About the CBI

October 2005
 Background Note: Estonia

Estonia flag is three equal horizontal bands of blue (top), black, and white.

PROFILE

OFFICIAL NAME:
Republic of Estonia

Geography
Area: 45,226 sq. km. (17,462 sq. mi.); about the size of New Hampshire and
Vermont.
Cities: Capital--Tallinn (pop. 397,150). Other cities--Tartu (101,190); Narva
(67,752); Kohtla-Jarve (46,765); Parnu (44,781); Viljandi (20,509). The last
population census was held in 2000.
Terrain: Flat, average elevation 50 m. Elevation is slightly higher in the
east and southeast. Steep limestone banks and 1,520 islands mark the
coastline. Land use--9.5% arable land, 47,4% forest and woodland, 22% swamps
and bogs, 21.5% other. Coastal waters are somewhat polluted.
Climate: Temperate, with four seasons of near-equal length. Annual
precipitation averages 50-75 cm.

People
Nationality: Noun and adjective--Estonian(s).
Population: 1.332 million.
Annual growth rate: -0.65%. Birth rate--9.3/1,000. Death rate--13.6/1,000.
Migration--616 persons (1999). Density--30/sq. km. Urban dwellers--70%.
Ethnic groups: Estonians 65%, Russians 28%, Ukrainians 2.5%, Belarusians
1.4%, Finns 0.9%, other 2.2%.
Religions: Lutheran; the Estonian Apostolic Orthodox, subordinated to
Constantinople; the Estonian Orthodox, subordinated to the Moscow
Patriarchate; Baptist.
Languages: Estonian (official).
Education: Years compulsory--9. Attendance--218,600 students at 550 schools,
plus 50,800 university students. Literacy--98.2%.
Health: Infant mortality rate--7.87 deaths/1,000 live births. Life
expectancy--65 yrs. men, 76 yrs. women.
Work force: 704,500.

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
5 years; prime minister (head of government). Legislative--Riigikogu
(Parliament--101 members, 4-year term). Judicial--Supreme Court.
Administrative regions: 15 counties, 42 towns, and 205 municipalities.
Political parties/coalitions: Estonian Center Party--Chairman, Edgar Savisaar
/Coalition; Estonian Reform Party--Chairman, Andrus Ansip/Coalition; Pro
Patria Union--Chairman, Mart Laar; Estonian People's Union--Chairman, Villu
Reiljan/Coalition; Moderates--Chairman, Ivari Padar; Estonian United People's
Party--Chairman, Jevgeni Tomberg; Estonian Social Democratic Labor
Party--Chairman, Tiit Toomsalu; Estonian Independence Party--Chairman, Vello
Leit; Res Publica--Chairman, Juhan Parts; Estonian Christian People's
Party--Chairman, Aldo Vinkel; Russian Party in Estonia--Chairman, Stanislav
Cherepanov; Estonian Democratic Party--Chairman, Jaan Laas; Republican
Party--Chairman, Kristjan-Olari Leping.
Suffrage: Universal at 18 years of age; noncitizen residents may vote in
municipal elections.
Government budget: $2.3 billion.
Defense: 2% of GDP.
National holidays: Jan. 1 (New Year's Day), Feb. 24 (Independence Day), Good
Friday, Easter Sunday, May 1 (May Day), Whitsunday, June 23 (Victory
Day--anniversary of Battle of Vonnu in 1919), June 24 (Midsummer Day), Aug.
20 (Day of Restoration of Independence), Dec. 25 (Christmas Day), Dec. 26
(Boxing Day).
Government of Estonia Web site: http://www.riik.ee/en/

Economy
GDP (2005 est.): $19.2 billion (World Bank).
Growth rate (2004): 6%.
Per capita GDP (2004): $14,500.
Inflation (2004): 3.0%.
Unemployment (2004): 9.6%.
Natural resources: Oil shale, phosphorite, limestone, blue clay.
Agriculture (3% of 2001 GDP): Products--livestock production (milk, meat,
eggs) and crop production (cereals and legumes, potatoes, forage crops).
Cultivable land--433,100 hectares.
Industry (26% of 2002 GDP): Types--engineering, electronics, wood and wood
products, and textiles.
Services (70% of 2002 GDP): Transit, information technology (IT),
telecommunications.
Trade: Exports (2004)--$5.7 billion. Partners--Finland 16.6%, Sweden 11.1%,
U.K. 8.6%, Russia 6.9%, Latvia 7.4%, Germany 7.2%, U.S. 5.5%, Lithuania 4%.
Imports (2004)--$ 7.3 billion. Partners--Finland 20%, Germany 11%, Russia
13%, Sweden 8%.
Exchange rate (2004): 12.5 kroon EEK=U.S.$1.
Foreign direct investment (June 2003): Sweden 39%, Finland 30%, Netherlands
6%, U.S. 7%, Norway 3%, Denmark 2%, Germany 2%.

