About the CBI

October 2005
Background Note: Lithuania

Lithuania flag is three equal horizontal bands of yellow (top), green, and
red.

PROFILE

OFFICIAL NAME:
Republic of Lithuania

Geography
Area: 65,200 sq. km. (26,080 sq. mi.); about the size of West Virginia.
Cities: Capital--Vilnius (pop. 541,278); Kaunas (364,059); Klaipeda
(188,767); Siauliai (130,020) (January 2004).
Terrain: Lithuania's fertile, central lowland plains are separated by hilly
uplands created by glacial drift. A total of 758 rivers, many navigable, and
2,833 lakes cover the landscape. The coastline is 90 km. (56 mi.) long. Land
use--44.2% arable land, 0.91% cultivated, 53.87% other.
Climate: With four distinct seasons, the climate is humid continental, with a
moderating maritime influence from the Baltic Sea. January temperatures
average -5oC (23oF); July, 17oC (63oF). Annual precipitation averages 62
centimeters (24.4 in.).

People
Nationality: Noun and adjective--Lithuanian(s).
Population: 3.4 million (July 2005 est.).
Growth rate: -0.3%. Birth rate--8.9/1,000. Death rate--11.9/1,000.
Ethnic groups: Lithuanian 83.4%, Poles 6.7%, Russians 6.3%.
Religions: Catholic (79%), Orthodox (4.1%), Protestant (1.9%).
Languages: Lithuanian; a minority speaks Russian (8%) and Polish (5.6%).
Education: Years compulsory--10 (until the age of 16). Literacy--99.6%.
Health: Infant mortality rate--67.8/1,000. Life expectancy--66.48 yrs. male,
77.85 yrs. female.
Work force (2005 est.): 1.61 million: services 56%; industry and construction
20%; agriculture 16%.

Government
Type: Parliamentary democracy.
Constitution: On October 25, 1992 Lithuanians ratified a new constitution,
which officially was signed on November 6 that year.
Branches: Executive--popularly elected president (chief of state); prime
minister (head of government). Legislative--Seimas (parliament--141 members,
4-year term). Judicial--Constitutional Court, Supreme Court, and Highest
Administrative Court.
Administrative regions: 10 counties and 60 municipalities.
Principal political parties/coalitions: Labor Party--39 seats, Conservative
Party--25 seats, Social Democratic Party--20 seats, Liberal and Center
Union--18 seats, New Union--11 seats, Liberal Democratic Party--10 seats,
Union of Peasant and New Democracy Parties--10 seats, Independent--6 seats,
Polish Electoral Action--2 seats.
Suffrage: 18 years, universal.
General government budget (2004): $4.96 billion (average exchange rate of
2004--2.78 Lt=$1).

Economy
GDP (2004 est.): $22.3 billion.
Annual GDP growth (2004 est.): 6.7%.
GDP per capita (2004 est.): $ 6,474.
Inflation (at the end of 2004): 2.9%.
Unemployment rate (2004 est.): 11.4%.
Major sectors of the economy: Manufacturing 20.8%, wholesale and retail trade
18.1 %, transport and communications 13.2%.
Trade: Exports--$9.28 billion (2004 est.): mineral products 25.2%, machinery
and mechanical appliances 12.7%, textiles and textile articles 11.7%, wood
and paper products 5%. Major export partners--Germany 10.2%, Latvia 10.1%,
Russia 9.2%, France 6.3%. Imports--$12.35 billion (2004 est.): mineral
products 19.7%, machinery and equipment 19%, transportation equipment 13.2%,
chemicals 8.4%, base metals 7.2%, textiles and clothing 7%. Major import
partners--Russia 22.9%, Germany 16.7%, Poland 7.3%, the Netherlands 4%.

GEOGRAPHY
The largest and most populous of the Baltic states, Lithuania is a generally
maritime country with 60 miles of sandy coastline, of which only 24 miles
face the open Baltic Sea. Lithuania's major warm-water port of Klaipeda lies
at the narrow mouth of Kursiu Gulf, a shallow lagoon extending south to
Kaliningrad. The Nemunas River and some of its tributaries are used for
internal shipping. (In 2000, 89 inland ships carried 900,000 tons of cargo,
which is less than 1% of the total goods traffic). Between 56.27 and 53.53
latitude and 20.56 and 26.50 longitude, Lithuania is glacially flat, except
for morainic hills in the western uplands and eastern highlands no higher
than 300 meters. The terrain is marked by numerous small lakes and swamps,
and a mixed forest zone covers 30% of the country.

