LATVIAN FOREIGN AND SECURITY FOREIGN LATVIAN POLICY LATVIAN FOREIGN AND SECURITY POLICY YEARBOOK 2020 YEARBOOK 2020 Latvian Institute of International Affairs (LIIA) Address: 21 Pils street, LV-1050, Riga, Republic of Latvia www.lai.lv | www.jzc.lai.lv The Latvian Foreign and Security Policy Yearbook 2020 aims to contribute to the understanding of Latvia’s foreign and security policy decisions and considerations in 2019, as well as assess the oppor- tunities and concerns that await Latvia in 2020. During the past year Latvia saw considerable impro- vements in its security situation, while simultaneously met with new international and regional chal- lenges. 2020 promises to be a similarly dynamic year full of opportunities and challenges. Latvia will have to make brave and strong choices in its foreign and security policy. Supported by: The Parliament of the Republic of Latvia and the Ministry of Foreign Affairs of the Republic of Latvia In cooperation with Friedrich-Ebert-Stiftung Editors: Andris Sprūds, Sintija Broka Authors: Māris Andžāns, Aldis Austers, Reinis Āboltiņš, Una Aleksandra Bērziņa-Čerenkova, Artūrs Bikovs, Ilvija Bruģe, Jānis Eichmanis, Vineta Kleinberga, Rihards Kols, Imants Lieģis, Gunta Pastore, Gunda Reire, Edgars Rinkēvičs, Toms Rostoks, Silvestrs Savickis, Ēriks Kristiāns Selga, Andris Sprūds, Inna Šteinbuka, Vita Anda ēT rauda, Elizabete Vizgunova, Yinglu Xu Project coordinator: Sintija Broka The opinions expressed here are those of the authors and do not necessarily reflect the positions of the Latvian Institute of International Affairs, Parliament of the Republic of Latvia, Ministry of Foreign Affairs of the Republic of Latvia or Friedrich-Ebert-Stiftung or represent the opinion of any government authority or ministry. Translation from Latvian: Līvija Anna Uskale, Santa Pelše,Skrivanek Baltic, Rihards Muciņš, Una Aleksandra Bērziņa-Čerenkova, Uldis Verners Brūns English language editor: Talis Saule Archdeacon Layout: Oskars Stalidzāns Cover design: Mārtiņš Bērziņš © Authors of the articles, 2020 This book is published in collaboration © Translation: Līvija Anna Uskale, Santa Pelše, with the Publishers “Hansa Print Riga” Skrivanek Baltic, Rihards Muciņš, Una Aleksandra Bērziņa-Čerenkova, Uldis Verners Brūns, 2020 ISBN 978-9934-567-51-3 © Layout: Oskars Stalidzāns, 2020 UDK 327(474.3)(058) © Cover design: Mārtiņš Bērziņš, 2020 La 950 © Latvian Institute of International Affairs, 2020 TABLE OF CONTENTS FOREWORD Andris Sprūds . 5 ADDRESS BY THE MINISTER OF FOREIGN AFFAIRS Edgars Rinkēvičs . 7 DEMOCRACY BETWEEN THE MILLSTONES OF HARD DIPLOMACY AND SOFT POWER Rihards Kols . 9 2019 IN EUROPE Vita Anda Tērauda ....................................................16 ALIVE AND KICKING IN 2019 Imants Lieģis . 22 GLOBAL PROCESSES AND LATVIAN FOREIGN POLICY IN 2019 Toms Rostoks ...................................................... 33 WHO WILL BE STEERING? LATVIA ON THE MEANDERING ROADS OF THE EUROPEAN UNION Vineta Kleinberga . 44 THE FUTURE OF THE EURO AREA: IT IS HIGH TIME TO BECOME REALISTIC Aldis Austers ...................................................... 60 ECONOMIC CONSEQUENCES OF RADICALIZATION AND POPULISM: FALSE PERCEPTIONS Inna Šteinbuka, Yinglu Xu . .78 ASSESSING THE LATVIAN FINANCIAL SYSTEM AS AN INTERNATIONAL FOCAL POINT A YEAR AFTER THE ABLV CRISIS Ēriks Kristiāns Selga ................................................. 96 LATVIA AND TRANSATLANTICISM Gunda Reire ...................................................... 103 LATVIAN DEFENCE: GRADUALLY ADVANCING Māris Andžāns .................................................... 118 LATVIA’S RELATIONSHIP WITH RUSSIA: NO CHANGES ON THE EASTERN FRONT? Artūrs Bikovs ..................................................... 130 CENTRAL ASIA: WHO WILL WIN THE FUTURE? Gunta Pastore ..................................................... 142 THE EASTERN PARTNERSHIP – 10 YEARS ON Ilvija Bruģe ....................................................... 154 LATVIAN-BELARUSIAN RELATIONS: CHANGES ARE INEVITABLE Elizabete Vizgunova ................................................. 163 TOWARDS MORE VISIBILITY IN EAST ASIA – LATVIA’S NEED FOR AN EXPANDED OUTLOOK Una Aleksandra Bērziņa-Čerenkova ......................................178 ARCTIC SCENARIOS: A LATVIAN PERSPECTIVE Jānis Eichmanis . 186 ENERGY: LOCAL CHALLENGES IN THE REGIONAL CONTEXT Reinis Āboltiņš .................................................... 196 PUBLIC DIPLOMACY AT A CROSSROADS OF PRIORITIES Silvestrs Savickis ...................................................207 CONTRIBUTORS .................................................. 