The Washington Diplomat / January 2015
By Larry Luxner
Tiny Latvia, home to 2 million inhabitants, inherits the rotating presidency of the European Union on Jan. 1, 2015 — one year after adopting the euro as its official currency. But the Baltic republic’s anti-Russian stance is already infuriating Moscow.
While the title is somewhat symbolic, Latvia’s role at the helm of the EU significantly increases its visibility and influence for the next six months, particularly as the 28-member bloc takes on an increasingly belligerent Kremlin.
Andris Razāns, Latvia’s ambassador to the United States, said his country intends to make the most of its six-month presidency. Next May, Riga will host a summit of the Eastern Partnership, a five-year-old initiative governing the EU’s relationship with the former Soviet republics of Armenia, Azerbaijan, Belarus, Georgia, Moldova and, notably, Ukraine, where Russia-backed separatists have been waging a war against the pro-Western government in Kiev. The emphasis will be on civil society and people-to-people contacts, which implies progress toward visa-free travel to the EU for the 76 million people living in the region.
“We have seen tremendous change since we regained independence in 1991,” said Razāns, a career diplomat who replaced Andrejs Pildegovičs as Latvia’s envoy in Washington two and a half years ago. “For a country that was occupied by the Soviet Union, we have made a gigantic step and now will be running EU business for the next half a year. We’ll be setting agendas and working not only for our national sake but for the sake of all 28 member countries, trying to find the best solutions in each and every area where the EU is relevant.”
The relevance of Latvia and its Baltic neighbors, Lithuania and Estonia, has been catapulted by the crisis in Ukraine, where fighting has claimed an estimated 4,300 lives since April, according to the United Nations. Last March, Russian President Vladimir Putin ratcheted up tensions with the West by annexing Crimea. More recently, a series of Russian military incursions into European airspace has rattled nerves in Finland, Sweden and even as far as Portugal, reviving Cold War-era distrust and rejuvenating the NATO alliance.
Latvia, Lithuania and Estonia joined the security bloc in 2004 and have been clamoring for stepped-up NATO deployments in the wake of Putin’s recent provocations. In fact, the three Baltics have been sounding the alarm about a Russian resurgence for years, but the warnings largely fell on deaf ears. Paraphrasing President Obama’s recent speech in Estonia, Razāns suggested that Europeans have every reason to fear Putin.
“Nobody really can say what is in the mindset of people who planned and exercised the invasion of Ukraine,” he said. “If you see Russian troops moving into Ukraine, it’s a threat not only to Ukrainians or people in Riga or Vilnius, but also to people in London, Madrid or Paris.”
None of this, however, means that World War III is imminent, says Razāns.
“I simply don’t believe it’s possible to repeat the history of 1939 given today’s realities. Today we have a completely different situation,” said the ambassador. “Latvia, Lithuania, Estonia, Poland and Romania are not only a part of the EU but also members of NATO, and NATO has immediately taken very important, concrete and understandable steps to reinforce our security by the positioning of additional NATO troops. People in the street see this.”
NATO has accused Moscow of sending troops and weapons to Ukraine in a bid to help pro-Russian rebels in the east. In response, the Pentagon has extended its “temporary” deployment of U.S. troops in Poland and the Baltics through 2015. Originally, the soldiers were supposed to leave by year’s end, but NATO wants to keep them in place for another 12 months.
“We have planned rotations out through next year,” Lt. Gen. Frederick Hodges, commander of NATO land forces, said at a Nov. 20 press briefing in Vilnius. “There are going to be U.S. Army forces here in Lithuania, as well as Estonia, Latvia and Poland, for as long as is required to deter Russian aggression and to assure our allies.”
Despite the tentative moves to bolster forces in vulnerable countries, NATO remains divided, underfunded and unsure of its purpose in confronting 21st-century threats. Moreover, under a 1997 accord with Russia, NATO is forbidden from stationing troops in the Baltics permanently; therefore the deployment remains a temporary one. Russia has denounced any military buildup as reneging on a promise it claimed was made after the breakup of the Soviet Union that NATO would not encroach on its borders. It was Ukraine’s political shift toward the EU last year — and fears it would eventually join NATO — that in part triggered Moscow’s backlash.
“They [NATO] are trying to destabilize the most stable region in the world: Northern Europe,” charged Russian Deputy Foreign Minister Alexei Meshkov in an interview with the Russian news agency Interfax. “The endless military exercises, transferring aircraft capable of carrying nuclear arms to the Baltic states. This reality is extremely negative.”
Latvia doesn’t buy the Russian rhetoric. Having been occupied by the Soviets for nearly 50 years, the Baltics are today among Moscow’s loudest critics. But even Latvia hasn’t been as brazen as neighboring Lithuania, whose president, Dalia Grybauskaite, recently accused her Russian counterpart, Putin, of running a “terrorist state.” That sparked immediate demands from some Russian lawmakers to break diplomatic ties with Lithuania.
“The fear is there, but it’s not purely a Latvian phenomenon,” Razāns told The Washington Diplomat. “Russia’s annexation of Crimea and its occupation of Ukraine were blunt violations of international law. Facts are facts. This is a challenge to the post-Cold War order in Europe.”
