U.S. Department of State
Background Notes: Estonia, June 1997

Released by the Bureau of European and Canadian Affairs, June
30, 1997.


Official Name: Republic of Estonia

PROFILE

Geography

Area: 45,226 sq. km. (18,086 sq. miles); about the size of New Hampshire 
and Vermont. 
Cities: Capital--Tallinn (pop. 434,763); Tartu (115,400); Narva 
(77,770); Kohtla-Jarve (71,066); Parnu (54,200); Sillamae (19,804); 
Rakvere (20,100). 
Terrain: Flat, with an average elevation of 50m. Elevation is slightly 
higher in the east and southeast. Steep limestone banks and 1,520 
islands mark the coastline.
Land use: 22% arable land, 11% meadows and pasture, 31% forest
and woodland, 21% other, 15% swamps and lakes. Coastal waters are 
largely polluted.
Climate: Temperate, with four seasons of near-equal length. January 
temperatures average -3-70C (20-270F); July, 15-180C (60-650F). Annual 
precipitation averages 61-71 cm. (28 in.).

People

Nationality: Noun and adjective--Estonian(s).
Population: 1.49 million. 
Annual growth rate--.7%. Birth Rate: 6/1,000. Death Rate: 12/1,000.
Migration Rate: 3/1,000. Density: 35/sq. km. (90.4/sq. mi.). Urban 
dwellers: 71%.
Ethnic groups: Estonians 64%, Russians 29%, Ukrainians 3%, Belarusians
2%.
Religions: Predominantly Lutheran; minorities of Russian Orthodox, 
Baptist.
Language: Estonian. Most people also speak Russian.
Education: Years compulsory--12. By 1989, 12% of the adult populace 
completed college. Attendance--214,000 students at 561 schools, plus 
24,000 university students. Literacy-- 100%.
Health: Infant mortality rate--9/1,000 births. Life expectancy--65 years 
for men, 74 for women. 
Work force (785,500 people): Agriculture--12%. Industry--32%. Housing--
5%. Health care--6%. Education, culture--12%. Trade--9%. Transport--8%. 
Construction--10%. Other--4%. Government-- 2%.

Government

Type: Parliamentary democracy.
Constitution: On June 28, 1992 Estonians ratified a constitution based 
on the 1938 model, offering legal continuity to the Republic of Estonia 
prior to Soviet occupation.
Branches: Executive--President (Chief of State), elected by Parliament 
every five years; Prime Minister (Head of Government). Legislative--
Riigikogu (Parliament -- 101 members, 4-year term). Judicial--Supreme 
Court.
Administrative regions: 15 counties and 6 independent towns.
Principal Political Parties/Coalitions: Coalition/Rural Union (PM 
Siiman/ex-Pres. Ruutel)--19/22 seats; Reform Party (ex-FM Kallas, 
Riigikogu Chair Savi)--19 seats; Center Party (ex-PM Savisaar, Rein 
Veidemann)--15 seats; Pro Patria/Nat'l. Independence (ex-PM Laar, 
Kelam)--8 seats; Moderates (ex-PM Andres Tarand, Lauristin)--6 seats; 
"Our Home is Estonia;" ("Russian"; faction, Andrejev)--6 seats; Right-
Wing (ex-Parliament Chairman Ulo Nugis)--5 seats
Suffrage: 18 years-- universal; non-citizen residents may vote in 
municipal elections.
Government budget: $790 million. 
Defense: 4% of budget.
National holidays: February 24 (Independence Day), June 23 (Victory
Day--anniversary of Battle of Vonnu in 1919).
Flag: Horizontal tricolor--blue, black and white.

Economy

GDP (1995): $5 billion 1994-96 growth rates: @ 5% annually.
Per capita income: $3,000. 
1996 inflation rate: 26%. 
Unemployment: 8%.
Natural resources: Oil shale, phosphorite, limestone, blue clay. 
Agriculture/Forestry (10% of 1995 GDP): milk and dairy products, meat, 
cereals, potatoes. Cultivable land--1.36 million hectares (60% arable, 
18% meadow, 13% pasture). Manufacturing/Mining/Energy (45% of GDP): 
electricity, oil shale, chemical products, electric motors, textiles, 
furniture, cellulose/paper
products, building materials, processed foods. Trade, Hotel/Dining: 15% 
of GDP. Construction: 8% of GDP. Public Services: 7% of GDP. 
Transport/Communication: 8% of GDP. Finance/Real
Estate: 4% of GDP. Other: 3% of GDP. 1995 Exports ($1.6 billion): 
textiles/clothes 15%, machinery/equipment 12%, food 10%, wood/wood 
products 8%, chemicals 8%. Major markets--Finland
(32%), Russia (16%), Sweden (9%), Germany (10%), USA (2%). 1995 Imports 
($2.2 billion): machinery/equipment 20%, minerals 13%, vehicles 10%, 
textiles/clothes 10%, food 8%. Partners--Finland
(21%), Russia (18%), Sweden (11%), Latvia (8%), Germany (7%), USA (2%).
Official exchange rate: 8 kroon (EEK) = 1 Deutschmark (DM). 12.5 kroon = 
@ US$1.
Foreign Capital Investment: 6,000-plus foreign enterprises with 
investment of $230 million. Finland 52% of firms with 22% of capital; 
Sweden 11% of firms with 27% of capital; Russia 13% with 12% of
capital; Germany 4% with 4% of capital; USA 4% with 7% of capital.

