U.S. DEPARTMENT OF STATE
ESTONIA BACKGROUND NOTES
SEPTEMBER 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. 420,470); Other cities-Tartu (101,901); 
Narva (75,211); Kohtla-Jarve (68,533); Parnu (51,807); Sillamae 
(19,804); Rakvere (20,100). 
Terrain: Flat, average elevation 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 somewhat 
polluted.
Climate: Temperate, with four seasons of near-equal length. 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-  16/1,000; 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.
Languages: 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.
Political parties/coalitions: Coalition/Rural Union (PM Siimann/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-Riigikogu Chairman Ulo 
Nugis)-5 seats.
Suffrage: 18 years-universal; non-citizen residents may vote in 
municipal elections.
Government budget: $1 billion. Defense: 1.2% of GDP.
National holidays: Feb. 24 (Independence Day), June 23 (Victory Day-
anniversary of Battle of Vonnu in 1919).
Flag: Horizontal tricolor-blue, black, and white.

ECONOMY

GDP (1996): $3.7 billion. Growth rate-@ 4.4%. 
Per capita income: $2,748. 1996 inflation rate- 23%. Unemployment- 5.5%.
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%. Public services-7%. 
Transport/communication-8%. Finance/real estate-4%. Other-3%. 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%), U.S. (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%).
Exchange rate: 13.9 kroon EEK=US $1.
1995 Foreign capital investment: 6,000 foreign enterprises with 
investment of $230 million. Finland 52% of firms with 22% of capital; 
Sweden 11%/27%; 
Russia 13%/12%; Germany 4%/4%;
U.S. 4%/7%. 

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 
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 OSCE 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 13th  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 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 14 politically divergent parties, Estonia experienced 20 different 
parliamentary governments between 1919 and 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 10% 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 2% 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 40 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 
U.S.S.R. 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 remained at the nuclear submarine 
training reactor facility at Paldiski until September 30, 1995, in order 
to remove equipment and help decommission the facility. 

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 one-third 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 Siimann (CP) 
Foreign Affairs-Toomas Ilves (non-partisan) 
Interior-vacant
Social Affairs-Tiiu Aro (CP) 
Education-Mait Klaassen (CP) 
Transport. and 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 U.S.S.R.

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. On July 15, the European Commission 
recommended that the EU invite Estonia to commence accession talks in 
early 1998. These policies have also helped reduce inflation from 90% a 
month in early 1992 to about 1% a month in 1997.

Estonia has also made excellent progress in regard to structural 
adjustment. Industrial production is expected to increase 8% in 1997. 
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 form the communist era 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. It is estimated 
that the unregistered economy provides almost 14% of annual GDP.

Trade has continued to expand since 1994; the current account deficit, a 
whopping 10% of 1996 GDP or one-third of imports, reflects a 
corresponding demand for relatively low-interest, foreign-built durable 
goods (homes, cars, major appliances). Nevertheless, in 1996 Estonia's 
balance-of-payments was positive by $90 million because of a capital and 
finance account that doubled the 1995 figure. 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. Oil shale 
energy, 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 off-loading capabilities.

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 5% in 1994, and has increased about 4% annually ever since. 
During those first 4 years, employment declined 15% 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 integrate its economic relations 
with 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 all the rest of its trade now is 
directed toward the West. Since 1994, Estonia has signed agreements with 
the U.S. on trade and intellectual property protection, investment, 
avoidance of double taxation, and science and technology cooperation. 
American companies have invested $56 million in Estonia, or 8% of its 
total foreign direct investment; a number of major potential 
privatization deals with U.S. companies are pending. In 1996, the U.S. 
exported $83 million of goods and services to Estonia and imported $60 
million. Given this base, U.S. firms should consider Estonia for 
significant investment and re-export opportunities.

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 1-year draft period of active duty. 
Alternative conscription for 18 months for conscientious objectors is 
available. The navy has about 75 personnel, and the air force is 
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," has about 6,000 personnel and 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 enjoys visa-free travel 
with its Nordic neighbors and with Latvia and Lithuania.

Estonia maintains embassies in the United States, Argentina, Australia,  
Austria, 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 
70 years. The U.S. never recognized the forcible incorporation of 
Estonia into the U.S.S.R., 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 1996, the U.S. committed over $45 million to assist Estonia's 
economic and political transformation and to address humanitarian needs. 
Estonia's graduation in September 1996 from USAID's assistance programs 
recognizes its position as a leading economic reformer in Central and 
Eastern Europe.

