Identifier
Created
Classification
Origin
09RIGA371
2009-07-08 13:18:00
CONFIDENTIAL
Embassy Riga
Cable title:  

SCENESETTER FOR MEETING WITH LATVIAN FM RIEKSTINS

Tags:  PREL ECON PINR LG 
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R 081318Z JUL 09
FM AMEMBASSY RIGA
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INFO RUEHTL/AMEMBASSY TALLINN 0002
RUEHVL/AMEMBASSY VILNIUS 4055
C O N F I D E N T I A L RIGA 000371 

SIPDIS

EUR FOR NB

E.O. 12958: DECL: 07/08/2010
TAGS: PREL ECON PINR LG
SUBJECT: SCENESETTER FOR MEETING WITH LATVIAN FM RIEKSTINS

Classified By: Classified By: CDA Bruce Rogers for reasons 1.4 (b) and
(d)

C O N F I D E N T I A L RIGA 000371

SIPDIS

EUR FOR NB

E.O. 12958: DECL: 07/08/2010
TAGS: PREL ECON PINR LG
SUBJECT: SCENESETTER FOR MEETING WITH LATVIAN FM RIEKSTINS

Classified By: Classified By: CDA Bruce Rogers for reasons 1.4 (b) and
(d)


1. (U) The Secretary's meeting with Maris Riekstins
provides an opportunity to demonstrate our strong support
for Latvia at a time when it faces serious economic
difficulty. The meeting will support the government as it
restructures government fiscal policy and functions to comply
with commitments to international lenders, show our
appreciation of Latvia's NATO commitments during the current
financial hardships, and encourage officials to
resolve Jewish property restitution issues.

Economic crisis straining GOL
--------------


2. (U) After years of double-digit GDP growth, Latvia's GDP
has fallen by 18% in the last year and the government has
found itself in need of assistance. The IMF, European
Commission, and others offered a loan package, dependent on
austerity requirements, to the GOL. In June, the
parliament passed amendments cutting the budget, including
cuts in government wages, pensions, and social support
payments. The EC has declared this sufficient to continue
disbursing loans, but the IMF is taking more time to study
the GOL plan. The government's exit strategy is adoption
of the euro. To meet the required 3% budget deficit target
to do so, additional measures will be needed in 2010 and
2011 to shrink the deficit. These will likely require
painful tax increases and cuts in entitlements.


3. (U) We have been supportive of international assistance
to Latvia, but have stressed to the government that
it needs to follow through with meaningful structural
reforms. We have also pressed the GOL to develop
contingency plans in case their initial cost-cutting
efforts are deemed inadequate by the IMF. To
date, they have resisted doing so, fearing that it could
lead to a lack of confidence in "Plan A." You should
express our support for Latvia during the crisis, but
emphasize that single-year stopgap cuts will not be
sufficient - long-term strategic thinking, including
contingency plans, will be critical.

NATO - Latvia active but seeks reassurance
--------------


4. (C) NATO lies at the core of Latvian security
policy. In the wake of events in Georgia last summer,

Latvia remains interested in further demonstrations of
commitment to Article 5. They want to know how we are
going to breathe life into the recent summit language on
the American commitment to Latvia. He will likely raise
further engagement with Central Asia as a key to stability
in Afghanistan, and highlight Latvian efforts in this
regard. Riekstins will also point out Latvia's increasing
participation in Afghanistan, and its role in the Northern
Distribution Network (NDN) bringing non-lethal supplies to
the region, as demonstrations of its dedication to NATO.


5. (U) Latvia is a reliable friend and ally,
but its economic situation is straining its ability to play
an active role. Through multiple deployments in Iraq, and
now Afghanistan, Latvia has demonstrated its support for
trans-Atlantic security missions. It has taken casualties
in both operations, most recently when 2 Latvians were
killed fighting alongside Americans on May 1. Budget cuts
have caused the Latvians to cease participation in the NATO
mission in Kosovo, the EU mission in Bosnia and the NATO
Response Force. The government says it is committed to
remaining in Afghanistan, where it has 130 troops serving
in the Norwegian-led Meymaneh PRT, and an additional 30
troops leading a joint OMLT with the Michigan National
Guard in RC-East.


6. (U) The Government of Latvia has been active in
supporting democracy and rule of law issues in ex-Soviet
nations in the region, particularly Belarus, Ukraine,
Georgia and Moldova. It has had to eliminate all funding
for these programs due to the economic situation, but is
still actively seeking ways to demonstrate its commitment
to the cause and show leadership in its "neighborhood."
You should thank them for their efforts and encourage them
to maintain their dedication to NATO and building the
capacity of the other post-Soviet republics.

Other issues
--------------


7. (U) Jewish Property Restitution: While Latvia has an
overall good record on property issues, the restitution of a
remaining number of communal and heirless private
properties has been slowed by a combination of politics,
economics, and even some anti-Semitism. A 2006 agreement on
this issue fell apart at the last minute. The government
has created a task force to study the issue, but we have
repeatedly urged that they engage more seriously with
the Jewish community.


8. (U) Energy security: Latvia relies entirely on Russia
for natural gas imports, and will be losing a source of
imported electricity when the nuclear plant at Ignalina,
Lithuania is shut at the end of 2009. Thanks to large
underground natural gas storage facilities, and a
relatively good relationship with Russia on energy issues,
Latvian gas supplies are not an immediate concern. The GOL
has made plans to build new electrical generation facilities
to help with short term needs, and is seeking construction
of links to the Nordic electrical grid in the longer term.
Plans for a shared Baltic/Poland nuclear plant to replace
Ignalina have not progressed. There have been some positive
signs in planning regional inter-connections, but we should
continue pressing the urgency of moving past general
agreements and into implementation.


Riekstins and the MFA
--------------


9. (U) Like many GOL institutions, the MFA faces severe
cutbacks to comply with austerity requirements. The
Ministry has just cut overseas staffing from 466 to 296
employees. Staffing levels in Riga will be similarly
reduced, and salaries for remaining employees slashed.
Their Mission in Washington will not escape these cuts )
and positions in their Defense Attache Office and
their Foreign Commercial Service are also being eliminated.
The MFA will be hard-pressed to meet all its responsibilities
given the cutbacks.


10. (C/NF) Riekstins is a career diplomat and a dedicated
supporter of trans-Atlantic ties. He spearheaded Latvia's
efforts to join NATO and subsequently served as Ambassador
to the United States. Riekstins himself is in a difficult
position politically. In gaining his position as Minister of
Foreign Affairs, he joined the People's Party, which
has since fallen on hard times. Though the party still holds
the most seats in the parliament, they have been saddled with
a large share of the blame for Latvia's economic crisis.
As a result, they performed very poorly in recent municipal
and European Parliament elections and their future looks
bleak.
Riekstins is one of two official candidates to be Latvia's
next EU commissioner, but his prospects for the job are
unclear.
ROGERS