LATVIA IN 2007, KEEPING THE RELATIONSHIP STRONG

C O N F I D E N T I A L SECTION 01 OF 03 RIGA 000056

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/18/2017
TAGS: PREL PGOV KCRM ECON KPAO CVIS LG
SUBJECT: LATVIA IN 2007, KEEPING THE RELATIONSHIP STRONG

REF: 06 RIGA 792

Classified By: Ambassador Catherine Todd Bailey. Reason: 1.4 (D)


1. (C) Summary: As we begin 2007, Latvia is in a different
place than last year. The NATO summit, which kept Riga on
allies' lips for a year, is over and President
Vike-Freiberga, who almost single-handedly put Latvia back on
the world map, is leaving office in July. Yet, the US
maintains important interests in Latvia, including:
encouraging its active engagement as a NATO Ally, promoting a
trans-Atlanticist voice in the EU, securing the freedom
restored in 1991, supporting the spread of democracy in the
region, and promoting the development of economic and
commercial ties. The Latvians are generally headed on the
right path but to keep them there we need to continue or even
increase bilateral contacts, encourage their self-confidence
to be active in international fora, and highlight for
American companies the value of doing business here. End
summary.


2. (C) 2006 was an impressive year for US - Latvian
relations. President Bush visited for the second time in 18
months, this time to attend the successful NATO summit in
Riga. In addition, Labor Secretary Chao, members of Congress
and officials from State, DOD, and Treasury had successful
visits to Latvia. Latvian President Vike-Freiberga addressed
a joint session of Congress. The Latvian government took
strong action to address deficiencies in the banking sector,
albeit after we took action under the Patriot Act. Latvian
troops continued to serve effectively in Iraq and
Afghanistan, as well as Kosovo. A pan-Baltic trade and
investment conference brought over 60 US companies to Riga to
explore doing business in the Baltics. With the summit over
and Vike-Freiberga leaving office, we need to consider how to
ensure the relationship continues to produce results for both
countries and maintains a high international profile for
Latvia.


3. (C) The Latvia - US relationship remains based on a shared
commitment to core values of democracy, market economy, and
personal liberty. As a NATO ally, Latvia is continuing to
develop a modern, deployable military backed by a political
system willing to commit blood and treasure to the war on
terror. In 2006, Latvia transitioned to an all volunteer
military. FMF funds are improving the military's
capabilities -- during the NATO summit, Latvia had a complete
regional air picture and the U.S. air security mission
against renegade aircraft was run from a combat center that
we helped fund. IMET programs are producing officers and
NCO's who are effective leaders of a modern military and
reinforcing our shared values. Latvia is committed to ISAF
and will, during 2007, increase its commitment to that
mission with uncaveated combat troops even as it draws down
it troops in Iraq consistent with the changes in the Polish
sector. Our mil-mil relationship is strong and with
continued funding for FMF and IMET, we are on a good path in
this area.


4. (C) Where we need Latvia to do more is on the political
side. Within NATO, Latvia could be a strong voice for closer
relations with Ukraine and Georgia, developing global
partnerships, ensuring that NATO commanders have the troops
they need for missions with unneeded meddling by capitals,
and for preserving the vital Article V guarantee at the heart
of the alliance. The same is true in the EU, where Latvia is
a backer of the trans-Atlantic relationship, Turkish
accession, action on Belarus, and improved EU relations with
countries like Moldova, Georgia and Ukraine. In both
organizations, Latvia can be a voice for realistic
relationships with Russia. But too often, in both
organizations, Latvia does not join the debate, fearing that
the bigger states don't want to hear from them. We need to
reassure them that we do value what they have to say, even in
those instances when we don't agree. We need to build
political common cause on issues, but early in the process,
not waiting until one or two days before a meeting, when
their positions are usually already set. Overcoming both
their natural shyness and a lingering Soviet legacy that
initiative and outspokenness is bad will be a challenge, but
the results would be worth it. In order to get the Latvians
more engaged in broader groupings, we need to keep up the
high-level bilateral conversations in both Washington and
Riga to encourage their efforts and urge more vocal
engagement.


5. (U) We also need to reinforce the importance of the
shared values at the heart of our relationship. Today's
Latvian youth are more connected with Europe, especially
through culture and education, than their predecessors. The
significance of the US policy of non-recognition of the
Soviet occupation diminishes over time. Paraphrasing one

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former diplomat, when the average Latvian thinks about
foreign policy, eighty percent of their focus is on the EU,
eighteen percent on Russia and two percent on the rest of the
world, including the US. To preserve Latvia's supportive
foreign policy orientation over the medium to long term, we
need to continue our robust public diplomacy program and
expand people to people contacts, especially among students.
We should also move forward with establishment of a
binational Fulbright commission to place a strong structure
around that program. Latvians also place a high value on
their culture and we need to find opportunities to weave
cultural events into our PD activities. In February, we will
screen Mississippi Burning as part of our programming for
Black History Month and in May we will, in cooperation with
the Latvian Culture Ministry, bring Broadway writer/producer
Steven Schwarz to put on a Broadway exhibition.


