A Quest For Security Through The Economy


Mr Chairman,
Ladies and Gentlemen,

Shall we suppose for a moment that on the eve of the approaching election in Germany a political party will set up a programme of restoring the Third Reich, regarding both its ideology and its frontiers. That would immediately trigger the legal mechanism, and the party would be banned even before the press of the Federal Republic's neighbours could react.

Estonia, however, happens to be in a predicament in such a case. Zyuganov's party in the Russian Federation has set up a political programme of restoring the Soviet Union, regarding both its ideology, frontiers, and zones of influence. The Russian legal system is still in the phase of inception: it is incapable of reacting in the manner of the Court at Karlsruhe. Another manifestation of ostrich policy is the attitude that a person killed by the Soviet system is viewed as if he were less killed than someone killed by nazism. I will refrain from asking which totalitarian system accounts for more millions of lost human lives: every human being is sacred, although it would seem as if a human life in Europe were more sacred than in Rwanda. I will overlook double morals. In a consumer society the abundant choice of cosmetics would cover up your or my blushes in front of a TV camera anyway, during the ten seconds that CNN apportions to a problem. Through these sceptical remarks I am working my way to the core of my talk: the fundamental problem of Estonia and the other two Baltic states lies in the fact that we are unable to protect our security effectively in a critical situation, and there is no one to come and protect our security in a critical situation.

In this realistic conclusion, Ladies and Gentlemen, we are unanimous, whether we like it or not. I imply politicians, political decision makers, not poets, my former colleagues who even now are closer to my heart than politicians.



As long as Estonia's security is not guaranteed internationally, Estonia has to reinforce it herself. Hence the heading of my talk today: A Quest for Security Through the Economy.

A historical turning point

Estonia and her Baltic sister states have to model their security in three different directions. First of all we must forge such intensive relations with the West that any pressure brought to bear on Estonia and the Baltic states by Moscow extremists would cost them dearer than the expected profit from it. I hope you noticed that I was speaking of extremists rather than the government of the Russian Federation. I am positive that the difficult talks with President Boris Yeltsin on 26 July have created a new situation which leads to two conclusions. We were able to agree on three fundamental issues and to formulate two of them in legal documents and sign them on the same day, followed by the third a few days later. Unlike Germany, where the 31st of August is regarded as the end of the post-World-War-II period, the Republic of Estonia treats the 31st of August as the end of World War II itself on the territory under the jurisdiction of Estonia. This is a turning point for the improvement of our relations with the Russian Federation, and we have to make the most to expand and deepen this historic opportunity. Naturally these three agreements are just the first among many to follow. In other words, a number of problems, including the diametrically opposing interpretation by Estonia and Russia of the Tartu Peace Treaty signed between Estonia and Russia in 1920 as a document authenticating the sovereignty of the Republic of Estonia, have not yet been properly settled in conformity with international law. Ignoring this imposes a role on both the Russian Federation and the Republic of Estonia which is against the national interests of either. According to a statement by the Russian Federation Ministry of Foreign Affairs of July 4, that internationally valid treaty is not in force for Russia. The argument offered has been borrowed from the arsenal of the Cold War, maintaining that the Republic of Estonia, occupied by the Soviet Union, had joined the Union voluntarily. The inference - being of an extremely dubious value for the Russian Federation - would be that the secret annex to the Hitler-Stalin Pact, on whose strength Estonia and her Baltic sisters were militarily occupied by the Red Army, continues to be selectively in force. I mean selectively in the sense that with regard to Poland as a great power the secret annex is no longer in force, whereas with regard to Estonia and the small Baltic states it still is. Such interpretation is unconstructive and harmful for Russia herself in the first place, since it undermines the credibility of the Russian Federation in the eyes of the international community. I am convinced that both Estonia and Russia have common interests for settling this problem at the negotiating table in a way consistent with the practices of the international community. We are conscious and grateful that Germany and other western countries have never recognized the Baltic states as part of the Soviet Union: that they have

emphasized the legal continuity of our states. At the same time we perceive that after the withdrawal of the armed forces of the Russian Federation from the Baltic states the previous non-recognition policy of the western states is losing its topicality and may create a perilous illusion as if the the Baltic issue were settled and erased from the agenda. That would unwillingly become an encouragement of Russian extremists, which would be equally unwanted and dangerous for President Yeltsin, the Republic of Estonia, for the stability of the Baltic region and Western Europe, including the Federal Republic of Germany, of course. In my vision we have here a fertile field for international cooperation to find a correct legal solution, for it is in the common interest of us all. Thus we have reached a historical turning point in the Estonian-Russian relations, having obtained a bilateral opportunity and responsibility to respect each other's sovereignty and national security interests, to abandon rhetorical confrontation, to show mutual respect of international norms and practices, without giving either party any special rights in national security or in the field of human rights for the mere reason that one party is a very big nation and the other a very small one. The democratic world is not a department store where states are evaluated according to their weight.


