Department of Political Studies - University of Catania
Jean Monnet Chair of Comparative European Politics

University of Reading (UK)

 September 1997 - JMWP 11.97

Abstract - The disintegration of the Soviet Union and the end of the Cold War generated a multilateral order in which new actors are looking for their reintegration in the new international system. In this context, the situation of the Baltic states (i.e. Estonia, Latvia and Lithuania) is rather peculiar when looking at geography and history. Geographically closed to the Nordic democracies and historically linked to Germany, the young republics have been attempting to reinsert themselves internationally by revitalising these connections. In order to achieve this goal, the Balts were likely to go through two possible avenues (i.e. the creation of a Nordic-Baltic regional organisation and the Baltic integration in the European Union - EU). In this paper, the choice of the latter will be explained by two main arguments: the recent integration of Finland and Sweden in the EU as well as the attraction for the stable institutionalisation of the EU integration as an historical factor.

The collapse of Communism created in Eastern Europe a chaotic situation in political, economic as well as in security terms. This chaos was the result of the move from a bipolar to an unstable multilateral international system in which the Eastern European domestic tensions threat to spill over into the Former Soviet Union (FSU) as well as into the West (Rivikin: 1992). The difficulty of managing this multilateral international system is mainly linked to the demilitarisation issue when considering the dangers for world security coming from the appropriation of the Soviet military apparatus from the new Republics. Indeed, the disintegration of the former Red Army generated at least four new nuclear powers (e.g. Ukraine, Belarus, Kazakhistan and Russia - the latter accepted at international level as the successor of the USSR).

The reactions of the international actors more involved in the current Eastern European situation have been different. On one side, dangerous effervescences and the opening up of new markets have been the major motivations of the Western (i.e. of the European Union) attitude towards the Eastern European transition. Indeed, the close geographical location to the region was crucial in boosting the EU to conclude several trade and economic co-operation agreements as well as to launch several technical assistance programmes. On the other side, the Nordic countries reacted to the end of the Cold war era trying "to limit the impact of the change" (Waever; 1992, 77). Their main fear has been embodied by the feeling of becoming peripheral in an international system always more and more organised in regional blocs.

Within Eastern Europe, the situation of the Baltic states (i.e. Estonia, Latvia and Lithuania) is quite peculiar in terms of geography and history. Geographically, the Baltics are near to the Northern democracies, whilst, historically, Germany continues to play a decisive role, after the falling of the wall and its reunification. Indeed, on one hand, the Baltic states have developed regional co-operation links with the Norden democracies, which are attempting to institutionalise them by setting up a liberalised trade area around the Baltic Sea. On the other hand, the three Baltic currencies are pledged to the German mark and the German government has been one of the most active supporters of the EU integration of Estonia Latvia, and Lithuania. Moreover, if the rapid and peaceful recovering from the economic and political transition generated the Western European interest, the EU intervention in the East stimulated the three republics to apply for the EU membership.

In this context, the three Balts elaborated their own regional project, in a first instance, to face the Russian threat to their independence and then in the attempt to re-insert themselves in the international system and in the Western European political, economic and security system, in particular. Accordingly, if, in the beginning, the Baltic call for their re-integration in the Western European system was dictated by the Russian military occupation, then it embodied the desire and the need to find a place in the new world order after a fifty year absence.

This paper will identify two arguments in order to explain the Baltic decision to pursuit the target of the EU membership as a highway to re-integrate themselves in international system in political, economic, and security term. In order to do so, the EU integration solution will be compared with the attempt of "re-articulating the Nordern" (Waever: 1992, 77) through the Nordic-Baltic regional integration project. It will be argued that the EU avenue has been the most likely to occur so far because of the breakdown of the Nordic front as well as the high level of institutionalisation of the Union, compared with the just born Nordic-Baltic project. The argument will be developed in three sections: The next section will look at the issues concerning the situation of the Nordic identity in the post-Cold War era as well as the perspective of a Nordic Baltic unification based upon the Baltic regional integration project. The second section will focus on the EU intervention in the East and on the Baltic attempt to gain full membership, by considering the delicate issues involved in it. In the fourth section, the argument explaining the decision to follow the EU rather than the Nordic solution path will be developed. In the last section, some conclusions will be drawn.

