Cablegate: Secretary Chao's Meetings with Gol Officials

VZCZCXRO0535
PP RUEHAST
DE RUEHRA #0836/01 2861410
ZNR UUUUU ZZH
P 131410Z OCT 06
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC PRIORITY 3429
RUEHC/DEPT OF LABOR WASHDC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

UNCLAS RIGA 000836

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SENSITIVE
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E.O. 12958: N/A
TAGS: PREL PGOV ELAB ECON MARR CVIS OVIP CHAO ELAINE RU
LG
SUBJECT: SECRETARY CHAO'S MEETINGS WITH GOL OFFICIALS
1. (SBU) Summary: Secretary of Labor Elaine L. Chao's visit to
Latvia provided an opportunity to discuss economic growth and job
creation, relations with Russia and the recent Latvian elections

with senior governmental officials. All interlocutors noted the
challenge for Latvia of the out migration of workers to Ireland, the
UK and Sweden, especially nurses and people in the construction
trade. All believed that Latvian-Russian relations were slowly
improving, although President Vike-Freiberga expressed great concern
over the current tensions between Russia and Georgia. The Prime
Minister and President both said the election results were a sign of
political stability in Latvia, although the President said she would
consult with party leaders the week of October 16 before deciding to
whom she would offer the opportunity to form government. Comment:
While protecting her constitutional prerogatives, we heard nothing
from the President to indicate that she would not tap PM Kalvitis to
remain in office. End summary and comment.

2. (U) Secretary of Labor Elaine L. Chao visited Latvia October 10 -
13. On October 11, she held meetings with senior GOL officials
including President Vaira Vike-Freiberga, Prime Minister Aigars
Kalvitis, and Speaker of Parliament Ingrida Udre. The Prime
Minister also hosted a lunch which included Defense Minister Atis
Slakteris, Culture Minister Helena Demakova, and Economics Minister
Aigars Stokenbergs. Latvian Ambassador to the United States Maris
Riekstins joined all meetings. Ambassador Bailey, DOL Associate
Deputy Secretary Laura Genero and DOL A/S for Public Affairs Randy
Clerihue joined for all meetings. Pol./econ officers served as
notetakers. IN all of her meetings, the Secretary reflected on the
large amount of positive change in Latvia since her visit in 1992 to
sign the Peace Corps country agreement.

Speaker of Parliament Ingrida Udre
-------------------------------------------

3. (U) Secretary Chao's meeting with Speaker Udre and other guests
from the Saiema (parliament) included discussion of job creation and
social policy; and Latvian-Russian relations. Chairperson of the
Parliamentary Committee for Social and Employment Affairs Yevgenia
Stalidzane mentioned that there were a number of social problems in
Latvia resulting from the transition from socialism to capitalism,
such as the difficult economic situation faced by pensioners and the
disabled, as well as the lack of quality care in the health care
system. Speaker Udre explained that pensioners are unhappy because
reforms have introduced a uniform pension amount, irrespective of
the number of years a worker has worked. However, pensions are
raised on a regular basis, indexed according to the rate of
inflation.

4. (U) Secretary Chao asked about Latvia's labor market, and how it
was dealing with outflow of workers to other EU countries. Speaker
Udre mentioned that most Latvian worker emigrants have gone to
Ireland, the UK and Sweden. They are not only working in
low-skilled jobs; some have found work in highly skilled fields as
well. Udre said the best solution to labor emigration was to raise
wages and salaries in Latvia, reduce personal income tax rates, and
in general, adopt policies that will increase the standard of
living. She was confident that most Latvians will return to Latvia
if these conditions are met. Unemployment remains a problem in
Latvia, with much higher rates outside of Riga. The main problem is
lack of training and education. People do not have the skills
necessary for obtaining employment in a rapidly changing economy.
Government employment policy should focus on providing youth and
other persons with practical job skills. EU funds will greatly
assist Latvia in meeting these goals. Speaker Udre also mentioned a
new government policy, "People in the Center of Life," which will
focus on building a knowledge-based economy and society.

5. (U) Commenting on Latvian-Russian relations, Udre said that they
are becoming more constructive and pragmatic. Russia is potentially
a huge market for Latvian goods and services. But it is also
apparent that Russia still seeks to maintain control over the former
Soviet Republics, and that it has never fully accepted the fact of
the Baltic States' independence. Nevertheless, Speaker Udre felt
that Latvia is a natural partner for Russia, due to a common history
and Latvian's knowledge of the Russian language. She hoped that the
border treaty could be concluded once the new Latvian government has
been confirmed by a parliamentary vote-of-confidence.

Prime Minister Aigars Kalvitis
-------------------------------------

6. (U) The Secretary stressed President Bush's respect for Latvia
and its people, and our country's gratitude for Latvia's support in
the war on terror. The President looks forward to expressing his
personal thanks when he visits in November for the NATO summit. The
PM expressed appreciation for the recent allocation of additional
FMF funds for Latvia and for US assistance with the Riga Freeport.
He underscored the importance of the bilateral relationship, noting
that the economics minister had recently had a very successful visit
to the US. On military deployments, he reported that the parliament
had recently extended the mandate for Latvian troops in ISAF in
Afghanistan for one year and he said he expected no problems with
the December vote to extend the mandate for Latvian troops in Iraq.
The Latvian people, he explained, understand the need for collective
security. Latvia's hosting of the NATO summit will put in on the
world stage for a few days, he added.

7. (U) PM Kalvitis turned to the issue of visas, saying that getting
into the visa waiver program (VWP) was "key" for Latvia and that he
hoped they could ender the program in "the next couple of years,"
adding that this was important for the people of Latvia. The
Secretary, noting that the U.S. is a nation of immigrants, stressed

SIPDIS
President Bush's interest to address the situation through use of
the roadmap. Acknowledging the Latvian's patience on this issue,
stressed the Embassy's active engagement with the roadmap process.
The PM underscored that Latvians are not looking to immigrate --
they are needed here -- but said that they do like to travel and the
US is a preferred destination.