Discern complications to get rid of them

The above objectives must be attained without even unwittingly provoking Russia. Russia has slowly begun to put up with the independence of Estonia and the other Baltic states as an inevitability; the same can hardly be said about Russia's attitude towards some of the CIS member states. As a recent example, I can tell you about Russia's desire to control the export of oil from the states of the Caucasus and Central Asia. Moreover, Russia has not forgotten the icebreaker role of Estonia and the other Baltic states in the disintegration of the Soviet Union. The Baltic states generated ideas. The Baltic states decomposed the rotten system of totalitarianism much like fungi do in a decaying biosphere. The extremist circles in Russia still regard the Baltic states as a threat. This is where the roots lie of the verbose anti-Estonian "cold war" in the sphere of human rights, of economic discrimination, of a customs war. This, however, is a double-edged sword. Here is a classical example: Moscow set world prices on energy to Estonia, without doing so to Latvia and Lithuania. The result is that today Estonia is independent of Russian energy whereas Latvia and Lithuania are dependent on it and are being manipulated by it. A forced shoch therapy during the frosty winter of 1990/1991 served as an ideal introduction to the subsequent programmed shock therapy, which has taken Estonia to the first place among Central European states for some of her economic-political indicators.

As far as investments and re-investments are concerned, Estonia holds by far the leading place among the Visegrad and the Baltic states. The political

inference is that the further integration of Estonia into Europe must be simultaneous with the other Baltic and Visegrad states. Zones of varied security will lead to zones of insecurity. But security is indivisible and will not endure stronger and weaker links. Estonia has arrived at the conclusion that the guarantee of our security is the reliability of our economy. This prescribes our nearest task: we have to be equally needed to both the West and the East. By the West we mean the European Union, which will soon embrace the Nordic states, countries that are our partners of great cultural, economic, historical and emotional closeness. By the East we mean the Russian Federation, first of all Greater StPetersburg with its seven million inhabitants and its heartland, but also Ukraine and Kazakhstan. The latter, having an area as large as Western Europe, outstandingly rich in mineral resources, will soon open her embassy in Tallinn; it is one of the five Kaspian Ring states. Along the Volga waterway and through Estonian ports she wants to reach the world ocean and world trade. A Kazakhstan bordering on China has discovered that she needs Estonia.

What is Estonia's reliability based on?

Fifty years of occupation behind the iron curtain has had two contrasting effects on Estonia, a negative and a positive one.
First, we still are a European state, but with a number of qualities of the third world. The primary among them is the necessity to decolonize Estonia. This secures us supporters among the third world countries.

Second, we still possess an enormous capital of idealism. A shock therapy presupposes temporary self-sacrifice in the name of a clear goal. Estonia's goal is early integration into the EU, WEU and NATO. To this end it has taken the parliament a remarkably short period of time to create a legislative basis underlying our financial policy and economic reform.

The cornerstones of the financial policy are, first, a balanced budget, and second, the principle that the amount of money emitted must not exceed the amount of the hard currency cover for it. The strict independence of the central Estonian bank is guaranteed by law.

Earlier on I mentioned decolonization. Let me illustrate it by a few simple numbers. In the years of occupation 97% of Estonian external trade was connected to the former Soviet Union. By last year we managed to orientate towards the West and reduce our dependence on the eastern market; at the moment Estonia is less dependent on the eastern market than Finland was in the early 1980s.

At the same time I want to underscore that turning our back on the eastern market is by no means an aim in itself for Estonia. On the contrary, the aim is

the substitution of normal trade relations for colonial dependence. Our primary aim is to move on from the normalization of relations towards balanced partnership relations. We are interested in an MFN agreement with Russia, and we cannot allow the current practice of Russia using tariffs as a means of foreign- policy pressure. We are prepared to promote intensively transit trade with Russia through Estonian ports, provided that it is balanced with trade relations towards the West. One such possibility is a North-South gas pipeline from Norway, through Finland, the Gulf of Finland, the Baltic states and Poland down to the newly-formed German states - and an East-West gas pipeline which would provide an outlet for Russian energy export through Estonian ports. Trade built on balance is one of the foundations of security. Estonia is sincerely interested that economic reform in Russia should indeed become irreversible, so we could view Russia as a stable trade partner who would not change her tariffs once every week.

Estonia can appreciate and acknowledge the efforts of the leadership of the Russian Federation to cope with those grievous economic, ideological, political, military cataclysms. According to the opinion of a Russian economist, Russia has reached a stability which he called stability at the bottom of a ravine. However, it seems that Russia should be congratulated on the arresting of inflation and of the recession in production. The German and Estonian estimates coincide here, since our security interests coincide, our experiences coincide. The primary experience is the conviction that security is indivisible.


Integration and investments as guarantees of security

Estonia has so far been the only country that has switched to the free trade policy without intermediate stages. Estonia is quite ready for Europe, even today.

My question is: Is Europe ready for Estonia?

Besides political and security policy mechanisms, Estonian legislation has created favourable conditions for foreign investments:
- Estonia has established one of the simplest systems in Europe for income tax calculation;
- the income tax is low (26%);
- foreigners have a right to buy land;
- there is no repatriation tax on the imported capital;
- thanks to the balanced budget the average monthly salary of our relatively qualified labour is $140 a month.

I believe that today, three weeks since the departure of the North-Western

Command of the Russian Federation from the territory under Estonian jurisdiction, we must estimate namely that event as epoch-making. It has opened up fundamentally new opportunities and responsibilities, which have to be evaluated soberly and seized quickly. Nature abhors a vacuum, and the more so does a free trade economy. In Estonia you will find a European way of thinking complete with a competent knowledge of Russia's problems, which at present is perhaps the most valuable capital. The European Union and, unfortunately, the Federal Republic of Germany in that number, has failed to appreciate it to an extent similar to the EFTA states or even some more distant and more exotic countries, including Japan. It is inherent in the human being to cling to yesterday's experience. Fortunately, the antipode of the human being is humankind, which has, ages before Norbert Wiener, discovered a simple truth: the prerequisite of self-preservation is constant change.

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