiscal year of the European Union which impede the allocation of EU funds to organizations dealing with infr astructure problems.

Osinovsky also spoke about renovation of fortresses in Narva-Ivangorod and expressed hope that after completion it would be possible to build a new bridge across the Narva River which is very necessary today. He also recalled important precedent in 2012 when auditors of the Russian Audit Chamber and Estonian State Control prepared a joint report with recommen dations of controlling agencies for environmental protection of Chudskoe Lake and reasonable use of trans-border water reserves, as well as movement of goods and vehicles through border and customs checkpoints of Russia and Estonia. The lawmaker stressed that cross-border cooperation in Narva-Ivangorod has specific humanitarian significance as for many years the region was the only space where people did not perceive the presence of the border. A visa-free regime is therefore specifically vital for the region.

Senior MGIMO research fellow and Executive Director of the Baltic Civilization Institute Alexander Chechevishnikov asked Estonian guests to specify the major aspect of negotiations. “Estonian political circles are currently discussing the possibility to “package” border agreements and the solution of a number of infrastructure problems in cross-border cooperation. Can such “packaging” jeopardize progress in border agreements? You also met Vladimir Titov yesterday. Can you add something to the information posted on the Russian foreign ministry website?

Marko Mihkelson thanked for the question which “allows to clearly state that you are wrong. Naturally, the fact of discussing various issues can be interpreted as their interdependence. Our position aims at resolving various issues without interlinking them.” He stressed that border agreements are drafted in strict compliance with the approach and recalled that yet in 2004 Estonia ratified the agreement on avoiding double taxation which still awaits Russian ratification. The drafting of other agreements is on a high level – on diplomatic property, cross-border cooperation, etc. An agreement on pensions has been concluded. They were all drafted separately. As for the meeting with Vladimir Titov, it was constructive. “We spoke not only about border. We discussed a wide range of problems as Mr. Titov is in charge in the foreign ministry of cooperation with European states. Ninety minutes of the meeting passed quickly. It w as very interesting.”

Lawmaker Vladimir Velman noted a radical improvement in tonality of communications during the visit to the Russian capital. He recalled that last time Estonian lawmakers met colleagues from the State Duma nine years ago. Much has changed since then. Today many Pskov residents go on holidays to Tartu and other Estonian regions. Contacts are not only limited by Pskov, they develop also with Novgorod region. Velman noted also positive work of foreign affairs ministries of both countries in promoting conditions for economic and cultural development of Setu people living in border territories. Thus, the resolution of the border issue will crown multi-faceted cooperation taking place on the Russian-Estonian border.

In answer to the question from Lev Voronkov about the initiative of Thorvald Stoltenberg who proposed in 2009 to five northern countries a program to strengthen military and foreign policy potential Ambassador Juri Luik said there were numerous proposals regarding the security policy of regional countries. Stoltenberg proposed to create a common peacekeeping force for northern European countries. However the reality showed that to carry out even soft operations it is necessary to have at least one major country which would provide logistics, hardware, and arrange evacuation. “So far we have not identified a peacekeeping operation in which only weak countries would participate.” Luik recalled there were problems in airspace defense. Practice showed it is impossible to resolve them without major countries only by North European countries. The ambassador said a positive aspect of defense cooperation were joint military purchases , e.g. radar purchases by Finland and Estonia. He stressed that numerous interesting ideas are voiced but not all of them can be implemented in the region.

MGIMO director’s aide Vladislav Vorotnikov complained that for nine years since he entered the institute there was no possibility to meet Estonian parliamentarians in the building of the institute. Now time has come. Vorotnikov spoke about public and academic diplomacy and asked whether it was possible to launch a Russian-Estonian commission of historians like it happened with other Baltic countries. The question was answered by Marko Mihkelson, an historian by education. He said historians should have free access to archive sources. The Estonian embassy in Moscow has intensified presentations of historic publications including joint ones of late which is more productive than other formats.

Juri Luik, in his turn, said Estonian historians often complain about problems in accessing Russian archives and expressed hope MGIMO would help resolve them. In this connection it would be appropriate to recall the opinion of distinguished Estonian historian and Professor Magnus Ilmjarv expressed in an interview with the Amber Bridge (2011 #4, page 37). He said Russian archives are open while Estonian historians often lack money for work in Russia. Work in archives is an art and is productive only when researcher understands which documents can keep a trace of various developments and how to find them in archives.