The growing season lasts 169 days in the east and 202 days in the west, with
most farmland consisting of sandy- or clay-loam soils. Limestone, clay, sand,
and gravel are Lithuania's primary natural resources, but the coastal shelf
offers perhaps 10 million barrels' worth of oil deposits, and the southeast
could provide high yields of iron ore and granite. According to some
geographers, Lithuania's capital, Vilnius, lies at the geographical center of
Europe.

PEOPLE
The earliest evidence of inhabitants in present-day Lithuania dates back to
10,000 BC. Between 3,000-2,000 BC, the cord-ware culture people spread over a
vast region of eastern Europe, between the Baltic Sea and the Vistula River
in the west and the Moscow-Kursk line in the east. Merging with the
indigenous population, they gave rise to the Balts, a distinct Indo-European
ethnic group whose descendants are the present-day Lithuanian and Latvian
nations and the now extinct Prussians. The name "Lietuva", or Lithuania,
might be derived from the word "lietava," for a small river, or "lietus,"
meaning rain (or land of rain).

Lithuanians are neither Slavic nor Germanic, although the union with Poland
and Germanic and Russian colonization and settlement left cultural and
religious influences. This highly literate society places strong emphasis
upon education, which is free and compulsory until age 16. Most Lithuanians
and ethnic Poles belong to the Roman Catholic Church; Orthodoxy is the
largest non-Catholic denomination.

Enduring several border changes, Soviet deportations, a massacre of its
Jewish population, and German and Polish repatriations during and after WWII,
Lithuania has maintained a fairly stable percentage of ethnic Lithuanians
(from 79.3% in 1959 to 83.5% in 2002). Lithuania's citizenship law and
constitution meet international and OSCE [Organization for Security and
Cooperation in Europe] standards, guaranteeing universal human and civil
rights.

The Lithuanian language still retains the original sound system and
morphological peculiarities of the prototypal Indo-European tongue and
therefore is fascinating for linguistic study. Between 400-600 AD, the
Lithuanian and Latvian languages split from the Eastern Baltic (Prussian)
language group, which subsequently became extinct. The first known written
Lithuanian text dates from a hymnal translation in 1545. Written with the
Latin alphabet, Lithuanian has been the official language of Lithuania again
since 1989. The Soviet era had imposed the official use of Russian, so many
Lithuanians speak Russian as a second language while the resident Slavic
populace generally speaks Russian or Polish as a first language.

HISTORY
The first written mention of Lithuania occurs in 1009 AD, although many
centuries earlier the Roman historian Tacitus referred to the Lithuanians as
excellent farmers. Spurred by the expansion into the Baltic lands of the
Germanic monastic military orders (the Order of the Knights of the Sword and
the Teutonic Order) Duke Mindaugas united the lands inhabited by the
Lithuanians, the Samogitians, Yotvingians, and Couranians into the Grand
Duchy of Lithuania (GDL) in the 1230s-40s. In 1251 Mindaugas adopted
Catholicism and was crowned King of Lithuania on July 6, 1253; a decade
later, civil war erupted upon his assassination until a ruler named Vytenis
defeated the Teutonic Knights and restored order.

From 1316 to 1341 Vytenis' brother and successor, Grand Duke Gediminas,
expanded the empire as far as Kiev against the Tatars and Russians. He twice
attempted to adopt Christianity in order to end the GDL's political and
cultural isolation from western Europe. To that purpose, he invited knights,
merchants, and artisans to settle in Lithuania and wrote letters to Pope John
XXII and European cities maintaining that the Teutonic Order's purpose was to
conquer lands rather than spread Christianity. Gediminas' dynasty ruled the
GDL until 1572. In the 1300s through the early 1400s, the Lithuanian state
expanded eastward. During the rule of Grand Duke Algirdas (1345-77),
Lithuania almost doubled in size. The 1385 Kreva Union signed by the Grand
Duke of Lithuania Jogaila (ruled in 1377-81 and 1382-92) and the Queen of
Poland Jadwyga intensified Lithuania's economic and cultural development,
orienting it toward the West.

