Anniversary of Anguish over Bronze Battle

This weekend past saw the first anniversary of the Estonian Bronze Soldier crisis - over the removal of a soviet WW II monument from central Tallinn. As the crisis evolved it ignited a bilateral quarrel between Tallinn and Moscow, in the end setting Russia and the European Union at loggerheads. As the first anniversary of the Bronze battle drew close, a certain extent of anguish and apprehension arose among Estonian authorities. What was to happen this time over? The simple answer was - next to nothing.

On Saturday, some 100 demonstrators gathered in a park in central Tallinn to commemorate last year's events, and to call for the resignation of the Estonian government led by Andrus Ansip. The event was peaceful and heavily monitored by police and the Estonian secret service (KAPO).

That the demonstration actually rallied less of a crowd than the number of people merely injured last year must be considered a fundamental failure for Russian "minority" interests in Estonia. Not least so as, just a few weeks ago, an organization to unite Russians in Estonia held its first congress. That Saturday's demonstration had such a poor showing may thus point to a waning significance of the Russian issue in Estonia. Or should perhaps alternative explanations be sought?

What evolved over a few weeks last spring was that the same methods used during the coloured revolutions in Serbia, Georgia, and the Ukraine, were now applied by Russians themselves. As the protest was reaching its crescendo, actions and debate were coordinated by sms, e-mail, and blogs targeting largely unprepared Estonian political leaders and authorities. The subsequent cyber attacks on Estonian web-servers proved the peak in efforts to paralyze society. Someone had obviously done his homework.

In terms of the Russian-speaking population of the Baltic States, Russia has long propagated that these "minorities" are consistently discriminated against, and has even ventured so far as to compare the situation with Apartheid. Last year's events also gave Moscow an opportunity to highlight the issue on the international scene. Although much of recent bravado has mysteriously evaporated, Russia has e.g. demanded an addendum on the Russian minorities in Estonia and Latvia in ongoing negotiations on a new Partnership and Cooperation Agreement with the European Union.

Still, much indicates that Moscow came out of the 2007 conflict with the EU on the wrong end of the stick - besides the PR-fiasco for Moscow's international image - why such demands are most likely to be ignored. Also, Russian policy towards the Baltic States since 1991 has largely proven a failure. Already in 1997, Russia's Council for Foreign and Defence Policy - an influential think-tank - in a report characterised Moscow's policy as counterproductive, if it intended to safeguard the interests of Russian "minorities".

It is far too seldom argued that what is not said and done may be as interesting as what actually is. So may be the case also here, although reporting on something that did not happen - as the Bronze battle anniversary - would hardly qualify as breaking news or of interest to a larger audience.

Turning to the case in point, the Bronze Soldier crisis has fundamentally been interpreted as an ethnic conflict. In fact, few issues are as politically sensitive as ethnic tension. Recent history has witnessed oppression and even genocide on minorities to an extent that has shocked world opinion. However, this also has made us prone to see far too many societal conflicts with ethnic lenses.

So, why did the anniversary of the Bronze Soldier crisis pass by next to unnoticed? May it be that there are alternative or complementary explanations to last year's turmoil than the ethnic angle? Before trying some hypotheses, it should be clearly stated that the removal of the Bronze Soldier from central Tallinn unequivocally was the igniting factor of the 2007 crisis. It is quite obvious that the Estonian government acted in haste and with poor judgement. Thus, they partly brought the crisis upon themselves.

Still, that does not explain the absence of protests a year after the so far largest protests by ehtnic Russians in post-soviet Estonia. The situation has not altered and the reasons for, arguably, Russian discontent with conditions in the country has not changed for the better - rather the opposite as a fact. Political forces traditionally safeguarding interests of Russians have partly been rendered obsolete. In socioeconomic terms, nothing has really happened, as illustrated in a report by Marju Lauristin last autumn.

So, except for Estonia's monumental mistake and obvious Russia-related explanations of lacking protests this year - the upcoming presidential installation on 7 May and last year's domestic need in Russia to rally around a cause - what might serve as alternative or complementary hypotheses for the difference between last year and now?

One reason largely unexplored is the transit of Russian goods and products through Estonia. Russia has long wanted to divert this trade to Russian harbours instead of having to pay the costs of transit. Furthermore, Kremlin-sponsored Russian companies had long been eager to out-compete those companies that controlled and profited from the Estonian transit trade. The same applied for control over export-harbours in Estonia. For most observers, it serves as no surprise to state that the transit trade involves enormous sums of money. One can only imagine how much by pointing to the fact that Estonia lost some 6,3 billion Estonian Kroonas in transit revenues due to a few weeks of Russian blockade.

Consequently, just a week or so before the April 2007 events, Russian vice Premier, Sergei Ivanov, held a speech in Murmansk, in which he propagated curbing transit trade and diverting Russian exports to ports in the Petersburg region and Gulf of Finland.

Negotiations for transit quotas and pricing on Russian goods by Estonian railway were to be held in May 2007. In 2006, the Estonian state re-nationalized Estonian Railway (Eesti Raudtee), why preconditions for influencing the outcome of negotiations had been altered to the detriment of Moscow's interests.

As for harbour facilities, the ports of Tallinn and Muuga represented around one-quarter of Russia's total refined-product exports, thus by far outweighing any Russian harbour. Control over harbours in Tallinn, Muuga and Sillamäe had long been coveted by Russian business interests. As previously reported, last year's crisis also saw a transfer of trade between these ports to the benefit of Russian interests.

Then, there is also the question of shipping. The crisis and the subsequent Russian trade blockade is said to have favoured shipping operations, controlled by Swiss-based Gunvor Group. Gunvor is owned by Swedish oil trader Torbjörn Törnqvist, with interests in e.g. Surgutneftegaz. In November last year, Russian political scientist Stanislav Belkovsky made allegations in the German newspaper die Welt that Putin had amassed a personal fortune of some 40 billion USD, and that part of this was held by a 50% share of the Gunvor Group.

Although these rumours and allegations cannot be corroborated, and in fact have been denied by most concerned parties - among others Törnqvist himself - one cannot but stop to wonder what role business with a Russian stake had in the 2007 Russian-Estonian crisis. The example of controlling the transportation system - railways, harbours, and shipping - of Russian exports by way of Estonian transit might thus arguably be one alternative or complementary explanation to why last year's Russian-Estonian crisis was allowed to escalate to the level it did.

