RUSSIA/CIS RISKWATCH – ISSUE 6 – DECEMBER 2014

Introduction


As well as marking the fall of the Berlin Wall, 2014 was the 25th anniversary of the famous Baltic Way, a peaceful show of defiance in which two million citizens of the Soviet Socialist Republics of Estonia, Latvia and Lithuania linked hands over a distance of 675 km to demonstrate their desire for independence from Moscow. In that respect, the recent return to prominence of these small republics on the north east coast of the Baltic Sea is entirely appropriate. In this calendar year alone, these small outposts of the EU and NATO, with a total population of around 7 million people, have hosted visits from an astonishing number of senior local and global leaders, including two EU High Representatives for Foreign Affairs, two NATO Secretary Generals, Vice President Biden, EC President Barroso, Chancellor Merkel of Germany, and, on a brief but significant visit to Estonia in September, the President of the United States Barack Obama.

It would be gratifying if these visits had been made simply to mark this anniversary, as an acknowledgement of the political, economic and social progress each of these states has made since regaining their independence. Outside the region, however, the anniversary was barely noticed. With the turmoil in ‘east-west’ diplomatic relations we have witnessed this year, a revolution in Kiev, annexation of Crimea, and several thousand lives lost in fighting in eastern Ukraine, the Baltic States are now considered Europe and NATO’s frontline in what is fast becoming an unconventional conflict between the Europe and the US on the one side, and Russia on the other. All three Baltic States have firmly and demonstrably supported the actions of the EU and US in sanctioning Russia for its response to the events in Ukraine. But all three also share borders with Russia (Lithuania via Kaliningrad), centuries-old history and elements of culture, and minority communities of Russian-speakers of varying size and integration. So a good time to look more closely at the region in this, our 6th Russia/CIS RiskWatch newsletter.

With its well-earned reputation as a high-tech innovation hub in both public and private sectors, Estonia has been at the forefront of cyber technology for a couple of decades. In our first article, Oliver Church from Control Risks’ Cyber Risks team examines how the country has developed a unique expertise in cyber defence, culminating in NATO’s decision to locate its cyber defence centre of excellence in Tallinn and conduct recent cyber wargames from there.

Neighbouring Latvia, meantime, having made a successful recovery from the catastrophic collapse of its economy during the 2007/2008 crisis, is now struggling to reconcile competing diplomatic, political and economic interests. Steven Eke, Control Risks’ Senior Analyst for the Baltic States, examines how the country can balance its strident diplomatic tone against Russia with the large amounts of Russian investment and significant ethnic Russian minority population, as it prepares to chair the presidency of the Council of the European Union from the beginning of January.

Also happening on January 1 2015, Lithuania will become the 19th member of the EU to adopt the Euro as its national currency, jettisoning the litas and joining its neighbours Estonia and Latvia in the currency union. At a time when many commentators are questioning the long-term survival of the currency, what does Lithuania hope to get out of this and what are the prospects for further economic success? Control Risks has recently announced a new partnership with Oxford Economics to integrate political and economic insight and analysis in a new format to launch later next year. I am therefore especially gratified that Scott Livermore, a Managing Director from Oxford Economics, has contributed to this newsletter by sharing his analysis of Lithuania’s economic outlook.

I hope you enjoy this issue of Russia/CIS RiskWatch. As always, we welcome your comments and suggestions for improvements or issues to focus on in future editions. It only remains for me to wish all our readers a peaceful and relaxing holiday season, whatever you celebrate, wherever you will be, and whoever you will be with. С наступающими!

Best regards,

Tim Stanley

Tim Stanley
Market Director, Russia/CIS