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 50 meters (160
ft.).

The climate resembles New England's. Oil shale and limestone deposits, along
with forests that cover 47% of the land, play key economic roles in this
generally resource-poor country. Estonia boasts more than 1,500 lakes,
numerous bogs, and 3,794 kilometers of coastline marked by numerous bays,
straits, and inlets. Tallinn's Muuga port offers one of Europe's finest
warmwater harbor facilities.

Estonia's strategic location has precipitated many wars that were fought on
its territory between other rival powers at its expense. In 1944 the Union of
Soviet Socialist Republics (U.S.S.R.) granted Russia the trans-Narva and
Petseri regions on Estonia's eastern frontier. Russia and Estonia signed a
border treaty in 2005 recognizing the current border. Estonia ratified the
treaty in June 2005, but Russia has not yet done so.

PEOPLE
The name "Eesti," or Estonia, is derived from the word "Aestii," the name
given by the ancient Germans to the peoples living northeast of the Vistula
River. The Roman historian Tacitus in 98 A.D. was the first to mention the
"Aestii" people, and early Scandinavians called the land south of the Gulf of
Finland "Eistland," and the people "eistr." Estonians belong to the
Balto-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 have strong ties to the Nordic countries today stemming from strong
cultural and religious influences gained over centuries during 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. About 20% of the population belongs to
the following churches registered in Estonia: Estonian Evangelical Lutheran
Church, Estonian Apostolic Orthodox Church, Estonian Orthodox Church
subordinated to the Moscow Patriarchate, Baptist Church, Roman Catholic
Church, and others.

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 Soviet premier Josif Stalin's mass deportations and
executions.

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. During the
Soviet era, the Russian language was imposed for official use.

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 more than 150,000 people
and remained the last corner of medieval Europe to be Christianized.

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.

Despite successful Russian raids and invasions in 1481 and 1558, the local
German barons continued to rule Estonia and from 1524 preserved Estonian
commitment to the Protestant Reformation. Northern Estonia submitted to
Swedish control in 1561 during the Livonian Wars, and in 1582-83 southern
Estonia (Livonia) became part of Poland's Duchy of Courland.

In 1625, mainland Estonia came entirely under Swedish rule. 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. Sweden's defeat by
Russia in 1721 resulted in the Uusikaupunki Peace Treaty, and Russian rule
was then imposed 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, allowing 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 Estonian developed. Kalevipoeg,
Estonia's epic national poem, was published in 1861 in both Estonian and
German.

As the 1905 revolution in Russia swept through Estonia, the Estonians called
for freedom of the press and assembly, for universal franchise, and for
national autonomy. The 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 February 24, 1918, 1 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 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 22 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. Estonia's principal markets became Scandinavia, Great
Britain, and western Europe, with some exports to the United States and
Soviet Union.

The first constitution of the Republic of Estonia, adopted in 1920,
established a parliamentary form of government. The Parliament (Riigikogu)
consisted of 100 members elected for 3-year terms. Between 1921 and 1931,
Estonia had 11 governments. Konstantin Päts was installed as the first
President of the republic in 1938.

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 Nonaggression Pact on August 23, 1939 signaled the end of
independence. The agreement provided for the Soviet occupation of Estonia,
Latvia, Finland, and later, Lithuania, in return for Nazi Germany's assuming
control over most of Poland. After extensive diplomatic intrigue, the
Estonian Socialist Republic (E.S.R.) was proclaimed on July 21, 1940, 1 month
after Estonia was occupied by Soviet troops. The E.S.R. was formally accepted
into the Soviet Union on August 6, and the official name of the country
became the Estonian Soviet Socialist Republic (E.S.S.R.).

