Estonia's New Coalition Government

After weeks of negotiations, an agreement on a new coalition government in Estonia was today finally reached. Thus, for the next four years, Estonia will be ruled by a government of Reformists, the Pro Patria and Res Publica Union (IRL), and the Social Democrats. That is, if the coalition partners will be able to see eye to eye in the long run.

Until now, the track record for Estonian governments has for most part been less than a year in office. Still, the 4 March election results proved an exception from this rule, as the Prime Minister, Andrus Ansip, retained support for staying in office for the first time since Estonia regained independence in 1991. Consequently, the main goal of coalition talks seems to have been to maintain the political stability that the elections formed a basis for.

Still, as previously reported, next to everything seemed up for grabs after the 4 March parliamentary elections. The only clear thing was that Prime Minister Ansip's Reform Party would take the lead in government formation talks. Who the other government coalition partners would be was however unclear. How great an importance that in the end would be given to a broader and more stable government was the great question in Tallinn. Speculations on a grand coalition have been frequent and for long there were many indications in this direction. One obvious result of the coalition now formed is that the Reformists have left out both their old coalition partners in the previous government, namely the Centre Party and the People's Union.

That Edgar Savisaar's Centre Party would not form part of a new government came as no surprise, as Reformists and Centrists had been the main contenders for power during the election campaign. However, also the Estonian People's Union was left out, which may be attributed to its losing almost half its votes in the elections.

Still, this was not a foregone conclusion as also the Pro Patria and Res Publica Union (IRL), which forms part of the new government coalition, suffered a similar fate. The conservative IRL was previously the biggest opposition party in parliament - the Riigikogu - but what perhaps was decisive for including the IRL was that its election loss was expected in contrast to that of the People's Union. It was also quite clear at an early stage that Reformist coalition-builder Ansip would opt for including the IRL in the new government.

One potential partner that particpated in the race for government power was the Green Party, which entered parliament for the first time by the elections. That this did not become the case was probably due to the same reasons motivating its inclusion: It might have proven quite gullible for the other coalition parties once in government. Consequently, Green Party leader Marek Strandberg characterised the reasons for leaving coalition talks thus: "The current situation reminds us of a school excursion to the Tallinn meat factory, after which the temptation to test the sausage considerably diminishes."

As the Green Party abandoned coalition talks, Prime Minister Ansip was left to broker a deal with the Social Democrats. In the end, it turned out that the Reformists and the IRL would have to pay a high price for winning over the Social Democrats. All in all, the coalition package will be a staggering 47 billion kroons - the equivalent of 3 billion euros - for covering the reforms of the three government partners. Such state expenditures will only add to Estonia's problems of an already precariously overheated economy.

The costly coalition deal has led to massive critique from Centre Party leader Edgar Savisaar. The Centrists themselves were heavily criticised during the election campaign for making irresponsible and populist promises of expensive reforms that might topple the Estonian economy. For the Centrists, this might have proven a decisive factor for losing the elections. Thus, Savisaar now argues that "Ansip has chosen the road to Golgotha for the new government." This might well be true, but such a statement also raises the question whether the Centre Party may reach resurrection in the next elections. It is true that Savisaar will only be 61 years old in 2011, but considering his health problems, he might well exit the political stage much earlier. Thus, rumours of his political immortality may be greatly exaggerated. Without Savisaar's dominant and all-exclusive leadership of the Centrists, the party would probably fall apart within weeks, as there is no clear successor, and nobody could shoulder Savisaar's role of constant fighter. Perhaps, there is no wonder that his wife, Vilja Savisaar, takes an increasingly active part in the party's top-level decision-making.

Still, regardless of Savisaar's future, the Centre Party is on the retreat. The Estonian people decisively opted for political stability and continued reform and modernisation to fully integrate with the European Union. Here, the Centrists have little to offer. The great challenge now for the new government is to realise the people's hopes. Regrettably, the costly coalition deal fares ill for the new government's prospects to fulfill the hopes for the brighter future the Estonians so much desire.

Update: Mart Laar on Thursday declared that he will himself not seek inclusion in the new Estonian cabinet. Instead, he will concentrate on developing the new Pro Patria and Res Publica Union (IRL) to seek leadership of the unified party. Stepping aside of government duties also gives Laar the opportunity to lead IRL in the 2011 elections without the political burden a cabinet post might have involved.

A surprise in the new cabinet is the inclusion of Jüri Pihl as Minister of the Interior. Pihl has previously headed the Estonian security police (KAPO), and also been Prosecutor General. Until now, Pihl has been unpolitical, but will now represent the Social Democrats in cabinet, which further strengthens the impression of a coming SDE stronghold on Estonian politics. Pihl is widely believed to have close relations with Western structures and has also been close to Aleksander Einseln, former Commander in Chief of the Estonian Armed Forces.

Estonia: Battle by Bronze Proxy

Why is it that a WW II-monument repeatedly sparks bilateral crises between Estonia and Russia? This question has, in recent days, gained new relevance after strong Russian reactions against the Estonian parliament's decision to remove the so called Bronze Soldier (Pronkssõdur) soviet war monument from central Tallinn. The reason is simple: The Bronze Soldier has become a proxy for the conflict between Estonian and Russian interests in Estonia before the 4 March parliamentary elections. The Estonians thus vage a battle by bronze proxy.

It is becoming increasingly clear that Edgar Savisaar's Centre Party (Keskerakond), will stand as victors on election day, ousting the coalition government led by Prime Minister Andrus Ansip's Reform Party (Reformierakond). Such a result risks toppling the delicate balance between western financial interests, dominating the Estonian banking system, and Russian interests controlling the lucrative transit trade, with far-reaching consequences for domestic and foreign policy.