8. (U) The PM noted that Latvia wants to share its success in making
political and economic reforms with countries like Moldova, Georgia
and Ukraine. Latvia feels a responsibility and hopes to work
closely with both the EU and the US in these areas. The secretary
asked about the state of Latvian-Russian relations and the PM
reported that he was focused on building constructive relations to
overcome a "difficult history" and noted the two agreements on
economic and political cooperation to be signed October 13 in Moscow
as a sign that Latvia was ready to "move forward" on the bilateral
relationship. Noting difficulties in Georgia, Moldova, and Ukraine
with Russia, Kalvitis said he believed Moscow understood that the
Baltic states were out of its control or influence. Internally in
Russia, the PM thought that Putin has "forced control" on the
country but wondered whether it could last past his term in office.
The Russian economy is not competitive in a global market, the
government pays little or no attention to infrastructure and social
issues and many of the best and brightest are leaving.

9. (U) Returning to the issue of the Riga freeport, the Secretary
urged the PM to implement the recommendation in the USG assessment
of the port. The PM expressed his appreciation to the US for the
report and TDA grant for technical assistance and said the port was
one of the issues on which there was "some work left to do" after
elections. He stressed his belief that the port needed to be
developed in a way that transparently contributes to economic
development in Latvia.

Lunch w/PM and Ministers
---------------------------------

10. (SBU) Over lunch, the Secretary, PM and other ministers talked
about the recent elections. Secretary Chao noted that Latvia's
elections were a model for other emerging democracies. All of the
Latvian officials were members of the People's Party, which won the
largest number of seats in the new parliament. The PM explained
that because of Latvia's strict campaign spending limits for
parties, a number of "NGO's" had sprung up to advocate for parties.
He fully acknowledged that People's Party had benefited from such
organizations, but stressed that these were not direct campaign ads
and fully legal under Latvia's campaign finance laws. Kalvitis said
that the new parliament should reconsider the campaign financing
laws to eliminate spending caps but instead focus on trabsparency in
contributions. Secretary Chao noted that these are many of the same
issues the US faces in addressing campaign financing.

11. (SBU) Asked about the campaign, PM said it was amore muted
campaign, due in large part to the spending restrictions. Econ
ministers Stokenbergs noted that although People's Party only has
about 5000 members, they received over 177000 votes, the most by any
one party. The ministers all attributed the party's success to
being seen as a party that governs fairly and delivers results. MOD
Slakteris, who is also chairman of the party, said their leaders are
viewed as being smart and having vision for the country. The PM
stressed that the party had not lost touch with the people, saying,
"People know I can meet at NATO or deal with Putin, but I can also
still milk a cow -- they know we are regular people."

12. (U) Asked about the change to an all volunteer military force,
Slakteris said it was an important break from the conscription of
Soviet times and that they were doing well in recruiting people for
the military. He said service in missions like Afghanistan and Iraq
was sought out by the troops because there is a perception in the
military that those who have not gone are "not real soldiers." At
the same time, he acknowledged the difficult situation on the ground
in Iraq, but said he liked the new defense minister. Slaketris did
not think that the Iraq deployment had been an issue in the
elections.

President Vike-Freiberga
------------------------------
13. (U) The Secretary congratulated the President on her strong
showing in the race for UN Secretary General, especially given that
some of the candidates had been in the race for nearly two years.
It helped put Latvia on the map and highlighted the very positive
story Latvia has to tell the world. The President said she was
proud of what she had achieved, especially given that Russia and
China were so committed to the idea of it being "Asia's turn." She
added that a longer, more intensive campaign would have required her
to shirk some of her presidential duties, which she was unwilling to
do.

14. (SBU) The President, while carefully guarding her role in
choosing the next Prime Minister, was upbeat about the elections ni
that they showed political stability in Latvia. She drew a contrast
to difficulties in Poland and the Czech Republic, and wide swings in
government policy following elections in Slovakia and Sweden. The
president said she would begin consultation with the parties the
week of October 16 before offering someone the opportunity to form
government, but she said, "there is likely to be real continuity."

15. (SBU) Turning to foreign policy, the President reported that
there had been a meeting of the Latvian national security council
earlier in the day and that she was satisfied that Latvia was ready
for the security challenges of hosting the NATO summit. She
expressed great concern about recent Russian actions toward Georgia,
saying she hoped the EU would issue a strong statement at the
October 16 - 17 GAERC on the issue. While noting that the Georgians
probably went too far with the arrests of the Russian officers, the
Russians had completely overreacted and she hoped the EU statement
would reflect that. She called the registration of Georgian
students in Russian schools "pure racism" and drew a direct parallel
between deportations of Georgians to Soviet deportations of Latvians
to the Gulag.

16. (U) On social and economic issues, the President expressed great
concern for people who "unfairly pay the cost of our transition",
mainly artists and scientists who were well treated in Soviet days
but haven't done as well in a market economy. She expressed a hope
that the government would raise the pension rates for these people
and other retirees. The President also spoke about efforts to build
on the 2004 Riga Women's Business Leaders' summit by noting that an
informal mentoring network has developed among women business
leaders in Latvia. The President also noted the challenges of
retraining older members of the work force to be competitive in the
modern economy. Her husband, who joined for dinner, explained his
involvement with a group that provides eight hours of basic computer
and internet training for free, noting that the oldest graduate was
91. The Secretary applauded all these initiatives.

17. (U) The Secretary's party cleared this cable.

Bailey

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