Independence, a Second Time Around

 		 
   

Cooperation in the 1990's

 
    During the economic stagnation of the late 1980€s, as Moscow was loosening its grip, it became clear to the Baltic republics that the time and possibility had come to try their own wings. Only a few months into the new decade Lithuania took the lead and declared itself independent on 11 March 1990, the other two Baltic republics followed suit, Estonia on the 30th the same month, and Latvia, a couple of months later, on 4 May. The Soviet Union, however, was not ready to recognize the independence of the three Baltic republics, nor did the West want to risk their newfound friendship with Gorbachev and his reforms in the Soviet Union by recognizing the existence of three small states. The result was that the three Baltic republics were left to manage on their own, as they had been doing during their struggle for independence for the past few years. Consequently, they continued their cooperation, now on a state to state basis. Their first joint actions were to sign an Agreement on Economic Cooperation on April 12, 1990 and renew the Treaty on Cooperation from 1934 by signing a Declaration on Unity and Cooperation on May 12, 1990 and establishing the Council of the Baltic States. Also the Baltic Judicial Bureau was restored, with the prime task of coordinating the legislation of the Baltic states, with integration into the European Union as their mutual goal.(Motulaite & Vares 1994, p. 20; Vares 1993, pp. 4-5)

   Kirsikka Bonsdorff: Details, details. You write: "Nor did the West want to risk their newfound friendship with Gorbachev..." "The West"? They were left completely alone in their struggles for independence? No help what soever? Details, details.

 

   
Political Cooperation
 
    The period between their declarations of independence in spring 1990 until the international recognition of the three Baltic countries€ independence, following the Soviet coup in August 1991, was one of political cooperation and joint statements, to free themselves from Soviet hegemony. The most important statements made during this time were the Declaration of State Independence, adopted by the Council of the Baltic States in June 1990, and the joint refusal of the Baltic states to take part in the new Soviet Union treaty, on July 27, 1990.(Gricius 1994, p. 26)

 
    International recognition of the independence of the three Baltic states paved the way for more concrete inter-Baltic cooperation. All three states had expressed their intention to apply for EC-membership. The mutual problem of the former Soviet forces stationed on their territory also initiated joint statements by the Council of Baltic States in October 1991, urging Russia to withdraw their troops at once. There was also an attempt made by the three Baltic countries to coordinate their foreign policies. However, this was never to be realised. Until the summer of 1992 both Russia and the West had dealt with the three Baltic states as an entity, but from the latter half of 1992 onwards Russia started to negotiate separately with the three different countries. Thereby making €better friends€ with Lithuania, while Russia€s relations with Estonia and Latvia became more and more difficult. At this point the West continued to view the three Baltic states as one unit, much to the chagrin of the countries themselves, who definitely began to form separate foreign and economic policies, following the elections in the three republics in autumn 1992.(Ibid, pp. 26-27; Sakwa 1993, pp. 340-342)

   Kirsikka Bonsdorff: How did individual Western countries respond to the declaration of independence in 1990? Which countries were the first ones to recognice the independence of the Baltic states? Was Finland among the first countries? What was this international process like?

 

    Still, the inter-Baltic cooperation in 1991-1992 had mostly been of a declarative character, concerned with the withdrawal of the former Soviet troops, one of the few factors really unifying the countries. Neither did the future for cooperation look too bright, since the nationalistic elements won in both the Estonian and Latvian elections. In Lithuania on the other hand, the nationalists were defeated by the ex-socialist Brazauskas, who hoped to improve Lithuania€s relations with Russia, with whom it still had strong economic ties. The foreign policies of the three Baltic states, thus started to deteriorate more and more, both in their negotiations with Russia, as well as regarding foreign investment.(Gricius 1994, pp. 27-29; Sakwa 1993, pp. 340-342)

 
   
Economic Cooperation
 
    There had been very little trade and economic cooperation between the three Baltic republics during their first independence, when foreign trade was mostly with Germany and Great Britain. The following 50 years of Soviet dominance directed the trade in the exact opposite direction and developed the industries of the Baltic republics to attend the needs of the Soviet market, so no economic links between the three republics were established then either. Intra-Baltic cooperation was first established in April 1990 with the signing of the Agreement on Economic Cooperation, in an attempt to escape the iron grip of the planned economy. Efforts to coordinate economic legislation and increase trade between the three Baltic countries have, however, not been very successful, and Baltic trade has again turned towards the West.(Gricius 1994, pp. 30-32; Hiden & Salmon 1994, pp. 209-210)

