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News highlights from Lithuania, Latvia and Estonia.

News Highlights from April 1999

• A good indication the question of Baltic NATO membership has reached a new stage, as one top NATO analyst recently explained, is the way policy makers in Washington now don't react when you suggest that Lithuania, Latvia and Estonia might someday join the powerful alliance as full members: they don't fall onto the floor laughing uncontrollably. Baltic membership, after years of being brushed aside as a fantasy, is now being taken very seriously, indeed. Not that everyone yet agrees on the subject. But as observers point out, that almost everyone agrees Baltic membership is conceivable is a huge step forward.
         NATO action in Kosovo, on the other hand, has raised fears expansion will be put on the back burner as the alliance struggles to extricate itself from a Balkan war. Moreover, with Moscow now furious over NATO's bombing of the Serbs, the alliance may be even more sensitive about offering the Baltics membership over Kremlin objections. Others say it could work out the other way round: that NATO members could be so ticked off with Moscow's handling of the crisis that they'll give up worrying about its objections and push Baltic membership through faster than ever.

• It couldn't get too much worse. In the last quarter of 1998, growth in the Baltic states was dropping faster than you could say "Russian economic crisis." Estonia saw the most dramatic falls in GDP growth-from a spectacular 13 percent in the final quarter of 1997 to near zero a year later. Total Estonian growth for 1997 was nearly 11 percent, sliding to 4 percent for all of 1998. Growth in the other Baltic states never quite reached the heights of Estonia in 1997, but economies in Lithuania and Latvia also slowed dramatically. In Latvia, 1998 growth was an uninspiring 3.8 percent. In Lithuania, it was 4.4 percent. With sectors once catering to the Russian market restructuring or shutting down, unemployment is also up, over 10 percent in Latvia-a post-Soviet high. But business confidence seems to be on the rise, with a sense that the worst is almost certainly over and that fast-paced growth will kick in again sometime in 2000. Positive signs are that interest rates have come down, inflation keeps falling and foreign investment continues to pour in. Estonian leaders have said that they are shooting to achieve 10 percent growth in two or three years time. All three Baltic countries, in theory, should be able to achieve double digit growth by 2002 or 2003.

• They are ahead in so many other areas compared to elsewhere in the former communist bloc, so Lithuania, Latvia and Estonia say it's no surprise they're also in the lead in whipping the Y2K bug. A matter of months before the new millennium, Baltic officials insist they have everything—or almost everything—under control.
         The Y2K problem arises from a programming fault in computers which use just the last two digits of the year to keep track of the date. Millions of computers could crash when 99 turns to 00—with computers mistaking the year 2000 for 1900—causing breakdowns of major systems around the world.
         More alarmist observers have raised the prospect of missiles being inadvertently launched, of planes falling out of the sky and of whole electric utilities suddenly grinding to a halt. Others say the risk of accidents at atomic power plants will also increase.
         But officials and most independent observers say the Baltics began addressing the problem well enough in advance and, although glitches are possible, there's little chance of major disruptions originating from Baltic-based systems when the clock strikes midnight on New Millennium Eve.
         Daniel Vaarik, who as recent spokesman for the Estonian government sat in on high-level meetings about Y2K, said Estonia began drawing up comprehensive plans to deal with the problem already three years ago. He contrasted the Estonian approach with the lax attitude of neighboring Russia.
         "I heard a Russian official say that Russia will deal with the Y2K problem when the problem occurs," said Vaarik. "That hasn't been our philosophy. It hasn't been a last minute thing here."
         Charles Zimmerman, a Western business consultant based in Riga, said he believed Latvia and Lithuania had also dealt effectively with the most pressing threats posed by Y2K.
         "I wouldn't say there is any reason at all for panic in the Baltic states," he said. "The main problems associated with banking and banking services, for instance, have pretty much been taken care of as far as I can tell."
         Y2K busters in the Baltics have focused much of their attention on the banking sector and the massive energy utilities in all three countries. The place that at least in theory has the potential of causing the most trouble in the changeover to the new millennium is the region's only nuclear plant, Lithuania's giant Ignalina power station.
         But Lithuania, with Swedish financial help, began checking for and disposing of any millennium bugs at the Soviet-built plant more than a year ago.
         Lithuanian official Renaldas Gudauskas assured a conference on nuclear safety in Copenhagen recently that everything had been done to fix any Y2K faults at Ignalina and that there was "no possibility for fatal consequences."
         The Baltics have had a number of advantages in dealing with Y2K. As relative newcomers to the Computer Age, for instance, the vast majority of computers in the Baltics are new. Most computers built after 1992 do not have the Y2K flaw.
         As comparatively small countries, the scale of the problem is also smaller. Necessary tests and programming corrections are more manageable, and less costly, than in larger countries. Each Baltic country has just one major international airport, for example. Estonia has just two major banks.
         While expressing confidence that big problem areas have been dealt with, Daniel Vaarik conceded there may be smaller systems, like elevators or air conditioners, that may not have gotten appropriate attention.
         "Some of these problem areas are hard to find or they are systems we just haven't found," he said. "And these systems are the ones that use older technology and are maybe more prone to the Y2K trouble. This is a worry."
         But staying out of Baltic elevators on New Year's Eve might not be a sufficient caution.
         Baltic observers say it isn't only a question of what they have or haven't done: it's a question of how well countries outside the Baltic states are prepared to cope with Y2K. Their fate isn't entirely in their own hands.
         Baltic electric power grids, for instance, are linked in places with Russian grids. If Russian power stations shut down, that could affect the electricity distribution throughout the Baltic states.
         Baltic banks, too, are closely inter-linked with the international banking system. If there are major disruptions elsewhere in the world, especially in Scandinavia, the three Baltics would suffer along with everyone else.
         And if there is post-new year's chaos in Russia-which some analysts think is likely-that would almost certainly have an impact here. If transit trade from Russia were disrupted, that could seriously damage Baltic economies, especially Latvia's.
         There is, of course, also concern about the proximity of Russian nuclear power plants and missiles. Many experts say the chances of a nuclear mishap are slim, and Western countries have also pumped large amounts of aid into Russia to deal specifically with its missiles and atomic plants.
         But if a year-2000 nuclear catastrophe does originate in Russia, the Baltic states can only hope the wind's not blowing this direction when it does.