217 FOREWORD Andris Sprūds Director of the Latvian Institute of International Affairs | Professor at Riga Stradiņš University Latvia’s foreign policy environment is and will continue to be constantly changing. Therefore, it is necessary to regularly update and evaluate Latvia’s foreign and security situation and its diplomatic capabilities. The LatvianForeign and Security Policy Yearbook is an annual publication in which the Latvian Institute of International Affairs, in cooperation with foreign policy-makers and experts, continues to analyse Latvia’s international challenges and choices, make recommendations, and inform the public. The publication appraises the events and decisions of 2019 and seeks to outline Latvia’s foreign and security policy scenarios and make recommendations for 2020. The 30th anniversary of the fall of the Berlin Wall and the Baltic Way solidarity demonstration allowed us to look back on what has been achieved and reminded us of a dynamic and changing international environment. A new European Parliament and Commission with new objectives and tasks have been elected in the European Union. Apparently, after the UK’s general elections, the country’s withdrawal from the EU may be concluded. The NATO Summit in London has re-affirmed solidarity within the alliance, while reminding of the need to continuously strengthen both the fundamental principles of the transatlantic alliance and cooperation between its member states. The rhetoric and behaviour of the administration of the US President Donald Trump have a profound impact on the international system and regional dynamics. At the same time, the US has consistently held on to its commitment to strengthen security on the alliance’s eastern flank, and it has motivated the allies to do their homework. The future course of interactions and existing conflicts in the Middle East is not easy to predict. Other major powers, particularly Russia and China, are also demonstrating their ambitions to play a greater role and their willingness to engage in regional and international processes. The year 2020, like 2019, will bring many challenges, tough decisions and opportunities. The aim of the yearbook is to appraise Latvia’s fulfilled and potential positions and policies regarding external threats, security measures, relations with 5 neighbouring countries, and the strengthening of external economic competitiveness. Despite the changing international environment, Latvia is still affected by its geographical location at the intersection of superpower interests; a challenge that Latvian foreign policy-makers have sought to address strategically and diplomatically. The challenges of foreign and domestic policy that Latvia will face in the future will require long-term strategies in all sectors of national importance as well as the creation of a stable economic, political and security environment. A resilient and cohesive society and the ability to pursue a proactive, Euro-Atlantic, effective foreign and security policy can only be fostered in such an environment. Partnership and cooperation are essential for a successful outcome. The 2020 yearbook reflects the importance of cooperation. The publication has benefited greatly from the willingness of our Latvian experts to share their opinions and recommendations. Very successful, productive, and mutually enriching cooperation has been established with the Ministry of Foreign Affairs, allowing a bridge to be formed between policy-makers and think-tanks. We are also grateful for the support of the Saeima, and especially the Foreign Affairs Committee and the European Affairs Committee, for their significant contribution and support to foreign policy research and the building of public awareness. The longstanding and generous support provided by the Friedrich Ebert Foundation has also been irreplaceable. The foundation has repeatedly demonstrated its contribution to the promotion of intellectual discussion and the exchange of views at a national and international level, which has been an invaluable input for the promotion of a stimulating and informed discussion between decision-makers, experts and Latvian society. Finally, this publication would be inconceivable without a reader that is interested in understanding the challenges and perspectives that determine Latvia’s ability to implement a successful foreign and security policy in a complex regional and international environment. 6 ADDRESS BY THE MINISTER OF FOREIGN AFFAIRS Edgars Rinkēvičs Minister of Foreign Affairs of the Republic of Latvia Dear Reader, Anniversary celebrations are one of the ways to nurture the collective memory we share and reinforce national identity. In 2018, we celebrated our centenary looking back on events which were the basis for the emergence of the Republic of Latvia as a country. In 2019, an important date was the establishment of the Foreign Service of Latvia on 29 July 1919; it is the one and only