Several questions were asked by students. Chairwoman of Estonian Student Club of MGIMO Sonya Afanasyeva asked lawmakers to comment the intention of Chairman of the State Duma committee on international relations Alexsey Pushkov to file a request to the Strasbourg Court regarding the activities of the language commission of Estonia. Yevgeny Osinovsky said the issues related to the Russian language were discussed a day before at a meeting in Duma and assured that Estonia has always been inclined to cooperate with international organizations and comply with its international commitments. However he admitted that language issues in Estonia are very emotional for well-known historic reasons. Another student from Estonia, Georgy Makhmurov, asked about prospects of construction of a high-speed railway from Moscow to Tallinn. Marko Mihkelson said the agenda currently includes simplifying customs procedures on railway transport according to those enforced on Moscow-Helsinki and St. Petersburg-Helsinki trains.

In one of the interviews Marko Mihkelson said both countries are engaged in constructive dialogue although there are still many problems. Time is necessary for major changes. It is in the interests of Estonia to have integrated society and common home. It is necessary to take steps which make us competitive on the international labor market. Estonians currently speak also Russian, Finnish, and English.

In Estonia like in many Baltic countries there are calls to stop living with old hard feelings. Historian Mihkelson agreed we should not always and everywhere speak about the past as it sets up “an emotional trap”. We have to remember the past but look into the future. Estonia wants to maintain very good-neighborly relations with Russia which are beneficial for both countries.