Russia's imposition of a trade blockade on Estonia for a few weeks last year was a hard hit on the transit trade. The transport of Russian goods by rail, road, and boat was halted. The companies involved in this line of trade, were among the all too evident losers, and many of them were more or less put out of business - both Russian companies and Estonian with often large Russian ownership interests. These companies were not sponsored by the Kremlin. Instead, it appears that the blockade wiped out annoying competition, and that mightier Russian business interests moved in to take over the transit trade, once the blockade was lifted. Such methods would not be a novelty in Russian business practices and thus serve to surprise nobody. Big business in Russia regularly gets Kremlin's blessing to move in and wipe out competition in order to monopolise a market. The difference in what would arguably be the Estonian case, is that these practices were now applied on another state not in the CIS, but on a member of the European Union.

So, apart from speculations and conspiracy-theories that normally surround events such as the Bronze Soldier crisis, it would seem worthwhile to test such alternative or complementary hypotheses as accounted for above. Who stood to gain from a blockade halting transit trade, and who has actually done so? However, if proven right, such an argument would not only expose that the Kremlin serves its own interests, but also a blatant disregard by Russia for the interests of the Russian "minorities" in the Baltic States, because the greatest losers of the conflict would turn out to be the very same Russian minorities that Moscow claims to defend.

Consequently, it may actually have been the Russians in Estonia who lost most out of the Russian-Estonian conflict over the removal of the Bronze Soldier. Russians were hit by losing the revenues from transit trade, both in terms of profits and employment. Furhtermore, Russians were the ones who were most exposed by raising the issue of disloyalty to Estonian society as a whole. For any minority in any country, such cross-pressure may prove highly detrimental to their future prospects of finding a place in society in social, economic and political terms, and still Moscow decided it was worth to run this risk.

Perhaps, in the end it is safest not to test such hypotheses as forwarded above, because - if validated - they would bring the perceived cynicism of Russian leaders to new and even higher levels. Moscow's indignation and heavy hand towards Estonia was officially motivated by the public outcry among Russians over the removal of the Bronze soldier. General opinion held that Moscow now finally had to step in to protect the Russian "minority" in Estonia. In stark contrast to this official policy, a proven transit trade hypothesis would - to the opposite - paint a picture of Russians abandoned by Russia and their cause sacrificed for the sake of petty business interests. One cannot help but wonder what the Russians who took to the streets in both Tallinn and Moscow in protest against "fascist Estonia" would think if confronted by proof to that effect. In the meantime, such hypotheses are, of course, just a fidget of one's imagination - or are they?

Pride & Prejudice

Gay rights are human rights. It is a paradox that the same rights, that served as the moral basis of liberation from the communist yoke in Eastern Europe, are now denied a group most in need of them. Still, today this is the case in large tracts of our continent, remaining a stain on the very same shield of liberty set to protect the right of the individual.

During the last few weeks, events related to LGBT-rights have given rise to both concerns and hopes about the situation of homosexuals in Central and Eastern Europe. Developments have clearly shown that homophobia is still rampant in the region, but all the same there are promising tendencies in some countries that at least some authorities have started to respond to international critique against official homophobia. Reviewing recent events, gives a somewhat more hetereogeneous picture than was the case only a year ago.

Lithuania

A few weeks ago, a celebrity homosexual was beaten beyond recognition in Lithuanian capital Vilnius. The only reason was that he was openly gay. He might as well have had a pink triangle stitchted to his chest. Homosexuality is simply not socially accepted in this deeply Catholic country, and people and parliamentarians alike do not hesitate to openly condemn this "pariah to society."

Last week, Amnesty criticised Lithuania for not respecting gay rights, actively hindering an EU-sponsored campaign "For Diversity - Against Discrimination" - in celebration of the Europan Year for Equal Opportunities for All. Now, the campaign has had to be delayed in anticipation of permission from Lithuanian authorities. Last week, the Vilnius Rainbow festival was denied the right to assembly in the capital. In response to the exposed situation for the Lithuanian LGBT-community, the European section of the International Gay and Lesbian Association (ILGA) has decided to arrange its annual conference in Vilnius this autumn.

Russia

Turning East to Moscow, a group of LGBT-activists - including several western parliamentarians - were brutally beaten by anti-gay groups, when trying to hand over a petition to mayor Yuri Luzhkov. Their simple plea was to argue for the permission to march through central Moscow during the 2007 Moscow Pride festival. While being beaten by skinheads, Russian police stood idly by watching the "spectacle" afar, only to afterwards arrest some thirty gay rights' activists, including two members of the European Parliament.

Latvia

However, what might be considered a slight improvement was yesterday's Pride march in Latvian capital Riga, organised by the Mozaika network. With the experiences from last year's violent anti-gay protests in fresh memory, authorities now allowed some 1,000 activists to march the streets under heavy police protection. Still, the march has created a deep rift in the Latvian LGBT-community, and ILGA-Latvia has publicly denounced organisers as provocateurs and profiteers, whose actions will only worsen the situation in the country.

Poland

Another partial success was the 19 May Warsaw Pride festival, where some 5,000 LGBT-activists were, for the first time, allowed to undertake the march. Despite massive anti-gay protests, the Pride parade went by without the extensive violence we have got used to see in other parts of Central and Eastern Europe. However, Poland remains a fundamentally homophobic country, and the Kaczyński twins, ruling Poland as President and Prime Minister, are among the country's foremost opponents of gay rights. Polish homophobia is, to be quite frank, on the edge of the ludicrous. Thus, last week, Poland's Children's Ombudsman considered banning the kids' show Teletubbies. Why? The reason is laughable: Apparently, one of the "male" characters in the show carries a handbag. Such a role model might prove a negative influence on Polish children, the Polish Ombudsman argued, as it might indicate the small blue figure was - GAY! Lo and behold! It was only after widespread ridicule in international media, that the Ombudsman decided to reconsider her position.

Gay Rights are Human Rights

Protection against discrimination on the basis of sexual orientation has gradually become a self-evident part of international law over the decades. The 1966 International Covenant on Civil and Political Rights (ICCPR) has been judged applicable on sexual orientation, thus safeguarding the same political rights to the LGBT-community as any other social or political movement.

In a regional context, the Council of Europe's Convention for the Protection of Human Rights and Fundamental Freedoms nowadays covers protection against sexual orientation discrimination, and the European Social Charter safeguards the social and economic rights of homosexuals.

In the framework of the European Union, the Treaty of Amsterdam enables the EU to fight sexual orientation discrimination as does the Charter of Fundamental Rights of the European Union.

The list is far from exhaustive, and serves only to illustrate how current international law protects the human rights of LGBT-individuals. Still, although many states of Central and Eastern Europe pride themselves with becoming part of Europe, prejudice prevails against homosexuals in large tracts of the region. It simply is not acceptable when politicians and people alike pursue a policy of public homophobia, as is the case in many of the abovementioned countries. Becoming part of Europe means becoming party to the humanistic social and cultural heritage of Europe. As long as this is not the case, the road to true integration remains long. The tragedy about sexual orientation discrimination in Central and Eastern Europe is however that it often is the same dissidents and democratisers who, during the soviet era, fought for human rights, that today deny one of the most exposed groups in society the very same rights they once held so dear. Obviously, the fruits of freedom are sown unequally.