• McDonald's Big Macs are going at too good a price in the Baltic countries, signaling that Lithuanian, Latvian and Estonian national currencies may be undervalued, according to a recent report in the Economist magazine.
         The magazine used a Big Mac index to rate the strength and weakness of currencies around the world, basing their findings on the principle that a dollar should have the same purchasing power everywhere.
         In the United States, the average price of a Big Mac was around 2.43 dollars, according to the London-based magazine.
         In the Baltics, prices were some 30 percent less. Estonia had the region's most pricey Big Macs, selling for an average of 1.72 dollars. They cost 1.68 dollars in Latvia, and were the cheapest in Lithuania, going for about 1.55 dollars a burger.
         The cheapest Big Macs in the world are in Malaysia, at an average cost of 1.19 dollars. At 3.97 dollars, Switzerland has the most expensive Big Macs.
         Baltic observers argued that the Economist survey indicated lower costs of production and labor in the region, not that Baltic currencies were undervalued.

• An armed Lithuanian soldier in April fell asleep on a train and woke up in Russia, causing a minor diplomatic incident between the two countries.
         Sergeant Darius Dzikevicius was standing guard on a regularly scheduled transit train carrying Russian military personnel through Lithuania to Russia's Kaliningrad enclave when he fell asleep. He was supposed to get off the train before the border, but woke only after the train crossed into Russia. Reportedly in a panic, he then leapt from the moving train and was detained by Russian troops.
         After negotiations and assurances that the one-man invasion was inadvertent, the Lithuanian soldier was released.
         After the Soviet collapse, Lithuania and Russia signed an agreement permitting the Russian military, under guard, to travel back and forth to the heavily militarized Kaliningrad region through Lithuania.

• An Estonian court in April sentenced a Finnish man to five years in prison for enslaving someone he said was in debt to him. Prosecutors said 26-year-old Pasi Roininen, a Finnish citizen living in Estonia, kept his 40-year-old victim on a cow leash, forcing him to work in a greenhouse during the day. At night, the man was kept in a boiler room chained to a pipe.
         Apparently in an effort to foil any escape attempt, Roininen painted the man's torso and face red. The victim, who has since died, was held in captivity for a week.
         During the trial, Roininen said the Estonian man was an alcoholic and owed him 1,500 dollars for reneging on a deal to work on his house. Despite witness testimony, Roininen said he never chained the man up.
         "It was true the man had a drinking problem," police investigator Riina Kroonberg told the Eesti Päevaleht daily. "But that doesn't mean someone had the right to make a slave out of him."