Estonia is a member of the UN, OSCE, NACC, COE, UNCTAD, ICFTU, IAEA, 
IMO, ICAO, FAO, WIPO, IMF, WB/EBRD, and other UN-related organizations.

PRINCIPAL U.S. OFFICIALS

Ambassador-Walter Andrusyszyn
Political Officer-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].  n

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program provides 
Travel Warnings and Consular Information Sheets. Travel Warnings are 
issued when the State Department recommends that Americans avoid travel 
to a certain country. Consular Information Sheets exist for all 
countries and include information on immigration practices, currency 
regulations, health conditions, areas of instability, crime and 
security, political disturbances, and the addresses of the U.S. posts in 
the country. Public Announcements are issued as a means to disseminate 
information quickly about terrorist threats and other relatively short-
term conditions overseas which pose significant risks to the security of 
American travelers. Free copies of this information are available by 
calling the Bureau of Consular Affairs at 202-647-5225 or via the fax-
on-demand system: 202-647-3000. Travel Warnings and Consular Information 
Sheets also are available on the Consular Affairs Internet home page:  
http://travel.state.gov and the Consular Affairs Bulletin Board (CABB). 
To access CABB, dial the modem number: (301-946-4400 (it will 
accommodate up to 33,600 bps), set terminal communications program to N-
8-1 (no parity, 8 bits, 1 stop bit); and terminal emulation to VT100. 
The login is travel and the password is info (Note: Lower case is 
required). The CABB also carries international security information from 
the Overseas Security Advisory Council and Department's Bureau of 
Diplomatic Security. Consular Affairs Trips for Travelers publication 
series, which contain information on obtaining passports and planning a 
safe trip abroad, can be purchased from the Superintendent of Documents, 
U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-
7954; telephone: 202-512-1800; fax 202-512-2250. 

Emergency information concerning Americans traveling abroad may be 
obtained from the Office of Overseas Citizens Services at (202) 647-
5225. For after-hours emergencies, Sundays and holidays, call 202-647-
4000. 

Passport Services information can be obtained by calling the 24-hour, 7-
day a week automated system ($.35 per minute) or live operators 8 a.m. 
to 8 p.m. (EST) Monday-Friday ($1.05 per minute). The number is 1-900-
225-5674 (TDD: 1-900-225-7778). Major credit card users (for a flat rate 
of $4.95) may call 1-888-362-8668 (TDD: 1-888-498-3648) 

Travelers can check the latest health information with the U.S. Centers 
for Disease Control and Prevention in Atlanta, Georgia. A hotline at 
(404) 332-4559 gives the most recent health advisories, immunization 
recommendations or requirements, and advice on food and drinking water 
safety for regions and countries. A booklet entitled Health Information 
for International Travel (HHS publication number CDC-95-8280) is 
available from the U.S. Government Printing Office, Washington, DC 
20402, tel. (202) 512-1800.
Information on travel conditions, visa requirements, currency and 
customs regulations, legal holidays, and other items of interest to 
travelers also may be obtained before your departure from a country's 
embassy and/or consulates in the U.S. (for this country, see "Principal 
Government Officials" listing in this publication). 

U.S. citizens who are long-term visitors or traveling in dangerous areas 
are encouraged to register at the U.S. embassy upon arrival in a country 
(see "Principal U.S. Embassy Officials" listing in this publication). 
This may help family members contact you in case of an emergency. 

FURTHER ELECTRONIC INFORMATION
 
Department of State Foreign Affairs Network. Available on the Internet, 
DOSFAN provides timely, global access to official U.S. foreign policy 
information. Updated daily, DOSFAN includes Background Notes; Dispatch, 
the official magazine of U.S. foreign policy; daily press briefings; 
Country Commercial Guides; directories of key officers of foreign 
service posts; etc. DOSFAN's World Wide Web site is at 
http://www.state.gov.

U.S. Foreign Affairs on CD-ROM (USFAC). Published on a semi-annual basis 
by the U.S. Department of State, USFAC archives information on the 
Department of State Foreign Affairs Network, and includes an array of 
official foreign policy information from 1990 to the present. Contact 
the Superintendent of Documents, U.S. Government Printing Office, P.O. 
Box 371954, Pittsburgh, PA 15250-7954. To order, call (202) 512-1800 or 
fax (202) 512-2250.

National Trade Data Bank (NTDB). Operated by the U.S. Department of 
Commerce, the NTDB contains a wealth of trade-related information. It is 
available on the Internet (www.stat-usa.gov) and on CD-ROM. Call the 
NTDB Help-Line at (202) 482-1986 for more information. 

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