It should be made clear that the concept of Nordic will be used, here, comprehensively, as suggested by Ole Waever (1992). According to this author, "the term Norden is preferred because Scandinavia tend to exclude Finland and Denmark, while Northern Europe tends to include parts of Germany, the Soviet Union, Poland, Scotland, and other areas. Traditionally, the Nordic countries have formed a closer-knit community than this wider group. Norden is probably best defined as the members of the Nordic Council - Denmark, Finland, Iceland, Norway and Sweden - with the refinement that Iceland is forgotten every second time" (ibid., 78). Hence, even if both the terms Nordic or Northern will be used below, the reference is to the meaning specified by Waever.

The 1989 changes generated a crisis of the Nordic identity. In security terms, up to then, the Norden was characterised by a "lower military tension" (Waever: 1992, 77) compared to Central Europe. In economic terms, the Nordic model proposed a "third way" which, different from the European Welfare state and the Soviet collectivisation, seemed to be the real winner in the competition between communism and capitalism. Most of the economic and social scientists looked at this third way as the right equilibrium in terms of security, economic and social order, which the two blocs did not achieve. By marking the disintegration of the Soviet model, the end of the bipolar confrontation broke this equilibrium. Thus, the "less-European identity" (ibid.) of the Nordic area was felt to lead these countries to a peripheral role in the new international system. Moreover, in 1991, the Nordic community suffered from the Sweden and Finland decision to join the EU since this resolution generated a split within the Nordic region, divided between EU members (Denmark, and now Sweden and Finland) and Atlantic non-members (Iceland and Norway). Following Waever (1992) in the identification of three possible scenarios (i.e. integration, fragmentation and a Cold War II), in the current integration scenario, the Nordic countries are paying the price of participating in the EU system. As illustrated by the Danish experience of the EU membership, this price is due to the fact that this small size member state finds itself involved in issues which it would prefer not to deal with.

In the attempt to avoid the peripherisation, the Norden states tried to limit the impact of the 1989 events by strengthening the concept of Nordic identity. The Nordic reaction to the uncertain future was embodied by the project of a regional union, based upon the memory of the Hanseatic League, which, from the thirteenth until the fifteenth century, associated merchants and cities of North Germany and the Baltic coast trading around the Baltic Sea. However, this project was not successful in creating an alternative to the European Union even if it has provided the Nordic EU members with subgroup feelings within the Union. Accordingly, as it will be better argued below, the Baltic regional project failed in "re-articulating the Norden " (Waever: 1992, 96).

In the three Baltics, regional co-operation developed once the independence was achieved. Rather than a solution imposed by external events, in order to resolve the transition problems, the regional co-operation seemed to be a natural step in the policy of the three independent republics, sharing a common historical background. Indeed, this path was chosen in 1989, when an agreement on economic co-operation set up a Baltic Co-ordination Council in the capital of Latvia (i.e. Riga).

Under the pressure of the economic priorities, the Balts moved towards the establishment of a Baltic common market, which would have been accomplished ideally in two stages: during the first (1990-1991), a legislative base would have been elaborated and adopted; during the second, a market mechanism would have been identified and reviewed on yearly basis. This implied also the commitment to issue a Baltic national currencies, to introduce common customs regulations as well as to co-ordinate trade policies. The decision-making power was given to a Baltic Co-operation Council, within which each country is represented by a member appointed by its government in the areas of economics, finance, and material resources. At the same time, the Balts decided to create a monetary fund of the Baltic States and a Baltic investment Bank. One year later, the Baltic Financial Foundation was set up with the aim of financing Estonian, Latvian and Lithuanian joint projects. The Customs Union and the Resources Union were established in the next few months within the framework of free trade regulations, equal rights for Baltic entrepreneurs and free movement within the Baltic states.