Economic interest has been one of the main driving-forces in Estonian politics since the country regained its independence in 1991. A division of labour was developed roughly between two opposing groupings - the Russians controlling transit trade and backed by Moscow, and the Estonians controlling the financial and banking sector and backed by western - mainly Scandinavian - interests. This is reflected also in politics. Thus, Savisaars Centre Party has gradually become Moscow's agent, with heavy economic backing from Russia, to the point that the party actually has entered into union with Russian power party United Russia (Единая Россия). Savisaar's main opponent, the Reform Party, is to the contrary linked to finance and banking dominated by western business interests. A final peculiar twist to the matter is that these two main contenders for political power in Estonia, in fact form the current coalition government, together with the People's Union (Rahvaliit).

It is obvious that the the Bronze Soldier crisis this time is a desperate attempt by the Reform Party, facing potential defeat, to gain votes by shedding light over the close relations between the Centre Party and Russia. So, who are the major players in Moscow's relations with Estonia? On the Russian side, two names stand out as safeguarding these interests, namely Gleb Pavlovsky, one of Russia's foremost "political technologists," and Igor Levitin, Russia's Minister of Transportation. Pavlovsky gained wider international attention in 2005, due to allegations of involvement in the dioxin poisoning of Ukrainian president-to-be Victor Yushchenko. As for Levitin, Savisaar the other year unsuccesfully tried to grant him Estonian citizenship due to his great services to the country.

Then, what is actually at stake for the upcoming elections? Estonia is currently struggling with an overinflated rate of public lending - a financial bubble that could easily burst in face of any radical change of power in Tallinn. If Savisaar's Centre Party would win on 4 March, this might well be the spark to set off a major financial crisis in Estonian economy. As the Reform Party relies on the finance and banking sectors that constitute the lenders, such development would be catastrophic to the party, and potentially topple the fragile balance of power within Estonian politics and society. Moreover, it would hit hard on the western investors, forming Estonia's link to European economy. Therefore, the Reformists now are desperate to undermine the Russian interests forming the power base for Savisaar's Centrists. Thus, the Bronze Soldier crisis must be seen as an attempt to provoke sanctions from Russia, which would hit the very transit trade that forms the basis of Savisaar's Russian backing.

As the Estonian parliament (Riigikogu) this morning decided to move the Bronze Soldier monument, the country's president, Toomas Hendrik Ilves, was quick to declare that he would not sign such legislation, claiming it to be in breach of the constitution. In this context, one must ask whether it really was necessary for the parliament to pass a law on the removal of the Bronze Soldier. If this really was the intention of the Reform Party, could it not have been easier accomplished by a simple government decision? From this perspective, it is quite obvious that the Reformist ulterior motive was to provoke a crisis with Russia that would benefit the party for the upcoming elections.

So, what have been the reactions in Moscow? Russian Foreign Minister, Sergey Lavrov, was quick to characterise the decision as a "grave mistake" and as a "blasphemous act." Also, the chairman of the Russian Duma's foreign relations committee said that the decision would have catastrophic consequences for Russian-Estonian relations, especially trade and economy, thus hinting at exactly the effect the Reformist Party wanted to achieve. However, Estonia's ambassador to Moscow, Marina Kaljurand, was quick to point out that Russia would be unlikely to impose bilateral sanctions on Estonia, not wanting to risk a "trade war" with the European Union. What will actually come out of this is yet to be seen, but it seems that Russian politicians would be shrewd enough to call the bluff. Still, Russian-Estonian relations have been shaky for long, as previously reported, so it is difficult to say what will come out of Moscow this time.

Here one should instead direct more attention to an overseen foreign policy factor in the context of Russian-Estonian relations, namely the projected Russian gas pipeline through the Baltic Sea. This crucial project for Russia is meeting increasing opposition among Baltic Sea states, and currently public opinion also in Sweden is turning against letting the pipeline run through its territorial waters. Would Sweden and other Baltic states turn down the project, with a Centrist government ruling Estonia, one scenario is that Russia might turn its frustration towards Tallinn, possibly giving massive support to Savisaar in order to gain a permanent influence over EU-member Estonia. This would create a very difficult terrain for the EU and Estonia's neighbours to manouevre, not to speak of what challenges it would pose to president Ilves and the Estonian political system.

Finally, is there any solution in sight for the issue of the Bronze Soldier monument? As for its removal, Estonia probably lost its chance back in 1991. However, doing so spurred an idea of expanding the monument to hold also statues of Estonian, German, as well as allied soldiers of WW II, along with various paraphernalia. This idea was never realised, paradoxically due to lack of metal for the statues. In the early 1990s, Estonia was a major exporter of metal, despite its evident lack of this type of natural resources. Mainly Russian business interests made fortunes by exporting whatever metal scrap they could lay their hands on, thus forming the mighty Russian economic interests that now dominate the transit trade. So, what then made Russian fortunes - the metal that might have expanded the Bronze Soldier monument into a unifying symbol for Russians and Estonians alike - now comes back to haunt the transit profiteers by a constant threat of sanctions to their trade. Had there been metal then, this explosive matter might have been defused at an early stage. Then, of course, Estonians and Russians would probably have found some other symbol to quarrel over.

Comment: On Baltic economy, especially Latvia, cf. "A Bursting Baltic Bubble." For an overview of Russian-Estonian relations see also "Estonia: Stalemate in Russian Relations."