The Oligarchs, the Russians, and the Latvian Supermarket Tragedy

Latvian Supermarket

By Connor Phillips.

Latvia has long had a reputation for beating the odds.  By any account, this tiny Baltic nation of just over 2 million people should not even exist in the first place:  ruled for centuries by a succession of empires, it was devastated in World War I, but nonetheless managed to establish itself as an independent state after fighting off both Germany and the Bolsheviks.  Within twenty years, however, the Germans and the Communists were back, dividing Eastern Europe into spheres of influence with the 1934 Molotov-Ribbentrop Non-Aggression Pact, which ceded Latvia to the USSR.  When leaders of the free world Franklin Roosevelt and Winston Churchill failed to challenge this status quo at the Yalta Conference, it seemed that the state of Latvia would become a historical footnote.  But as the Soviet Union crumbled in the late 1990s, the Latvian people declared independence once more, dusted off their 1922 constitution, and picked up where they had left off. 

The new (old?) nation was quick to integrate itself with the West, joining the EU and NATO.  Nevertheless, its tribulations were not over.  After Latvia had aligned its currency (the lat) with the euro to prepare for integration into the Eurozone, the Great Recession hit with a vengeance, slashing Latvia’s GDP by a fifth.  Rather than break the “peg” to the euro and risk being shut out of the currency union, Prime Minister Valdis Dombrovskis introduced a harsh package of austerity measures to restore Latvia’s creditworthiness.  Citizens fled the country in droves to find work elsewhere in the EU, but productivity rose enormously, and Latvia returned to growth (in fact, by 2013 it had become the fastest-growing country in the EU).  While it still has a long way to go, Latvia beat the expectations of analysts around the world and became the eighteenth country to adopt the euro on January 1, 2014.  To add to the occasion’s auspiciousness, its capital of Riga simultaneously became the European Capital of Culture. 

What should have been a moment of triumph, however, was much more somber.  Latvians were reluctant to give up the lat, a symbol of their country’s independence, in exchange for the beleaguered euro, and Riga itself had just exited a period of mourning:  on November 21, 2013, the roof of a Maxima supermarket in Riga had collapsed, killing 54 people and injuring another 41.  This tragedy, the worst in half a century, illuminates some of the deepest fault lines still running through this country—issues which Latvia must overcome to establish itself as a full democracy. 

First, the transition from a Soviet command economy to a free-market system in the early 1990s allowed powerful figures within Latvia to build up political bases and business empires.  As a consequence, a corrupt system developed where three oligarchs—Aivars Lembergs, Andris Skele, and Ainars Slesers—and their political parties effectively became the most influential entities in Ukraine.  Although a series of corruption investigations and the economic crisis of 2008 discredited the oligarchs, the aftermath of the disaster seemed to signal that they still retain undue influence in Latvia’s government.  Prime Minister Dombrovskis, a popular and well-respected non-oligarchic leader, unexpectedly announced days after the collapse that he was taking full responsibility for the tragedy and resigning, ending his tenure as the longest-serving prime minister in Latvia’s history.  In the wake of his departure, Lembergs’ Union of Greens and Farmers has returned to the ruling coalition.  There are rumors that President Andris Berzins, himself a former member of the Union, pressured Dombrovskis into leaving in order to bring the oligarchs back into the fold. 

More broadly, many Latvians suspect that some sort of corrupt arrangement among architects, construction companies, and the government officials tasked with overseeing them allowed substandard designs or material to be used for the supermarket.  Even if the collapse is not linked to outright political corruption, it is still an indication of an environment where business owners operate with relative impunity.  And the aftermath of the disaster is laying bare other ugly social realities, including the poor working conditions of Maxima’s employees and the firefighters who died trying to rescue them, fueling demands for a national reckoning with socioeconomic inequalities that many believe austerity measures exacerbated.  In fact, it was as part of these measures that the State Building Inspection Office was disbanded in 2009 and construction oversight was transferred to local authorities.  It would be a gross oversimplification to say that austerity measures killed the 54 individuals who died in the Maxima Supermarket.  However, it is fair to surmise that if the State Building Inspection Office still existed when the supermarket was constructed, it might have sounded the alarm. 