Russia: Motives & Misperceptions

As relations between Russia and the West deteriorate, a growing tendency to misperceive Russian motives is discerned. Russia is not a monolithic power, but analysts increasingly tend to give prominence to factors that themselves cannot wholly explain Moscow's actions. A recent example is the Russian-Estonian crisis.

The current crisis between Moscow and Tallinn has its specific origins, and should come as no surprise to most observers. The basic preconditions for crisis were set already in the early 1990s, and both parties are since stuck in a mutually detrimental relationship. The difference this time though is that there currently are no countervailing forces in Moscow to keep the conflict in check, as has previously been the case. This is matched by poor judgement on the Estonian side. Also, the conclusion by western analysts that Russia is using its energy weapon against Estonia by imposing an export blockade seems flawed and an example of mental bandwagoning among people prone to single factor explanations.

Public opinion in Russia about the Baltic states was forged from the disappointment of their determination to abandon the ailing Soviet empire. The Balts were considered part of the liberal and reform oriented forces in soviet society, why Russians felt betrayed by the Balts as Moscow perceivably strived towards the same political goals as the Balts were identified with. The realisation that the Baltics now were abroad took a long time for most Russians to come to terms with. That Russians had become subjects of a non-Slavic state in which they had to seek citizenship to enjoy the full rights of society was incomprehensible. That states like Kazakhstan might treat Russians badly was only to be expected, as they did not share the liberal heritage Russians associated with the Balts. A measure of double standards was thus introduced in comparing the situation of Russians in former soviet republics. As for the Baltics, Russians felt scorned in their identity as imperial civilisation carriers. An inferiority complex was thus the nucleus of the dispute over the situation of Russian "minorities" in the Baltic states.

As things have evolved in Russian-Estonian relations over the last month, the image conjured up by Russian media is that of Russians being wronged and bereft of their rights and heritage. The difference this time is that there are no countervailing forces in Moscow to keep too overt nationalist sentiments in check. Still, most analysts limit themselves to describe the conflict in either bilateral or Estonian terms, whereas Russian domestic factors are left out. This limits reporting to developments of the same Russian-Estonian themes covered over the last 15 years, and old articles might be taken out of the drawer to be rewritten or updated, simply filling in the new facts. In essence, however, they lack the proper contextualisation to explain why the conflict has taken a new turn for the worse. Action is not enough - as the removal of the Bronze Soldier and its consequences. Context must be added to analysis in order for us to understand the full extent of the problem.

Next year, Russia faces presidential elections. By all appearances it seems to be a runoff between Sergei Ivanov and Dmitri Medvedev. The power struggle in the Kremlin is however already underway, and who eventually will get the upper hand sways back and forth between the two main contenders. Half a year ago, Medvedev was in the lead, but now Ivanov has made a comeback and seems to be in the best position to become master of the Kremlin in 2008. In this context, Ivanov has used the Estonian crisis to gather his forces in front of a common foe. Opinions on Estonia are by now so deeply set that they may be used as a vehicle to gather the Russian masses. Previously, Russian leaders have known where to draw the line in using the "Baltic question" but now president Putin cannot put the foot down as too great interests are at stake, in who will rule Russian politics in coming years, to risk anything just to preserve a working relationship with Tallinn. As for relations with the European Union and Nato, Putin walks a thin line in risking a multilateralisation of the Estonian issue.

However, Medvedev is also not left out in gaining the dividends of the Estonian crisis. Last week, Sergei Ivanov, during a meeting with governors in Murmansk, declared that the Russian oil and coal previously exported by transit through Estonia will now instead go through the port of St. Petersburg. Russia annually ships around 25 million tonnes of fuel oil, gas oil and petrol through Estonian ports. Imposing a Russian energy blockade on Estonia is regarded by many analysts as a way for Moscow to use its energy weapon. Such a conclusion, however, seems flawed as Estonia is relatively spared of any major consequences for its energy supply. Instead, it may prove a way for major Russian oil exporters - mainly Rosneft - to curve export competition by other Russian oil companies.

Transferring exports to St. Petersburg will indirectly give Rosneft greater control over who will be able to export Russian oil. St. Petersburg port is already today gravely undersized - not to mention corrupt - and much effort has been made in recent years to construct new harbours in the Gulf of Finland - Primorsk for oil and Ust Luga for bulk. Opting for Petersburg therefore means that companies that previously have exported by way of Estonia now are at the mercy of Rosneft to meet their deliveries to western customers. In essence, the energy blockade against Estonia gives Medvedev's interests a way to hit at remaining independent competitors within the oil industry. Consequently, Ivanov reaps the political and Medvedev the economic rewards of the Estonian crisis.

So, should all explanations based on the actual situation in Estonia and relations with Russia be discarded? Of course not. However, it is equally important to analyse the conflict on its own merits as it is to contextualise it, striking a balance on the domestic-foreign frontier. An obvious example is the risk that the conflict may spread also to Latvia. Most observers would say that situations differ too much for something similar to happen in Riga, but still Latvian authorities are apprehensive. From both a political and economic perspective, Ivanov and Medvedev may gain from sparking a crisis also with Latvia for the very same reasons why they have let the crisis with Estonia get so much out of hand. There simply is too much to gain and too little to lose domestically at the moment, that a Russian-Latvian crisis should not be ruled out just because situations in Estonia and Latvia are not similar enough. Giving the crisis a Russian domestic political contextualisation shows this.

Still, is the Kremlin willing to risk its relations with the West - EU, Nato and the US - over such an insignificant issue as the Baltic question? Actually, such an assumption should not be ruled out. Already, Moscow is at loggerheads with Washington, and the US understands that it now has to be tough on Russia in order to have a working relationship. The European Union, however, takes a much weaker stand when it comes to Russia, and when it does confront Moscow it is on negotiation issues such as the Partnership and Cooperation Agreement (PCA) and the European Energy Charter. Until now, Russia has never had anything to lose in real terms in relations with the EU, and the Union consistently avoids putting its foot down in relations with Moscow. That Poland and other member states, in this context, may hamper EU-Russia negotiations is officially treated with resignation in Bruxelles, while most unofficially sigh with relief. Thus, Russia rationally calculates that the EU will never truly make a stand in their relations, why Moscow really risks nothing by a confrontational policy.