GEOGRAPHY

Between 57.3 and 59.5 latitude and 21.5 and 28.1 longitude, Estonia lies 
on the eastern shores of the Baltic Sea on the level northwestern part 
of the rising East European platform. Average elevation reaches only 50m 
(160 ft.). The climate resembles New England's. Shale and limestone 
deposits, along forests which cover 40% of the land, play key economic 
roles in this resource-poor country. Estonia boasts over 1,500 lakes, 
numerous bogs, and 3,794km of coastline marked by numerous bays, straits 
and inlets. Tallinn's Muuga port offers one of Europe's finest warm-
water harbor facilities.

Today, Estonia is slightly larger than Denmark, the Netherlands and 
Switzerland. Estonia's strategic location has precipitated many wars 
that were fought on its territory between two other rival powers at its 
expense. In 1944 the U.S.S.R. granted Russia the trans-Narva and Petseri 
regions on Estonia's eastern frontier, which still remain contested 
bilaterally.

PEOPLE

The name "Eesti," or Estonia, is derived from the word "Aisti," the name 
given by the ancient Germans to the peoples living northeast of the 
Vistula River. The Roman historian Tacitus in the first century A.D. was 
the first to mention the Aisti, and early Scandinavians called the land 
south of the Gulf of Finland "Eistland," and the people "aistr." 
Estonians belong to the Baltic-Finnic group of the Finno-Ugric peoples, 
as do the Finns and Hungarians. Archaeological research supports the 
existence of human activity in the region as early as 8,000 BC but by 
3,500 BC the principal ancestors of the Estonians had arrived from the 
east.

Estonians look like, and consider themselves, Nordics, evidenced through 
the strong cultural and religious influences gained over centuries 
during Germanic and Scandinavian colonization and settlement. This 
highly literate society places strong emphasis upon education, which is 
free and compulsory until age 16. The first book in Estonian was printed 
already in 1525. Most Estonians belong to the Evangelical Lutheran 
Church, but a sizable minority are Russian Orthodox.

From 1945-1989 the percentage of ethnic Estonians in Estonia dropped 
from 94% to 61%, caused primarily by the Soviet program promoting mass 
immigration of urban industrial workers from Russia, Ukraine and 
Belarus; as well as by wartime emigration and Stalin's mass deportations 
and executions. Estonia's citizenship law and constitution meet 
international and CSCE standards, guaranteeing universal human and civil 
rights.

Written with the Latin alphabet, Estonian is the language of the 
Estonian people and the official language of the country. One-third of 
the standard vocabulary is derived from adding suffixes to root words. 
The oldest known examples of written Estonian originate in thirteenth 
century chronicles. The Soviet era had imposed the official use of 
Russian, so most Estonians speak Russian as a second language while the 
resident Slavic populace speaks Russian as a first language.

HISTORY

Estonians are one of the longest settled European peoples, whose 
forebears, known as the "comb pottery" people, lived on the southeastern 
shores of the Baltic Sea over 5,000 years ago. Like other early 
agricultural societies, Estonians were organized into economically self-
sufficient, male-dominated clans with few differences in wealth or 
social power. By the early Middle Ages most Estonians were small 
landholders, with farmsteads primarily organized by village. Estonian 
government remained decentralized, with local political and 
administrative subdivisions emerging only during the first century A.D. 
By then, Estonia had a population of over 150,000 people and remained 
the last corner of medieval Europe to be Christianized.

Estonia also managed to remain nominally independent from the Vikings to 
the west and Kievan Rus to the east, subject only to occasional forced 
tribute collections.

However, the Danes conquered Toompea, the hilled fortress at what is now 
the center of Tallinn, and in 1227 the German crusading order of the 
Sword Brethren defeated the last Estonian stronghold; the people were 
Christianized, colonized and enserfed. Despite attempts to restore 
independence, Estonia was divided among three domains and small states 
were formed. Tallinn joined the Hanseatic League in 1248.

By 1236, the Sword Brethren allied with the Order of the Teutonic 
Knights and became known as the Livonian Order of the Teutonic Knights. 
Finding upkeep of the distant colony too costly, the Danes in 1346 sold 
their part of Estonia to the Livonian Order. Despite successful Russian 
raids and invasions in 1481 and 1558, the local German barons continued 
to rule Estonia and who since 1524 preserved Estonian commitment to the 
Protestant Reformation. Northern Estonia submitted to Swedish control in 
1561 during the Livonian Wars, and in 1582/3 southern Estonia (Livonia) 
became part of Poland's Duchy of Courland.

