Identifier
Created
Classification
Origin
09RIGA576
2009-12-03 15:10:00
CONFIDENTIAL
Embassy Riga
Cable title:  

LATVIA: DAS QUANRUD BOLSTERS ENGAGEMENT

Tags:  PREL PGOV ECON MOPS LV 
pdf how-to read a cable
VZCZCXRO6570
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHRA #0576/01 3371510
ZNY CCCCC ZZH
O 031510Z DEC 09
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6168
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 02 RIGA 000576 

SIPDIS

E.O. 12958: DECL: 12/02/2019
TAGS: PREL PGOV ECON MOPS LV
SUBJECT: LATVIA: DAS QUANRUD BOLSTERS ENGAGEMENT

REF: A) SECSTATE 123222 B) SECSTATE 120288 C)
SECSTATE 120807 D) RIGA 573 E) RIGA 567 F)
RIGA 566

Classified By: Ambassador Judith Garber, reasons 1.5 (B) and (D)

C O N F I D E N T I A L SECTION 01 OF 02 RIGA 000576

SIPDIS

E.O. 12958: DECL: 12/02/2019
TAGS: PREL PGOV ECON MOPS LV
SUBJECT: LATVIA: DAS QUANRUD BOLSTERS ENGAGEMENT

REF: A) SECSTATE 123222 B) SECSTATE 120288 C)
SECSTATE 120807 D) RIGA 573 E) RIGA 567 F)
RIGA 566

Classified By: Ambassador Judith Garber, reasons 1.5 (B) and (D)


1. (C) Summary. Latvia's political leadership firmly and
unequivocally supports President Obama's Afghanistan policy,
and will maintain its own caveat-free troop contribution in
the face of severe economic crisis at home. The Government
of Latvia appreciates USG assurances of support on NATO
collective security, and will approach relations with Russia
pragmatically, without sacrificing principles. Within the
EU, Latvia will support the U.S. position on possible Iranian
sanctions. Both the government and leading private sector
elements believe that Latvia's economic growth will resume
very slowly in the second half of 2010, and that no powerful
engines or formulas exist for spurring robust growth in the
near future. While large gas storage facilities will ensure
Latvian energy security over the coming winter, long-term
challenges in energy diversification, and in fighting
corruption are both recognized as considerable. End Summary.



2. (SBU) EUR DAS Pamela Quanrud visited Latvia November 30 -
December 2. She met the Minister of Finance, and high-level
officials from the Office of the President, the Ministry of
Foreign Affairs, the Ministry of Defense, and Ministry of
Economics. Quanrud also met with the Foreign Affairs
Committee of Parliament, the Chair of the Latvian Chamber of
Commerce, and Latvian Banking Association officials. She
rolled out the President's Afghanistan strategy in a December
2 press roundtable, and held an outreach activity with youth
leaders from parties across the Latvian political-ethnic
spectrum. Several salient themes emerged throughout the
meetings:

Afghanistan
--------------


3. (C) Latvian officials expressed strong resolve in backing
President Obama's way forward in Afghanistan and Pakistan
(refs A, C and F),noting that despite a massive 18.7%
third-quarter year-on-year drop in GDP, Latvia would maintain
its presence of 175 caveat-free troops in Afghanistan. No

substantial Latvian troop increases were possible, but
Latvian officials undertook to encourage other European
powers to contribute more, commensurate with their economic
capabilities. DAS Quanrud expressed appreciation for
Latvia's sustained contribution, firmly at the upper end of
the NATO scale in relation to Latvia's population and GDP.
Latvian interlocutors, particularly in Parliament, were eager
to see Latvian firms compete for supply contracts for the
thousands of container loads of non-lethal equipment heading
through Riga port and on Latvian railways en route to
Afghanistan. The MFA indicated they will need "messages of
reinforcement" from the U.S. on Afghanistan if other allies
begin to leave early. The MFA also expressed the hope that
better U.S.-Uzbek relations could speed the transit of
supplies for Afghanistan through Central Asia.