As in the European integration history, also in the Baltic experience economic priorities led to political institutionalisation. Keeping in mind the Benelux model, the three Eastern European countries added a political framework to the economic institutions. Indeed, the next step was the creation of the Baltic Assembly (November 1991), an inter-parliamentary consultative organisation, in which each national Parliament is represented by a 15-member group. The sessions of the Baltic Assembly, like those of the Baltic Co-operation Council, are held in Riga. The institutional regional framework continued to develop in 1992, when the Baltic Council established a permanent bureau co-ordinating the exchange of legislation and a commission, formed by four representatives from each country and preparing proposals and documents to be discussed at the Council.

However, the Baltic regional integration was slowed down by the uncoordinated national monetary policies and by the domestic ethnic-political cleavages. The different times in introducing the national currencies affected the creation of the common monetary customs and the implementation of border policies. De facto, some doubts on the effective accomplishment of the Baltic unity rose among academics and businessmen such as Ulo Parnits. President of a business consulting and market research firm in Tallinn, in early 1993 Parnits affirmed that "economic co-operation between the Baltics is either totally lacking or very weak" (The Baltic Independent: 15 January 1993, 6). Indeed, even if the aim of regional integration was a formal priority in the political agenda of the three republics, the Baltic front was often broken by nationalistic feelings as shown by the independent negotiations of the Latvian government on the withdrawal of Russian troops.

Even considering the major limitations of the Baltic regional project, the Nordic interest in it was mainly due to the fact that this project belongs to the new Europe born after the falling of the Berlin wall, while the project for a Nordic Union was a post-Second World War idea. Indeed, the later project would have had revitalised the Nordic traditional state-to-state co-operation by adopting a decentralised regional organisation. Moreover, because of the Baltic national renaissance, feelings of common heritage of the Norden region have been revitalised. For this reason, the Baltic project was considered by the Northern neighbours as an important part of the regional co-operation scheme. As the Swedish Foreign Minister, Margeretha af Ugglas said, "for historical and geographical reasons, our immediate responsibility is the Baltic area" (Baltic Briefing: 1992a, 15). On the Baltic side, the development of the links with the Nordic democracies could give them a guaranty of stability and, at the same time, could speed up their transition process.

The economic co-operation between the Baltic states and the Northern democracies (Denmark, Finland, Iceland, Norway and Sweden) was developed around the Baltic Sea and the environmental problem. A concrete example of this co-operation is the launching of the Conference for the Nordic Environmental Finance Corporation (NEFCO). The Nordic co-operation was "a historical point of reference" (Fitzmaurice: 1992, 143) in each Nordic country. Nevertheless, it was not before 1965 that a co-ordinating umbrella body (the Union of Nordic associations) was set up, following a high pressure by the Danish government. Most of the co-operation between these two collective actors (i.e. the Nordic and the Baltic states) developed during the Baltic transition to a multi-party democracy and a market economy, heavily financially supported by the Nordic countries. Finland and Sweden, for instance, defended the cause of the Baltic independence internationally openly in contrast with the reluctance of the Nordic countries to do something during the interwar period.

This co-operation was mainly institutionally unstructured until 1990, when a join communiqué of Nordic and Baltic Council stressed "the need for close co-operation between the Council as well as between the individual states in the region" (The Estonian Independent: 23 May 1990, 3). Since then, several economic co-operation treaties have been signed between the EFTA bloc and the three Republics. In the early 1990s, free trade and trade policy co-operation agreements were concluded between Estonia and five out of the seven EFTA members (Finland, Sweden, Norway, Switzerland and Liechtenstein) (Ministry of Foreign Affairs Republic of Estonia: 1994). In the same period, Latvia signed agreements with Denmark and the Netherlands.