Lithuania's independence under the union with Poland was restored by Grand
Duke Vytautas. During his rule (1392-1430) the GDL turned into one of the
largest states in Europe, encompassing present-day Belarus, most of Ukraine,
and the Smolensk region of western Russia. Led by Jogaila and Vytautas, the
united Polish-Lithuanian army defeated the Teutonic Order in the Battle of
Tannenberg (Grunewald or Zalgiris) in 1410, terminating the medieval Germanic
drive eastward.

The 16th century witnessed a number of wars against the growing Russian state
over the Slavic lands ruled by the GDL. Coupled with the need for an ally in
those wars, the wish of the middle and petty gentry to obtain more rights
already granted to the Polish feudal lords drew Lithuania closer to Poland.
The Union of Lublin in 1569 united Poland and Lithuania into a commonwealth
in which the highest power belonged to the Sejm of the nobility and its
elected King who also was the Grand Duke of Lithuania. Mid-16th century land
reform strengthened serfdom and yet promoted the development of agriculture
owing to the introduction of a regular three-field rotation system.

The 16th century saw a more rapid development of agriculture, growth of
towns, spread of ideas of humanism and the Reformation, and book printing.
The emergence of Vilnius University in 1579 and the Lithuanian Codes of Law
(the Statutes of Lithuania) stimulated the development of culture both in
Lithuania and in neighboring countries.

The Polish-Lithuanian Republic was weakened by the rising domination of the
big magnates, and the 16th-18th-century wars against Russia and Sweden over
Livonia, Ukraine, and Byelorussia. The end of the 18th century witnessed
three divisions of the commonwealth by Russia, Prussia, and Austria; in 1795
most of Lithuania became part of the Russian empire. Attempts to restore
independence in the uprisings of 1794, 1830-31, and 1863 were suppressed and
followed by a tightened police regime, increasing Russification, the closure
of Vilnius University in 1832, and the 1864 ban on the printing of Lithuanian
books in traditional Latin characters.

Because of his proclamation of liberation and self-rule, many Lithuanians
gratefully volunteered for the French Army when Napoleon occupied Kaunas in
1812 during the fateful invasion of Russia. After the war, Russia imposed
extra taxes on Catholic landowners and enserfed an increasing number of
peasants. A market economy slowly developed with the abolition of serfdom in
1861. Lithuanian farmers grew stronger, and an increase in the number of
intellectuals of peasant origin led to the growth of a Lithuanian national
movement. In German-ruled East Prussia, also called Lithuania Minor,
Königsberg or Kaliningrad, Lithuanian publications were printed in large
numbers and then smuggled into Russian-ruled Lithuania. The most outstanding
leaders of the national liberation movement were J. Basanavicius and V.
Kudirka. The ban on the Lithuanian press finally was lifted in 1904.

During WW I, the German Army occupied Lithuania in 1915, and the occupation
administration allowed a Lithuanian conference to convene in Vilnius in
September 1917. The conference adopted a resolution demanding the restoration
of an independent Lithuanian state and elected the Lithuanian Council, a
standing body chaired by Antanas Smetona. On February 16, 1918, the council
declared Lithuania's independence. The years 1919-20 witnessed Lithuania's
War for Independence against three factions--the Red Army, which in 1919
controlled territory ruled by a Bolshevist government headed by V. Kapsukas;
the Polish Army; and the Bermondt Army, composed of Russian and German troops
under the command of the Germans. Lithuania failed to regain the
Polish-occupied Vilnius region.

In the Moscow Treaty of July 12, 1920, Russia recognized Lithuanian
independence and renounced all previous claims to it. The Seimas (parliament)
of Lithuania adopted a constitution on August 1, 1922, declaring Lithuania a
parliamentary republic, and in 1923 Lithuania annexed the Klaipeda region,
the northern part of Lithuania Minor. By then, most countries had recognized
Lithuanian independence. After a military coup on December 17, 1926,
Nationalist Party leader Antanas Smetona became president and gradually
introduced an authoritarian regime.

Lithuania's borders posed its major foreign policy problem. Poland's
occupation (1920) and annexation (1922) of the Vilnius region strained
bilateral relations, and in March 1939 Germany forced Lithuania to surrender
the Klaipeda region. Radical land reform in 1922 considerably reduced the
number of estates, promoted the growth of small and middle farms, and boosted
agricultural production and exports, especially livestock. In particular,
light industry and agriculture successfully adjusted to the new market
situation and developed new structures.

