LATVIAN BUDGET CUTS: MOD LACKS FUNDING TO PAY FOR

C O N F I D E N T I A L RIGA 000344


EUR FOR NB AND RPM

E.O. 12958: DECL: 06/19/2019
TAGS: PREL NATO MARR MOPS LV
SUBJECT: LATVIAN BUDGET CUTS: MOD LACKS FUNDING TO PAY FOR
NEW NATO HEADQUARTERS, SEEKS U.S. ASSISTANCE

Classified By: CDA Bruce D. Rogers. Reasons 1.4 (b) and (d)


1. (C) Summary: Severe budget cuts leave Latvia unable to
meet its 2010, 2011 and 2012 contributions to the common
funding for the new NATO Headquarters. To avoid defaulting
on its obligations, the GOL has begun to explore "bilateral
arrangements." Specifically, Latvia hopes that it can
persuade other allies to loan it the money to cover the
approximately 2.5 million Euros that will come due during
that period (out of a total national share of 8 million
Euro). Latvia would both repay the loan and re-commence
paying the rest of its share of the funding beginning in

2013. To date, the GOL has unsuccessfully approached both
Belgium and an unnamed second ally. They have now turned to
us and have instructed their Ambassador in Washington and
their PermRep at NATO to approach the USG. End Summary


2. (C) On June 19 Latvian MOD State Secretary Janis Sarts
told Charge and Defense Attache that Latvia's recently
approved budget cuts had reduced the MOD's 2009 budget from
294 Million Lats (approximately USD 600 Million) to 172
Million Lats. As a result the MOD has instituted a number of
stringent measures to ruthlessly cut costs. These include
halting all Mine Counter Measure exercises, grounding
Latvia's small air force and ceasing all training except that
devoted to Latvia's deployments to Afghanistan. In addition,
Sarts stated that there was simply no way to come up with the
money to pay for their portion of the new NATO HQ for the
three years in question. He did believe that Latvia could
meet its 2009 commitment of 300,000 Euro. (FYI: Similarly,
Latvia will not be able to meet its obligations to the EU's
Atalanta mission).


3. (C) Sarts first raised the possibility that Latvia would
not meet its contributions with the staff of NATO's
Infrastructure Committee during a visit to Brussels in April.
In response, the International Staff cautioned that, were
Latvia to do so, it could lead to a cascading effect with
other nations pleading similar budget woes, effectively
halting the new HQ. Regardless, faced with an estimated 2010
budget of 120 Million Lats, the Ministry has decided that the
HQ is not a priority, when compared to Latvia's commitment to
ISAF. Having made that decision, however, the GOL wants to
avoid harming the new HQ project and is seeking to meet its
obligations through other measures. (FYI: Sarts plans to be
in Brussels for further talks with the IS on July 2 and 3.)


4. (C) Charge responded that the USG understood the
seriousness of Latvia's budget situation and that we knew
that this decision was not an easy one. The concept of
"bilateral arrangements' (which Sarts claims was suggested by
the NATO IS) is novel and we were unable to predict what the
US response might be. Charge and DATT recommended that,
regardless of the approach that it took, the GOL should
stress that it was taking these steps in order to maintain
its forces in Afghanistan at current levels. Sarts responded
that Latvia could do so under current budget projections
until 2011 by which time it will have exhausted its supplies
of ammunition and other training materials. On this last
point Sarts acknowledged that the Minister disagreed with him
and believed that Latvia could maintain its presence in
Afghanistan despite the country's budgetary woes.


5. (C) Comment: It was unclear whether Sarts was acting on
instructions or whether this was an exploratory effort. His
attempt to raise the possibility of a withdrawal from
Afghanistan was a direct (and obvious) attempt to influence
USG decision-making. Having said that, Latvia's budgetary
situation is serious and the issue of defense spending as a
proportion of national expenditures is likely to become more
heated over the coming year. The deployment to Afghanistan
has already been criticized by the largest ethnic Russian
party in parliament and the GOL wants to minimize the coming
argument. The government can defend Afghanistan and ISAF, a
600 Million Euro building is harder to justify.


ROGERS