Why Latvia Matters (Part I)

  • 2010-08-04
  • By Monika Hanley

KEEP OUT: Latvia is growing as an East-to-West transit corridor, with cargo that increasingly consists of illegal immigrants.

RIGA - Imagine for a moment a country so desired that for the last thousand years countless forces have occupied it. Despite this, imagine a country still speaking the oldest European language, bearing the world’s first Christmas tree, and being at the forefront of the economic crisis that crippled the nation and set off a devastating domino effect worldwide.
Then imagine that this country is only about the size of the state of West Virginia.

Latvia, as a nation of strategic importance, has continuously been sought after by nations wishing to strengthen their empires and lands. Even after joining the European Union and NATO in 2004, there still exists a fear of occupation in this small country. A contentious issue to be sure, but one that has not gone unnoticed, especially since the 2008 Russian invasion of Georgia. But is it a real threat? What is still so desirable about this small country that would prompt such fears? This article, the first of a short series, will attempt to answer the question: “Why Latvia Matters.”

Gateway to the World

The Latvian and Estonian border with Russia has long been a major transit area, with goods flowing both East to West, and vice versa. According to the World Bank, the transport and communication sector accounts for over 14 percent of Latvia’s GDP, with freight shipments from Russia and other CIS countries to the West being the core of the transit industry.
Recently, however, those goods include not just material items, but people as well. Human trafficking, both voluntary and by force, is on the rise in the Baltics with authorities helpless to stop it.

Paying upwards of $15,000 for transport to the West, police have detained a number of Afghans and Palestinians who fled their countries through Russia and were found traveling from Estonia to Riga. The problem is not just for the Baltic States, however, as many of these immigrants travel onwards to Scandinavia in search of a better life. Finnish authorities told Baltic border services that illegal immigrants traveling through Estonia was on the rise, especially from Russia.
When confronted with this problem, Russian authorities said that the Baltic States should work more to close the various loopholes that allow immigrants to easily pass through, and made no changes on their end. At the moment there are an estimated 20,000 immigrants waiting on the Russia border with Estonia and Latvia waiting to cross and make their way further West.

Economic Crisis-Return to Soviet times?

Nils Usakovs, Riga’s mayor, recently proposed an economic recovery plan, approved by the Latvian parliament, to ease residency restrictions for non-EU members in Latvia. This plan allows for a non-EU citizen to be granted a five year residence permit in Latvia based on an investment of 25,000 lats (35,700 euro) in a company or property.

While on the surface the idea may seem sound, the plan has sparked legitimate fears of a new “Russian invasion.”
“Who else would be coming to Latvia? Of course the plan is aimed at Russians,” says Ilze Kanepe, a bookkeeper in Riga’s Old Town. “It sounds like for a fee of 25,000 lats they can be granted legal status. This could be nice for the wealthy business people, but what about the rest of the citizens who have worked hard for what they have?” Kanepe asked.
Kanepe’s fears are also shared by protestors who stood outside the parliament in March, carrying signs reading “Let’s sell the corrupt members of parliament - not our land!”

Parliamentarians were also against the amendment and Peteris Tabuns (TB/LNNK) got emotional in his objections. “The elementary thing is that without patriotism there can be no economic wealth, nor faith in the people. These people [foreign investors] who will come here will use Latvia’s resources, but they will not learn the language, only benefit from exploitation,” said Tabuns.

“The losses will be tenfold, hundred fold compared to that which we may gain,” Tabuns continued.
While Latvia’s economy may be near to the absolute worst in the EU, with one of the highest unemployment rates (23 percent), there can be no denying that the region is still important. Swedbank’s chief economist Martins Kazaks responded to the new economic recovery initiative rather negatively, saying that even with the new plan to entice investors, the economic situation must be solved first. “One may take a look at this from the point of view that, yes, this may to some extent attract some investors. But it’s certainly not going to solve the situation that Latvia is facing.”