Lyudmila Yermakova,

ITAR-TASS,

for Amber Bridge

using the site materials imi-mgimo.ru

As for the First World War, Russia has to restore memory about it. It was a deliberately forgotten war.
Ilmjarv. Naturally, it all has to be analyzed. But I doubt it would be of interest for current generations as it happened too long ago. The longer we live the close are the two wars to each other.
Estonia and Latvia were parts of the USSR for half a century. It is a long time for a human being. What imprint did it leave in the conscience of modern Estonians, Latvians and Russians in Latvia and Estonia? How much are they still Soviet? How does the Soviet epoch sprout in modern times?
Ilmjarv. When Baltic countries regained independence there were people who believed it was possible to return to 1939. They believed the Soviet period can be erased from memory and the lost paradise can be returned. Many nostalgic newspaper articles, movies and TV shows have until recently tried to describe the period between the wars as a time of general wellbeing with no problems. However a different reality appeared from under the nostalgic blanket. The problem was in limited historic landscape and non-critical reflection in self-conscience. It confirms the words by French historian Ernest Renan who said the wall of national identity is built, inter alia, with a good share of errors and dreams.
I have to say there were two Soviet Unions – one before 1956 and another one which was more vegetarian – after 1956. Estonian history science did not study the second one properly. The question about the perception of the Soviet Union by Russians in Estonia also demands major analysis. I believe they perceive it as their own country – “it was our state”. Naturally, Estonians are of a different opinion. But it is also impossible to claim that Estonians have absolutely no nostalgia about the Soviet Union. Sociological research is necessary. There is nostalgia about the time when everyone enjoyed free education and free medical aid…
Straube. It is difficult for me to say what various categories of Latvians think. In general there is a negative assessment of the Soviet times as they are associated with the loss of independence and other problems if we speak about political aspects of the past. It is different in private life. When people today encounter problems they can react were unexpectedly: it was better under the Soviet power. The spontaneous emotional reaction is often positive regarding the Soviet past.
It is clear for an historian that such perception of the past is natural for people in any time and in any society. People could react the same way when Latvia was within the Russian Empire or during a hundred years under the Swedish rule or under Polish authority or in the time of the Order and Bishop. It is all history and you cannot change the past. Its knowledge is valuable in itself because it allows to learn history lessons. History is full of mistakes, betrayal, and stupidity. My teacher Theodor Zeids said there is no logic in history, it is the most illogical science. But anyway for us to avoid stupid things today and tomorrow we have to learn the lessons of knowledge which history provides to us and thus comprehend opportunities for our development. There is always something good in all times, including the Soviet period. There are also positive examples of our coexistence with Baltic Germans: we learned a lot from them and they learned a lot from us. Years and centuries pass and negative perceptions disappear as people realize: yes, it was this way. School textbooks and scientific literature begin to provide more objective assessments. Time will come for a calm assessment of the Soviet period…
Soviet traits do exist in people. They lived with them, continue to live and will die with them.
Are there many Soviet-minded people among the Latvians who support nationalistic positions? By Soviet I mean simplified perception of the world.
Straube. Primitive perception of the world is characteristic also of the people in liberal-democratic societies, not only the Soviet Union. I believe it is less in societies with a long democratic history. The more they have democracy and the more they are used to resolving social problems themselves the less standard is the conscience of the people. There are numerous stereotypes about socialist society. If we look at northern countries which have much more socialism than in the Soviet Union the idea may not look that bad.
Do you agree that history teaches?
Ilmjarv. If we take Germany or Japan, for example, they have likely learned something. Finland is also an example. But we can hardly say each people learn the lessons of history. However when we pronounce the names of countries we do not distinguish between the state and the people.
Many modern Germans are ill at ease, to put it mildly, when they are blamed for the developments that took place seventy years go. The more time passes the more absurd it will be to remind modern people about the deeds of their predecessors. It turns out the loser is to blame. Only those who suffered a major defeat have to feel historic guilt. And the skeletons of the winners remain in closet and sleep well.
Ilmjarv. If we study the history of war losers we shall immediately discover it is a very delicate topic. In response you often hear arguments that you should not harrow feelings and pick in acute and dramatic moments of history. Nobody likes to be weak. History dislikes losers. It is written by winners.
Today it is yet impossible to write the history of the Baltic peoples so that it is equally acceptable for all. The history of any people and country has developments and periods which are viewed in a very contradicting manner.
How do you see the future of your country as a citizen and historian who went beyond its geographic and mental boundaries in his works? What would you predict to your country?
Straube. One can seriously speak about future only when present-day problems are overcome. One of them which we do not always perceive is a legacy of the Soviet epoch. At that time they often spoke about “the big brother” in Moscow who taught us how to live. We continue to live with the syndrome. It always seems to us that we do not know how to do something and that someone other knows and can do better. I clearly see it in my professional sphere – in science and education. It always seems to us that we are not that clever as our “big brothers” – now in the European Union. When travelling from one European country to another I do not see anything outstanding. The problems are the same everywhere. Both positive and negative experience exists everywhere. We should stop crying the blues and idealizing others. When we overcome it and convince ourselves that we are capable of resolving problems independently then there will be sense to look into the future.
If we overcome depressive self-conscience there will be hope that society will become better conscientious and honest and the law will become equal for everyone. There have always been dishonest people. If society is democratic and active in the fight against negative things the existing share of dishonest people who do not respect law will decrease. It would be easier for everyone to live in such predictable society.
We have also to understand that Latvia cannot limit itself to a transit bridge and has to produce something. It is ridiculous to hear constant deliberations about the necessity to build enterprises. Each time every option is opposed by irreconcilable greens. Next day they demand higher wages and pensions from the government. But that is impossible. If we want to live better we have to work hard and produce something rather than look at western commodities unloaded in Riga port and sent further east or vise versa. Or from north to south and back.
We have to reorient our patriotism towards rational and pragmatic course. Today it is sometimes destructive for the state itself. Time ago we were proud that the USSR collapsed and nobody was polluting our nature and rivers any longer and that there were no chemicals in agriculture. However modern realities do not make us happy about green grass and pure air. We have to think how to build up Latvia. Poor Latvians whether Latvian, Russian, Estonian or Jewish will not survive without industry.
Ilmjarv. I once heard interesting stories at a conference in Kharkov. They said it was good in Estonia and bad in Ukraine. I spontaneously responded: you number 47 million in Ukraine and we number one million and three hundred thousand in Estonia. Close to a million are Estonians. It is our main problem from the future point of view. There are no borders. Nobody in the EU knows how to cope with existing unemployment. Small Estonia is a tiny piece of the global world. If I were a politician I would definitely say how to resolve the problem. But I am historian and will not interfere in politics.

In the Miss Universe 2012 pageant final held on the night of last December 20 in Las Vegas 20-year old American Olivia Culpo won the crown. Estonia was represented by student Natalya Korneichuk, the winner of Miss Tallinn 2012 beauty contest and the first princess of Miss Estonia 2012 pageant. Although she failed to get even to the top fifteen American media called her performance “one of the strongest in the past years.” Natalya said she was satisfied with the trip and experience.

Were you afraid, Natasha?

I was not very aware of what to expect in Las Vegas although I realized there will be 70 live broadcast TV channels and 700 million viewers. It adds responsibility. I know by experience that 15 seconds before the first appearance are the most horrible ones. Twelve. . . ten. . . eight. . . five. . . Everybody in position and you see the edge of the stage. You shiver, but there is no other option than to subdue the fear and come out with a proudly raised head. As soon as you go on stage all emotions move to the background. You have to do your job. The final is not the most important event when spectators see you on TV. The so-called preliminary performance before the jury which lasts some three hours is more significant as the finalists are determined there. Then the show of national costumes follows and the final.