Developments in Russia are met with growing concern in Europe, and there is an understanding that sooner or later the European Union will have to confront the issue, as many of its members are already experiencing the realities of a more assertive Russia on the world stage. Doing so, however, sets out from, on the one hand, foreign relations and, on the other hand, Russia's domestic political situation. The latter is mainly directed at the crisis for democracy and human rights and far too seldom at the factors that Russian rulers themselves would deem of political importance. Foreign and domestic factors are increasingly treated as monolithic and attempts at joint analysis are often superficial or aim at the wrong factors.

The result is that it is becoming all the more of a mystery in the West why Russia acts as it does. The West is once again allowing Russia to become "a riddle wrapped in a mystery inside an enigma" for the evident reason that Europeans are too subsumed by their own values, norms, perceptions, and prejudice to follow the simple logics of current Russian politics and society. Then it is much easier to produce an image of a state that once more might pose a threat to Europe - an alien entity accepted by its mere existence but doomed to remain foreign to Europe. Here, the Russian-Estonian crisis serves as a striking example of how the West fails to account for important factors in its perceptions of Russia. As European public opinion turns increasingly against Russia, the risk of misperceptions may become an even greater danger than a revived Russian threat in the eyes of Europe. Russian motives are not always what they seem.

Latvia: From President to Film Star?

With only a few months left in office, Latvian president Vaira Vīķe-Freiberga might ponder upon her future career. Having failed to become UN Secretary General, she soon enters a new life - possibly as a movie star. Admittedly, this might be a grave exaggeration, as the film in question will be a documentary on Vīķe-Freiberga, and thus probably not a box-office hit.

As a new president will move into Riga castle on 1 July this year - possibly Foreign Minister Sandra Kalniete - Vīķe-Freiberga might reflect upon how to assume her rightful role in history books. However, she might not have to think for long, as a documentary film on her life has recently been put into production.

The documentary is to illustrate Vīķe-Freiberga's lifetime achievements against the backdrop of Latvian history from the 1920s. The director, Vilnis Kalnaellis, will have full access to the presidential film and video archives. The "Vaira Vīķe-Freiberga story" will not be opening at theatres before the end of the year, but the film is intended to be launched on the international as well as the domestic market.

However, public expectations might be higher for a potential sequel in four years' time - possibly starring Sandra Kalniete. The fact is that a "Sandra Kalniete story" might prove much more interesting for a movie audience than that of Vīķe-Freiberga.

In 2001, Kalniete published a book about the deportation of her family to Siberia during the Stalin era - With dancing shoes in Siberian snows (Ar balles kurpēm Sibīrijas sniegos). The story of her early life became an international bestseller and Kalniete was awarded several literary prizes for the book. So, one should perhaps keep one's fingers crossed for Kalniete to assume the Latvian presidency this spring - at least if you are a documentary film bum.

What Government for Estonia?

Defying all odds and opinion polls, the Reform Party stands as victor of Estonia's parliamentary elections this Sunday. Thus, Savisaars populist Centre Party was beaten by a close 1.7% margin. Together, the two reluctant coalition partners now form a majority of votes in the Estonian Parliament - the Riigikogu. It is, however, too early to say if Reformists and Centrists will continue their government cohabitation. In essence, the upcoming government formation may present almost any combination of parties in a coalition cabinet.

Sunday's election results must be characterised as a landslide victory for the Reformist Party, led by Prime Minister Andrus Ansip. The party went from 17.7% support (19 seats) in the 2003 parliamentary elections to 27.8% (31 seats) now, thus increasing its support by 10% of the electorate. Thus, the Reformists will dominate the 101 seats' parliament as its single largest party, and Ansip has also been asked to form a new government by President Ilves. Ansip is also the first Estonian Prime Minister to survive an election, and the second Baltic after Latvia's Aigars Kalvītis. This does not necessarily mean that the current government coalition will remain in power. To the contrary, the election campaign has been very tough between the main coalition partners - Reformists and Centrists. Still, it might be a good idea to keep track of reservations at Tallinn restaurant Balthasar in coming days, to see whether a new "garlic coalition" may be reformed.

Concerning Edgar Savisaars Centre Party, it held its ground, and went from 25.4% (28 seats) in 2003 to 26.1% (29 seats) in the current elections. Due to the mentioned antagonism between the Centrists and Reformists during the election campaign, few observers believe that the parties will continue their government cohabitation. Still, together they would form an absolute majority in the Riigikogu, which might partly serve as a convenient solution to governability and partly marginalise the opposition. Despite indications to the contrary, this option should not be too lightly ruled out.

As for the third government coalition partner, the Estonian People's Union, the party remains in parliament, although almost halving its votes from 13% (13 seats) in 2003 to the now 7.1% (6 seats). The People's Union is a populist and nationalist agrarian party. The party, founded by former president Arnold Rüütel, has been in government with both the Reformists and Res Publica (now IRL - cf. below), and was also a coalition partner in the outgoing Ansip cabinet. Consequently, it might prove very convenient for Ansip to form a consistent right-wing government of Reformists, IRL, and the People's Party.

What might, at first sight, appear as the great election loser is the Pro Patria and Res Publica Union (IRL). In comparison to 2003, the party went from 31.9% (35 seats) to Sunday's result of merely 17.9% (19 seats). This result was however expected, and IRL actually had a stronger showing than expected. Last spring, the two conservative parties - Pro Patria and Res Publica - merged to unify the conservative electorate, which also made it Estonia's biggest opposition party. However, prior to unification, Juhan Parts' Res Publica government had been ousted, marginalising the party in Estonian politics. In view of this, the unified party's result in Sunday's elections was better than expected, despite the fact that it lost almost half its seats in parliament. Some of this loss may also be attributed to the Christian Democrats, which competed for the same votes as IRL and did not reach the 5% parliamentary threshold. As for IRL's potential for forming part of a new government, Reform Party leader Ansip hinted in this direction before the Sunday elections. However, judging from results, a Reformist-IRL coalition would need a third party to form a workable parliamentary majority. Together, the two parties occupy 50 parliamentary seats, falling below absolute majority by a single seat.

Such a partner might well be the Social Democrats, which also increased its votes from 7% (6 seats) in 2003 to 10.6% (10 seats) now. Prime Minister Ansip has also hinted that a leftist alternative might be preferrable, but whether this might include the Social Democrats or the Centre Party is unclear. Personal animosity between leading Reformists and Social Democrats is a factor that must be calculated with in this context, and in the end this might rule out a Social Democratic role in government.

Another alternative to a non-centrist government is the newcomer to Estonian politics, namely the Green Party. With 7.1% of votes (6 seats) they passed the parliamentary threshold with a wide margin. Speaking for such an alternative would be that a new party might be quite gullible for the other coalition parties once in government. A coalition between Reformists, the People's Union, and the Greens - as well as other combinations - is an unexptected option that might present too tempting an alternative to resist for Ansip.