In this light, Dombrovskis’ single-minded determination to secure Latvia a spot in the Eurozone seems less like a visionary crusade that brought resounding success than a foolhardy endeavor that led to dangerously nearsighted austerity.  Of course, one event, however tragic, cannot provide the final verdict on the desirability of a state policy, but it does call into question why Latvia was so determined to adopt the euro in the first place.  And the answer sheds a great deal of light on Latvian politics:  the choice was less about what Europe is than what it is not.

When it exited the Soviet Union, Latvia was left with a population that was a quarter ethnic and linguistic Russian.  This substantial minority is a sensitive issue for a nation-state whose entire existence is predicated on its Latvian identity.  Many Russians who entered the country after the Soviet conquest in 1940 are still denied citizenship, Russian is considered a foreign language, and left-wing political parties—which call for equal language rights and full citizenship for Russians—have struggled to gain power.  Indeed, the oligarchs, whose parties were largely center-right, were able to maintain control for so many years by arguing that a vote for the left would be a vote for Russia.  Despite winning the parliamentary elections of 2011, Harmony Centre, Latvia’s only major left-wing party, whose support consists mainly of ethnic Russians, was excluded from Dombrovskis’ government. 

This record may seem backwards, and even unworthy of the EU’s high standards on human rights.  It is important to remember, however, that Latvia is nestled right next to Vladimir Putin’s Russia, and the influence of its former occupier is still uncomfortably strong.  Russian oligarchs see Latvia as a good place to store their assets, register companies, and (allegedly) launder money into the EU, while Putin is suspected of cultivating a fifth column among Latvia’s ethnic Russian population.  For its part, Harmony Centre has only exacerbated the social divide, with party leader Nils Usakovs maintaining close ties to Putin’s United Russia party.  This simmering tension helps to explain why Latvia’s leaders so doggedly pursued austerity in the hopes of entering the common currency, reasoning that one step closer to Brussels would be one step farther from Moscow.  A similar schism between a pro-EU native population and a substantial Russian minority can be seen in many other former Soviet states, notably Ukraine. 

While understandable, the anti-Russian bias in Latvian politics is also dangerous.  With Dombrovskis out of office, and eyeing a position in the EU bureaucracy rather than a return to power, the cause of non-oligarchic politicians in Latvia is struggling.  The Reform Party has tanked in the polls, most recently drawing the support of an impressive 1.1% of the electorate.  Its disappointing numbers means that, with Harmony Centre still clearly the most popular individual party in Latvia, a future governing coalition will likely have to include oligarchic parties, unless Harmony Centre can be brought into the fold.  In other words, Latvia’s ethnic tensions may prevent it from fully resolving its corruption problems. 

Nevertheless, 2014 could be a turning point.  Latvia faces two important elections before the year is out—European elections in May, followed by elections for a new post-Dombrovskis Parliament in October—as well as the results of investigations into the Maxima collapse.  In an ideal world, the investigation would provide the political momentum to take down the most influential oligarchs, while Usakovs transformed Harmony Centre from an ethnic Russian party into a social democratic one and the elections produced a “grand coalition” of left and right that marginalized both the oligarchs and the troublingly right-wing National Alliance.  It all seems very unlikely.  But Latvia has defied expectations before, and some good may yet emerge, improbable as it may seem, from the greatest loss of life in Latvia’s post-Soviet history.  

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  1. Alise

    There’s a mistake in the fourth paragraph:

    “As a consequence, a corrupt system developed where three oligarchs—Aivars Lembergs, Andris Skele, and Ainars Slesers—and their political parties effectively became the most influential entities in Ukraine.”

    It should read Latvia and not Ukraine.

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