In 1625, mainland Estonia came entirely under Swedish rule, and in 1645, 
Sweden bought the island of Saaremaa from Denmark. In 1631, the Swedish 
king Gustav II Adolf granted the peasantry greater autonomy, opened the 
first known Estonian-language school in Tallinn, and in 1632, 
established a printing press and university in the city of Tartu. The 
Swedish defeat resulting in the 1721 Treaty of Nystad imposed Russian 
rule in what became modern Estonia. Nonetheless, the legal system, 
Lutheran church, local and town governments, and education remained 
mostly German until the late 19th century and partially until 1918.

By 1819, the Baltic provinces were the first in the Russian empire in 
which serfdom was abolished, spurring the peasants to own their own land 
or move to the cities. These moves created the economic foundation for 
the Estonian national cultural awakening that had lain dormant for some 
600 years of foreign rule. Estonia was caught in a current of national 
awakening that began sweeping through Europe in the mid-1800s.

A cultural movement sprang forth to adopt the use of Estonian as the 
language of instruction in schools, all-Estonian song festivals were 
held regularly after 1869, and a national literature in Estonia 
developed. Kalevipoeg, Estonia's epic national poem, was published in 
1861 in both Estonian and German.

More importantly, activists who agitated for a modern national culture 
also agitated for a modern national state.

As the 1905 Revolution swept through Estonia, the Estonians called for 
freedom of the press and assembly, for universal franchise, and for 
national autonomy. The 1905 uprisings were brutally suppressed and 
Estonian gains were minimal, but the tense stability that prevailed 
between 1905 and 1917 allowed Estonians to advance the aspiration of 
national statehood.

With the collapse of the Russian empire in World War I, Russia's 
Provisional Government granted national autonomy to Estonia. A popularly 
elected assembly (Maapaev) was formed but was quickly forced underground 
by opposing extremist political forces. The Committee of Elders of the 
underground Maapaev announced the Republic of Estonia on 24 February 
1918, one day before German troops invaded. After the withdrawal of 
German troops in November 1918, fighting broke out between Bolshevik and 
Estonian troops. On February 2, 1920 the Treaty of Tartu--the Soviet 
Union's first foreign peace treaty--was signed by the Republic of 
Estonia and Soviet Russia. The terms of the treaty stated that Soviet 
Russia renounced in perpetuity all rights to the territory of Estonia.

Independence lasted twenty-two years. Estonia underwent a number of 
economic, social, and political reforms necessary to come to terms with 
its new status as a sovereign state. Economically and socially, land 
reform in 1919 was the most important step. Large estate holdings 
belonging to the Baltic nobility were redistributed among the peasants 
and especially among volunteers in the War of Independence. Loss of 
markets in the east led to considerable hardships until Estonia 
developed an export-based economy and domestic industries. Estonia's 
principal markets became Scandinavia, Great Britain and Western Europe, 
with some exports to the United States and Soviet Union.

During its early independence Estonia operated under a liberal 
democratic constitution patterned on the Swiss model. However, with nine 
to fourteen politically divergent parties Estonia experienced twenty 
different parliamentary governments between 1919-1933. The Great 
Depression spawned the growth of powerful, far-rightist parties which 
successfully pushed popular support in 1933 for a new constitution 
granting much stronger executive powers. In a preemptive move against 
the far right, Estonia's first and also then-president, Konstantin Pats, 
dissolved parliament and governed the country by decree. By 1938 Estonia 
ratified a third, more balanced and very liberal constitution, and 
elected a new parliament the following year.

The independence period was one of great cultural advancement. Estonian 
language schools were established, and artistic life of all kinds 
flourished. One of the more notable cultural acts of the independence 
period, unique in Western Europe at the time of its passage in 1925, was 
a guarantee of cultural autonomy to minority groups comprising at least 
3,000 persons, and to Jews.

Estonia had pursued a policy of neutrality, but the signing of the 
Molotov-Ribbentrop Non-aggression Pact on August 23, 1939 signaled the 
end of independence. The agreement provided for the Soviet occupation of 
Estonia, Latvia, part of Finland and later, Lithuania, in return for 
Nazi Germany's assuming control over most of Poland. After extensive 
diplomatic intrigue, the Estonian Soviet Socialist Republic was 
proclaimed on July 21, 1940, one month after Estonia was occupied by 
Soviet troops. The ESSR was formally accepted into the Soviet Union on 
August 6.

Soviet occupation was accompanied by expropriation of property, 
Sovietization of cultural life and the installation of Stalinist 
communism in political life. Deportations also quickly followed, 
beginning on the night of June 14, 1941.

That night, more than 10,000 people, most of them women, children and 
the elderly, were taken from their homes and sent to Siberia in cattle 
cars. When Nazi Germany attacked the Soviet Union on June 22, most 
Estonians greeted the Germans with relatively open arms.