The inter-war period gave birth to a comprehensive system of education with
Lithuanian as the language of instruction and the development of the press,
literature, music, arts, and theater. On August 23, 1939, the
Molotov-Ribbentrop Pact pulled Lithuania first into the German sphere of
influence and then brought Lithuania under Soviet domination following the
Soviet-German agreement of September 28, 1939. Soviet pressure and a
complicated international situation forced Lithuania to sign an agreement
with the U.S.S.R. on October 10, 1939, by which Lithuania was given back the
city of Vilnius and the part of Vilnius region seized by the Red Army during
the Soviet-Polish war. In return, some 20,000 Soviet soldiers were deployed
in Lithuania.

On June 14, 1940, the Soviet Government issued an ultimatum to Lithuania,
demanding the formation of a new Lithuanian government and permission to
station additional Red Army troops. Lithuania succumbed to the Soviet demand,
and 100,000 Soviet troops moved into the country the next day. Arriving in
Kaunas, the Soviet Government's special envoy began implementing the plan for
Lithuania's incorporation into the U.S.S.R. On June 17 the alleged people's
government, headed by J. Paleckis, was formed. Rump parliamentary elections
were held a month later, and Lithuania was proclaimed a Soviet Socialist
Republic on August 3. Totalitarian rule was established, Sovietization of the
economy and culture began, and Lithuanian state employees and public figures
were arrested and exiled to Russia. During the mass deportation campaign of
June 14-18, 1941, about 7,439 families (12,600 people) were deported to
Siberia without investigation or trial; 3,600 people were imprisoned, and
more than 1,000 massacred.

A Lithuanian revolt against the U.S.S.R. quickly followed the outbreak of the
war against Germany in 1941. The rebels declared the restoration of
Lithuania's independence and actively operated a provisional government,
without German recognition, from June 24 to August 5. Lithuania became part
of the German occupational administrative unit of Ostland. People were
repressed and taken to forced labor camps in Germany. The Nazis and local
collaborators deprived Lithuanian Jews of their civil rights and massacred
about 200,000 of them. Together with Soviet partisans, supporters of
independence put up a resistance movement to deflect Nazi recruitment of
Lithuanians to the German Army.

The Red Army forced the Germans out of Lithuania in 1944 and reestablished
control. Sovietization continued with the arrival of communist party leaders
to create a local party administration. The mass deportation campaigns of
1941-52 exiled 29,923 families to Siberia and other remote parts of the
Soviet Union. Official statistics state that more than 120,000 people were
deported from Lithuania during this period, while some sources estimate the
number of political prisoners and deportees at 300,000. In response to these
events, an estimated several tens of thousands of resistance fighters
participated in unsuccessful guerilla warfare against the Soviet regime from
1944-53. Soviet authorities encouraged immigration of other Soviet workers,
especially Russians, as a way of integrating Lithuania into the Soviet Union
and of fomenting industrial development.

Until mid-1988, all political, economic, and cultural life was controlled by
the Lithuanian Communist Party (LCP). The political and economic crisis that
began in the U.S.S.R. in the mid-1980s also affected Lithuania, and
Lithuanians as well as other Balts offered active support to Gorbachev's
program of social and political reforms. Under the leadership of
intellectuals, the Lithuanian reform movement "Sajudis" was formed in
mid-1988 and declared a program of democratic and national rights, winning
nationwide popularity. Inspired by Sajudis, the Lithuanian Supreme Soviet
passed constitutional amendments on the supremacy of Lithuanian laws over
Soviet legislation, annulled the 1940 decisions on proclaiming Lithuania a
part of the U.S.S.R., legalized a multi-party system, and adopted a number of
other important decisions. A large number of LCP members also supported the
ideas of Sajudis, and with Sajudis support, Algirdas Brazauskas was elected
First Secretary of the Central Committee of the LCP in 1988. In December
1989, the Brazauskas-led LCP split from the CPSU and became an independent
party, renaming itself in 1990 the Lithuanian Democratic Labor Party.