Invasion fears

Citizens and Latvians abroad speak nonstop at times about a “Russian invasion,” but how real are these fears? Are they military? Economic? Social?
Russian-born journalist and researcher Vadim Nikitin compares Latvia to Israel, calling the Russian situation comparable to the apartheid in Israel. “As the EU correctly criticizes Israel’s illegal settlements in East Jerusalem, it shouldn’t forget about the apartheid-light taking place on its own turf.”

Would people be surprised at a Russian expansion? Some may even call it justified in the next few years, as a response to the EU’s continuing expansion of influence. With the creation of the Eastern Partnership Policy (including Moldova, Armenia, Azerbaijan, Ukraine, Georgia and Belarus) many critics saw this policy as a way to persuade a traditionally Russian influenced region to be more amiable towards the EU.

Pipeline Wars

While the EU’s neighborhood expansion may be seen as an encroachment on Russia’s “territory of influence,” Russia is also expanding its influence into Europe, most notably with Russian gas exports. This in turn gives Russia more leverage, as seen in the various gas shutoffs in recent winters, the most notable of which was said to have been caused by an unfavorable move by Ukraine, namely a move towards the West in terms of policy.
“It’s very clear to see the desire to pressure the Ukrainian politicians, and pressure them that if they continue to pursue a pro-Western course and not adhere to the rules imposed by Moscow on the post-Soviet space, they will face difficulties,” said Vladimir Milov, former deputy energy minister of Russia.

Many EU officials are now spouting what the Baltics have known for years: That Europe must find alternatives to Russian gas imports, currently comprising about 25 percent of the gas supply to Europe. Russia is currently the single largest supplier of gas in Europe, through a variety of land-based pipelines, all of them under the control of the Kremlin. President of the European Commission Jose Manuel Barroso called for finding alternative solutions in the EU, as depending on Russia for 25 percent of the gas supply is not the best method in the long run.

Among the pipeline projects currently underway with Russian backing are Nord Stream in the Baltic Sea and South Stream across the Black Sea. Latvia in the beginning had campaigned for the NordStream pipeline to be above ground through Latvia and the Baltics, supporting instead the “Amber Project,” which looked at building a land gas pipeline to Europe via Latvia, Lithuania and Poland. This proposal however was rejected by the NordStream project.

A diesel pipeline, run by Russian company Transnefteproduct in Ventspils, has been shut down since 2007, originally closed based on an “oil leak” in Belarus. A similar example of power politics in the oil game occurred in Lithuania the same year. A pipeline in Butinge was shutdown with company representatives citing a pipeline leak as the reason for closure. However, it is well known by oil traders that the Kremlin was not pleased with Lithuania’s decision to sell the Mazeikiu refinery to a Polish- (not Russian-) firm. Whatever the underlying reason, the region is suffering due to Russian control of pipeline companies and sources.

An unnamed Transnefteproduct source put it simply: “No one is planning to touch Latvia as a transit route,” citing political motives as a major reason.
Analysts in the region and abroad say that Russia, though clearly a major player in Europe, will never be part of the European Union based on mindset, size, and most importantly, lack of desire to be a part of the system. Some critics on the opposing end argue that it is inevitable that Russia will join the EU. Maybe not in 5-10 years, but eventually Russia will be pressured into finally conforming to European standards of business and law.

For now, Latvia stands between Russia and the EU, new policies have been enacted which are seen as more “pro-Russia” than before and there seems to be a tacit struggle for control of business and government. While the West is keen on pressing the “reset button” with Russia, Russia has clearly yet to do the same with the Baltics.
Is a military attack in the future? What would NATO do in such a case? Russia has been conducting military exercises near Baltic borders in the last year and no one has said a word.

In a future Outlook these questions regarding military strategy and geopolitical importance will be looked at deeper as we ask foreign and regional experts the question: “What if Latvia was re-invaded?”