Soviet occupation was accompanied by expropriation of property, Sovietization
of cultural life, and Stalinist communism permeating political life. On June
14, 1941, mass deportations took place simultaneously in all three Baltic
states. Officially, nothing was said about the arrests, and no one was
prosecuted or sentenced.

When Nazi Germany attacked the Soviet Union on June 22, 1941, most Estonians
greeted the Germans with relatively open arms and hoped to restore
independence. It soon became clear that sovereignty was out of the question.
Estonia became a part of "Ostland." Massive repression continued. About 5,500
Estonians died in concentration camps.

In World War II Estonia suffered huge losses. Ports were destroyed, and 45%
of industry and 40% of the railways were damaged. Estonia's population
decreased by one-fifth (about 200,000 people). Some 10% of the population
(more than 80,000 people) fled to the West between 1940 and 1944. More than
30,000 soldiers were killed in battles. In 1944 Russian air raids destroyed
Narva, and one-third of the residential area in Tallinn was destroyed. By
late September 1944, Soviet forces expelled the last German troops from
Estonia, ushering in a second phase of Soviet rule. That year, Moscow also
transferred the Estonian Narva and Petseri border districts, which held a
large percentage of ethnic Russians, to Russian control. In 1944, there were
massive arrests of people who had actively supported the German occupation or
been disloyal to Soviet order.

An anti-Soviet guerrilla movement known as "the Forest Brethren" developed in
the countryside, reaching its zenith in 1946-48. In March 1949, 20,722 people
(2.5% of population) were deported to Siberia. By the beginning of the 1950s,
the occupying regime had suppressed the resistance movement.

After the war the Communist Party of the Estonian Soviet Socialist Republic
(ECP) became the preeminent organization in the republic. The ethnic Estonian
share in the total ECP membership decreased 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.

A positive aspect of the post-Stalin era in Estonia was a reopening in the
late 1950s of citizens' contacts with foreign countries. Ties were
reactivated with Finland, and in the 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 era of Soviet President Mikhail Gorbachev.

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 also was introduced into the Estonian pre-school teaching.

By the beginning of the Gorbachev era, concern over the cultural survival of
the Estonian people had reached a critical point. The ECP remained stable in
the early perestroika years but waned in the late 1980s. 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.

The republic's Supreme Soviet transformed into an authentic regional
lawmaking body. This relatively conservative legislature passed an 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 a 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 Soviet
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. In May 1990, the name of the Republic of Estonia was
restored, public use of the symbols of the E.S.S.R. (anthem, flag, and coat
of arms) were forbidden, and only laws adopted in Estonia were proclaimed
valid.

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, 1991. Following Europe's lead,
the United States formally reestablished diplomatic relations with Estonia on
September 2, and the U.S.S.R. Supreme Soviet offered recognition on September
6, 1991.

After more than 3 years of negotiations, on August 31, 1994, the armed forces
of the Russian Federation withdrew from Estonia. Since regaining independence
Estonia has had 12 governments with 8 prime ministers: Edgar Savisaar, Tiit
Vähi, Mart Laar, Andres Tarand, Mart Siimann, Siim Kallas, Juhan Parts, and
Andrus Ansip.

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. Parliamentary and presidential elections were held on September 20,
1992. Approximately 68% of the country's 637,000 registered voters cast
ballots. An outstanding writer and former Minister of Foreign Affairs,
Lennart Meri, won on the first ballot and became President. He 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.

In 1996, Estonia ratified a border agreement with Latvia and completed work
with Russia on a technical border agreement. President Meri was re-elected in
free and fair indirect elections in August and September 1996. During
parliamentary elections in 1999, the seats in Riigikogu were divided as
follows: the Center Party received 28, the Pro Patria Union 18, the Reform
Party 18, the Moderates 17 seats. Pro Patria Union, the Reform Party, and the
Moderates formed a government with Mart Laar as Prime Minister whereas the
Center Party with the Coalition Party, People's Union, United People's Party,
and members of parliament who were not members of factions formed the
opposition in the Riigikogu.

In the fall of 2001, Arnold Rüütel became the President of the Republic of
Estonia. In January 2002, Prime Minister Laar stepped down, and President
Ruutel appointed Siim Kallas the new Prime Minister. The Reform Party and the
Center Party formed a new coalition government in power as of January 28,
2002. Parliamentary elections were held on March 2, 2003. A coalition
government comprised of the Res Publica, Reform, and the Peoples' Union
Parties took office in April 2003. President Rüütel appointed Juhan Parts of
Res Publica as Prime Minister.

