Publication: Monitor Volume: 4 Issue: 127

The Russian government has introduced additional “economic measures” against Latvia, effective July 1. These include: a discriminatory 20 percent surcharge on the transit of most major goods to, from, and via Latvia; and new rules for banking transactions, virtually depriving Latvian exporters of short-term credit from Russian banks. Russian Foreign Minister Yevgeny Primakov had warned last week that some new “economic measures” would be forthcoming in retaliation for Latvia’s alleged “violation of the rights of the Russian population.” (BNS, June 30) These restrictions add to those introduced during April and May, which hit Latvia’s agricultural and fish exports to Russia and the Latvian trucking business.

Latvian Foreign Minister Valdis Birkavs announced yesterday that Riga will complain to the G-7 countries, the World Trade Organization, the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development and other organizations that either credit Russia or Russia aspires to join. Those organizations, Birkavs recalled, rule out the unilateral imposition of economic sanctions and other discriminatory steps that interfere with the free flow of transit. (BNS, July 1)

Moscow insists on classifying these restrictions as “economic measures of influence,” not “sanctions.” Their effect on Latvia’s macroeconomic indicators and credit rating is not yet apparent. They are also undoubtedly designed for political effect in Latvia. Influential business groups dependent on the Russian trade have responded by turning against the government; and the Saimnieks party, the single largest in parliament, has quit the coalition government and tried to bring it down. These groups cite the “economic measures” as evidence that Latvia must accommodate Russian interests. The governing Fatherland and Freedom and its allies argue that the sanctions ought to spur Latvia’s private sector to wean itself off from the Russian markets, improve product quality and seek alternative outlets.