Historical background:
The oil products pipeline from the Russian refinery center of Samara on the Volga River has been closed since October 1992. The pipeline was closed by Russia when Latvia claimed ownership after its independence from the Soviet Union.

In April 1994 Russia reported that it is resuming to pump oil products to the Latvian port of Ventspils after a deal on joint ownership of a disputed pipeline. Latvia and Russia had agreed to set up a joint venture to run the Latvian section of the pipeline, with Latvia holding a 66 percent share and Moscow 34 percent. However, a dispute took its course once again, when Russian government, with the approval of the Russian President Boris Yeltsin, decided to cut oil exports through the port of Ventspils. This decision was made in order to pressure the Latvian government to modify its citizenship law to include the Russian minority as full members of the Latvian society.

Russian minority in Latvia:
Ethnic Latvians make up a little over half of the population of 2.5 million people while ethnic Russians account for about 34%. Latvian was made the official language over Russian in 1988. Since the break-up of the Soviet Union in 1991, Russia has increasingly accused Latvia of discriminating against some 700,000 of its ethnic-Russian residents, most of whom moved there after Stalin's forcible annexation of the republic in 1940. Around 550,000 bearers of old Soviet passports in Latvia will be left stateless when their documents expire in October 1998. Latvia defends the strict conditions, including knowledge of the Latvian language for those wishing to obtain citizenship, as part of a naturalization process.

However new tension arose in March 1998 when Russia accused Latvian police of brutality against elderly and predominantly ethnic-Russian residents of Riga, who were protesting against increases in utility rates. Russia was infuriated: Vladimir Lukin, chairman of the foreign affairs committee of the lower house of the Russian parliament and former ambassador to Washington, called Latvian cabinet "a gang of cretins."

In April 1998 a bomb detonated near the Russian embassy, resulted in damage but no casualties. The Russian foreign ministry connected the "disgraceful" attack with the current "anti-Russian hysteria" in Latvia. Therefore, citing pan-European criticism of Latvia's anti-Russian policies and the rise of right-wing nationalism in Latvia, Russia has threatened sanctions. Riga has claimed that sanctions are unjustifiable. "If Russia cuts the transit of goods, it will be harmful to its own economy as well as ours," Latvian Foreign Minister Valdis Birkavs said in a statement on April 8, 1998. Ernest Yurkans, deputy of the Latvian parliament told NTV that Russians in Latvia would be the first to suffer from sanctions.

Latvian President Gunter Ulmanis has tried to stem the international criticism which has come from Russia and lately, western Europe. Italian Foreign Minister Lamberto Dini stated that the recent events had distanced Latvia from EU membership. Baltic neighbor Estonia has been given clearance to apply for membership; Latvia must wait. The Council of Europe, and the Organization for Security and Cooperation in Europe (OSCE), have also warned Riga that a number of provisions contained in a new language bill, designed to prohibit the use of Russian in the workplace, violate international human rights conventions guaranteeing free speech. Under this pressure, some changes to the draft have been presented.

Economic consequences:
According to the Russian Prime Minister Sergei Kiriyenko the Russian government has prepared a number of measures from President Yeltsin for introducing economic sanctions against Latvia. Certain limitations on purchases of goods will be imposed, he said. "The Latvian economy is rather closely linked with provision of services to Russian enterprises, including transit services," Kiriyenko said. "There are quite a few means of economic leverage," he said. "It would be better if Russia did not have to take such measures, but if the attitude towards Russians in [Latvia] remains as it is, we will do it," he said.

The oil products pipeline, part of the former Soviet unified system, can handle about 400,000 tones a month, mostly diesel fuel. The Ventspils Nafta oil terminal has been relying on rail supplies of up to 500,000 tones a month since its closure. Ventspils handles 11 to 12 percent of Russian oil exports, which last year ran 127 million tons, or 40 billion gallons. Under the diversification measures, Russia shipped 610,000 fewer tons, or 192,150,000 gallons, from April to June, 1998 compared with the first three months of the year.

Russian oil exports will be reduced by 61,000 barrels a day. "This was a unanimous decision by both state officials and oil businessmen aimed at stabilizing the world oil market," Boris Nemtsov, first deputy prime minister in the Russian caretaker government, told journalists after a conference with oil company managers. "Russia, the world's third largest oil producer and exporter, must not stay out of" the reduction of oil exports by other countries, he said. The export of petroleum products will be cut by 4,900 tones a day, Nemtsov said. A special government commission is drafting contingency proposals on steps to counter emergency situations on the world oil market, he said. These steps will not be taken unless there is no other choice, because they would be very painful for the Russian budget, Nemtsov said.