On March 24, 2005, the coalition government led by Juhan Parts fell following
passage of a no confidence motion in the Riigikogu. Reform Party Chairman
Andrus Ansip became the new Prime Minister on April 13, 2005, leading a
coalition of the Reform, Center, and People's Union parties.

Principal Government Officials
President--Arnold Rüütel
Prime Minister--Andrus Ansip (Reform)
Foreign Affairs--Urmas Paet (Reform)
Interior--Kalle Laanet (Center)
Social Affairs--Jaak Aab (Center)
Education-- Mailis Reps (Center)
Economy and Communications--Edgar Savisaar (Center)
Justice--Rein Lang (Reform)
Defense--Jürgen Ligi (Reform)
Environment--Villu Reiljan (People's Union)
Agriculture--Ester Tuiksoo (People's Union)
Finance--Aivar Soerd (People's Union)
Culture--Raivo Palmaru (Center Party)
Population Minister--Paul-Erik Rummo (Reform)
Minister of Regional Affairs--Jaan Õunapuu (People's Union)
Riigikogu Chairman--Ene Ergma (Res Publica)

Estonia maintains an embassy in the United States at 2131 Massachusetts
Avenue, NW, Washington DC 20008 (tel: [1] (202) 588-0101; fax: [1] (202)
588-0108). It operates a consulate at 600 Third Avenue, 26th Floor, New York,
NY 10016-2001 (tel: [1] (212) 883-0636; fax: [1] (212) 883-0648).

ECONOMY
For centuries until 1920, Estonian agriculture consisted of native peasants
working large feudal-type estates held by ethnic German landlords. In the
decades prior to 1918 independence, centralized czarist rule had contributed
a rather large industrial sector dominated by the world's largest cotton
mill, a ruined postwar economy, and an inflated ruble currency. In years 1920
to 1930, 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. 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.
Postwar Sovietization of life continued with the integration of Estonia's
economy and industry into the U.S.S.R.'s centrally planned structure. More
than 56% of Estonian farms were collectivized in the month of April 1949
alone. Moscow expanded on Estonian industries that 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.

Since re-establishing independence in 1991, 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 Council for Mutual Economic Assistance (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 are hallmarks of Estonia's free-market-based economy.
Estonia also has made excellent progress in regard to structural adjustment.

The privatization of state-owned firms is virtually complete, with only the
port and the main power plants remaining in government hands. The
constitution requires a balanced budget, and the protection afforded by
Estonia's intellectual property laws is on a par with that of Europe's. In
early 1992 both liquidity problems and structural weakness stemming from 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's fully electronic Stock Exchange opened in early 1996 and was bought
out by Finland's Helsinki Stock Exchange in 2001. It is estimated that the
unregistered economy provides almost 12% of annual gross domestic product
(GDP).

Estonia is nearly energy independent, supplying more than 90% of its
electricity needs with locally mined oil shale. Alternative energy sources
such as wood, peat, and biomass make up about 9% of primary energy
production. Estonia imports needed petroleum products 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 a modern facility featuring good transshipment capability, a
high-capacity grain elevator, chill/frozen storage, and brand-new oil tanker
off-loading capabilities. The railroad, privatized by an international
consortium in 2000, serves as a conduit between the West, Russia, and other
points to the east.

Estonia still faces challenges. Agricultural privatization has caused severe
problems for farmers needing collateral to be eligible for loans. The income
differential between Tallinn and the rest of the country is widening.
Standards of living have eroded for the large portion of the population on
fixed pensions. The formerly industrial northeast section of Estonia is
undergoing a severe economic depression as a result of plant closings.

During recent years the Estonian economy has continued to grow. Estonian GDP
grew by 6.5% in 2001 and by 6.0% in 2002. Inflation declined modestly to 4.2%
in 2001; for 2002 the inflation rate was 2.7%. The unemployment rate in 2002
was 10.6%. Estonia joined the World Trade Organization in 1999. Estonia
concluded European Union (EU) accession negotiations in December 2002 and
signed the EU Accession Treaty in April 2003. In a September 2003 referendum,
Estonian citizens voted to amend their constitution and join the European
Union. Estonia formally joined the EU on May 1, 2004, one of 10 states,
mostly from eastern Europe, to join the Union on that date. While the effects
of EU membership will not be measurable in the short term, membership will
likely have a positive influence on Estonia's gross domestic product, exports
of goods and services, and the inflow of foreign investment.