Preparations for such a large-scale pageant demand major effort. It is not an easy walk. Each day participants meet at 6 hours in the morning at breakfast: everybody has to be fit, relaxed and smile. You have to smile round-the-clock. We succeeded to excellently do it in the first days, but got tired of it soon. Every hour was busy and we could not even make an unplanned step without permission. We stayed all the time in the hotel and were allowed outside only a few times. We were divided in groups of four girls and each group had a mamma – a girl who looked after us, reported the news, and managed the work plan. Miss Italia was my neighbor. Her delegation asked for it as I was the only participant who spoke Italian. So I worked as a translator in the first days and helped Russian and Italian girls with interviews. As for communications, they tell various things about pageants, but all participants decently behaved themselves. As it usually happens the girls formed groups – Latin American countries, Asian, and English-speaking. We had a nice company – Russia, Ukraine, Israel, Italy and me.

See a model in teenager

It is hard to meet a girl today who would not dream of showing herself out. Did you also dream of catwalk, stage, or screen?

On the contrary, I was a diligent schoolgirl and studied well. There were no teenager problems with me and I did not trouble my parents. But all of a sudden my life changed: I was noticed and offered to try myself as a model, i.e. to use both intellect and appearance.

I mastered the fashion industry step by step. I was a pawn and thought why can’t I try and be the queen?

How did they notice you? In the street?

They saw my photos, not me. I placed them in a social network on a popular Estonian website. It was yet before the Facebook era. There were only two photos in which I looked like a true teenager with tumbled hair and a cap and in “military” trousers. I believe it was very difficult to see a model in the teenager. However they did and convinced me to come to a casting. My mother went with me. I was dressed like in the pictures as I hated high heels. I called my classmates who wore high heels in school as dollies. I preferred sportswear or torn jeans, T-shirts and jogging shoes. I remember my mother insisting that I should not go to the theater in the jogging shoes. Strange as it was they offered me to go to Milan. At the age of 16 I could not make independent decisions while my parents were strict people and education was most important for them. I promised in writing to the mother and father that I would never reprimand them if they allow me to try myself in the model business. After long negotiations I left on my first labor contract. Thus I became a model.

Pawn wants to be queen

What did the school of life teach you?

I mastered the fashion industry step by step. I was a pawn and thought why can’t I try and be the queen? I had to thoroughly study how the whole system operates. I specialize in management, business governance, fashion marketing which is haute couture marketing, fashion brand management, and public relations in the sphere. It is definitely a narrow niche however the range of knowledge is big.

You can use it any other business, not only fashion. But I am interested in the fashion industry which I properly know. Now I am learning how the mechanism operates from the other side, not only as a model sees it. It takes time to get to the top of the career ladder and decide yourself (e.g. who is to be the face of the season). It is a long way.

It seems I heard some disdain when you said you were a pawn. A pawn is the only chess figure which does not backtrack. It is the main figure in a certain way.

I meant biased opinion about models. “Are you a model? You are simply nothing! You do what they tell you to do”. That is not true. Naturally we have to thoroughly plan the operating scheme – there is an agent who distributes models and is in charge of them. The work itself is not that easy and simple as it might look. The main problem is the psychological barrier as every day you have to hear not very pleasant words. Today you are too slim, tomorrow you are too fat, the day after tomorrow you have the wrong shape of the nose. Every day you have to reconcile with someone’s dislike of you. You have to go to castings for them to see you, fit you in their brand and decide whether to hire you or not. There are 7-8 castings every day. There will definitely be someone naughty who would spoil your mood and try to humiliate and offend you. The psychological component of the profession is difficult. You have to be very strong to pass the tests and climb to the top which few people can reach.

Were you upset? Did you cry?

I did when I was small. Just imagine: you are sixteen, you go to school where everybody praises you as a good girl. Then you arrive in a new place where nobody cares whether you are good and smart. They closely look at you and say: “Something is wrong with her. Definitely something is wrong. We have to think whether we want to work with you. We have to think hard. And you go to castings while we are thinking.” After a week you no longer remember the words as everyone is caring for you and saying you are so wonderful! Everything is unreliable and fragile in the profession. You can never be hundred percent convinced in tomorrow .

Did you get used to it for long?

I had no time to get used to it as I had to work. First I had to learn to properly walk on high heels. It is an art specifically if you wore only flat shoes before. High heels can deform you leg. So you have to gradually get used to them. I did it with time and even enjoyed it as there was a reverse effect – I stopped wearing jogging shoes and abandoned my sport style. I began to pay more attention to my clothes and to what is fashionable at present. It was a maturing stage when you abandon your previous indifference to how you look. Naturally, it affected my development as a girl and female – you care about your look, you want to be beautiful regardless of the situation, you w ant to enjoy yourself .