In 1990, Sajudis-backed candidates won the elections to the Lithuanian
Supreme Soviet. On March 11, 1990, its chairman Vytautas Landsbergis
proclaimed the restoration of Lithuanian independence, formed a new Cabinet
of Ministers headed by Kazimiera Prunskiene, and adopted the Provisional
Fundamental Law of the state and a number of by-laws. The U.S.S.R. demanded
revocation of the act and began employing political and economic sanctions
against Lithuania as well as demonstrating military force. On January 10,
1991, U.S.S.R. authorities seized the central publishing house and other
premises in Vilnius and unsuccessfully attempted to overthrow the elected
government by sponsoring a local "National Salvation Committee." Three days
later the Soviets forcibly took over the TV tower, killing 14 civilians and
injuring 700. During the national plebiscite in February more than 90% of
those who took part in the voting (76% of all eligible voters) voted in favor
of an independent, democratic Lithuania. Led by the tenacious Landsbergis,
Lithuania's leadership continued to seek Western diplomatic recognition of
its independence. Soviet military-security forces continued forced
conscription, occasional seizure of buildings, attacking customs posts, and
sometimes killing customs and police officials.

During the August 19 coup against Gorbachev, Soviet military troops took over
several communications and other government facilities in Vilnius and other
cities but returned to their barracks when the coup failed. The Lithuanian
Government banned the Communist Party and ordered confiscation of its
property.

Despite Lithuania's achievement of complete independence, sizable numbers of
Russian forces remained on its territory. Withdrawal of those forces was one
of Lithuania's top foreign policy priorities. Lithuania and Russia signed an
agreement on September 8, 1992, calling for Russian troop withdrawals by
August 31, 1993, which took place on time.

GOVERNMENT AND POLITICAL CONDITIONS
Lithuania is a multi-party, parliamentary democracy. The president, who is
elected directly for 5 years, is head of state and commander in chief
overseeing foreign and security policy. The president nominates the prime
minister and his cabinet and a number of other top civil servants.

The parliament (Seimas) has 141 members that are elected for a 4-year term.
About half of the members are elected in single constituencies (71), and the
other half (70) are elected in the nationwide vote by party lists. A party
must receive at least 5% of the national vote to be represented in the
Seimas.

Since 1991, Lithuanian voters have shifted from right to left and back again,
swinging between the Conservatives, led by Vytautas Landsbergis (now headed
by Andrius Kubilius), and the Labor (former communist) Party, led by former
president Algirdas Brazauskas. This pattern was broken in the October 2000
elections when the Liberal Union and New Union parties won the most votes and
were able to form a centrist ruling coalition with minor partners. President
Adamkus played a key role in bringing the new centrist parties together. The
leader of the center-left New Union (also known as the Social Liberal party),
Arturas Paulauskas, became the Chairman of the Seimas. The then-government of
liberal Rolandas Paksas got off to a rocky start and collapsed within 7
months. In July 2001, the center-left New Union Party forged an alliance with
the left-wing Social Democratic Party and formed a new cabinet under former
President Algirdas Brazauskas. The cabinet of Algirdas Brazauskas is made up
mostly of non-party technocrats and has emphasized the need for financial
discipline.

In January 2003, former Prime Minister and Liberal Union Party leader
Rolandas Paksas defeated incumbent president Valdas Adamkus in a runoff
presidential election. In December 2003, an ad hoc parliamentary commission
found that President Paksas' vulnerability to influence constituted a threat
to national security. On April 7, 2004, parliament removed President Paksas
from office. Parliamentary Speaker Arturas Paulauskas became acting
President. Valdas Adamkus won the second round of presidential elections in
June 2004 and was sworn in as President on July 12, 2004. The first round of
parliamentary elections was held October 10, 2004 and a second round was held
October 24, 2004. A new government, led by Prime Minister Algirdas
Brazauskas, took office on December 14, 2004.

Lithuania officially became a member of the North Atlantic Treaty
Organization on March 29, 2004 after depositing its instruments of treaty
ratification in Washington, DC. Lithuania joined the European Union on May 1,
2004.

Principal Government Officials
President--Valdas Adamkus
Prime Minister--Algirdas Brazauskas, Social Democratic Party
Minister of Foreign Affairs--Antanas Valionis, New Union
Minister of Defense--Gediminas Kirkilas, Social Democratic Party
Minister of Interior--Gintaras Furmanavicius, Labor Party
Minister of Justice--Gintautas Buzinskas, Labor Party
Minister of Finance--Zigmantas Balcytis, Social Democratic Party
Minister of Transportation--Petras Povilas Cesna
Minister of Economy--Kestutis Dauksys, Labor Party
Minister of Agriculture--Kazimira Prunskiene, Peasant Party
Minister of Education and Science--Remigijus Motuzas
Minister of Health--Zilvinas Padaiga, Labor Party
Minister of Social Security and Labor--Vilija Blinkeviciute, New Union
Minister of Culture--Vladimiras Prudnikovas, Labor Party
Minister of Environment--Arunas Kundrotas, Social Democratic Party
Seimas Chairman--Arturas Paulauskas

Lithuania maintains an embassy in the United States at 2622 - 16th Street,
Washington DC, 20009, tel: (202) 234-5860.

