Latvia – the Good Guys, the Bad Guys and the Russians

I am tempted to write about Ukraine again this week. The EU reaction to the Tymoshenko verdict is a worthy story in itself; but one that will undoubtedly run and run. So I will write about Latvia, where the end-game after the September elections was always likely to be reaching a climax about now.

Three trends have dominated Latvian politics in recent years. First, the “Russian” parties have gradually expanded to maximise their electorate since the citizenship controversies of the 1990s. In 1991, 34% of the population was Russian; as of 2010 the figure was 27.6%, plus 6.1% of Belarusians and Ukrainians, though with 300,000 Russian-speakers still non-citizens. So 28.4% for the Russian Block dubbed “Harmony Centre,” first place and 31 out of 100 seats in last month’s elections was probably a peak, unless it can do a better job of crossing ethnic and linguistic boundaries in the future.

The second trend is economic boom and bust. Latvia had one of the fastest growing economies in Europe in the late 2000s, then the worst recession, with GDP falling 25% from peak to trough in 2007-09. Latvia is, however, proud of the fiscal retrenchment it undertook under the Dombrovkis government (of the New Era party, now part of “Unity”), and its economic recovery since the first quarter of 2010.

The third trend has been the rise and fall of local oligarchs as a factor in Latvian politics, who not surprisingly were strongest when the economy was booming but have come under pressure since. Of the three Baltic States, Latvia therefore has had most in common with the “political technology” culture of other post-Soviet states. The oligarchs founded or took over half a dozen parties: including the People’s Party, the “Union of Greens and Farmers” and the Latvia First party, which came first, second and fifth in the 2006 elections, and For a Good Latvia, a second attempt in 2010. The Russian parties have also used Russian political technology advisers and techniques, and Harmony Centre has been accused of Moscow links and murky finances.

Crudely, the basic political geometry in Latvia in recent years has been that the “normal” Latvian parties were forced to deal with the oligarchs because they didn’t want to enter any coalition with the Russians. But several factors have forced this to change since 2007. First was the embryonic “umbrella revolution” in November 2007, that brought down a People’s Party-led government. This was actually before recession hit Latvia hard in 2008, though the signs of economic over-heating were already apparent; but, secondly, the experience of recession and the budget cuts themselves have sharpened the anti-oligarch popular mood. A third factor was Latvia’s presidents: first Vaira Vīķe-Freiberga (1999-2007), who blunted the oligarchs’ hubristic attempts to take over the security services, then Valdis Zatlers (2007-11), who was ironically originally supported by the oligarchs, but turned against them. Calculating that he therefore wouldn’t win a second term, Zatlers called a surprise referendum in July 2011, with 94.3% of voters backing an early dissolution of parliament. At the same time he founded his eponymous “Zatlers Reform Party” (ZRP). The fourth factor was the gradual electoral attrition of the oligarchic parties, starting with the elections in 2010. This time, in 2011, only the Union of Greens and Farmers made it into parliament, with 12.2% and 13 seats.

The pre-term elections and the arrival of the ZRP therefore created a potential breakthrough. The ZRP won 20.8% and 22 seats, albeit partly at the expense of the mainstream Latvian party “Unity” on 18.8% and 20 seats, while the Latvian nationalist “National Alliance” was up on 13.9% and 14 seats. Harmony Centre’s first place won the global headlines, but the real story was that the Latvia parties could now govern on their own, with 56 seats and without the oligarchs.

But it was never going to be that simple. Zatlers’ brand-new party was full of political unknowns and fellow travellers.  He firmly ruled out any deal with the Union of Greens and Farmers, but surprised many supporters by negotiating with Harmony Centre first. The idea of a historic compromise with the Russian-speaking population may well be Latvia’s next big task, but it would probably have been better to finish off the job of squeezing out the oligarchs first.

That said, the negotiations produced the outline of a future compromise. Although Harmony Centre’s photogenic leader, the mayor of Riga Nils Ušakovs has already come close to accepting that Latvia was indeed occupied by Soviet forces in 1940, Harmony Centre came up with the intriguing formula that “there was an occupation, but there are no occupiers”, i.e. nobody among the current Russian-speaking population is to blame. Except maybe the last Communist leader of Latvia Alfrēds Rubiks, who was actually imprisoned in the early 1990s – Harmony Centre also indicated it would distance itself from the three deputies belonging to Rubriks’ Socialist Party. And finally, having run a populist left-centre election campaign, Harmony Centre accepted the need for fiscal discipline.

But the negotiations were premature. When Zatlers finally swung back to the idea of a coalition with Unity and the National Alliance, he had alienated too many in his own ranks, and failed to win the post of speaker at two attempts. Solvita Āboltiņa of Unity took the position instead. Even more seriously, six deputies dramatically quit the party, led by Klāvs Olšteins, who was allegedly demanding the ministries of Interior for himself and Transport, both of which had been centres of oligarchic corruption in the past. The suspicion had always been there that the retreating oligarchs might try and “parachute” some supporters into the ZRP – which promptly demanded that the Latvian anti-corruption bureau KNAB investigate the suspiciously lavish election spending of the six.

But Dombrovskis is still due to be Prime Minister again, with Unity looking more of a dominant force than the ZRP.  So-called “oligarchs” have entrenched themselves in most post-Soviet states, but at least Latvia is setting the barrier high and taking them on. So we are not necessarily back to square one: opportunities may have been missed, but the elections have made a difference – even if a third election ultimately proves necessary to finish the job.

Andrew Wilson is a Senior Policy Fellow with the European Council on Foreign Relations (ECFR). His latest book Belarus: The Last European Dictatorship is available on October 31, 2011.

This week in the East is a weekly commentary by Andrew Wilson for New Eastern Europe.