Foreign Trade
Estonia's liberal foreign trade regime, which contains few tariff or
nontariff barriers, is nearly unique in Europe. Estonia also boasts a
national currency that is freely convertible at a fixed exchange rate, and
conservative fiscal and monetary policies.

Estonia's business attitude toward the United States is positive, and
business relations between the United States and Estonia are increasing
significantly. The primary competition for American companies in the Estonian
marketplace is European suppliers, especially Finnish and Swedish companies.

Total U.S. exports to Estonia in 2002 were $164 million, forming 3% of total
Estonian imports. In 2002 the principal imports from the United States were
meat and edible meat offal, poultry, boilers, and other electrical machinery
and transmission/recording apparatus for radio/TV. The May 2004 round of EU
expansion is likely to yield, over time, positive benefits for U.S. business.
However, Estonia's membership is disadvantageous for certain U.S. exports to
Estonia. For example, since January 2000 Estonia has imposed import tariffs
on certain agricultural products from third countries, including the United
States, in accordance with EU rules and regulations.

Estonia, being a small country of 1.4 million people, relies on its greatest
natural asset--its location at the crossroads of East and West. Estonia lies
just south of Finland and across the Baltic Sea from Sweden, both EU members.
To the east are the huge potential markets of northwest Russia. Having been a
member of the former Soviet Union, Estonians know how to do business in
Russia and in other former Soviet countries. Estonia's modern transportation
and communication links provide a safe and reliable bridge for trade with
former Soviet Union and Nordic countries. According to the RIPE Network
Coordination Centre (www.ripe.net), Estonia has the highest
Internet-connected hosts/population ratio in central and eastern Europe and
also is ahead of most other EU countries. Latest surveys indicate that 41% of
the Estonian population regard themselves as Internet users.

Country Commercial Guides are available for U.S. exporters from the National
Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at
1-800-STAT-USA for more information. Country Commercial Guides can be
accessed via the World Wide Web at the U.S. Department of Commerce's site.
They also can be ordered in hard copy or on diskette from the National
Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters
seeking general export information/assistance and country-specific commercial
information should contact the U.S. Department of Commerce, Trade Information
Center by phone at 1-800-USA-TRAD(E) or by fax at 1-202-482-4473.

DEFENSE
Estonia achieved its main security and defense policy objective by accepting
a formal invitation at Prague in November 2002 to join the North Atlantic
Treaty Organization (NATO) Alliance. Accession to NATO has been included in
all coalition agreements of all Estonian governments since the 1991
restoration of independence, including the present government. The same
objective also is stated in the National Security Concept of the Republic of
Estonia, approved by the Parliament in March 2001. Estonia officially became
a member of the North Atlantic Treaty Organization on March 29, 2004 after
depositing its instruments of treaty ratification in Washington, DC.

The 2003 state budget allocated 2% of GDP for defense expenditures. The
United States is among the countries with which Estonia has very intensive
cooperation in the defense and security field.

FOREIGN RELATIONS
Estonia is a party to 181 international organizations, including Bank for
International Settlements (BIS), Council of the Baltic Sea States (CBSS),
Customs Cooperation Council (CCC), Council of Europe (CE), Euro-Atlantic
Partnership Council (EAPC), European Bank for Reconstruction and Development
(EBRD), Economic Commission for Europe (ECE), European Union (EU), Food and
Agriculture Organization (FAO), International Atomic Energy Agency (IAEA),
International Bank for Reconstruction and Development (IBRD, or World Bank),
International Civil Aviation Organization (ICAO), International Confederation
of Free Trade Unions (ICFTU), International Red Cross and Red Crescent
Movement (ICRM), International Finance Corporation (IFC), International
Federation of Red Cross and Red Crescent Societies (IFRCS), International
Hydrographic Organization (IHO), International Labor Organization (ILO),
International Monetary Fund (IMF), International Maritime Organization (IMO),
International Criminal Police Organization (Interpol), International Olympic
Committee (IOC), International Organization for Migration (IOM, observer),
International Organization for Standardization (ISO, correspondent),
International Telecommunication Union (ITU), Organization for the Prohibition
of Chemical Weapons (OPCW), Organization for Security and Cooperation in
Europe (OSCE), Partnership for Peace (PFP), United Nations (UN), United
Nations Conference on Trade and Development (UNCTAD), United Nations
Educational, Scientific, and Cultural Organization (UNESCO), United Nations
Mission in Bosnia and Herzegovina (UNMIBH), United Nations Interim
Administration Mission in Kosovo (UNMIK), United Nations Truce Supervision
Organization (UNTSO), Universal Postal Union (UPU), Western European Union
(WEU, associate partner), World Health Organization (WHO), World Intellectual
Property Organization (WIPO), World Meteorological Organization (WMO), World
Trade Organization (WTO).