Two and a half years of Nazi occupation amply demonstrated that German 
intentions were nearly as harsh as Soviet aggression:

Estonia became a part of "Ostland," and about 5,500 Estonians died in 
concentration camps. However, few Estonians welcomed the Red Army's 
return to the frontier in January 1944. Without much support from 
retreating German troops, Estonian conscripts engaged the Soviets in a 
slow, bloody, nine-month battle. Some ten percent of the population fled 
to the West between 1940 and 1944. By late September, Soviet forces 
expelled the last German troops from Estonia, ushering in a second phase 
of Soviet rule. That year, Moscow also moved to transfer the Estonian 
Narva and Petseri border districts, which held a large percentage of 
ethnic Russians, to Russian control.

For the next decade in the countryside, an anti-Soviet guerrilla 
movement known as "the Forest Brethren" existed in the countryside. 
Composed of formerly conscripted Estonian soldiers from the German Army, 
fugitives from the Soviet military draft or security police arrest, and 
those seeking revenge for mass deportations the Forest Brethren used 
abandoned German and Soviet equipment and worked in groups or alone. In 
the hope that protracted resistance would encourage Allied intervention 
for the restoration of Estonian independence, the movement reached its 
zenith in 1946-48 with an estimated 5,000-30,000 followers and held 
effective military control in some rural areas.

After the war the Estonian Communist Party (ECP) became the pre-eminent 
organization in the republic. Most of these new members were Russified 
Estonians who had spent most of their lives in the Soviet Union. Not 
surprisingly, Estonians were reluctant to join the ECP and thus take 
part in the Sovietization of their own country. The ethnic Estonian 
share in the total ECP membership went from 90% in 1941 to 48% in 1952.

After Stalin's death, Party membership vastly expanded its social base 
to include more ethnic Estonians. By the mid-1960s, the percentage of 
ethnic Estonian membership stabilized near 50%. On the eve of 
perestroika the ECP claimed about 100,000 members; less than half were 
ethnic Estonians and comprised less than two percent of the country's 
population. Russians or Russified Estonians continued to dominate the 
party's upper echelons.

A positive aspect of the post-Stalin era in Estonia was a re-opening in 
the late 1950s of citizens' contacts with foreign countries. Ties were 
also reactivated with Finland, boosting a flourishing black market. In 
the mid-1960s, Estonians began watching Finnish television. This 
electronic "window on the West" afforded Estonians more information on 
current affairs and more access to Western culture and thought than any 
other group in the Soviet Union. This heightened media environment was 
important in preparing Estonians for their vanguard role in extending 
perestroika during the Gorbachev era.

By the 1970s, national concerns, including worries about ecological 
ruin, became the major theme of dissent in Estonia. In the late 1970s, 
Estonian society grew increasingly concerned about the threat of 
cultural Russification to the Estonian language and national identity. 
By 1981, Russian was taught in the first grade of Estonian language 
schools and was also introduced into the Estonian pre-school teaching. 
These acts prompted forty established intellectuals to write a letter to 
Moscow and the republic authorities. This "Letter of the Forty" spoke 
out against the use of force against protesters and the increasing 
threat to the Estonian language and culture. In October of 1980, the 
youth of Tallinn also demonstrated against toughened Russification 
policies, particularly in education.

By the beginning of the Gorbachev era, concern over the cultural 
survival of the Estonian people had reached a critical point. Although 
these complaints were first couched in environmental terms, they quickly 
became the grist of straightforward political national feelings. In this 
regard the two decades of independent statehood were pivotal.

The ECP remained stable in the early perestroika years and appeared 
strong at its 19th Congress in 1986. By 1988, however, the ECP's 
weakness had become clear when it was unable to assume more than a 
passive role and was relegated to a reactive position.

Praising the 1980 "Letter of the Forty" Vaino Valjas replaced Karl Vaino 
as Party Chief and thereby temporarily enhanced the ECP's reputation 
along with his own. Nevertheless, the Party continued its downward 
spiral of influence in 1989 and 1990. In November 1989, the Writers' 
Union Party Organization voted to suspend its activity and the Estonian 
Komsomol disbanded.

In February 1990, Estonia's Supreme Soviet eliminated paragraph 6 of the 
republic's constitution which had guaranteed the Party's leading role in 
society. The final blow came at the ECP's 20th Congress in March 1990 
when it voted to break with the CPSU. The Party splintered into three 
branches, then consolidated into a pro-CPSU (Moscow) and an independent 
ECP.

As the ECP waned, other political movements, groupings and parties moved 
to fill the power vacuum. The first and most important was the Estonian 
Popular Front, established in April 1988 with its own platform, 
leadership and broad constituency. The Greens and the dissident-led 
Estonian National Independence Party soon followed. By 1989, the 
political spectrum widened and new parties were formed and re-formed 
almost daily.

A number of changes in the republic's government brought about by 
political advances in the late 1980s played a major role in forming a 
legal framework for political change. This involved the republic's 
Supreme Soviet being transformed into an authentic regional law-making 
body. This relatively conservative legislature managed to pass a number 
of laws, notably a package of laws that addressed the most sensitive 
ethnic concerns. These laws included the early declaration of 
sovereignty (November 1988); a law on economic independence (May 1989) 
confirmed by the U.S.S.R. Supreme Soviet that November; a language law 
making Estonian the official language (January 1989); and local and 
republic election laws stipulating residency requirements for voting and 
candidacy (August, November 1989).