ECONOMY
The Soviet era brought Lithuania intensive industrialization and economic
integration into the U.S.S.R., although the level of technology and state
concern for environmental, health, and labor issues lagged far behind Western
standards. Urbanization increased from 39% in 1959 to 68% in 1989. From
1949-52 the Soviets abolished private ownership in agriculture, establishing
collective and state farms. Production declined and did not reach pre-war
levels until the early 1960s. The intensification of agricultural production
through intense chemical use and mechanization eventually doubled production
but created additional ecological problems. This changed after independence,
when farm production dropped due to difficulties in restructuring the
agricultural sector.

The transportation infrastructure inherited from the Soviet period is
adequate and has been generally well maintained since independence. Lithuania
has one ice-free seaport with ferry services to German, Swedish, and Danish
ports. There are operating commercial airports with scheduled international
services at Vilnius, Kaunas, and Klaipeda. The road system is good. Border
facilities at checkpoints with Poland were significantly improved by using EU
funds. Telecommunications have improved greatly since independence as a
result of heavy investment. The Telecom company had a monopoly on the market
until the end of 2002, but now there are a number of cell phone companies to
provide competition.

The economy of independent Lithuania had a slow start, as the process of
privatization and the development of new companies slowly moved the country
from a command economy toward the free market. By 1998, the economy had
survived the early years of uncertainty and several setbacks, including a
banking crisis, and seemed poised for solid growth. However, the collapse of
the Russian ruble in August 1998 shocked the economy into negative growth and
forced the reorientation of trade from Russia toward the West. Since the
Russia crisis, the focus of Lithuania's export markets has shifted from East
to West. In 1997, exports to former Soviet states were 45% of total
Lithuanian exports. Today, exports to the East (the Commonwealth of
Independent States--CIS) are only 16% of the total, while exports to the
EU-25 are 71%. The government of 1999, which was led by Prime Minister
Kubilius, managed to control raging budget deficits in the midst of the
crisis, and all successor governments have maintained that fiscal discipline.

The last couple of years have been good for the Lithuanian economy. In 2003,
Lithuania's GDP increased 9.7%, exceeding even the most optimistic
expectations. Private consumption was the principal driver of recent economic
growth. The contribution of domestic market oriented sectors, especially
construction, also was increasing. Growth was strongest in construction,
financial intermediation, and processing and light industries. Inflation was
low, the growth of the external account deficit stabilized, and the state
finances improved noticeably with a fiscal deficit of 1.2% of GDP in 2002.
(However in 2004 the budget deficit increased to 2.48% of GDP.) Progress has
been achieved in the areas of privatization and deregulation. Weaknesses
remain in public policy development and structural and agricultural reforms.

The privatization of major state enterprises is expected to be completed in
the next couple of years. Currently, 78% of the economy's output is generated
by private sector. The share of employees in the private sector rose to about
70%. Recently, the Government of Lithuania completed banking sector
privatization, with 89% of this sector controlled by foreign capital, mainly
by Scandinavian capital. The privatization of the national gas and power
companies "Lietuvos Dujos" (Lithuanian Gas) and "Vakaru skirstomieji tinklai"
(Western electricity distributor) is completed. However, the privatization of
"Rytu skirtomieji tinklai" (Eastern electricity distributor), "Lietuvos
Energija" (Lithuanian Energy), and "Lithuanian Railways" has been postponed.

Inflation reached 2.9% in 2004, after two years of deflation, largely as a
result of the sharp rise in international oil prices. The minimum wage
increased in 2005 to $197.50 per month, well below the poverty threshold. The
average wage stands at $458 per month.

Exports to the United States make up 4.7% of all Lithuania's exports, and
imports from the United States comprise 1.57% of total imports to Lithuania.
Lithuania has accumulated foreign direct investment (FDI) of $6.3 billion.
U.S. investments accounted for 6.3% of FDI. The current account deficit in
2004 stood at 7.2% of GDP.