Recent developments in Latvia's citizenship law:
The decree on the "Restoration of Latvian Citizenry and Basic Principles of Naturalization," adopted in October 1991, has been fundamental in the creation of the newly independent state and its history. According to this decree, all immigration in the Soviet period is considered illegal. People who settled in Latvia after 1940 and their descendants are defined as "illegal immigrants" representing an occupation power. Hence, the principle of exclusion and inclusion is based on "blood". Citizenship is gained if one can prove a consanguineous relation to persons of the first Latvian republic.

This situation leaves a group of 700,000 stateless persons out of a total population of 2.56 million (Vebers 1994). The vast majority of non-citizens are ethnic Russians or Russian- speaking Slavs. Being a non-citizen entails not only a total lack of polilitical rights; social and economical rights are also affected; "over 60 laws, decrees and other normative acts have been imposed upon non-citizens resulting in an array of restrictions of the social, economic, property and employment rights" (Tsilevich 1995). As a result of these restrictions, the Russians have been transformed from an ethnic minority into a socially disadvantaged group. Russian government is demanding that the Latvia's citizenship law be changed in order to grant Russian minority equal rights.

September 11, 1997. According to the letter from Mr. Valdis Birkavs, Latvian Minister for Foreign Affairs to H.E. Mr. Max van der Stoel, OSCE High Commissioner on National Minorities the developments in the field of human rights in Latvia have been slowly taking place. The Saeima (Parliament) adopted the Law on Refugees and Asylum Seekers on 19 June 1997. On the same day, the Law on the Ratification of the 1951 UN Convention on the Status of Refugees was adopted. On 4 June 1997 the Saeima adopted the law on the ratification of the European Convention on Human Rights and its Additional Protocols 1, 2, 4, 7 and 11. Latvia has accepted the Convention's control mechanism, i.e. the right to individual complaint and the compulsory jurisdiction of the European Court of Human Rights.

Many obtacles of Russian minority to become Latvian citizens were based on a very high naturalization fee and the difficult naturalization tests. On 22 July 1997 the Cabinet of Ministers accepted conceptually the proposal that the naturalization fee be reduced as follows: 1) the naturalization fee shall be 15 Lats for high school students and university students from indigent families; 2) the naturalization fee shall be abolished for orphans and children whose parents' rights have been taken away; 3) the Head of the Naturalization Board shall have the right to exempt from the naturalization fee persons who are recognised as indigent. Such a reduction should eliminate or at least diminish significantly applicants' problems with covering the naturalization fee.

The existing history test (naturalization exam) has been designed in accordance with the Law on Citizenship which prescribes that an applicant has to know the history of Latvia. Therefore, the essential issues of the history of Latvia have been included in the test. It should also be stressed that all questions that are included in the test are covered by a book by J.Taurçns, "The Main Questions of the History of Latvia and the Constitutional Principles of the State". The history part of the exams has been simplified - the number of required correct answers has been reduced significantly. Initially, the applicants had to prepare 300 possible questions, which were unknown beforehand; now there are only 150 questions which have been published. The number of required correct answers has been reduced from 12 out to 18 to 11 out of 18. The Latvian language test has been redesigned so that it is less connected with remembering large portions of text. These tests have been designed in collaboration with experts from the Council of Europe.

June 4, 1998. After voting against considering amendments to the citizenship law as an urgent measure , the parliament approved the draft in the second reading. Under the amendments, which comply with OSCE recommendations, children of non-citizens born in Latvia after 21 August 1991 would automatically be granted citizenship if their parents requested it. Also on 4 June, "Diena" published a letter from British Prime Minister Tony Blair urging his Latvian counterpart, Guntars Krasts, to help ensure that Latvian law and practice "fully conforms with the standards of international society."

June 22,1998. The parliament approved an amendment to the citizenship law in the third and final reading whereby citizenship will be granted to all children born to non-citizens after 21 August 1991 if their parents request it. In an emergency parliamentary session called by the opposition Democratic Party Saimnieks, lawmakers voted by 54 to 14 to adopt the amendment. The parliament also voted to abolish the so-called "naturalization windows," which placed quotas on granting citizenship, and to simplify language tests for people over 65. The OSCE had strongly recommended that the parliament adopt those changes.

August 7, 1998. Latvian Railroad Minister Vilis Kristopans told reporters that the country's GDP may decrease by 2-3 percent owing to worsening relations with Russia, ITAR-TASS reported. Kristopans said budget revenues will fall because of a decrease in transit cargo and in Latvian exports to Russia. The minister, who is planning to meet with leaders of Russian transportation departments next month, said it will be difficult to discuss anything if the amendments to the citizenship law have not gone into effect by then. A campaign is currently under way in Latvia to collect signatures in support of a referendum on the amendments.