Razāns, 46, has a deep sense of history, having grown up well-versed in the details of Latvia’s turbulent past. In 1918, his country declared independence, but sovereignty would be short-lived. The secret Molotov-Ribbentrop Pact of 1939 — signed one week before the outbreak of World War II — divided Europe into Nazi and Soviet spheres of influence.
“That was the graveyard for all the calamities of Europe, and we ended up in the Soviet sphere without any legal or historical justification,” said Razāns. In June 1940, Soviet troops invaded Latvia, Lithuania and Estonia. A year later, the three were occupied by Nazi Germany and then recaptured by the Soviet Union in 1944. Besides Germany, no Western nation recognized the Soviet annexation as legitimate, but until 1990, all three Baltic states remained firmly under Moscow’s control.
“I’m old enough and fortunate enough to remember when Latvia was part of the Soviet Union. I spent my childhood and early years in a very different society from what we have today,” said Razāns, who studied engineering at Riga Polytechnic Institute, earning a master’s degree in history from the Latvian State University.
After joining his country’s Foreign Ministry in 1992, he embarked on his first overseas assignment at the Latvian Embassy in Copenhagen. Razāns went on to become deputy chief of mission in Stockholm (2000-03); diplomatic advisor to the Latvian prime minister (2004); ambassador to Denmark (2004-09); ambassador to Morocco (2008-10); and political director and undersecretary of state at the Foreign Ministry (2010-12).
The ambassador spoke to us the same week Germany marked the 25th anniversary of the fall of the Berlin Wall.
“Of course, that event had geopolitical significance for Europeans and Americans, but we were living behind a double Berlin Wall,” Razāns explained. “First was the physical divide between communism and democracy in Europe, but then there was a second wall — the Soviet border — that was perhaps even more difficult to penetrate. And because of the injustice of the Second World War, Latvia found itself on the other side of that border.”
Few people could have imagined — even in the mid-1980s — that very soon, not only would the infamous wall come tumbling down, but that Germany would be reunited, communism itself would be defeated throughout Europe and the three Baltic states would finally regain their long-sought independence.
Yet all those things did happen, in a dizzying sequence of events that stands as perhaps the most dramatic political transformation of the 20th century.
“I was 24,” Razāns recalled. “The Soviet Union collapsed for good, and there was very strong support from our Western allies. It was a moment of historic change, when we were allowed for the first time to travel to other European countries. One thing was very clear for Latvians: There was no question what kind of future we were looking for.”
At the time of the Soviet Union’s dissolution, he noted, there was no significant difference in the per-capita incomes of Latvia, Belarus or Ukraine — even though Latvia’s per-capita GDP today is twice that of Belarus and 3.75 times that of Ukraine. Of all the 15 former Soviet republics, only Estonia exceeds Latvia in per-capita GDP.
“We all began from the very same position, and there were still Russian troops on our soil. We had very European roots, and that was perhaps our only advantage. But economically, we had to start from scratch with privatization and resolution of properties,” said the ambassador.
“It didn’t take long for politicians in my country to figure out that the only way to quickly cross the dividing line — from a closed society of one-party rule to a democratic, multiparty society — was through membership in the EU. Everybody recognized that it would be very difficult,” he said. “When we started the accession talks in 1994, there were a lot of skeptics.”
Nevertheless, Latvia’s dream came true a decade later on May 1, 2004, when it was officially welcomed into the EU club. One consequence of that membership was an immediate drop in population. Already plagued by an extremely low birthrate, the problem was compounded when young people — suddenly given the chance to work and live elsewhere in Europe — left by the thousands, mainly to Great Britain, Ireland, Germany and various Scandinavian countries.
Even so, Latvia’s economy took off like never before. After sputtering in the first few years of independence, the former Soviet republic quickly became Europe’s fastest-rising star. With EU membership, Latvians suddenly had mobility, and the government began raising salaries to keep the smartest people from leaving. Excessive spending fueled inflation, but no one seemed to notice.
In 2006, Latvia’s GDP grew by a record 12 percent, followed by a 10 percent expansion in 2007. Latvia became a mecca for the high-tech, IT and financial sectors. It was one of the world’s first countries with more mobile phone lines than people, and Latvia quickly surpassed the United States in per-capita broadband Internet access.
But then, things came crashing down as liquidity suddenly dried up and banks stopped lending in 2008. The government was forced to buy 85 percent of Latvia’s second-largest bank, Parex. It also cut state salaries by 15 percent, leading to violent protests in Riga (see “Latvia Sobers Up as the Party Ends” in the May 2009 issue of The Washington Diplomat).
“It was like nothing we had experienced before, but we learned our lessons,” said Razāns. “There was only one remedy: We had to live within our means. The cause of the crisis was simply that people relied too much on cheap, easy liquidity that they thought would be available forever. When Wall Street experienced problems in 2008, Latvia suffered as well. The shock was very deep.”
But painful austerity measures managed to turn the finances around. In late 2012, Latvia even repaid the IMF in full, several years early. And even though high unemployment persists — Latvia’s jobless rate now stands at around 12 percent — economists agree that the worst is over.