The work was different. When I first came to Milan and I began with presentations and worked for the American Guess firm. I am not very tall for the catwalk – 175 centimeters. Milan and specifically Paris like very tall girls and I was too small for the catwalk. My appearance better fits photos, they call it commercial appearance. That is why I mostly posed for pictures: cosmetic brands, e.g. L’Oreal, clothes brands – Fornarina, an Italian brand.

In contrast to beauty industry the model business prefers it natural. No sunrooms, no buildup hair or extended eyebrows. You have to show your natural appearance.

You had to quit your natural look, didn’t you?

It is not that easy. Take the hair color, for example. Now I have brown hair. I changed my natural gray color at the age of 15. “Feathers” were fashionable at the time and I had a multicolor hairdo which I greatly enjoyed. When I first came to an agency they told me I can try myself in the business only if I immediately go to the hairdresser to return my natural color. In contrast to beauty industry the model business prefers it natural. No sunrooms, no buildup hair or extended eyebrows. You have to show your natural appearance.

Much depends on you, but not everything

Is it a myth that all models are stupid?

Don’t forget there are models for sale. It specifically concerns popular models. Why did they become so famous? Because they are for sale. Our Estonian models Karmen Kass and Karmen Pedaru are very intelligent girls. To rise to the top of success you have to be psychologically strong and keen in the fashion industry. You have to know what is happening in it, communicate and be of interest to various people. We work in Milan, Paris, New York, and Asia. There are different cultures. You have to be tolerant and know how to share your culture.

These are not vague generalities! If you are an interesting person and psychologically strong individual who leads a healthy way of life you can achieve success.

Luck is not important, isn’t it?

It is not the only reason, so to say. I have a close friend who is an ideal person without exaggeration. Since the age of 13 she has been dreaming of going to New York and rising to the top of the fashion industry, be recognized and successful. She did a lot to achieve it. She is very intelligent, educated in law, an open and interesting person with a healthy way of life. She did it for her dream, but it did not come true.

What is she doing now?

She is a lawyer back home in Croatia. She was 22 when we met in Milan. She had a higher education, a record in model business, and she helped me a lot. However she failed to succeed in her model career no matter how hard she tried. She went back home and was hired by a law firm. Somebody would say she has a good and prestigious job. But her eyes no longer burn like they did in Milan. There are opposite examples: a girl walked in a street, they noticed her and invited not only as a cover girl, but to the best IMG agency in New York. It was a loud start from the very beginning, a big career. It was luck! Unfortunately, not everything depends on you. But I believe if there is a dream you should try and do everything possible to make it come true. If you fail you will lead a life like all other people do.

Each model dreams of coming to New York. I thought they preferred Paris.

It was Paris before as it was the trendsetter in the fashion industry. Milan as well. Now it is New York. Today you cannot just decide and go to New York. You can go to Milan. Let’s take a beginner model in Tallinn. You can ask to send you to Milan. It is possible to find an agency in Milan that would agree to accept you. It is impossible in New York. There are two options: if you are 14-15 years old and an absolutely new face you have a chance: if you correspond to their criteria they will make a model out of you and will help you. There is no guarantee you will succeed but they may take you because you are young and have a potential. The second option: you have a record in Milan, Paris or London, possibly Madrid or Barcelona, you have a weighty portfolio. Then you may go to New York. They take very strong girls, as a rule. New York is the final stage. Milan is most open today. Paris is more difficult as they are very demanding and captious there. They want every girl to have an ideal shape and appearance. The model industry is quickly developing and girls began to go to Tel Aviv where they shoot excellent photos. Had I earlier said I am going to Tel Aviv it would sound strange, to say the least. Today Israel is a new market with excellent photographers and interesting offers. It is an excellent possibility to fill your portfolio. Or take Asia. Earlier it was considered a secondary market. Now it is very prestigious to work in Singapore or Hong Kong.

Miss Russia told me she had a busy schedule of meetings and events. It is very honorable to be the first beauty of the country.

Pageant — the rules of the game

This year you won Miss Tallinn title and were the First Princess in Miss Estonia pageant and represented the country at Miss Universe 2012 in Las Vegas. Isn’t it enough to be a model? Is it also necessary to be a recognized beauty? How does a model differ from a Miss? Is it a wrong question?

No. There is a difference.