 
    Although the new economic policies of the independent Baltic republics follow the same general direction, introducing democracy, currency reform and a liberalization of prices in order to achieve a market economy, the three Baltic states have chosen separate paths regarding their trade policies. From 1992 onwards, Estonia changed its foreign trade dramatically, so that both exports and imports from Russia dropped from approximately 50% to 20% of Estonian foreign trade. The decrease in trade with Russia meant a significant increase in Estonia€s trade with the West, but signified little change in the trade with the other two Baltic countries, which remained at a low level. Latvia€s reorientation in trade has not been quite as radical as that of its counterpart, Estonia. Latvian trade with Russia has not fallen so drastically, and there has been an increase in the trade shares of the other two Baltic states. Compared to Estonia and Latvia, Lithuania has instituated the most moderate foreign trade reorientation, Russia continues to be an important trade partner, partly due to historical and geographical reasons. Consequently Lithuania€s trade with the West has only increased moderately, further underlined by the fact that trade with Estonia and Latvia has increased since 1992. On the whole intra-Baltic trade has not increased much, though, nor has the product composition changed significantly, the trade consists mainly of mineral and chemical products, machinery and textiles.(Pautola 1996, pp. 5-11)

   Kirsikka Bonsdorff: Here you describe the differences between the states, you don't actually write so much about the cooperation.

 

    Intra-Baltic and Russian trade percentages of the entire foreign trade of Estonia, Latvia and Lithuania in 1995 (Ibid.): Russia Estonia Latvia Lithuania Estonia export 17.5% - 7.6% 4.6% import 16.3% - 2.0% 1.6% Latvia export 25.3% 3.1% - 5.5% import 21.6% 5.1% - 5.7% Lithuania export 20.4% 2.2% 7.1% - import 29.1% 2.0% 3.6% -

 
    One of the main obstacles to intra-Baltic trade during the first years of independence up until mid 1993, was the absence of national currencies in all three countries. Estonia was the first of them to successfully introduce its own currency, the kroon, on 20 June 1992. The Latvian rouble, which was introduced in May 1992, was not able to protect the country from the Russian economic crisis, and a new national currency, the lats was introduced only later on, in 1993. Lithuania, as the last of the three Baltic states, left the rouble belt in 1993, and took up the litas. Since all three national currencies were differently implemented, the kruun tied to the German mark, the lats free-floating and the Lithuanian litas pegged to a basket of four Western currencies, the economic cooperation between the countries was further complicated.(Gricius 1994, p. 31; Sakwa 1993, pp. 339-340)

 
    In an attempt to encourage intra-Baltic trade, the Baltic Heads of State met in Jürmala, Latvia in August 1993, followed by a meeting of the prime ministers in September the same year in Tallinn. The result was the Free Trade Agreement between Estonia, Latvia and Lithuania, signed in Tallinn on September 13, 1993. A free trade zone with more than 8 million consumers was created, where all tariffs on imported goods were abolished, the sole exception being agricultural raw materials and products, and providing common customs and visa regulations in all three countries. However, the hoped for increases in intra-Baltic trade were not achieved since the agreement came into force in April 1994, as shown by the chart above, the average of the trade between the Baltic countries is still only approximately 5% of their total foreign trade.(Pautola 1996, pp. 11-14; Gricius 1994, pp. 29-30, 39)

   Kirsikka Bonsdorff: You also mention here some important differences between the three Baltic republics, especially under titles 4.1.1 Political Cooperation and 4.1.2 Economic Cooperation. Would it be possible to change the titles so that they would include both the Cooperation aspect and the differences between the states? For example: 4.1 Cooperation and the differences in the 1990's, 4.1.1 Political Cooperation and differences, 4.1.2 Economic Cooperation and differences or something like that.

 

    After nearly half a century of Soviet dependence, following the coup of August 19, 1991, all three Baltic republics; Estonia, Latvia and Lithuania managed to gain full independence for the second time during this century. The battle for Baltic independence started in the late 80€s as Gorbachev€s perestroika and glasnost policies made the Soviet Union more open to diverse opinions and discussions. The struggle to regain their independence united the three Baltic republics in 1988. While still under the Soviet regime the cooperation between the Baltic republics was handled by social organisations like the People€s Fronts and Sajudis. With the declaration of independence of all three Baltic states during the spring of 1990, the cooperation was continued by the newly set up governments.(Gricius 1994, pp. 26 and 40-41) During the following year the Baltic republics signed agreements and made common statements, all in pursuit of their common goal to achieve international recognition of their independence from the Soviet Union. Upon becoming fully independent at the end of the summer of 1991, the cooperation between Estonia, Latvia and Lithuania slowed down and took on a declarative character.(Ibid.) As during their first period of independence the actual results of the inter-Baltic cooperation were almost nonexistant.