“It took approximately two and a half years, but we’re now among the most stable and safest countries in Europe,” said Razāns.
Peter Wittig, Germany’s ambassador to the United States, enthusiastically endorses Latvia as “a good example” for Europe’s troubled economies to follow.
“Structural reforms are difficult for all governments, because they usually entail measures that meet the resistance of certain interest groups. But they are necessary,” Wittig told us. “The Latvians were over-indebted, and then a very courageous government undertook some really wide-ranging reforms. Within a few years, they turned their economy around, managed their debt and became more competitive — and now they’re growing.”
Indeed, Latvia’s GDP grew 4 percent in 2013, but Razāns says this year’s growth will be a little less because “growth in the eurozone countries is stagnating in general.”
While sliding back into recession is always a concern, Russia’s Vladimir Putin is a much bigger threat, in the eyes of the ambassador. Razāns said that Western sanctions slapped against leading figures in Putin’s government, as well as the finance, energy and defense sectors, haven’t really hurt Latvia because only 9 percent of his country’s external trade is with Russia, compared to the EU, which accounts for 70 percent of Latvia’s trade.
“I think the sanctions are really useful,” he said. “The Russian economy is not doing exceptionally well, and the situation is not improving. It’s a matter of principle. As long as there is no appetite in Europe for other means to react, that is the best way to deal with the situation.”
Given Latvia’s sizable Russian minority and heavy dependence on Russian energy, especially gas, Riga may have some reservations about imposing harsher sanctions. If the situation deteriorates, however, the EU should be ready to pile on new and more severe economic penalties against Moscow, Razāns suggested.
“For Ukrainians, this is definitely a difficult moment. At the same time, there is no alternative for Ukraine but to embark on the Baltic way, meaning that Ukraine can only succeed if they introduce reforms to stabilize their economy and strengthen Ukraine from within,” said Razāns. “That would bring it much closer to Europe.”
Melanie Mierzejewski, a research analyst with the Latvian Institute of International Affairs, said Latvia should use its upcoming EU presidency to push for the following three policy goals: get the EU to ban sales of all European military equipment and dual-use technology to Russia for two years; engage the governments of Ukraine, Georgia and Moldova on political and economic reforms, which would help these countries fight corruption, develop their small-business sectors and strengthen the democratic roots of political parties; and increase the EU’s engagement with Belarus, which has long been isolated because of the brutal way President Alexander Lukashenko treats political prisoners — an EU policy she says has borne zero results and only driven Belarus closer into the waiting arms of Putin.
“In the months ahead, Latvia will face many tough choices. It will need to balance internal political needs with foreign policy considerations that reflect both Latvian national security interests and EU interests,” Mierzejewski wrote. “Rather than taking a firm stand against Russia, Latvia may instead choose to adopt the perspective of Western European countries that view the Russian-Ukrainian spat as temporary and unworthy of increasing tension between the EU and Russia.”
Such an “appeasement tactic” may be more popular with Brussels because it wouldn’t antagonize Moscow and would avoid painful economic sanctions. “However, if the EU wants to effectively ensure the long-term stabilization of its neighborhood, it will need to make it a policy priority and not kowtow to Russian belligerence,” she concluded.
With the eurozone economy at a virtual standstill, though, the EU may be reluctant to impose further sanctions on Moscow. To that end, as much as Russia will take center stage during Latvia’s EU presidency, Razāns also wants to focus on the Transatlantic Trade and Investment Partnership (TTIP), saying he’d love to see TTIP become a reality before Latvia hands off the EU presidency to Luxembourg — alphabetically next in line — on June 30.
“Latvia has always been an open and transparent market economy,” he said. “We can really gain more from opening up trade by dismantling barriers. We believe countries like Latvia will benefit from this, and we will be among its strongest supporters in the EU. We expect it will add more dynamism on the European side. This is more than a purely technical trade agreement. It will lift the transatlantic relationship to new heights.”
According to the American Chamber of Commerce in Latvia, the TTIP could increase economic activity by €119 billion per year in the EU and €95 billion in the United States.
“The TTIP would give Latvian firms — especially small and medium-sized enterprises — greater access to a huge market by reducing or eliminating market access barriers and tariffs,” said an AmCham press release.
Yet critics say the mega-deal will result in a watering-down of strict EU standards on food safety and the environment, opening up European supermarkets to genetically modified foods, pesticides and growth hormones that are now banned in the EU but allowed by U.S. authorities. Banking regulations could also be relaxed as well as laws protecting individual privacy on the Internet, say those opposed to TTIP.
Nevertheless, opposition to TTIP by the general public is unlikely. Furthermore, the deal is solidly supported by not only the Latvian government but also by Germany, economically the EU’s most powerful nation.
Razāns said he has absolutely no doubt that “both sides would gain immensely and strategically” from the trade deal.
“If and when Europe and the U.S. are able to agree on the TTIP, it will have some spillover effects into our neighborhood,” the ambassador told us, warning that “if we miss this chance now, we will never be able to get it back.”