A model means classical facial features, but no bright individuality, no zest, as they say. Actually there is, but it is different, that of a model. As a rule, it is a bright-haired girl with unclear facial features and not very expressive eyes. They can paint whatever they want on such a face and adjust it to any style or brand. A beauty or miss has a catchy appearance with a zest – either bright eyes or puffed lips. A gorgeous girl cannot be a model, as a rule. Naturally, there are exceptions. Brazil’s super model Andriana Lima is very beautiful and popular. But she is mostly a show girl. Suffice it to recall the show of the famous Victoria’s Secret Fashion brand.

The idea to participate in a pageant appeared long ago. At that time I did not study but worked in Milan. It came not to my mind, but to my friends. They suggested participating in a contest. I thought it might be an interesting new guideline.

The first pageant was international and rather difficult. I represented Estonia at Miss Globe International 2011 held in Northern Cyprus. I was very proud of myself when I went there as I had a record in the industry, knew how to walk and how to do the makeup. Everything will be easy and simple! You should have seen how the girls laughed at me when I walked my model way at the first rehearsal. A beauty contest has different rules of the game. Absolutely different! At the first show which introduced each country I put on a black dress, straightened my hair and used shiny lipstick. Then I saw all those dollies with glued eyebrows, buildup hair curls, and bright dresses. God, what is it? We went on stage and I got lost among them. The second rule: natural look does not work at a beauty contest. It does not matter how beautiful or nice you are. You have to be bright and catchy. It is no catwalk, it is a show. Everything is different – bright dresses, curly hair, red lips. In this sense beauty contest participants are true dollies. I realized that if I want to be catchy and equally compete with them I have to play their rules. It was a good lesson: I learned what a pageant is and how it differs from the model industry .

Still I was in the top ten at the pageant and won Miss Photogenic title. It was important that I communicated with girls from various countries. I was surprised to know that beauty contests are very important for many countries. In Venezuela or Spain, for example, the contests are a religion! The culture ministries allocate huge money for them. Girls who want to join Miss Venezuela contest prepare for it since the age of 16. A the age of 18 or 20 they may get to a casting. Miss Venezuela meets the ruling elite and participates in charity. She goes to the United States as it is an important part of national culture for the country. Not only in Venezuela, but in the whole of Latin America. Miss Russia told me the same things. She has a busy schedule of meetings and events. It is very honorable to be the first beauty of the country. It is different in Estonia. Unfortunately, too many pageants have appeared of late. People get confused as there are too many Miss as if there is nothing else to do. Had there been a single national high-level contest which elected the only Miss, the result would be better on the international level, I believe. Last time Miss Estonia enjoyed success at Miss Universe contest 12 years ago. She was among the top ten. Miss Universe pageant was held for the 61st time. In the past 60 years Estonia was in the top ten only once. Competition was tough this time but I did everything possible to properly fulfill my mission.

Preparations for the pageant were the most difficult time as they required a lot of effort to find support and distribute information about the upcoming event in our country. Most participants from other countries arrived in Las Vegas from resorts after rest. They were full of strength while I was already tired by the time of the pageant.

File. Natalya Korneichuk Student of the Design University in Milan specializes in fashion industry marketing and PR. Participant in Elite Model Look 2006

Titles: Miss Tallinn 2012 (winner) First Princess in Miss Estonia 2012 pageant Miss Globe Estonia 2011 (winner) Miss Globe International 2011 (top 10, Miss Photogenic) Speaks Russian, Estonian, English, and Italian.

There were people who helped me selflessly in preparations because they cared how I represent the country. However there should be a special professional team to arrange preparations for such a large-scale event. They say “one cannot conquer alone”. I have mixed feelings at present – joy and disappointment. Joy is because of unique experience which will help progress. I was noticed by international media which positive commented my performance. Interesting options of my career in fashion and show business appeared. Participation in Miss Universe pageant gives you a certain status which is important if you want to work in America or Asia where interest in pageants and the world of beauty is high. I am glad I got new acquaintances and opportunities. Disappointment comes from too much time and effort used in preparations and the result itself. Many people ask which place I occupied. Only top 15 are announced, other results are not published. Anyway, there would be much more chances had the Estonian representative enjoyed strong support of her own country and had a Miss Estonia delegation been present at the pageant with a well-known official sponsor like most countries did. I believe the rest was done as properly as my personal resource allowed me to prepare for the pageant.

Ella Agranovskaya,

for Amber Bridge

The energy situation in three post-Soviet Baltic countries differs from each other. Latvia has fully exhausted the resources of the major Daugava River in the region as nothing can be added to the existing cascade of hydropower plants there. Estonia generates power at Narva hydropower plant and heat plants and also receives electricity from Finland. Experts call for the construction of a liquefied gas terminal. Lithuania shut down the Sovietbuilt nuclear power plant and there is talk about the construction of a new one. It seems Lithuania lags behind the cherished dream of energy independence most of all.