Yet, these formal links did not create any institutional structure because of the heterogeneity of the Nordic participation in international organisations: two of the Nordic states (Iceland and Norway) are members of the Economic Free Trade Association (EFTA); the others, Denmark, Finland and Sweden are EU members. Moreover, the historical heritage and the geographic location have plaid a major role in making each Baltic state establish preferential relations with particular Northern countries rather than with all of them as a whole. For example, Estonia has created close links with Finland since 1992, when an agreement on the mutual protection and encouragement of investments and economic co-operation was signed. Latvia, still tied to the Russian economy, has tried to establish particular links with Sweden by basing them upon energy resources trade, whist Lithuania is closer to Germany because of its historical relations with Central Europe.

Thus, in spite of the successful chances and the doubtless advantages which the Baltic regional co-operation project could have had in revitalising the Nordic region, it created, instead, a forum of aggregation for the three democracies. This showed the difficult implementation of such a regional institutionalisation in short medium-run. Accordingly, it underlined the concrete impossibility of follow the Nordic solution in order to achieve the full re-integration in the international system.

After the collapse of the Soviet Union, the West has faced an explosive situation, characterised by ethnic differences and separatist desires. The main outcomes of it have been civil wars within the new national entities and appeals for assistance addressed to the West. As highlighted above, within Eastern Europe, the Baltics have a peculiar position where looking at their geography and history. Indeed, if, on one hand, the Baltic states are close to the Northern democracies (such as Finland, Sweden, Norway and Iceland), on the other hand, the historical role of Germany weights in the region even more after the falling of the wall and the re-unification. In addition, the fast recovering of the three republics from the economic and political transition, opened up greater business possibilities to the Western European countries wishing to solve their domestic economic difficulties.

In analysing the European Union’s role in the post-Soviet period, it should be kept on mind that, unlike the short and unstructured experience of the Council for Mutual Economic Assistance (CMEA), the European Union integration process has gone through a stable institutionalisation over time. The continue reconfirmation of this process has attracted Eastern European states, wishing to get EU full membership. On the European Union side, the concern about effeverscences spillovers as well as the foreseeable profits these new markets prospect monitored the Union policy. In the beginning, the EU Eastwards policy was based upon aid programmes aiming to create "favourable conditions for the harmonious development and diversification of trade as well as for the promotion of commercial and economic co-operation on the basis of equality, non- discrimination, mutual benefit and reciprocity" (Barker: 1994, 5). In reference to "commercial co-operation" (Ibid.), the EU members committed to "accord them most-favoured-nation (MFN) treatment to promote trade" (Ibid.); instead, the "economic co-operation" (Ibid.) were connected to the promotion of joint ventures, encouraging scientific and technological progress and protecting small and medium-sized enterprises (SMEs).

However, even if the EU intervention in the East followed the collapse of the old order straightforwardly, Estonia, Latvia and Lithuania started to be involved in it only in 1992 with the Phare programme and the European Energy Chart. The main reason for the Baltic exclusion relied on the Russian pressures to consider the three countries as part of the ex-USSR. For this reason, the Moscow claims of the Baltic region boosted the three republics to look for closer links with the West in order to maintain the new achieved independence and to re-integrated themselves in the international system after a fifty year absence. Moreover, the Union involvement in the Baltic region had a crucial impact on the intra-EU relations. Indeed, France and Germany have been the most active in settling down the main guidelines of the EU Eastwards policy. Whilst the German interest was, however, dictated by a long historical tradition, the French attitude was inspired to the egocentric feeling which the French national policy is rooted on. Paris was, indeed, concerned with the German re-unification and economic expansion towards East, since the German success would have reduced the central role France has historically aimed to play in the EU integration process. Thus, the French-German competition, on one side, and the integration of Finland and Sweden, on the other, were the major contingent factors in pushing the Union to abandon its neutrality on the Baltic issue.

The EU intervention aimed mainly to develop Eastern European markets in line with the Western economic organisation and needs. In the attempt to do so, its first priority was to stabilise the Eastern European domestic economies by establishing the European Bank for Reconstruction and Development (EBRD). Institutionally and economically the Bank has been under the EU members’ control holding the major capital stock share as well as the decision-making strategic positions. Thus, in these conditions, the Eastern complains on the failure of the Bank "to meet the financing needs of the region"(Ibid.) were not a surprise.

