SCENESETTER FOR SECRETARY RICE'S PARTICIPATION IN

C O N F I D E N T I A L RIGA 000945

SIPDIS

SIPDIS

FOR SECRETARY RICE FROM AMBASSADOR BAILEY

E.O. 12958: DECL: 11/20/2016
TAGS: PREL OVIP SECRETARY RICE LG
SUBJECT: SCENESETTER FOR SECRETARY RICE'S PARTICIPATION IN
NATO SUMMIT

Classified By: Ambassador Catherine Todd Bailey for Reason 1.4(d)


1. (C) Madame Secretary, we are extremely honored that you
will visit us November 28-29. Over two years into NATO and
European Union membership, Latvia has emerged as a
significant international player, despite its modest
population and resource base. Latvia stands out as a
successful post-Soviet society that has become a respected
voice in the international community. Strong memories of
occupation and oppression strengthen Latvia's resolve to
reach out to countries near and far striving to join the
forward march of freedom. Latvia has troops on the ground in
Iraq and Afghanistan, and remains solidly Transatlanticist in
its orientation. The country remains one of the fastest
growing economies in the European Union, and this economic
growth provides the resources Latvia will need to implement
its program to promote freedom and democracy abroad. Its
geographic position offers great potential as a
stepping-stone for U.S. exports and investors. Embassy Riga
daily makes it a priority to expand bilateral trade and
investment. Latvia's support for pro-market, pro-free trade
policies is important to the U.S., especially in European and
international organizations. Your visit to Latvia for the
NATO Riga Summit provides an excellent opportunity to
reinforce our partnership with Latvia in projecting freedom,
democracy, and market-based prosperity.

President Vike-Freiberga
--------------


2. (C) Latvia's hosting of the summit is a real capstone for
President Vaira Vike-Freiberga and what she will add to her
legacy. It is indicative of the high personal regard in
which she is held within the alliance that a country of
Latvia's small size would host the summit. But her excellent
reputation extends beyond Europe. Her candidacy for
Secretary General of the United Nations, with an emphasis

SIPDIS
that selection of this important post should be based on
merit rather than a regional rotation, that it was time for a
female Secretary General, and the need for reform at the UN,
was short but she rapidly moved into third place--even though
some candidates had been in the race for nearly two years.
Her performance in the race will likely open doors for her as
she considers her options after her term in office ends next
July.

Foreign Minister Pabriks
--------------


3. (C) As foreign minister, Artis Pabriks has been a firm
transatlantic voice in EU circles and a strong voice to the
Latvian public in articulating the importance of the
relationship with the U.S. Pabriks, an academic by
background, is not a politician in the manner of his
fellow-party member, Prime Minister Kalvitis. He has no
major power base in the People's Party, but is nonetheless
widely recognized as a person of integrity, intelligence, and
vision. He has proven to be a solid partner to Embassy Riga
during his tenure as foreign minister. In a meeting with the
Latvian press on November 9, Pabriks flagged concluding the
Latvia-Russia border treaty and pursuing Latvia's accession
to the OECD as two foreign policy priorities for the second
Kalvitis government.

Elections
--------------


4. (SBU) Latvia's October 7 parliamentary elections, the 5th
since independence was restored in 1991, provided a vote of
confidence in the incumbent minority government of Prime
Minister Aigars Kalvitis. Kalvitis' government has focused
on low taxes and creating a pro-business environment, while
building good relations with the US and Europe and
simultaneously working to improve the strained relationship
with Russia. Kalvitis will continue as PM and little change
in policy is expected as a result of the election. The big
surprise in the election was the unexpected success of the
center-left, Russian-oriented Harmony Center party which
bested its more strident competitor, a party named For Human
Rights in a United Latvia (PCTVL).

Democracy Promotion
--------------


5. (SBU) Latvia has demonstrated sustained support for
international military operations that further the freedom
agenda. With 120 soldiers in Iraq, 30 in Afghanistan, and
others in Kosovo, on a per capita basis Latvia is one of the

largest contributors to these operations. Latvia is shifting
from being a recipient of foreign aid to being a donor. Its
recently published development cooperation policy plan for
2007 envisions a four-fold increase in development
assistance--focused on Georgia and Moldova, with additional
assistance to Ukraine, Belarus, Afghanistan, and Kosovo.
Although Latvia's assistance funding remains modest, the plan
is evidence that Latvia is beginning to develop a foreign
policy commensurate with its EU and NATO membership. The
country sees a particular niche for Latvia to use its own
post-Soviet experience to help countries in the neighborhood
move closer to Europe. Latvia has an Embassy in Georgia and
hopes to open one in Moldova as well. Moldova opened an
embassy in Riga at the end of 2005.