How can the goal be achieved?

Green, but unprofitable

“Green” energy and co-generation (combined production of electricity and heat) are the most promising types of energy. It is disappointing that the “green” energy support system, say in Latvia, is branded as “political business”.

The country remembers the recent story of the construction of small hydropower plants which “accidentally” got into the hands of the wives of high-ranking state officials. Today any production of bio energy is also linked in Latvia to businessmen who are close to authorities. One cannot but agree with Economy Minister Daniels Pavluts who called for reforms and transparent energy management system.

The economy ministry submitted to the government its initiatives aimed at introducing new transparent and efficient standards of support to renewable sources of energy and cogeneration. The EU works to increase the share of renewable energy in the total power end-use to decrease reliance on fossil fuel. Latvia has pledged to achieve 40% of renewable energy in the total balance by 2020. “I am convinced it is an important goal and we have to support alternative energy producers. However economic growth possibilities and improved wellbeing of people cannot be sacrificed for the sake of statistical indicators. We cannot allow Latvia to preserve inefficient and nontransparent system under the cover of movement towards the conditional EU goal. The system has already created a new elite of green speculators at the expense of the taxpayer,” the economy minister said.

The obligatory purchase principle is currently in force in Latvia to support “green” energy producers: Latvenergo utility has to pay for renewable energy and co-generation much more than the market price. The difference is paid by all end-users, i.e. by every resident of the country.

What is to be done in the situation?

Naturally, cost efficiency of production has to be improved and the policy of endless subsidies has to be gradually abandoned. Lithuania and Denmark guarantee support to electricity producers for ten years, Hungary – 8, Estonia provides its current 7-year discounted tariff to the plants operating with biomass and hydro energy. There is no other country in the EU besides Latvia that provides unlimited support to renew able energy.

“I hope that in 2020 when we assess the implementation of the National development plan we shall state that the dream about green, economically feasible and competitive Latvia has come true and was no disappointment,” said optimistic Daniels Pavluts.

Vysaginas sword

There is also atomic power besides alternative energy sources. The construction of the Vysaginas NPP is on the Lithuanian agenda. Initially it was planned to engage neighboring countries in the construction but Poland and Estonia delicately refused. The Latvian position remains unclear.

Visaginas is said to be very lucrative for Latvia, however nobody has provided any convincing evidence. Politicians and their close businessmen claim the co-ownership of the plant will provide cheap electricity to Latvian consumers. However nobody explains how it is possible to buy electricity below market prices. There is no answer how the used nuclear fuel will be disposed of. Who and where will keep it? The hypothetic Latvian billion euro suggested for investment into Vysaginas NPP can be used for other guidelines.

“Latvia has to invest a billion euro not into Lithuanian economy and the construction of Vysaginas NPP, but into its own economy,” said President of the gas company Itera Latvija Juris Savickis. Although he represents competing industry he supports not only the construction of Vysaginas NPP but also the nuclear power plants in Belarus and Kaliningrad enclave of Russia. But he insists Latvia has to limit itself by bids for partial assignments in the Vysaginas projec which will be fully controlled by Lithuania and the strategic partner – the Japanese Hitachi Corporation.

The nuclear project in Vysaginas is not just a power plant. It is a major and profitable project for Lithuania which will push the ailing economy from the deadlock. ” I know the neighbors and have no doubt that most orders for the NPP will remain in Lithuania and that Lithuanians will win the tenders. Everything which Lithuania is capable of producing for the NPP will be made in the country. Naturally, Lithuanians cannot make the turbine while uranium will be supplied by Americans who cooperate with Hitachi,” Savickis said. Who will control the whole project? Lithuanians and Hitachi. However Vilnius is interested in getting the Latvian billion euro. . .

What can Latvia build with the billion? For example, a big gas storage in Dobele and its own liquefied gas terminal. It is an expensive project but it will be owned by Latvia. The billion can be invested into “green” power. Besides power engineering there are related industries which need investments.

It is also important that Lithuanians did not support the NPP project at a consultative referendum held together with parliamentary election. The NPP was backed by 34.09 percent of voters while 62.68 were against.

Gas puzzle

Baltic countries have no commercial gas reserves and buy the fuel in Russia. In seven months of 2012 Latvia imported natural gas worth 400 million dollars which is a 24.5 percent increase against the same period in 2011, the central statistics service of the country said.