Although not all non-Estonians supported full independence, they were 
divided in their goals for the republic. In March 1990 some 18% of 
Russian speakers supported the idea of fully independent Estonia, up 
from 7% the previous autumn, and only a small group of Estonians were 
opposed to full independence in early 1990. Estonia held free elections 
for the 105-member Supreme Council on March 18, 1990. All residents of 
Estonia were eligible to participate in the elections, including the 
approximately 50,000 Soviet troops stationed there. The Popular Front 
coalition, composed of left and centrist parties and led by former 
Central Planning Committee official Edgar Savisaar, held a parliamentary 
majority.

Despite the emergence of the new lawmaking body, an alternative 
legislature developed in Estonia. In February 1990, a body known as the 
Congress of Estonia was elected in unofficial and unsanctioned 
elections. Supporters of the Congress argued that the inter-war republic 
continued to exist de jure: since Estonia was forcibly annexed by the 
U.S.S.R., only citizens of that republic and their descendants could 
decide Estonia's future.

Through a strict, nonconfrontational policy in pursuing independence, 
Estonia managed to avoid the violence which Latvia and Lithuania 
incurred in the bloody January 1991 crackdowns and in the border-customs 
post guard murders that summer. During the August coup in the U.S.S.R., 
Estonia was able to maintain constant operation and control of its 
telecommunications facilities, thereby offering the West a clear view 
into the latest coup developments and serving as a conduit for swift 
Western support and recognition of Estonia's redeclaration of 
independence on August 20. Following Europe's lead, the U.S. formally 
reestablished diplomatic relations with Estonia on September 2, and the 
USSR Supreme Soviet offered recognition on September 6.

During the subsequent cold winter which compounded Estonia's economic 
restructuring problems, Prime Minister Edgar Savisaar demanded emergency 
powers to deal with the economic and fuel crises. A consequent no-
confidence vote by the Supreme Council caused the Popular Front leader 
to resign, and a new government led by former Transportation Minister 
Tiit Vahi took office.

After more than three years of negotiations, on August 31, 1994, the 
armed forces of the Russian Federation withdrew from Estonia. Several 
hundred civilian-clad Russian military will remain at the nuclear 
submarine training reactor facility at Paldiski until September 30, 
1995, in order to remove equipment and help decommission the facility. 
Estonia also maintains that in the absence of any other agreements, 
Russia must recognize the interstate border established by the 1920 
Treaty of Tartu as the official negotiating position for any new border 
agreement.

GOVERNMENT AND POLITICAL CONDITIONS

On June 28, 1992, Estonian voters approved the constitutional assembly's 
draft constitution and implementation act, which established a 
parliamentary government with a President as chief of State and with a 
government headed by a Prime Minister.

The Riigikogu, a unicameral legislative body, is the highest organ of 
state authority. It initiates and approves legislation sponsored by the 
Prime Minister. The Prime Minister has full responsibility and control 
over his cabinet.

Free and fair parliamentary and presidential elections were held on 
September 20, 1992. Approximately 68% of the country's 637,000 
registered voters cast ballots. The leading presidential contenders, 
President Ruutel and former Foreign Minister Lennart Meri, faced a 
secret parliamentary vote to determine the winner. Ruutel's former 
association with the ruling Communist Party probably helped Meri win on 
the first ballot. Meri chose 32-year old historian and Christian 
Democratic Party founder Mart Laar as prime minister.

In February 1992, and with amendments in January 1995, the Riigikogu 
renewed Estonia's liberal 1938 citizenship law, which also provides 
equal civil protection to resident aliens. Dual citizenship is allowed 
for Estonians and their families who fled the Soviet occupation. 
Accordingly, those who were citizens in 1940 are citizens now. Those who 
arrived subsequently can become citizens one year following a four year 
residence retroactive to March 30, 1990 and demonstrate comprehension of 
Estonian. Most non-citizen ethnic Slavs (35% of the populace) became 
eligible for naturalization in March, 1993. The Government funds 
Estonian language training.

In nationwide municipal elections held on October 17, 1993, opposition 
party and ethnic Russian candidates gained a majority in most areas, 
especially in Tallinn and the Northeast. After having survived a number 
of government scandals and controversies (over his handling of an 
Israeli arms deal, bank failures, ruble sales, and alleged misconduct of 
certain ministers), Mart Laar resigned in August 1994, after losing a 
parliamentary vote of confidence. The popular, nonpartisan former 
Minister of Environment, Andres Tarand, was appointed as Laar's 
successor.

Nearly 70% of the electorate voted in parliamentary elections held March 
5, 1995. The Coalition Party (former PM Vahi) and the Rural Union (ex-
ESSR Chairman Ruutel)-"KMU"--garnered 1/3 of the vote for a plurality. 
The Reform Party (Estonian Bank Director Siim Kallas) got 16% of the 
vote, and the Centrist Party (former PM Savisaar) 14%. Pro Patria 
(former PM Laar) and the National Independence Party received 7%, the 
Moderates (acting PM Tarand) 6%, "Our Home is Estonia" (Russians) 6%, 
and the right-wingers Riigikogu chairman Nugis) 5%. The new government, 
led once again by Tiit Vahi, has continued to pursue the same style of 
economic reform and Western integration that characterized Estonia since 
1992.