 
   

Difficulties and Achievements

 
    The reasons for the failings of the intra-Baltic political and economic cooperation are diverse, some of which have already been touched upon in the previous chapter. The complications in both areas of cooperations are not just a consequence of circumstances, but of the will on the part of the three Baltic states to develop strong separate national identities. The success of the nationalists in the 1992 elections in Estonia and Latvia shows the will of the population to pursue individualist foreign policies and to make the international community view the Baltic states, not as an entity, but as three different countries. This strong will can be seen to originate in the separate historical and cultural backgrounds of each country, as well as the €artificial€ and negative common experiences within tsarist Russia and the Soviet Union. In relation to the Western economic and security networks the Baltic states also wish to be treated as three different countries instead of one block, because they are all convinced that they are best off by themselves, the other countries would only prolong their accession into the Western structures.(Gricius 1994, p. 24)

 
    Whereas the difficulties in developing intra-Baltic trade, as well as economic cooperation between the three Baltic countries, are concerned, the central problems were the lack of national currencies in Latvia and Lithuania prior to 1993 and the pursuit of separate economic and foreign trade policies, already mentioned before. The degree of achievement of a market economy, through privatization and the inflation rates have differed significantly in the three states. Privatization of large enterprises has been most successful in Estonia, where over 50% of the larger state-owned enterprises are in private hands, the corresponding figure in Lithuania is 25%, whereas in Latvia only a few state-owned companies have been privatized. Another problem brought on by the 50 years of plan economy is the streamlining of the Baltic economies by the Soviet authorities, through industrialisation. Now the industries of the three independent republics still produce similar products and so the market for intra-Baltic trade is minimal. However, the economic links between the Baltic countries have been few even before the Soviet period, which can perhaps be explained by the similar resources of all three countries, limiting the trade creation in the area. Also the relatively small size of the Baltic market, encompassing only 8 million consumers with modest incomes, limits the gains of intra-Baltic trade. Perhaps the most significant impediments to trade between the countries are, from a macroeconomic point of view, the shortcomings in infrastructure, and from a microeconomic viewpoint the lack of managerial skills, unavailability of credit and poor access to business information.(Ibid, pp. 32, 41-42; Pautola 1996, pp. 11-15)

 
    However, there have also been some important achievements made in the realm of intra-Baltic cooperation during the second independence of the Baltic countries. During the first year following the declaration of independence in spring 1990, cooperation between the three states consisted of joint political statements adopted by the €Baltic States Council€, clarifing the positions of the Baltic states to the Soviet Union, and achieving international recognition of their independence in 1991. The first meeting of the Baltic Assembly in January 1992, can be seen as the beginning of a new stage in cooperation. It was created as a forum for inter-parliamentary consulting, coordination and discussion. An inter-parliamentary agreement was also achieved between the Baltic Asembly and the Nordic Council in June 1992, thus enabling Nordic assistance in the creation of democratic institutions in the Baltic Countries. The most important forms of cooperation between the three Baltic states, however, has been the meetings of the Baltic prime ministers, according to Niina Pautola. Their goals have been to struggle against crime and illegal immigration, secure the workings of the Baltic free trade agreement, develop a common security policy and form a unified energy policy, with the creation of the Baltic Energetic Council.(Gricius 1994, pp. 28-38; Pautola 1996, pp. 14-15)

 
    Intra-Baltic cooperation in 1995 concentrated on transportation, legislation, common security and trade. To solve the macroeconomic trade barriers the Baltic Council of Ministers adopted resolutions on the Via Baltica roadlink and the Baltic Customs Union, as uniform transit and customs regulations are required for the realization of the Via Baltica. The establishment of a Baltic Customs Union, which has been discussed since 1991, has now received more concrete plans, and it is expected to be implimented by January 1, 1998. A common defense union has also been actively discussed, since the eastern enlargement of the Western security structures to include the three Baltic states is a long term project. The Baltic countries have instead had to rely on military cooperation between themselves, with joint military maneuvers, conferences and seminars. A declaration on closer cooperation in the spheres of security and defense was signed by all three countries in September 1993 and in December 1995 the Baltic Assembly adopted a resolution stating that the Baltic Council of Ministers should make preparations for a Baltic defence treaty.(Ibid.)

   Kirsikka Bonsdorff: This chapter could - in my opinion - as well be a part of chapter 4.1. This is like a summary of chapters 4.1, 4.1.1 and 4.1.2. Do you agree? You write about the economical and political cooperation and differences between the Baltic states. Aren't difficulties and achievements a part of the cooperation and differences between the states?