Unlike the Baltic early exclusion from the EU intervention in Eastern Europe, the three republics were quite enthusiastic of developing foreign relations with the Western neighbours. The first agreements were seen as "the first phase in the countries’ return to Europe and [.....] in joining Poland, Hungary and Czechoslovakia, by signing accords with the Community in the medium-term" (European Report: 1992a, 1-2). The European Union’s interest for the Balts was expressed by the EU Trade Commissioner, Sir Leon Brittan, who, in opening the negotiations on the agreements with Estonia, Latvia and Lithuania, commented that "it is remarkable that in the three short years since the re-emergence of the Baltic states as independent states, they have so much progress" (The Baltic Independent: January 1995, 1). Indeed, the Balts started pushing for the full integration by calling on the European Union’s members to "consider ways and means to assure the extension of the European integration process in the interest of security and development of the whole region"(European Report: 1993b, 5). Indeed, "the Baltic region, as well as being a major commercial gateway to Russia, is a growing economic zone in its own right" (Press Release: 1994c). The Baltic Sea region is considered by the EU members as "a major market and an important centre of economic activity"(Ibid.). The development of the Via Baltica and the Helsinki-St. Petersburg corridor, for instance, has been on the base of the PHARE assistance, that remains a major instrument in this context.

However, the Baltic appeal suffered from the economically uneven situation within the region. Indeed, in 1993 the most economically advanced conditions permitted the Estonian government to remove all barriers to trade with the Community and to plan a series of steps in order to achieve full integration. If the most stable Estonian economy fed the country’s hope of a fast reintegration in the international system, at the same time it was the material base of discriminating declaration towards Latvia and Lithuania. De facto, the uneven economic situation among the Balts plaid a crucial role in the relations with the EU. Indeed, whilst the Estonian government obtained the immediate establishment of trade with reciprocal and equal commitments, Latvia and Lithuania had to go through different transition periods according to their conditions. Within the Baltic front, Estonian has been the most determined in succeed. Indeed, the Estonian government has monitored its foreign trade policy in the EU directions. The main goal of the Ministry of Foreign Affairs Republic of Estonia was openly orientated in decreasing the dependence on the East, especially in terms of energy resources; in increasing exports to the West, by integrating into global trade and by attracting foreign investment in order to modernise production and renovate infrastructures; and in diversifying the forms of foreign investment and increasing investment volume.

Unlike the uneven conditions among the three republics, the Baltic front has been compact in proceeding in the EU integration strategy. Indeed, the Commission initiative on implementation of the pre-accession strategy was approved at the summit meeting of the Council of Baltic Sea States in 1996. This highlights that, despite the uneven post-independent conditions, the Balts succeeded in acting politically close. For this purpose, the Baltic regional project has been an important instrument of regional re-construction and agglomeration as well as international re-integration. Following the 1995 Madrid European Council, the Commission recognised the Baltic region as a unitary actor by adopting a bilateral dialogue with the Council of the Baltic Sea States (CBSS). This suggests that Latvia and Lithuania manage to fill the economic gap successfully in the transition period, provided by the 1995 Free Trade Agreement. Besides the Commission, the Committee for the Regions has welcome the Baltic regional co-operation.

These manifestations from the EU institutions seem to suggest that the Union intends to go through the Eastwards enlargement without slowing down the cohesion goals established in the Maastricht treaty (February 1992). However, the current EU internal cohesion problems are again rising the question on how far this enlargement process should and can go. This is, for instance, a major issue in the European monetary and market integration.

Related to the recent integration of Finland and Sweden, the management of the economic relations between these two new EU members and the Balts is a crucial issue in the European regional background. On one hand, the new EU members do not intend to loose the economic connections with the Baltic countries, for which they are the largest trading partners. On the other hand, a fast Eastwards enlargement could damage the internal equilibrium of the Union. Both problems seem to have found a temporary solution in the 1995 Free Trade and European Agreements aiming to increase the links between the Union and the Balts and, at the dame time, it permitted the Nordic states to maintain their economic relations with the three republics.