With the August 1995 discovery that some Estonian politicians had been 
subjected to illegal surveillance, including wiretaps (referred to as 
Estonia's "Watergate"), the country faced its most severe political and 
constitutional test since regaining independence in 1991. After 
dismissing Interior Minister Edgar Savisaar for his implication in the 
scandal, Prime Minister Vahi submitted his cabinet's resignation. 
President Meri subsequently tapped Vahi to form a new coalition, which 
resulted in Vahi's alliance with the Reform Party. In meeting that test, 
Estonia again demonstrated that it is a normal democratic country based 
on rule of law and with a vibrant free press.

In 1996, Estonia ratified a border agreement with Latvia and completed 
work with Russia on a technical border agreement that Estonia is ready 
to sign. President Meri was re-elected in free and fair indirect 
elections in August and September. Free and fair nationwide municipal 
elections were held in October. In November, the Reform Party pulled out 
of the government when its majority partner, the Coalition Party, signed 
an agreement with the rival Center Party to cooperate in the municipal 
government councils. The Coalition Party survived the cabinet crisis as 
a minority government when the Prime Minister appointed several popular 
non-partisan candidates in ministerial posts.

Key Government Officials

President--Lennart Meri 
Prime Minister--Mart Siiman (CP) 
Foreign Affairs--Toomas Ilves (non-partisan) 
Interior vacant
Social Affairs--Tiiu Aro (CP) 
Education--Mait Klaassen (CP) 
Transport., Communications--Raivo Vare (CP) 
Economy--Jaak Leimann (non-partisan) 
Justice--Paul Varul (CP) 
Defense--Andrus Oovel (CP) 
Environment--Villu Reiljan (CP) 
Agriculture--Andres Varik (CP) 
Finance--Mart Opmann (CP) 
EU Affairs--Andra Veidemann (PP) 
Culture--Jaak Allik (CP) 
(State Chancellor)--Uno Veering (CP) 
Regional Issues--Peep Aru (CP) 
Riigikogu Chairman--Toomas Savi (RP)

Estonia maintains an embassy in the United States at 2131 Massachusetts 
Avenue, NW; Washington DC 20005 (tel: 202-588-0101). It operates a 
consulate at 630 Fifth Ave., Suite 2415, New York, NY 10020 (tel: 212-
247-7634).

ECONOMY

For centuries until 1920, Estonian agriculture consisted of native 
peasants working large feudal-type estates held by ethnic German 
landlords. In the previous decades, centralized Czarist rule had 
contributed a rather large industrial sector dominated by the world's 
largest cotton mill, a ruined post-war economy, and an inflated ruble 
currency.

By the early 1930s, Estonia entirely transformed its economy, despite 
considerable hardship, dislocation and unemployment. Compensating the 
German landowners for their holdings, the Government confiscated the 
estates and divided them into small farms which subsequently formed the 
basis of Estonian prosperity.

By 1929, a stable currency, the kroon (or crown), was established, and 
by 1939, Estonia's living standard compared well with Sweden's. Trade 
focused on the local market and the West, particularly Germany and the 
United Kingdom. Only 3% of all commerce was with the USSR.

The U.S.S.R.'s forcible annexation of Estonia in 1940 and the ensuing 
Nazi and Soviet destruction during World War II crippled the Estonian 
economy. Post-war Sovietization of life continued with the integration 
of Estonia's economy and industry into the U.S.S.R.'s centrally-planned 
structure. Over 56% of Estonian farms were collectivized in the month of 
April, 1949 alone. Moscow expanded on those Estonian industries which 
had locally available raw materials, such as oil-shale mining and 
phosphorites. As a laboratory for economic experiments, especially in 
industrial management techniques, Estonia enjoyed more success and 
greater prosperity than other regions under Soviet rule. As the author 
of the then-radical "Self-Accounting Estonia" plan in 1988, Prime 
Minister Savisaar succeeded by early 1992 in freeing most prices and 
encouraging privatization and foreign investment far earlier than other 
former Soviet-bloc countries. This experimentation with Western 
capitalism has promoted Estonia's clear advantage in reorienting to 
Western markets and business practice.

Upon re-establishing independence, Estonia has styled itself as the 
gateway between East and West and aggressively pursued economic reform 
and integration with the West. Estonia's market reforms put it among the 
economic leaders in the former COMECON area. A balanced budget, flat-
rate income tax, free trade regime, fully convertible currency, 
competitive commercial banking sector, and hospitable environment for 
foreign investment helped Estonia sign an EU Europe Agreement in June 
1995 without transition period. These policies have also helped reduce 
inflation from 90% a month in early 1992 to less than 3% a month in 1995 
and 1996.