August 27, 1998. Russian Deputy Foreign Minister Aleksandr Avdeyev, addressing a news conference following a regional foreign ministers' meeting in Vaesteraas, Sweden, said he has confidence in Latvia's commitment to changing its citizenship legislation, which left many ethnic Russians stateless after Latvia became independent in 1991. But at the same time, he said the proposed amendments contain provisions that "raise doubts about the government's sincerity." "Latvia will still have to do a lot to improve political and civil rights," he commented. Singling out the provision for automatically granting citizenship to all children born of stateless parents in Latvia since 1991, Avdeev noted that the proposed change requires that a citizen have no criminal record for five years. Since the children in question would be no more than seven years old, that provision implies the citizenship process will drag on for years, he argued.

3. Related Cases:

RUSSOIL: Khanty Mansi Oil Development
KOMI: The Russian Arctic Oil Spill
BALTIC: Baltic Sea Pollution
ESTONIA: Estonia Nuclear Waste
RUSSNUKE: Environment and Russian Nuclear Trade
AMBER: Amber Trade and the Environment in the Kaliningrad Oblast
BOLPIPE: Bolivia Gas Pipeline
BOSPORUS: Bosporus Straights and Environment
KAZAKH: Kazakhstan and Oil
TURKMEN: Turkmenistan Oil and Environment
ECUADOR: Ecuador Oil Exports

4. Draft Author:

Anna Ferus
School of International Service
American University
November 4, 1998

II. Legal Clusters

5. Discourse and Status: DISAGREE and INPROGRESS

The discourse in this case is, as of today, a disagreement between Latvia and Russia regarding the issues of the citizenship law for Russian minority in Latvia. However, because of the Russian and international pressure, the Latvian government is in progress of adjusting their citizenship law and controlling the acts of discrimination of ethnic Russians in their country.

6. Forum and Scope: LATVIA and BILATERAL

The dispute in this case is mostly bilateral - between Russia and Latvia, however a number of other countries and international organization have been pressuring both sides to take certain actions.

7. Decision Breadth: Number of Parties Affected=2 (Latvia and Russia)

8. Legal Standing: Law

As of today, there were no legal agreements signed between the parties regarding the dispute on any level.

III. Geographic Clusters

9. Geographic Locations

a. Continental Domain: Europe

b. Geographic Site: Eastern and Northern Europe

c. Geographic Impact: Latvia

10. Sub-National Factors: Russia

11. Type of Habitat: Temperate

IV. Trade Clusters

12. Type of Measure: EXBAN

Partial ban on export to Latvia occurred. Russia never called this ban sanctions.

13. Direct v. Indirect Impacts: DIRECT

The dispute has a direct impact on the economy of Latvia and partially on the economy of Russia. Latvia, however, is in a greater danger, because Russia has threatened ban the exports of not only oil, but all other commodities, on which Latvia's imports are strongly based.

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: YES (Oil)

b. Indirectly Related to Product: NO

c. Not Related to Product: NO

d. Related to Process: YES

15. Trade Product Identification: OIL

16. Economic Data:

Russia's oil exports earned the country only $ 2.9 billion in first quarter 1998, a 24.5% drop from first quarter 1997 (OGJ, June 8, 1998, P. 25). Export volumes rose 8.9% to 321 million metric tons. The price of Russian oil in the first quarter fell to $ 89.10/ton vs. $ 128.40/ton in first quarter 1997.

Russian oil exports data

	1st quarter 1998	Change from 1st quarter 1997
Profit	$2.9 bil	-24.5%
Amount	321 mil.metric tons	+8.9%
Price	$89.10/ton	-$ 39.30/ton

17. Impact of Trade Restriction: HIGH

Russia is still Latvia's largest trading partner and some 25 percent of its 1997 gross domestic product (GDP) came from the transit of Russian oil and other goods. In 1997, Russia accounted for 21 percent of the country's 971 million lats ($ 1.65 billion) of exports and 15.6 percent of the 1.58 billion lats ($ 2.7 billion) of imports. The Ministry of Economy has predicted that if Russia-bound exports are cut by half, prices in Latvia would probably rise to 40 percent.

18. Industry Sector: OILGAS

19. Exporters and Importers: RUSSIA and LATVIA

V. Environment Clusters

20. Environmental Problem Type: POLL and POLS

On August 5, 1998 a group of Latvian environmentalists staging a hunger strike outside the Lithuanian embassy to block the construction of a high-capacity oil terminal on the Lithuanian coast at Butinge. Economically and environmentally, the oil project has pitted the two ordinarily friendly Baltic states against one another. Butinges Nafta, the oil firm managing the project, plans to hook the new export-import terminal up to the Russian oil pipeline. This connection could potetentially draw transit business away from the Latvian port of Ventspils. Ventspils' ice-free port handles about 10 per cent of annual Russian oil exports, but Russia has expressed intentions to find alternate oil export points along the Baltic coast since imposing limited economic sanctions against Latvia in April of this year. But not all the cargo arrives at the Baltic Sea adding that huge volumes of chemical leakage raise the risk of fire and poison the farmland through which transports pass.

21. Name, Type, and Diversity of Species: