Baltic Reports No 9 / August 26 – September 1, 2019

  • September 15, 2019


Baltic states have huge potential, but the lack of qualified workforce and the recent short-sighted pension reforms make the region’s investment environment risky. This is what the investors concluded in a Baltic VCA Summit, the biggest event for investors in the region. 200 people from 13 countries attended the conference in the Estonian city Pärnu on 21st and 22nd of August. Although the Baltic countries are small, there are many attractive companies and strong communities created, Michael Collins, CEO of Invest Europe, the association representing European private equity firms, pointed out during the event. According to the report published by Invest Europe, in 2013, the total volume of private equity and venture capital market in the Baltics amounted to 385 million euros with only a few investors. Today, it has become a three billion euro market with investment strategies and start-ups with global success.

Russian Foreign Ministry published a tweet that questioned the democracy and the rule-of-law in the Baltic states. It stated that when Estonia, Latvia and Lithuania gained independence from the Soviet Union, people were hoping that the Baltics would turn into modern democratic and rule-of-law states, which, – as the tweet emphasises – never came true. By clicking on the tweet, the reader would wind up at a Facebook page that glorifies the Soviet Union. This is one of the many instances when Kremlin campaigners intentionally mislead their audiences into believing that the Baltic states didn’t exist before the Soviet Union, when in fact they did. A polite reminder this time was done by the Latvian Minister of Foreign Affairs Edgars Rinkēvičs who tweeted that the Baltic States were occupied by the Soviet Union as part of Hitler-Stalin deal. As a response, the next day, the Russian Ministry of Foreign Affairs stated that the conclusion of the Soviet-German Non-aggression Pact was an urgent, forced and extremely difficult decision that had to be taken. By stating this, the Russian authorities justified the Molotov-Ribbentrop pact, which lead to hundreds of thousands of people being killed. According to this secret protocol, Romania, Poland, Lithuania, Latvia, Estonia and Finland were divided into German and Soviet “spheres of influence” without their knowledge.

SOURCES: LSM, Emerging Europe, Invest Europe


Lithuanian Special Investigation Service has started dismantling corruption networks at  one of the most corrupt municipality offices in Lithuania, in Jurbarkas District, right at the border with Russia. Throughout August the Service arrested one and pronounced four suspects for the abuse of office, embezzlement, and forging documents during stadium construction project. The suspect allegedly helped the construction company to appropriate 180 000 euros without even starting the construction. After getting the money the owner sold the company to a mysterious foreign businesswoman, who disappeared. Earlier this year the Special Investigation Service investigated the disappearance of the EU-Russia’s cross-border cooperation funds, of which the same local office was involved in. Jurbarkas Municipality lead a large-scale infrastructural project with Kalininingrad’s Neman Municipality. The project ended with dozens of bankruptcies of Lithuanian and Russian construction companies and perishing of around 7 millions euros. Until the beginning of this year, neither sides took any steps to investigate the case. Negative publicity, presumably, would have lowered their chances of getting funding for the new projects of the new EU funding period. Office of the Jurbarkas District Municipality, bordering Kaliningrad, is considered to be one of the most intransparent offices in Lithuania. Therefore, it is believed to be susceptible to hybrid foreign interference.

Lithuanian Border officers announced two very worrying incidents last week. They detained a shipment of military ammunition at a border checkpoint with Belarus on August 26. The ammunition typically used by military aircraft was being transported from Russia to Peru. The declared route from Moscow’s airport to Vilnius Airport, the low value of the parcel, and the way the ammunition was being transported in a simple mini-van, raised suspicion. The EU sanctions against Russia prohibit transporting such goods through Lithuania. Two days before the ammunition was captured, two Russian Border Guards illegally entered Lithuania’s territory and were taken by the Lithunian border service. The Russian men explained that they were persecuting the violators and did not know that they had crossed the border to Lithuania. Detainees were handed over to Russia. Lithuanian security analysts notice the increase of such illegal border crossing  recently and claim them to be orchestrated attempts to test the strength of Lithuania’s agencies and find their weaknesses. 

Lithuania’s prospective European Commissioner Virginijus Sinkevičius is blamed for not being green enough for Brussels. Sinkevicius is a 28-year-old minister of economy and innovation and a member of the Lithuanian Union of Farmers and Greens. The leader of European Greens, Ska Keller, said that Sinkevicius doesn’t represent their ideas.  In Lithuania, this only Greens-affiliated prospective commissioner is a member of the political party which carries the word Green in its title, but that’s about how environmental it gets. The party’s chairman Ramunas Karbauskis is the biggest landowner in Lithuania and his agribusinesses are polluting a lot of land. The party implemented several anti-green sets of policies: they enabled the mass chopping of forests, and deepened the recycling crisis. And finally, the fertiliser business remained largely unregulated during their three years in power. Sinkevicius met with the new EU commission president-elect Ursula von der Leyen two days after criticism. He said that they discussed climate change and digitalisation assignments.



Five members of the city council of Narva, a Russian majority city on the border, were finally found guilty in a corruption case. Amongst them, Aleksei Voronov, who is also the head of Narva Vesi, the company that provides drinking water for the city. Voronov is deemed as the local oligarch, who kept the region of Ida-Virumaa under his power for years. He will have to go to prison for a year and over 300 000 euros were confiscated from him. The process will continue for three more members of Narva’s city council. All of this hopefully means that Ida-Virumaa has finally taken a big step in becoming a fairer and more safe place for its people.

Estonian government wants to cut the costs of the new and modern Estonian-Russian border marking. The conservative Interior Minister Mart Helme proposed to cut the costs from the “whistles and lights” as he calls it. This means leaving out the monitoring system and the barrier fences for animals at the border that is also an EU’s external border. At the same time, the euro-sceptic minister is hoping to get more funding from the EU. In 2014, Russia’s Federal Security Service captured an Estonian spy Eston Kohver right at the border and jailed him in Moscow. The Kremlin claimed that they took Kohver from Russia’s territory, but Estonians said that Kohver was illegally taken from Estonian territory. Because it was difficult to prove what had really happened, this incident started a public discussion about the bad conditions of Estonian-Russian border. The Interior Minister at that time, Andres Anvelt, launched a 320-million project to build a modern 339 kilometres long border marking. Anvelt’s plan was widely cherished at the time, but the current government is desperately looking for ways to decrease its Estonian part of the budget.

Most Estonians would gladly welcome short-term foreign workers from Ukraine, Moldova and other non-EU countries, a recent Postimees study shows. Only one third of the respondents would be against labor immigrants. Estonians think that there is a growing lack of work force in Estonia and workers from abroad would help to ease the problem, the study revealed. To the contrary of the findings, the government proposed to increase restrictions on foreign employees this spring. According to the draft law, the companies who receive direct benefits from employing foreign labor, would have a higher responsibility in making sure that the rules are followed. But employees find it unfair that the government is making the companies more responsible and increase their work load instead of dealing with the real problem, which is the lack of work force.



The Cabinet of Ministers decided not to approve Indriķis Muižnieks to continue in his position as Rector of the University of Latvia on August 27. The reappointment of Muižnieks has created a lot of discussions within academic and political circles, because the rules were violated during the election process.   Therefore, Latvian Ministry of Education and Science requested the government not to confirm Muižnieks in office. The University and Muižnieks himself deny any wrongdoing or that any rules or procedure were broken. Nevertheless, many people have suggested the appointment of a new rector has become politicized. Addressing the cabinet in person, Muižnieks said he had confidence that in a state governed by rule of law, the correct decisions would be made. He has been Rector since 2015 and has been associated with it in one way or another since 1976 when he graduated as a biologist and became a research assistant, rising to become Dean of the biology faculty in 1997. With the start of the new academic year imminent, the furor surrounding the rectorship is providing an unwelcome distraction to staff and students at Latvia’s most prominent academic institution. For now, the Government appointed Gvido Straube as acting rector. He is a Professor and former Dean of the Faculty of History and Philosophy , at the University of Latvia.

The International Monetary Fund has expressed concern over Latvia’s results in tackling financial crime and called for a faster implementation of international recommendations. Experts of the IMF visited Latvia this summer. The monetary organisation has subsequently published a report, where it suggests Latvia to implement the recommendations of Moneyval, which is the permanent monitoring body of the Council of Europe. They  assess compliance with the principal international standards to counter money laundering and the financing of terrorism and how effectively the standards are implemented. The IMF noted that Latvia is slow in combating financial crime, which could get the country downgraded to the «grey list» of states. This could seriously undermine trust in the Latvian financial system.


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