Expanding Bilateral Trade and Investment
--------------


6. (U) Latvia's open, agile and expanding market-oriented
economy provides U.S. companies a promising export and
investment destination in a newly-enlarged EU. The country
has created a very business friendly environment that is
attractive to foreign companies, and the country is
experiencing explosive GDP growth (10.2 percent in 2005). In
May of this year, Embassy Riga and the Government of Latvia
staged an extremely successful Pan-Baltic Trade and
Investment Conference focused on American business. President
Vike-Freiberga opened the conference (with the Prime Minister
in attendance) to an audience of approximately 150 business
people from the U.S. and the Baltic states. She also held
private meetings on the margins with a number of the U.S.
businesses--to thank them and encourage further trade and
investment. In many ways, Latvia is still a land of
discovery for Americans and American companies, and
strengthening economic ties between Latvia and the United
States is a top priority for this Embassy.


7. (SBU) American companies have invested more than 350
million dollars in Foreign Direct Investment in Latvia during
the last decade. The financial sector is expanding rapidly,
and GE Money is taking full advantage of these opportunities.
The company entered the Latvian market in 2004 and has grown
extremely quickly. GE Money is in the process of acquiring a
local bank so that it can further expand its presence in
Latvia and become a full service bank. There are excellent
prospects in manufacturing as well. Earlier this year,
American door and window manufacturer Jeld-Wen opened a wood
fiber plant near to town of Aizkraukle. This represented a
60 million dollar investment, and is the single largest
foreign investment in the manufacturing sector in Latvia in
the past decade. In October, U.S. firm New Century Holdings
began construction of a new glass manufacturing facility
called Groglass. This facility will use cutting edge
technology to produce a special type of glass that has
increased transparency (allows more light to pass through).
The amount of the investment in this new facility is expected
to be around 30 million dollars. Another sector presenting
opportunities to American firms is infrastructure. We expect
a major American hotel chain to open in Riga by 2010.

Energy Security
--------------


8. (C) Like other countries in the region, Latvia is focused
on energy security and the threat that Russia will use its
control of oil and gas resources as means of political
coercion. In 2002, Russia ceased sending oil through a
pipeline network to the Latvian port city of Ventspils, a
significant economic blow. (Note: Some oil still transits
through Ventspils, but it is brought in by railcar.) Energy
security took on increased urgency after Russia briefly
suspended natural gas supplies to Ukraine in January of this
year. In particular, Latvia is heavily dependent on Russia
for natural gas. To address this issue, the GOL wants to see
the Baltic electricity grid linked up with the Nordic grid.
It also wants to see the EU become more involved in
protecting the energy interests of its newest members. To
help diversify energy supplies, the GOL is considering a
joint project with the other Baltic countries to use private
financing to replace the aging Ignalina nuclear facility
located just across the border in Lithuania. Latvia remains
uneasy about the proposed Russian-German pipeline project.

Latvian-Russian Relations
--------------


9. (SBU) Latvian-Russian relations have been strained in
recent years. However, there have been some recent, positive

steps towards improving the relationship. In October, Latvia
and Russia signed two bilateral agreements: one established
an intergovernmental commission, and the other focused on
economic cooperation. In addition, the recently reelected
coalition government in Latvia hopes to make progress on the
long-stalled Latvia-Russia Border Treaty.

Tolerance
--------------


10. (C) One political theme that I hope you can touch on
during your discussions with Latvian counterparts is
tolerance, inclusion and respect for others. One of the
legacies of Soviet rule is a distrust of differences and a
tendency to focus on the past rather than looking forward.
This manifests itself in a variety of ways. Attacks on
individuals of color, including an Embassy family member,
attributable to racism are too often chalked up to
"hooliganism." Attempts by Riga's small gay community to
hold a pride march were met by violence and the interior
minister said that securing the event would be a bigger
security challenge than the NATO Summit. These attacks
violate basic human rights. In addition, there is still
tension between ethnic Latvians and the sizable ethnic
Russian population, particularly over language issues.

Visa Waiver
--------------


11. (C) Latvia has long advocated entry into the Visa Waiver
Program (VWP),and the Latvians assiduously raise this issue
at every opportunity with U.S. Government officials who visit
the country. To most Latvians, admission to the VWP would
symbolize that Latvia is fully accepted in the community of
Western nations and that the US fully recognizes Latvian's
contributions. Latvia has taken a number of steps to become
compliant with VWP criteria. For example, the country will
soon begin issuing biometric passports that include digital
facial recognition. While the non-immigrant visa refusal
rate for Latvians has dropped in recent years, it still
remains substantially higher than the 3 percent permissible
under VWP legislation.


12. (SBU) My Embassy team and I believe that your visit will
highlight to the Latvians the strength of our bilateral
relationship and continue discussions on some of the economic
and social issues that are crucial to Latvia's future
success. It is an honor to have you visit twice in 18 months
a country as you well know that serves as a very strong
partner.
BAILEY