Estonia has also made excellent progress in regard to structural 
adjustment. Since late 1995, more than 90% of small- and medium-scale 
privatization was complete, and the national privatization agency had 
privatized over 50% of large enterprises, including engineering, sea, 
air, and railway transport, healthcare, and insurance sectors. The 
privatization law provides equal opportunities for domestic and foreign 
individuals as well as corporations. The constitution requires a 
balanced budget, and Estonia's intellectual property protection laws are 
among Europe's strongest. In early 1992, both liquidity problems and 
structural weakness stemming from the communist period precipitated a 
banking crisis. As a result, effective bankruptcy legislation was 
enacted and privately owned, well-managed banks emerged as market 
leaders. Today, near-ideal conditions for the banking sector exist. 
Foreigners are not restricted from buying bank shares or acquiring 
majority holdings. Tallinn Stock Exchange opened in early 1996, and is 
fully electronic.

Trade has continued to expand since 1994; the current account deficit 
reflects continuing imports of capital goods. Estonia supplies 60% of 
its own energy converted from peat, wood, hydroelectric plants, and oil 
shale. Estonia has no domestic capacity to refine crude oil, and thus 
depends heavily on exports from Western Europe and Russia. Energetics, 
telecommunications, textiles, chemical products, banking, services, food 
and fishing, timber, shipbuilding, electronics, and transportation are 
key sectors of the economy. The ice-free port of Muuga, near Tallinn, is 
an underutilized modern facility featuring good transshipment 
capability, a high-capacity grain elevator, chill/frozen storage and 
brand-new oil tanker offloading capabilities.

Yet Estonia still faces challenges, including a slow pace of 
establishing and putting into effect a legal framework compatible with a 
market economy. Laws to streamline the privatization process, facilitate 
the transfer of real property, privatize housing and establish a 
commission for the enforcement of competition and anti-monopoly laws 
were enacted in late 1993, but have not yet been fully implemented. 
Housing privatization is moving relatively slowly. The same 
circumstances apply in regard to agricultural privatization, which has 
caused severe problems for farmers needing collateral to be eligible for 
loans.

Estonia has paid a price in terms of eroded standards of living, 
especially for the large portion of the population on fixed pensions. 
However, it is reaping the macroeconomic dividends from its "shock 
therapy", and is the first country from the former Soviet area to 
experience such a spectacular turnaround. After having declined for four 
consecutive years by a cumulative total of more than 50%, Estonia's GDP 
increased by nearly 6% in 1994, and has remained around 5% ever since. 
During that four-year period overall, employment declined15% and average 
real wages and real disposable income declined 60%. Since 1994, by 
contrast, real wages have increased by about 5% annually and 
unemployment has stabilized.

Estonia has made a determined effort to reorient its trade toward the 
West. Trade with Russia, which once accounted for the overwhelming 
majority of Estonia's imports and exports, now accounts for only one-
fifth of all trade; almost 80% of Estonia's trade now is directed toward 
the West. This reorientation of trade helped Estonia to conclude a 
Europe Agreement with the European Union in June 1995 which foresees no 
transition period to associated member status. With the United States in 
1994, Estonia signed agreements on trade and intellectual property 
protection, investment, and science and technology cooperation. Given 
this base and Estonia's associate status with the EU, U.S. firms should 
consider Estonia for significant investment and re-export opportunities.

Estonia's graduation from USAID's assistance programs, completed in 
September 1996, recognizes Estonia's position as a leading economic 
reformer in all of Central and Eastern Europe.

DEFENSE

Estonia's defense system is based upon the Swedish-Finnish concept of a 
rapid response force composed of a mobilization base and a small group 
of career professionals. The army consists of three battalions of 714 
men each, and there is a mandatory one year draft period of active duty. 
Alternative conscription for eighteen months for conscientious objectors 
is available. The fledgling navy and air force are still rudimentary.

Border guards fall under the Interior Ministry's supervision. Comprised 
of 250-300 men each, the seven border guard districts, including a 
"coast guard," are responsible for border protection and passport and 
customs duties, as well as smuggling and drug trafficking interdiction. 
A volunteer paramilitary organization, "kaitseliit," serves as a type of 
national guard.

FOREIGN RELATIONS

Estonia joined the United Nations on September 18, 1991, and is a 
signatory to a number of UN organizations and other international 
agreements. It also is a member of the Organization on Security and 
Cooperation in Europe, Partnership for Peace, the North Atlantic 
Coordinating Council, and the Council of Europe, which presidency it 
held in 1996. Estonia is unaffiliated directly with any political 
alliance but welcomes further cooperation and integration with NATO, the 
EU, and other Western organizations.

Estonia maintains embassies in the United States, Austria, Argentina, 
Australia, Belarus, Belgium, Brazil, Chile, Denmark, Finland, France, 
Germany, India, Israel, Korea, Latvia, Lithuania, Pakistan, Poland, 
Russia, South Africa, Sweden, Switzerland, Turkey, Ukraine, and United 
Kingdom. It operates missions in Canada, Hungary, Norway, the 
Netherlands, to the United Nations, and a Consulate General in Toronto, 
Canada. Honorary consuls are located in Australia, Austria, Switzerland, 
and in Seattle.