Gas to Latvia is imported by the Latvijas gāze Company which pumps it into the Incukalns storage and then delivers it to Latvian, Estonian, Russian, and Lithuanian consumers. Gas to Latvia is supplied by Gazprom and Itera Latvija which is a part of the international Itera Group. In 2011 the supplies were worth over 200 million dollars or 52.2 percent above the 2011 figure. Profit exceeded 16 million dollars and was 60.9 percent above previous indicators, according to the financial statement of the company.

Lithuanian Energy Minister Jaroslav Neverovic said his country wants to ensure competitive gas prices at talks with Gazprom. Key to the aim is the construction of a liquefied gas terminal. Lithuania wants to build it in Klaipeda in order to supply also Latvia and Estonia. Latvian experts believe it is more profitable to build the terminal in Latvia as it already has developed infrastructure and an underground storage in Incukalns. There is also a good site for a new storage on the border with Lithuania. According to research, the storage can decrease Baltic reliance on Gazprom from 100% to 59%.

There are alternative points of view in the dispute about the liquefied gas terminal. Thus, the Booz&Company consultancy believes it is more profitable to build it in Estonia or Finland rather than in Lithuania or Latvia.

Shale gas

The basic technology of shale gas production was borrowed by the Americans from Nazi Germany which had no oil and had to learn how to produce synthetic petrol from coal.

In Europe shale gas resources in-place are estimated between 19.4 and 91.4 trillion cubic meters. Extractable reserves are estimated at 15 trillion cubic meters. The U.S. Energy Information Administration puts the figure at 22.6 trillion.

The main shale gas deposits are located in northern Germany, France, Great Britain, Norway, Sweden, Poland, Ukraine, and Baltic countries while extractable reserves of the shale gas, according to the estimates of the U.S. administration, are accumulated in Poland (6.6 trillion cubic meters), France (6.4), Norway (2.9), Ukraine (1.5), Sweden (1.4), Denmark (0.8), and Great Britain (0.7 trillion cubic meters).

Main shale gas, gas and coalbed methane basins in Europe.

The estimates made over 40 countries prospect for shale gas in Europe close to consumption areas which minimizes transportation costs. They include Shell, Chevron, Exxon Mobil, Conoco Phillips, OMV, Halliburton and other giants. Poland, Hungary, Sweden, Spain, France, and England are experiencing a genuine shale gas boom triggered by the hope to repeat American shale gas revolution.

However there are skeptical voices as well.

Head of the British energy regulator Office of Gas and Electricity Markets Alister Buchanan said shale gas production was unlikely to begin in Europe earlier than 2025 and production volume can reach 15 billion cubic meters by 2030. BP estimated total European production of all nontraditional gas (shale, coalbed methane, etc) at 50 billion cubic meters by 2030. Therefore, imported gas will continue to play a major role in supplies for a long time. BP estimated it will account for 75 percent of gas consumption in the EU by 2030. Over a half (nearly 60%) will be supplied by pipelines.

Latvian scientists are in general skeptical about shale gas production in the country. However some politicians promise “to liberate” Europe from Russian natural gas at the expense of Latvian shale gas.

Latvian geologist Lyudmila Kartunova said Latvia is rich in all elements of the Mendeleev table. However, the entrails, like in most European countries, differ in structure from North America. It might be cheaper to fly to the Moon for some natural resources than produce them at home.

No sensations

Latvia plans to have a half of renewable energy in its balance by 2030. “At present Latvia produces first-generation biofuel from rape and grain. Production will continue for some time however the products do not satisfy durability criteria. Transition to second or even third generation of biofuel is expected by 2030. In 2017 Latvia may get a refinery to produce biofuel from wood,” said State Secretary of the Latvian economy ministry Juris Putse.

Properly purified rape seed oil used to produce biofuel is also suitable for food consumption although it depends on personal taste. Unfortunately, over a half of all fields in Latvia continue to grow the beautiful but very harmful plant for agriculture.

What do Baltic countries have to do to ensure energy independence? Anyway they shall not expect sensational solutions.

For example, Latvenergo plans to reconstruct the cascade of Daugava hydroelectric power plants by 2021 and replace all 21 turbines to increase their capacity. By now eight out of ten turbines of the Plavinas hydropower plant and four out of seven turbines of Keguma plant have been reconstructed. Investments exceeded 200 million dollars but will generously repay.

Prospects to reduce prices are offered by the planned construction of three nuclear power plants which is too many for the small region.

Wind turbines are promising on the sea coast.

What else? There are forests and marshes, wood and peat. However firewood would hardly keep the region warm.

Valery Zaitsev,

Valery Gorbov,

for Amber Bridge