All in all, next to everything seems up for grabs at the moment. As the obvious government former, Reform Party leader Ansip might choose next to any coalition partners he sees fit, and the few contradictory indications he has made so far only add to the impression of an unpredictable political landscape in the country. Still, the main result of the elections is - as a matter of fact - that relative political stability has been achieved for the first time since Estonia regained independence in 1991. As its neighbour Latvia, Estonia now strengthens the tendency towards a more robust political system in the Baltic States. This, in itself, constitutes a great success, regardless of which parties in the end will form the next government.

A Bursting Baltic Bubble?

Are the Baltic states facing an impending economic crisis? So seems to be the case, due to the current overheating of both Estonian and Latvian economies. Earlier this week, Standard & Poor's as well as Deutsche Bank warned that Latvia's economic imbalances might cause a currency devaluation. Estonia risks a similar fate in the runup to its 4 March parliamentary elections. Only Lithuania seems to be getting off scot free.

In January, Standard & Poor declared Latvia Europe's "most dynamic economy in 2007" with a GDP growth of 8.9%, and with neighbouring Estonia coming in second, with a 7.5% growth. Estonia and Latvia - along with Slovakia - are the fastest growing economies in Europe.

Growth, however, has a price. Both economies are facing an inflationary spiral with most economic indicators going wild. In the battle over customers, Latvian banks have lended money to consumers at an interest lower than the inflation rate, and Estonian banks have followed suit.

However, Latvia's problems are the most acute. Since January, economic growth has risen to 11%, by far exceeding the 6-7% that are long-term economically sustainable. High domestic demand and corporate investment rates add to the problems. The increase in imports - clearly over what the country exports - has also created a worryingly negative balance of trade.

As for the labour market, supply cannot meet demand as many Latvians work abroad. The annual wage-rises of an average 10% have so far been compensated by a corresponding growth in productivity, but this year the tendency is towards an impassable 20% rise.

What may really topple the economy, however, is the negative real interest rate combined with a high rate of public lending - largely in euro-loans. According to some sources, this has caused prices of real estate to double in recent years.

All in all, if Latvia were now to devalue its currency - the Lat - banks would be forced to compensate themselves by a drastic increase in interest rates. With loans largely in foreign currency, consumers would face acute solvency problems, potentially with a consequent crisis for the banking system. As it appears, recession seems to stand at the door.

So, what has the Latvian government done to curve inflation and battle economic overheating? Precious little, one must admit. Already last spring, Standard & Poor predicted several years' delay for Latvia's inclusion into the eurozone, postponing it for 2009-2010 at the earliest. Prognosis was based on sustained price growth, driven by demand and rising inflationary expectations. This, in itself, should have been a clear stop-sign for the Latvian government.

All the same, the Latvian economy is basically in good shape. The country's foreign debt is low and the state economy is under control. And, obviously, economy is booming. So, why waste a winning concept, seems to have been the reasoning of the government. Some measures have been made, but they have either failed or been dubious as for their effects.

Also, it is quite obvious that the government had had more reasons to be content. In October, the government coalition, led by conservative People's Party (Tautas Partija) leader Aigars Kalvītis, was the first to be re-elected since the country regained independence in 1991. No wonder the government had a laid back attitude to developments, wanting to enjoy its honeymoon with the voters as long as possible.

However, now the government has come to a rude awakening, as the situation has quickly gotten out of hand. The question is if it will dare to challenge the banking and financial sector, which - as in Estonia - belongs to its key support groups. It is questionable if the Kalvītis cabinet can rise to the challenge. In the meantime, the fear that the Baltic bubble bursts will linger on.

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."

Latvia: Will Riga Allow 2006 Pride Parade?

The 2006 Riga Pride Parade, planned for tomorrow, seems to become a repetition of last year's chaos and homophobic protests in the Latvian capital. On Tuesday, the Riga City Council decided to ban the parade referring to threats of violence, the Baltic Times reports.

The organisers - Latvia’s Mozaika gay rights group - yesterday appealed the decision in court, but will not go through with the parade if authorities decline to grant permission.

The Pride Parade is very controversial in Latvia. The country's LGBT-movement right to public assembly is backed by the Latvian President, but Christian leaders, conservative politicians, and a large part of the public opposes the the Pride Parade on moral and religious grounds.

Last September, the Latvian parliament - the Saeima - initiated a process towards a constitutional ban on same-sex marriage. However, in contrast to Latvian populist politicians, Latvian president, Vaira Vike-Freiberga, is adamant in her support to civil rights also including gay people:

The refusal to authorize this parade is unacceptable in a democratic country because Latvia's priorities are those articles of the Constitution, which enable people to express their opinion and the state should make it possible for them.

Last summer, Latvia's first gay pride parade was arranged, provoking violent protests from rightist groups throwing eggs and tomatoes at gay demonstrators. Then, some 30 people participated in the march, whereas several thousands had gathered to protest against it or to watch it as a freak event. In contrast to last year's low turnout, some 500 people are now expected to participate in Saturday's march.

It is with reference to the 2005 events, that the Riga City Council this year argued that the city cannot safeguard the security of gay demonstrators. A similar decision to ban the 2005 pride parade was overturned by court, why organisers are confident that they will be able to carry through also with this year's event.

If organisers will not be able to go through with the 2006 Riga Pride parade, Latvia's international reputation seems destined to be tarnished. Riga has been chosen as the venue for the NATO-Summit in November, but if Latvian authorities fail to safeguard civil rights in the country - regardless of sexual preference - voices will inevitably be raised to move the Summit.

President Vike-Freiberga, along with several leading politicians, clearly realises that Latvia must shoulder its responsibility in becoming a concomitant part of European democratic culture also on this point, and will therefore most likely support the struggle for gay rights despite widespread popular resistance. Thus, the prospects for gay people in Latvia seem destined to improve gradually over coming years, even if the country will have a very long way to go before acceptance and tolerance of gay people will prevail.

Update:

On Friday, the Riga court of appeals ruled against allowing the 2006 Pride Parade, thus infringing civil rights for public order reasons. The ban on the Pride Parade effectively prevents the 2006 parade and leaves future events much in peril.

On Saturday, participants of the Riga Pride festival had to take refuge in buildings were remaining events of the festival took place. Thousands of homophobic demonstrators had turned out into the streets, throwing eggs and human excrements at the about 100 Pride participants.