U.S.-ESTONIA RELATIONS
The relationship between Estonia and the United States of America has been
constant and strong since Estonia first became independent. Because of its
global political and economic influence, the United States is one of
Estonia's most important partners.

The United States recognized the Republic of Estonia on July 28, 1922. The
first Estonian diplomatic mission in the United States was opened in the same
year. It continued its activities throughout the period of illegal occupation
by the Soviet Union from 1940 to 1991. U.S. authorities recognized Estonia's
diplomatic mission as a legal representative of the Republic of Estonia.
Indeed, the recognition of the legal continuity of the Republic of Estonia
has been the cornerstone of Estonian-U.S. relations.

The U.S. reopened its Embassy in Tallinn on September 4, 1991, soon after the
restoration of Estonia's de facto independence on August 20, 1991. Relations
between the two countries have since developed at a rapid pace.

The U.S. Ambassador to Estonia is Aldona Zofia Wos. Mr. Jüri Luik has been
Estonia's Ambassador to the United States since September 2003. Estonia also
is represented in the United States by a Consulate General in New York and
three Honorary Consuls: Jaak Treiman in Los Angeles, Mart Kask in Seattle,
and Scott E. Schul in Maine.

U.S.-Baltic Charter
The Presidents of the United States, Estonia, Latvia, and Lithuania signed
the U.S.-Baltic Charter in Washington on January 16, 1998. The main goals of
this charter are to support Estonia's, Latvia's, and Lithuania's full
integration into European and transatlantic structures, and to establish the
general principles and aims for cooperation. The charter underlines the
importance of political, defense, security, and economic cooperation. It is a
statement of the United States' real, profound, and enduring interest in the
security and independence of the Baltic states.

The U.S. commitment toward the Baltic and Nordic states has been reaffirmed
with the articulation of the Enhanced Partnership in Northern Europe (e-PINE)
in October 2003. E-PINE recognizes the progress made in the region over the
preceding decade as well as the challenges that remain, both in the region
and with states beyond the borders of an expanding EU and NATO. E-PINE seeks
to build on past success and existing habits of multilateral cooperation in
the region. Through e-PINE, the United States is engaging all eight Nordic
and Baltic states on a shared agenda that focuses on three areas: political
security; healthy societies and healthy neighbors; and vibrant economies. To
carry out this coordination, e-PINE includes a forum for "8 plus 1"
cooperation as well as contacts among the states at the working level.

E-PINE represents the evolution of the previous guiding U.S. policy, the
Northern Europe Initiative (NEI). NEI, launched in 1997, promoted regional
cooperation in northern Europe as a way of further integrating the Baltic
states and northwest Russia and of strengthening our relations with the
Nordic countries. NEI programs addressed key problems in Estonia and its
neighbors--including HIV/AIDS, environmental pollution, corruption, and
social integration--and built cross-border linkages to contribute to
stability and security.

Principal U.S. Officials
Ambassador--Aldona Zofia Wos
Deputy Chief of Mission--Jeffery Goldstein
Head of Political/Economic Section--Stuart Dwyer
Management Officer--Thatcher Scharpf
Legal Attaché--James Nixon
Consular Officer--Rodger Deuerlein
Public Affairs Officer--Eric Johnson
Defense Attaché--Commander Karin Shuey (USN)
Chief of Office of Defense Cooperation--LTC Kenneth Pope

The U.S. Embassy in Estonia is located at Kentmanni 20, Tallinn [tel. (372)
66 88 100].