Already a Bloomberg.com user?
Sign in with the same account.
BALTS ARE FREE--BUT `WINTER IS COMING'
Several days after the failed Soviet coup, Communist Party apparatchiki dutifully reported for work at the Central Committee headquarters in Tallinn, Estonia's quaint capital on the Gulf of Finland. There they got the biggest jolt since natives watched Stalin's troops seize the Baltic states 51 years ago. The building had been shut by order of the city council. The likely new occupant: a church that plans to use it for Bible classes.
In the blink of an eye, the Balts have all but won their struggle for the freedom that they lost a half-century ago. Western nations from Denmark to Canada have begun recognizing the states' independence, and the U. S. is expected to follow suit. The Baltics also hope eventually to win associate status in the European Community. That would "lift major obstacles for us internationally and help us domestically," says Janis Jurkans, Latvia's Foreign Minister. Indeed, as part of the EC, the three Baltic states could receive $2 billion to $3 billion a year in aid for the next five to eight years.
But a huge problem remains: creating a viable economic system out of the ashes of the Soviet economy. "People have high expectations for independence," says Kaja Kell, an economic specialist at the Estonian News Agency in Tallinn. "Instead, there will be unemployment and a fall in the standard of living."
BARTER ECONOMY. To their advantage, the Balts have a centuries-old work ethic and a clear memory of better times. Their Achilles heel is a lack of essential energy supplies and raw materials. Latvia and Lithuania import 90% of their energy from other Soviet republics, notably Russia. Estonia is better off, importing just one-third.
One solution would be to make barter arrangements based on Baltic economic strengths, such as agriculture. "We have to establish economic relations with Russia now. The winter is coming, and we need coal and gas," says Jurgis Jurgelis, a member of Lithuania's parliament. "Meat and butter are kind of hard currency for us. If you want to get a tractor, you barter."
Within months, the nearly worthless Soviet ruble may be replaced by Baltic currencies. Step one is waiting until the ruble stops its free-fall. And Baltic money managers can't wait to say goodbye to Gosbank, Moscow's cumbersome central bank. The push for new currencies is already getting a small boost from the Bank of France. In the 1930s, then-free Lithuania squirreled away 2.4 tons of gold in French vaults, now worth about $27 million. Latvia has 1.1 tons. Estonia, though, has none.
The Balts have other aces up their sleeves, too. They took strong advantage of Gorbachev's program to form joint ventures with Western companies. Per capita, Estonia has more such ventures than any other republic--about 600. Estonia plans to introduce a privatization law soon based on principles approved this June. Latvia registers 400 joint ventures, and Lithuania 180.
'TOO SENSITIVE.' But what happens when private-property owners come back to stake their claims? Consider the plight of Henry Randmark, owner of a Hamburg graffiti-removal company. He's irked that the Tallinn government won't acknowledge his property rights. Randmark wants to get back the Tallinn veneer factory his mother used to own. It still exists. "I could be a millionaire many times over if I could get it back," he says.
Adding to the fire are residents--some Russian--who don't speak local languages and may bear the brunt of layoffs in the switch to a market economy. Violence hasn't marred ethnic conflicts in the Baltics as in Yugoslavia (page 59). But tensions flared when Russians dominated anti-independence rallies. Things could heat up if lots of non-Balts find out they're the first workers to get handed pink slips.
Some worry that the Baltics' Russians will fight a rear-guard action to maintain control. Symbols of the old order have vanished, Soviet customs offices and borders ostensibly have come under local control, and the Communist Party and the KGB are banned. But that didn't stop KGB border guards from turning away foreigners without Soviet visas at the Lithuanian-Polish border. "We don't have full control of our borders yet," concedes Endel Lippmaa, an Estonian official. "When we have that, the next move will be to disengage our monetary and economic system from the Soviets'." The trick, then, will be to get the Baltics up and running on more than just high hopes.Lisa Trei in Tallinn, with Igor Reichlin in Bonn and Stewart Toy in Paris