The United States established diplomatic relations with Estonia on July 
28, 1922. U.S. representation accredited to Estonia served from the U.S. 
Legation in Riga, Latvia, until June 30, 1930, when a legation was 
established with a non-resident minister. The Soviet invasion forced the 
closure of Legation Tallinn on September 5, 1940, but Estonian 
representation in the United States has continued uninterrupted for over 
seventy years. The U.S. never recognized the forcible incorporation of 
Estonia into the USSR, and views the present Government of Estonia as a 
legal continuation of the inter-war republic. Estonia has enjoyed Most-
Favored-Nation (MFN) treatment with the U.S. since December, 1991. 
Through 1994, the U.S. committed over $45 million to assist Estonia's 
economic and political transformation and to address humanitarian needs. 
In 1994, Estonian exports to the United States amounted to $23.4 million 
while U.S. imports accrued to $25.5 million. In 1994, U.S. investment, 
consisting of over 145 firms, made up over $50 million of $185 million 
in foreign investment in Estonia.

TRAVEL NOTES

Customs: Estonia does not require visas for American, Canadian or 
British citizens. Visitors are encouraged to register at the U.S. 
Embassy.

Hard currency exceeding 1,000 DM must be declared upon entry; foreigners 
need not declare hard currency exports less than this sum but may not 
export more currency than what they declared upon arrival. Articles with 
a total value of less than 5,000 kroons, either already declared or 
purchased in Estonia, are duty-free upon departure. A 100% export duty 
exists on items of greater total value, and 10-100% export duties can be 
levied on tobacco, alcohol, gasoline, precious metals and jewelry, furs 
and cultural objects.

Climate and clothing: Estonia's climate enjoys seasons of almost equal 
length. Tallinn and the coast is temperate, with pleasant, cool summers 
and damp winters; eastern Estonia is continental, with warmer summers 
and harsher winters.

Health: Medical care does not meet Western standards, but is constantly 
improving. Raw fruits and vegetables are safe to eat, and the water is 
potable. Heat and hot water are readily available.

Transportation: SAS, Finnair, KLM, Lufthansa and Estonia Airlines 
provide service between European cities and Tallinn Airport. Train 
service is available via Moscow, St. Petersburg and Warsaw/Frankfurt, 
and a bus line connects the Baltic capitals with Poland and Germany. Bus 
and taxi services within the capital and its environs are good. 
Excellent Tallinn-Helsinki and Tallinn-Stockholm ferry links exist year-
round. Taxis are inexpensive and available at stands or may be ordered 
by phone. Rental cars are available, and gasoline prices are at market 
rates.

Telecommunications: Telephone and telegraph services are readily 
available at standard international rates. Tallinn is 7 hours ahead of 
eastern standard time.

Work week: 41 hours for blue-collar, 40 hours white-collar. Most stores 
and shops are closed on Sunday, open Monday-Friday from 10:00am - 6:00pm 
and on Saturday from 9:00am - 1:00pm.

National holidays: Businesses and the U.S. Embassy may be closed on the 
following Estonian holidays: January 1 -- New Year's Day; February 24 -- 
Independence Day; Good Friday; Easter Sunday; May 1 -- Labor Day; June 
23 -- Victory Day (commemoration of Battle of Vonnu in 1919 during the 
War of Independence); June 21, 22 -- Midsummer; December 25 -- 
Christmas; December 26 -- Second Day of Christmas. The U.S. Embassy also 
is closed on U.S. federal holidays.

Tourist attractions: Estonia carries a 150-year history in tourism and 
witnessed over 200,000 visitors in 1990. Tallinn is the country's 
leading attraction, with its beautiful, Hanseatic, architecturally 
intact "Old Town." The island of Saaremaa holds deep cultural and 
traditional roots. Estonia offers verdant landscapes and nature 
reserves, numerous manors and medieval ruins, fascinating museums, 
tradition-rich folk music and folk dance festivals, and excellent 
sailing opportunities.

Currency, weights and measures: The freely convertible kroon is pegged 
to 1/8 the value of the German deutschmark. Traveler's checks and major 
credit cards can be used at most banks, hotels, and stores. Estonia uses 
the metric system and 220v current.

Crime: By U.S. standards, Estonia has a low rate of violent crime. 
However, the introduction of a market-oriented economy has resulted in 
an increase in street crime, especially at night near major hotels and 
restaurants frequented by foreigners. Penalties for possession, use and 
dealing in illegal drugs are strict, and convicted offenders can expect 
jail sentences and fines.

Principal U.S. Officials

Ambassador--Lawrence P. Taylor 
Political Office--Imre Lipping 
Economic Officer--David J. Katz 
Admin Officer--Matthew Weiller 
Consular Officer--Henry Hand 
Public Affairs Officer--Victoria Middleton 
Defense Attache--Commander Peter Hendricksen (USN)

The U.S. Embassy in Estonia is located at Kentmanni 20, Tallinn [tel. 
(372-6)312-021/4].

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