Estonia: Stalemate in Russian Relations

In August 1991, Estonia regained its lost independence after nearly 50 years of soviet occupation. Some 15 years later, Estonia and Russia still lack regulated borders. Last year a border agreement was finally signed, but it did not take long before Russia withdrew from the treaty - something next to unprecedented in international relations. Since then, a stalemate persists between the two countries as relations thus reached a dead end. What will it take for Estonia and Russia to sort out their differences?

In May last year, everything seemed set for a go-ahead on a final Russian-Estonian border treaty. The last hurdles had been cleared, as the two foreign ministers decided to sign the treaty in Moscow on May 18, instead of the infamous 9 May Soviet victory day. The latter was not possible, while 9 May 1945 signified the seal of Estonia's soviet occupation. The treaty was signed and the only thing that remained was to have it ratified by parliaments in the two countries. Both were eager to remove the matter from the agenda once and for all, and hastened to have ratification bills passed by parliaments. Just weeks earlier, president Putin had declared that:

Russia is ready to sign formal border treaties with Estonia, Latvia and Lithuania. I hope this will not be accompanied by some idiotic territorial demands. In today’s Europe, in the 21st century, one country making territorial demands against another, at the same time wanting to ratify a border treaty - this is complete nonsense.

However, this is more or less what happened, at least according to Moscow's version of events. Whereas the Russian parliament - the State Duma - was hesitant to ratify the border treaty, anticipating trouble, Tallinn moved on. Eager to get the question off the agenda before vacations, the Estonian government also put the treaty before parliament - the Riigkogu. Reactions to this were negative from the very outset, as many parliamentarians held that the government thereby tried to force through the treaty without proper discussion and debate. To be passed, the bill had to get a 2/3 majority. Such majority suddenly seemed unable to reach, why the government preferred to enter negotiations instead of facing certain defeat. These negotiations resulted in a separate preamble or declaration to the border treaty, referring to the Tartu Peace Treaty of 1920, by which Soviet Russia recognised Estonia's independence within the pre-WWII borders. However, current borders have been revised during soviet reign, which makes Tartu references unacceptable for Russia. With this preamble, the Estonian parliament passed the ratification.

Moscow's reaction
Moscow's reaction was predictable to say the least. On June 21, Russia's Ministry of Foreign Affairs stated that it would not put the treaty before the Duma for ratification. Then, during a visit to Helsinki at the end of June, foreign minister Lavrov declared that Russia had decided to revoke its signature from the border treaty. This is also what happened, and on 1 September president Putin formally withdrew Russia from the treaty. The move to withdraw from an already ratified treaty is next to unprecedented in international relations, and must be considered a very stern reaction. The scandal, a few years back, when president Bush revoked the US signature from the treaty on the International War Crimes Tribunal has reverberated in the international community ever since. Examples are scarce, because the international outcry for doing so is expected too great, and one has to pay too high a price for it to be worthwhile. Still, this was exactly what Moscow chose to do.

Estonian explanations
Why did the Estonians act in this way, if they clearly understood what the reactions from Moscow were to become? What were they to gain from this? Some suggestions have been made, although they fail to explain for - even in combination - Tallinn's action.

One factor is that Estonia in April 2005 went through a government crisis and that the sacked prime minister and leader of the Res Publica party, Juhan Parts, quickly needed to profile himself with some cause, not least after a failed unification of Estonia's two right-wing parties - Res Publica and the Reform Party. Thus, demands connected to the border treaty seemed as a convenient opportunity for Res Publica.

Another reason is that the foreign minister of Ansip's new Reform Party government - 31-year-old Urmas Paet, simply was too new and unexperienced on his post, why he could not manage to deal with Moscow and domestic political intrigues at once.

A third explanation, is that government coalition partners - not least the Social Democrats with their grey eminence Thomas Hendrik Ilves at a safe distance in Bruxelles - stood to gain from a squabble between the two right-wing parties.

Then, there is Estonian politics' black horse of Edgar Savisaar and his Centre Party. Being the new minister of finance, Savisaar was arguably the one pulling the real strings in cabinet affairs. Savisaar is a political survivor with a murky soviet past, who has been constantly scandalised over the years but always gets away without a stain on his popularity, especially among poor and rural population, including the Russians. Also, Estonian conservatives are usually quick to point out that the Centre Party is in union with president Putin's United Russia, thereby casting suspicion on him for being on Kremlin's leash or even - at times - payroll.

Finally, it must have been hard to put off Russian interests, though not necessarily Russia itself, from the temptation of exploiting Estonia's domestic difficulties in this situation. Whether the Russian factor could hold on to itself in not giving in to such an urge will however remain unclear. The effect was though in Russia's interest. Thus, Estonia stood to gain nothing, but to once again be portrayed by Russia to the great powers of Europe as an amateur in international relations in disrupting the treaty. Still, blaming Moscow is simply too much of going through the motions to be taken seriously. Perhaps, Russia in reality simply had to stand idly by while the Estonians themselves fumbled about in torpedoing the treaty.

So, is there any way out of this mess for Estonia? At an OSCE-meeting earlier this spring, foreign ministers Lavrov and Paet discussed the need for resumed negotiations to settle the border issue once and for all. Some discussions have also been held since, but both parties seem to agree that a ratified treaty will not come into force in the foreseeable future. The issue is simply politically dead at the moment, while so much prestige was put in on both sides to finalise the border settlement. Once this was lost, little room was left for future talks. Estonia thus seems to have little choice but to let the issue at rest for the time being.

Dealing with Russia
In view of the current situation, how should Estonia handle its relations with Russia? Professor Andres Kasekamp, director of the Estonian Foreign Policy Institute, believes that Estonia now will opt for an EU-solution. According to Kasekamp, Estonia should take the CFSP/ESDP more seriously. This is also currently the sentiment among many politicians in Estonia. The country seems intent on playing out the EU-card, despite the Union's demonstrated inability to stand firm on Russia. Such a policy thus seems to have a weak foundation in current realities. That Sweden and Finland were the only other EU-states in support of the Estonian position concerning the border treaty, is a telling example of how little the EU cares about Estonia's relations with Russia. EU politicians are simply fed up with the whole affair of Estonia not being able to conclude a border treaty with Russia for the last 15 years. EU-support thus seems destined to fail, and EU's European Neighbourhood Policy appears to offer little use to Estonia, as it does not comprise relations with Russia.