6. (U) We will also continue to make aggressive use of our
public diplomacy activities to advance the issue of tolerance
for all people in Latvia. While some small progress is being
made in relations between ethnic Russians and ethnic
Latvians, mainly by a younger generation which doesn't
remember the USSR, serious problems remain for racial
minorities and gays and lesbians in Latvia. International
pressure has helped keep the government focused on these
issues and our outreach, combined with the EU, can help sow
the seeds of change in society.


7. (C) No discussion of our public diplomacy would be
complete without mentioning Latvia's desire to join the visa
waiver program - the element of American policy that most
interests average Latvians and generates the greatest amount
of media attention. As the administration moves forward in
developing its new strategy on VWP reform and we focus
internally on interagency processes and Congressional
discussions, we in the field will need to be armed with the
latest guidance and American officials engaging with Latvians
need to be prepared to hear about it. No matter how much we
try to explain otherwise, Latvians will not see themselves as
full partners of the US until they are admitted to the VWP.
With Latvian officials claiming that the President's remarks
in Tallinn mean they will be in by the end of the year, we
need to manage optimistic expectations.


8. (C) Latvia has achieved remarkable things in the nearly 16
years since the restoration of independence, yet the
political system remains fragile. In October, we highlighted
ensuring continued progress on rule of law and the importance
of the selection of the next president as the two issues most
likely to be effected by Latvia's parliamentary elections
(reftel). While neither was determinative in the election,
we continue to believe that they are among the most important
issues for the current parliament's four year term. It is
too early to predict how the outcome of the presidential
race, but it will be important for us to watch which figures
emerge as strong candidates. On rule of law, initial
indications are not good. In December, parliament approved
the government's nominees for the Constitutional Court,
Latvia's most powerful court, despite the fact that the legal
affairs committee rejected them as unqualified. Parliament
has also failed to meet a deadline it set to establish an
office of Ombudsman to monitor human rights issues. While
the Embassy will continue to make rule of law issues a core
element its activities, we will need support from Washington
to ensure the message is heard. Justice Alito's planned
participation in a seminar this summer focused on ethics and
transparency in the judiciary will be very valuable, but we
also need to reinforce this in other ways. Latvians who meet
with US officials and don't hear about the importance of this
issue reportedly tell their colleagues back home that the
Embassy places more emphasis on this issue than does
Washington.


9. (C) Another worrying trend is the increasing (or perhaps
restored) influence of Latvia's oligarchs. It is an open
secret that the Greens and Farmers party, part of the

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governing coalition, will not take a position without
consulting Mayor of Ventspils Aivars Lembergs, who remains
under indictment for money laundering and abuse of office and
against whom more criminal charges may be filed. Similarly,
Andris Skele, founder of the leading People's Party, has been
playing a key role behind the scenes -- most notably by
scuttling an agreement on restitution of heirless and
communal Holocaust era Jewish property after months of
painstaking negotiations between the government and Jewish
community. Skele could also face legal troubles this year
for his involved in a failed scheme to bring digital TV to
Latvia. We need to be prepared to register our clear
disappointment when we see unelected individuals exercising
undue influence on national policy or if we find that
Latvia's "big fish" are receiving privileged treatment in the
legal system.

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10. (C) In 2006, Latvia continued its impressive growth rates
of recent years, although inflation is an increasingly
serious issue. Much of the growth, however, is based on
speculation in real estate and will be difficult to sustain
without significant investment in infrastructure and
continued progress on transparency. 4.5 billion Euros in EU
structural funds over seven years will help with the former,
but the latter is more challenging. In addition to our other
rule of law activities, our efforts on the banking sector and
the port of Riga in 2006 underscored our commitment to help
Latvia improve its climate for legitimate business. Now we
need to help American companies see the progress that has
been made, appreciate the value of Latvia's location and
infrastructure links to Russia and elsewhere, and make use of
the highly educated, multi-lingual workforce. The small size
of Latvia's market means many companies don't see the value
of doing business here, but we are trying to show them the
value of working from here, in the Baltics and the wider
area. In so doing, not only will we help American business,
but we will underpin the political ties with economic ones
and we will maintain the pressure for greater transparency
that is essential for the operations of successful American
companies. Our planned energy conference in June will be
another vehicle for promoting Latvia to American businesses.


11. (U) We have had good success in integrating businesses
into our policy and public diplomacy efforts, through
public-private partnerships. The Humana Foundation has
recently announced a long-term commitment to nursing
education in Latvia. Nursing is one of the most critical
shortfalls in the Latvain healthcare industry and our efforts
to bring Humana here provide a project that has the potential
to, over time, touch every resident of Latvia. In 2006, we
sponsored a visit by Ronald McDonald Children's Charities and
will work with them this year, in conjuction with local
businesses and the American Chamber of Commerce, to open a
chapter an eventually a Ronald McDonald House in Latvia.
Children's issues overall are of growing concern to average
Latvians and we will continue to look for new opportunities
in this area.


12. (C) We believe that the steps we outlined here provide
good building blocks for advancing the relationship and our
key interests with Latvia in 2007.
BAILEY