Before these agreements, the opinion about the Scandinavian-Baltic relations was quite cautious. In 1993, during a meeting of the EC-Estonia joint commission, the chief EC negotiator for the Baltic, Daniel Guggenbuhl, said that "It was too early to make any commitment to Baltics regarding the future of the Baltic-Scandinavian free trade agreement" (The Baltic Independent: 7 May 1993, B2). Nevertheless, Estonia, Latvia and Lithuania had always believed that the Finnish and Swedish integration in the EU would have speeded up their access to the Union. For this reason "the Swedish referendum on the EU membership was welcome by the Balts as giving impetus to the integration in the EU" (ibid.). However, the uneven post-independence economic conditions within the Baltic region as well as the stronger ties between Estonia, on one side, and Finland and Sweden, on the other, rose the prospect of breaking the Baltic front by integrating this state only, excluding Latvia and Lithuania. For a while, the choice of the EU integration solution to the Baltic problem of international reintegration seemed to imply a breakdown of the regional equilibrium. Later developments, instead show the crucial role played by the Baltic region as a whole which was recognised by the Union as a unitary actor.

The regional co-operation project in the Baltic region has created a unitary Baltic group since the development of the Nordic-Baltic project. The three republics started acting as a compact front internationally in that occasion. Indeed, the Nordic-Baltic project was rooted in the Baltic unity. Even if Estonia was the most preferred of the three because of its well-developed economy and its strongly historical links with the other Nordic countries, the latter have tried to involved all three republics in their policy towards the region. However, a crucial weakness of the Nordic-Baltic project relied on the lack of institutionalisation of the Nordic identity. This led to look at the project as a long-run, but difficult avenue to go through. Indeed, in the current situation, it could not be considered a pass for the Baltic integration in the international system. Moreover, it was not able to guarantee the Baltic independence from the threats of the new nuclear powers and from eventual spillover processes generated by domestic tensions in other FSU countries. Thus, the Baltics strengthened their regional unity through the project, but, at the same time, they were aware that it was not a straightforward option for a fast international reintegration. It can be argued, instead, that the Nordic-Baltic relations were successful in generating a progressive involvement of the three republics in the EU. I believe, this can be considered the case when looking at the EU solid institutional level. Compared to the Nordic integration avenue, the EU solution path has had the advantage of prospect the participation in an already institutionalised organisation with a successful history of regional integration. Of course, it should also be evaluated the delicate period the Union is going through in order to meet the forthcoming deadlines, which are likely to stop the enlargement process for a while. However, in this respect, the three young republics are as good competitors as Poland, Hungary, Slovakia and Czech Republic in the race for the membership, even if their independence has came later.

In the post-Communism era, the Baltic independence has been threatened by what has been defined as "nuclear terrorism" (Rivikin: 1992, 152) as well as by possible spillover effects of domestic effervescences. Because of this high level of instability in the ex-Socialist bloc, since the independence declaration, the three republics were exploring all possible avenues in order to avoid a historical drawback. In this paper, two avenues were analysed: the institutionalisation of a Nordic-Baltic regional organisation based upon the revival of the "Nordic identity"; and the EU membership avenue, rooted in the Western interest in new markets and foreseeable profits as well as in the credibility of the Union integration process. In the end, the analysis led to argue that the latter option was successful for several reason. Indeed, this project was still in fieri. It was a long-term option and unlikely to be accomplished, while the EU integration goal results to be a more real solution. Indeed, in the post-Soviet Europe, the European Union is the real winner after the 1989 revolution: it is the only credible European actor in the unstable world system. Thus, even taking into account the EU monetary and economic priorities as well as the competition of the Visegrard countries (i.e. Poland, Hungary, Slovakia and the Czech Republic) aiming at the EU membership too, the Baltics have been successful in increasing their links with the EU as illustrated by later events.

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ã Copyright 1997. Jean Monnet Chair of European Comparative Politics.

Grazia D. Santangelo. Ph.D student, Department of Economic, University of Reading

G.D.Santangelo@reading.ac.uk