The alternative of handling relations with Russia through Nato should, in this perspective, seem all the more tempting to Tallinn. Such a method would, in reality, mean using the US and the Transatlantic link to influence NATO-policy. In May 2005, president Bush visited Riga, and among other things discussed subjects such as democracy and freedom in Eastern Europe. This kind of US high-level discussions is in the best interest of Estonia, while statements to this fact facilitate setting the Nato-agenda in Tallinn's favour. US vice president Cheney's speech at the May 2006 Vilnius Conference also signalled a change towards a more critical stance in US policy towards Russia. In November this year, Riga will host the annual Nato Summit, offering an opportunity to further Estonian interests in relations to Russia by proxy of Nato. Estonian chances to bandwagon with the US to deal with Russia through Nato are therefore greater than ever. Still, Tallinn strangely enough seems to prefer the EU option - perhaps reflecting the post 2001 change in Nato's geographical focus. What Estonia fails to recognise is the fact that also within Nato, the tide is changing in relations with Russia. Tallinn should clearly not miss out on this opportunity to use a change in US and Nato policy towards Moscow in its own favour.

Finally, a joint approach in coordinating Estonian interests on Russia to concurrently influence both Nato and the EU in the same direction might be a recipe for success, but this is simply too complex a task for a small country to pull off.

Domestic difficulties
In the meantime, the Russian question in Estonia continues to drag on as an annually recurrent tradition. The drama has been played out by more or less the same actors over the last 15 years with little variation. This year's incident was the 20 May desecration of the Bronze Soldier Monument (Pronkssõdur) by Estonian nationalists. For Russians, it is a memorial to Soviet soldiers who died fighting in World War II. For Estonians, it is a symbol of the Soviet occupation.

Therefore, in connection to Russia's victory day each year, soviet veteran ceremonies at the monument are ritually followed by protests from Estonian nationalists. This year, events have been especially serious with a string of demonstrations. Among Estonian nationalist demonstrators were crackpot professional dissidents such as Holocaust-denier Tiit Madisson, but also more respected people such as former commander-in-chief Aleksander Einseln. Their objective is the removal of the Bronze Soldier from central Tallinn, and little consideration is taken to reasoning in view of their unwavering demands.

The situation has been exploited by extremists on both sides. Last week, the headline of the leading Russian newspaper in Estonia, Vesti Dnia (fmr. Sovetskaya Estonia), read: "On the Brink of Civil War." Also, rumours about Russian vandalisation of Estonian monuments, e.g. in Tartu, are spreading, and the resurfacing of old Interfront activists has been quite unexpected. Probably, protests will peter out in a few weeks, but it is worrisome that extremists repeatedly are allowed to set the political agenda for almost a month each year. This is simply not a sound political tradition for a small country like Estonia. Protests and demonstrations may well be overlooked by the majority of Estonians as an annual freak event, but each year extremists are allowed to set the public agenda through media.

Narva and the Russian-speaking population
When one refers to the situation of Russians in Estonia or Latvia, one should be aware of the fact that this does not necessarily mean Russians as such. Migration to Estonia in the post-war era came from all over the Soviet Union, why it might be as natural to come across a Tajik, a Ukrainian or a Lithuanian in Tallinn as it is with a Russian. Today, they all meet the same conditions and requirements for residence permit and citizenship no matter what their place of origin might once have been. That Russians are in a majority should not serve to hide this fact.

Estonia's Russian-speaking population is concentrated partly to Tallinn and neighbouring cities, and partly to Eastern Estonia. However, it is in the East that the Russian dominance is especially compact - in cities like Narva and Kohtlajärvi. For long, crisis has coincided with ethnicity in this part of the country, which incidentally also neighbours on the disputed border areas with Russia. Unemployment and social malaise have been a constant feature in Eastern Estonia during the last 15 years. A destitute population with little hope for the future has presented a great problem for Estonian authorities. The city of Narva, right on the border to Russia, facing Russian Ivangorod on the other side of the river, is a telling example.

In reality, the few Estonians living in Narva are state representatives in some capacity, and they associate little with the local Russian-speaking population. In Narva, it is perhaps no coincidence that the well-held offices of the Russian Consulate are located only a few hundred metres from the headquarters of KaPo - the Estonian security service.

However, things are now looking brighter for Narva. The situation is still such that everyone who knows how to, tries to move away from the city. Many of the top students at Estonian universities originate from Eastern Estonia, strongly motivated from knowing that the alternative is poverty. This may not be the case in the future though. In recent years, things have begun to turn around for Narva. Unemployment has decreased and many industries are moving production to this area due to dramatically rising costs and a deficit of qualified labour in Tallinn and the densely populated areas of Western Estonia. The opposite to high costs and unskilled labour is exactly what Narva has to offer. Adding to this, the lower wages in this region attract a rising number of investors. Whereas activities still are far from bustling, the tendency towards a rather rapid development within the next decade is clear.

Until now, Narva's economy has largely depended on border trade with Russia. With much lower prices on petrol, alcohol, and tobacco in Russia, shuttle traders cross the border back and forth on a daily basis, bringing merchandise for illegal distribution and sale on Estonian and Western markets. There are few figures on the full extent of this trade, but Russian customs' estimates say, that it accounts to some 20-30% of Northwestern Russia's foreign trade. There is no wonder then that transit-trade is Estonia's most profitable business, the proceeds of which have made great fortunes for the people who control it. Today, a majority of Estonia's richest businessmen are ethnic Russians. The paradox is that the population of Narva and Eastern Estonia has had little to gain from the shuttle-trade. Most of the money has ended up in the pockets of a few fellow compatriots that could not care less about the situation of their Russian kin. Therefore, the future of Narva rests on the opportunities to enter other economic areas.

That a rising number of businesses in Estonia are now moving production to Narva is thus very promising. Too long, the level of costs has not been sufficiently geographically diversified to make it profitable moving industry to the East. Now, this has changed, why companies will seek to increase their dividends by lowering costs by relocation. In the meantime, however, a generation of workers has been lost to Eastern Estonia due to unemployment destitution. The old generation may be lost, but the new generation faces a much more promising future, which might allow them to stay on in their hometowns in the East.

The Choice of a New Generation
Things are changing in Estonia with 15 years passed since regained independence. A second new generation is entering the public and business spheres. This generation has little to remember from soviet times. The situation applies to Estonians and Russians alike. The arguments from nationalists and pro-Russia groups are increasingly perceived as artificial constructs with little relation to everyday reality. Both groups are themselves becoming as antiquated as oblivious. With economic development, also social and economic differences between Estonians and Russians will narrow, and so will consequently also the potential for extremists to exploit such friction. The focus of a new generation in Estonia is set on Europe and not on Russia. Relations with Russia are increasingly becoming irrelevant for most people in Estonia. Once this is realised, Moscow will have difficulties to exploit the situation of the "Russian minority" in Estonia in relations with Tallinn. It will also become harder for Russia to raise support in Estonia per se by appealing to fellow Russians. Perhaps then, Moscow will definitely let go of its lost empire and plainly put borders and other issues at rest with Tallinn without further ado. However, also in Estonia it will take a new generation to sort out the country's differences with Russia, but in the end, Tallinn and Moscow will budge to the new realities.

What Prospects for a Baltic Sea region?

Over the past decade, regionalism has resurfaced on the international political agenda. The demise of bipolar division, globalisation, and rekindled cultural affiliation are but a few causes for such development. In a European context, there is reason to question whether the new regions will prove viable constructions, or if some are but transient phenomena in an overall evolution towards a Europe of the regions. Therefore, even advocates of Baltic Sea regionalism must ask –What are the prospects for a Baltic Sea region?

To prove cohesive, regions should be endowed with political dynamics of their own, driven by distinctive agendas, patterns of interaction and governed by regimes. They may be based on identification, institutionalism or functionalism, driven by subjective factors such as history, culture and identity, or by objective factors such as geography, geo-economics and geopolitics.

The rise of regional co-operation
The idea of Baltic co-operation arose in the late 1960’s out of concern for marine pollution in the Baltic Sea. Environmental protection proved an uncontroversial area for co-operation even for states divided by the Iron Curtain. In 1974 the Helsinki Commission was formed to monitor Baltic marine environment. All the same, it was not until the 1990 Ronneby Summit that environmental issues became a nucleus for extended co-operation. The Summit gathered regional heads of government, and for the first time the – then soviet – Baltic republics were allowed high level international representation. Ronneby led to the foundation of the Council of the Baltic Sea States (CBSS) in 1992, forming the hub of regional co-operation for the decade since. The CBSS was perceived as ”an overall regional forum to focus on needs for intensified cooperation and coordination among the Baltic Sea States” and set as its goal to ”strengthen the cohesion among these countries, leading to greater political and economic stability as well as a regional identity.” The Council comprises the Nordic and Baltic States, Russia, Poland, Germany and the European Commission. The bulk of co-operation has taken place in the large network of issue-specific organisations that developed in the 1990’s. Success or failure for these organisations may determine if the region will gain a common political agenda or be subject to interaction between individual state interests.

A region in the making?
A region of some 70 million people, the Baltic Sea area comprises major population centres of Northern and Central Europe. It looks back on a long tradition of trade and migration dating to the origins of recorded history. Whether dealing with Viking relations with ancient Rus’ or medieval trade within the Hanseatic League, one may find factors of commonality transcending the shores of the Baltic. History may be used as a symbol of unity in the pursuit of a common cultural heritage. In modern times, the Nordic as well as the Baltic States have often been perceived as geographic entities by the outside world. Larger nations, such as Germany, Poland and Russia, have used the region as a gate to either east or west.

If today, a regional identity is to be constructed, substantial development is needed, beside common frameworks and measures facilitating interaction. This includes improving both material conditions for trade and economy, transport and communication, and conditions for social sustainability in fields such as environment and health, democracy and justice. In both areas, directions of overall European integration will prove decisive for further development.

In the early 1990’s, countries of the region fought to grasp the new reality evolving around them. A number of alternatives were considered: formation of a neutral bloc in Central Europe, Baltic States’ admission to the Nordic Council, to mention but a few. Russia’s October 1993 events – the shelling of the White House – combined with Swedish and Finnish 1994 EU accession turned focus towards NATO and EU rapprochement among former Eastern bloc countries. Enlargement became the dominant issue on the agenda. Thus, Baltic Sea co-operation increasingly turned towards the EU, manifested by the 1996 Baltic Sea region initiative. The 1997 Northern dimension emphasised this overall direction. Today, Poland, Estonia, Latvia and Lithuania have all entered the European Union. As the map of Europe has once more been redrawn, how will it affect the Baltic Sea region?

Most Baltic Sea states are small countries, which individually have little leverage in an enlarged Union. Forming EU-policies on the basis of regional interests would offer greater influence on the development of the Union. Polish and Baltic membership in the EU has carried prospects for regional policy co-ordination, which - thus far - have been poorly exploited. However, to form a region, Baltic Sea states must realise that success is achieved as much out of common values as out of common interests. Progress towards this aim has gradually been made by regional co-operation, laying a material foundation for a social sense of regional commonality. To assure long-term regional concord, peoples of the Baltic must develop a feeling of shared destiny – a regional identity.

Dividing lines?
It is argued that international co-operation is best pursued among states of comparable size and power. When larger and smaller states interact, co-operation risks either dominance or neglect from the large. In the Baltic Sea region, Germany, Poland and Russia are giants in comparison to other CBSS-members. While German participation in regional co-operation has been stable, EU-membership has extended Poland’s choice of partners in Union affairs. A country of some 40 million, Poland may regard unilateral action, temporary alliance-building or issue-specific agreement with other actors more attractive than Baltic Sea co-operation. Sharing a common Union framework, the Baltic Sea region may still offer sufficient synergy for both Germany and Poland to find regionalism an attractive alternative. Instead, Russia remains the great outstanding issue.

Inclusion versus exclusion was at the top of the 1990’s European agenda. Among CBSS-states, all but Russia are members of either NATO or the EU. Neither is an option for Moscow. Instead, a socio-economic gap is widening between Russia and the rest of Europe. The old debate whether Russia is part of Europe has also resurfaced. Social and material exclusion of the country from European affairs is evolving. Having conceded to NATO enlargement, Moscow’s main concern is access to the European market. Russian WTO accession may prove a means in relations with Europe. If EU-enlargement to the Baltic Sea region excludes Russia from equal terms of trade with other CBSS-states, Moscow may co-operate only as far as it serves her own interests. This would hamper regional integration. The Baltic Sea region may become the major playground for Europe’s Russian dilemma. In all, if the larger CBSS-states start pulling in different directions, the Baltic Sea region will be a concern only for the small. Such development risks endangering long-term regional stability.

What prospects for a Baltic Sea region?
Hopes are as great as misgivings for a Baltic Sea region. What it all winds down to in the end is if the area actually makes for a region. Functionally, the area may form a region in geographic, economic and political terms. Institutionally, regional co-operation has a distinctive agenda and specific patterns of interaction governed by the CBSS-regime. Whether the region will carry its own political dynamics or simply has served as an antechamber to the EU is, however, too early to say. The future of Baltic Sea regionalism will largely depend on the evolution of a regional identity. It is especially encouraging that business and finance increasingly perceive a single Baltic Sea market. Thus, material conditions would form the social basis for regional development. For over a decade now, we have crossed old borders of political and economic division to interact in the pursuit of a common good. In review of some 15 years’ co-operative development, great progress has been made in the formation of a Baltic Sea region, but its realisation is still too early to predict.

Baltic Sea, region, regionalism, prospects, future