On February 2, 2002, the government repegged the Litas from the U.S. dollar
to the Euro at the rate of 3.4528 Litas for 1 Euro. The repeg, which went on
smoothly, reflects a change in trade orientation and is to help Lithuania
prepare for European Monetary Union. With the appreciation of local currency
against the U.S. dollar, production costs to enterprises have been
decreasing, but the higher exchange rate is not favorable to exports.

DEFENSE
Lithuania, a relatively new NATO member, fully endorses the concept of
"collective defense." National policy recognizes the primacy of NATO as the
guarantor of security in Europe. The goal of Lithuania's defense policy is to
create a military that can contribute to international missions through the
NATO alliance, the UN, and other groups, and to continue to integrate
Lithuania into Western defense structures. The defense ministry is
responsible for combat forces, search and rescue operations, and
intelligence. The government has committed to achieving the goal of
dedicating 2% of GDP for defense spending.

Lithuania maintains 8,500 active duty troops and 8,000 reserve troops. The
core of the Lithuanian force structure is the Iron Wolf Rapid Reaction
Brigade, which consists of five battalions and appropriate support elements.
The Lithuanian Air Force operates 17 fixed wing aircraft and nine
helicopters. The Home Guard is currently organized into seven districts.
Plans call for reorganization into five districts.

The Border Police are under the Interior Ministry and are responsible for
border protection, passport and customs duties, and interdiction of smuggling
and trafficking activities.

FOREIGN RELATIONS
Lithuania became a member of the United Nations on September 18, 1991, and is
a signatory to a number of its organizations and other international
agreements. It also is a member of the Organization for Security and
Cooperation in Europe, the North Atlantic Coordinating Council, and the
Council of Europe. Lithuania gained membership in the World Trade
Organization on May 31, 2001, and in November 2002 was invited to join NATO.
Lithuania officially became a member of the North Atlantic Treaty
Organization on March 29, 2004 after depositing its instruments of treaty
ratification in Washington, DC. Lithuania joined the European Union on May 1,
2004.

Lithuania maintains foreign diplomatic missions in 60 countries on six
continents, a consular post in one country that is not represented by an
embassy, consular posts led by Honorary Consuls in 32 countries that are not
represented by an embassy, and a special mission in one country without other
diplomatic representation. Lithuania's liberal "zero-option" citizenship law
has substantially erased tensions with its neighbors. Its suspension of two
strongly ethnic Polish district councils on charges of blocking reform or
disloyalty during the August 1991 coup had cooled relations with Poland, but
bilateral cooperation markedly increased with the holding of elections in
those districts and the signing of a bilateral friendship treaty in 1994.
Relations with Poland are now among the closest enjoyed by Lithuania.
Although a similar bilateral friendship agreement was signed with Belarus in
1995, Lithuania has joined the United States and other European nations in
urging the Government of Belarus to adopt democratic and economic reforms.
President Adamkus was instrumental in brokering a peaceful resolution to the
electoral challenges in Ukraine in 2004, and Lithuania plays an important
leadership role in promoting democracy throughout the region.

U.S.-LITHUANIAN RELATIONS
The United States established diplomatic relations with Lithuania on July 28,
1922. The Soviet invasion forced the closure of the Legation to Lithuania on
September 5, 1940, but Lithuanian representation in the United States
continued uninterrupted. The United States never recognized the forcible
incorporation of Lithuania into the U.S.S.R. and views the present Government
of Lithuania as a legal continuation of the interwar republic. Lithuania has
enjoyed most-favored-nation treatment with the United States since December
1991. Since 1992, the United States has committed more than $100 million to
Lithuania's economic and political transformation and to address humanitarian
needs. The United States and Lithuania signed an agreement on bilateral trade
and intellectual property protection in 1994--a bilateral investment treaty
in 1997, and in 1998, the United States signed a "Charter of Partnership"
with Lithuania and the other Baltic countries. Under this partnership,
bilateral working groups focusing on improving regional security, defense,
and economic issues were established.

Principal U.S. Officials
Ambassador--Stephen Mull
Deputy Chief of Mission--Thomas Kelly
Political/Economic Officer--Nancy Cohen
Public Affairs Officer--Anthony Pahigian
Defense Attaché--LTC Joseph King (USA)
Defense Cooperation Officer--LTC R. Darr Reimers
Management Officer--Cheryl Johnson
Consular Officer--James Fellows

The U.S. Embassy in Lithuania is located at Akmenu 6, 2600 Vilnius [tel/fax:
(370) 5-2665500]. The Embassy website is http://vilnius.usembassy.gov/