NATO
--------------


4. (C) Latvian officials continued to assure us that they
wanted no public discussion of a NATO Contingency Plan for
the Baltics, but that they desired smooth, quiet progress
toward that end, particularly through the Military Committee.
DAS Quanrud underscored that the U.S. commitment to Article
5 of the NATO Treaty is the bedrock of our foreign policy.
She stated our belief that NATO needs to have in place all
the resources necessary to support Article 5. While adequate
planning is one aspect, other factors, such as capabilities,
readiness and infrastructure, were also critical. Latvian
officials appreciated these reassurances, and hoped to hear
more about our plans in the near
future.

Russia and its Neighbors
--------------


5. (C) Latvian Presidency and MFA officials articulated a
pragmatic, yet principled approach to engagement with Russia.
MFA officials expressed concern about Russian hesitation to
conclude agreements on investment protection and
double-taxation. The MFA was as puzzled by Medvedev's offer
of what they considered an unserious draft European Security
Treaty, as they were by strange Russian behavior at the
NATO-Russia Council. MOD officials hoped that the High North
would be a good test ground for pragmatic re-engagement with
Russia -- thanks to the lack of historical tensions and
legacy issues in this region. The MFA also expressed strong
commitment to participation in the Eastern Partnership, and

RIGA 00000576 002 OF 002


supported Turkey's eventual accession to the EU.

Iran
--------------


6. (C) Presidency and MFA officials alike expressed support
for President Obama's approach on Iran (refs B and E),and
hoped that the Europeans could support that position with
greater unanimity. Presidency officials noted they had
studied the impact of sanctions on Latvia, and determined
they would be minimal. We were assured that AirBaltic would
not establish a direct route from Riga to Tehran. With
regard to sanctions, the MFA noted that while "there were two
schools of thought within the EU on sanctions," Latvia was in
the pro-sanctions camp.

The Budget
--------------


7. (SBU) Finance Minister Einars Repse met DAS Quanrud
November 30, on the eve of the most difficult budget debate
of Latvia's post-independence history. (ref D) Tax rate
increases, new taxes, and spending cuts were painful, Repse
recognized, but necessary to demonstrate Latvia's credibility
to international lenders. Repse acknowledged that the 2011
budget would also require further cuts, and that spending
increases would not be likely until 2013. DAS Quanrud assured
the Minister and other Latvian officials throughout the visit
that Latvia's hard choices would earn long-term dividends in
investor confidence.

The Economy
--------------


8. (SBU) Latvian officials and private sector figures
recognized that Latvia could not revert to growth based on
domestic consumption, and that exports were essential. While
wage decline has made export-oriented investment more
attractive, interlocutors recognized that a slow global
economy would make Latvia's future growth gradual. Despite
the health of the transportation sector (particularly
railways and ports),few real engines for sustained growth
could be readily identified. Bankers were particularly
gloomy about the limited prospect for anything other than
slow growth in the years ahead, and thought Euro accession
was unlikely before 2015, due to difficulties in meeting
Maastricht deficit and debt criteria.

Energy
--------------


9. (SBU) Economics Ministry officials claimed that Latvia
would not suffer power shortages as a result of the Ignalina
nuclear power plant closure in Lithuania, and were confident
that large Latvian gas storage facilities will protect Latvia
from gas shut-offs from Russia. The officials believed that
a new coal/biomass power plant under construction in Liepaja,
the NordBalt undersea electric cable, and further advances in
renewables technology would contribute to greater diversity
of energy supply over time. They admitted that greater
predictability, transparency and stability in setting tariff
rates and policy were needed to attract foreign investors to
the energy sector.

Transparency
--------------


10. (SBU) The Latvian Chamber of Commerce and Industry was
particularly concerned about the problem of corruption, and
the prospect of "state capture" by corrupt "oligarchs" in
October 2010 elections. They were considering establishing
an anti-corruption code of conduct for a critical mass of
Latvian businesses to adopt. The Minister of Finance
expressed the hope that careful monitoring, changes in
revenue service management, and public intolerance for
corruption in a time of economic crisis, could combat the
corruption problem.



11. (C) Comment: This visit did much to reinforce our core
embassy goal of "Keeping Latvia Engaged." The unusual
confluence of the historic Presidential decision on
Afghanistan, the passage of a crucial and contentious Latvian
budget, and Iran's growing intransigence on its nuclear
program all made this visit particularly well timed and
useful. A peaceful November 30 protest by hundreds of
Latvian bikers unhappy at paying a new 48USD annual
motorcycle tax was a colorful, if noisy, reminder of Latvian
democracy in action.
GARBER