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LSDP News 2016 04 28

Recognizing Baltic independence was a calculated risk

 Interview with Mr Jón Baldvin Hannibalsson

15 February 2016

You were Iceland’s Minister of Foreign Affairs for 7 years, covering the end of the Cold War (1988–1995). How did you see all those dramatic historical changes: the Perestroika, the fall of the Berlin Wall, the collapse of the Soviet Union, the rise of new democracies in the early 1990s?

Two decisive events aroused global attention: The Singing Revolution and the Baltic human chain. It was both a national and cultural awakening and a democratic revolution as well..

For us in the West, it was self-evident that if you restored democratic institutions (elections, parliaments, government responsible to parliament), then you should have been welcomed into the family of European democracies. At least, one should have expected this. But it wasn’t so. Why wasn’t it?

You were caught in the end-game of the Cold War. This end-game was based on a strong political partnership between the major leaders of the West and Mikhail Gorbachev. He was ready to accept not to use force to maintain the status quo in Central and Eastern Europe. But he drew the line at the borders of the Soviet Union, despite the fact that you had been invaded, occupied and annexed illegally.

Western leaders thought that if you were allowed to break out of the Soviet Union, it might endanger Gorbachev’s position. The break-up of the Soviet Union would lead to Gorbachev´s down-fall, which again would mean that the hard-liners would be back. We would be back in the Cold War. It could even lead to armed conflict in Eastern Europe. Central Europe would be endangered as well. Last, but not least, the peaceful reunification of Germany would be lost. There was a lot at stake. Disarmament, arms-control, withdrawal of occupation forces – the expected peace divident.

However, such line of thinking was mistaken on behalf of western leaders. It is always wrong to place all the stakes on a single individual. It turned out that even when Gorbachev fell, it was not historical inevitability that hardliners would be back. It turned out not to be so.

I personally was reluctant to follow such a recipe. And I had a different view of political reality inside the Soviet Union.

I come from a very political family. I am a third generation of Iceland’s social democratic leaders during a century. My father was a leader of the labor movement for a quarter of a century. My eldest brother studied in Moscow and Poland in 1954-1961, another brother studied in Charles University in Prague in the early 60s.. Both had close contacts with dissidents in Russia, the Baltic States, Poland, Czechoslovakia and elsewhere.

I myself as a Fulbright-scholar at Harvard studied and did research on comparative economic systems. My conclusion on the soviet economy was simple: it didn’t work, it was unworkable, it had lost its driving force, it was inflexible, wasteful, and inefficient, although it had sectors, mainly connected to the military, which were provided with enormous resources, with some success. The political elite – the nomenklatura – had lost its belief in the system. They had lost their appetite for using force to stay in power. And the Soviet Union could not be kept together, except by force. The soviet empire was in the throes of an existential crisis, just like the British, French, Spanish and other colonial systems had dissolved in the past. It was not a question of if – but only when.

I had my doubts about the wisdom of western leadership. When they started appealing to the captive nations to keep the Soviet Union together – in the name of peace and stability – it was obvious that something was wrong. And it turned out that we were right but they were wrong.

Here, in Lithuania, you are very well known and highly respected as the Icelandic foreign minister, who made the international recognition of Lithuania possible, during a very complicated period in our history. You were also the first foreign minister in the world to recognize Croatia as a sovereign nation in 1991. How was the decision of recognizing the Baltic States in 1991 born?

It is no secret that it was primarily my own initiative. Was it criticized inside the country? The Icelandic people felt deep sympathy for restored Baltic independence. As a small nation we tend to support David against Goliath.  It was not lost in our historical memory that you won your independence after the First World War at the same time as we did.

Nevertheless, it is no secret that we were dependent on the Soviet Union for the very vital part of our foreign trade, namely, oil. The strongest political lobby in Iceland – ship owners and fish business magnates – were deeply worried that I was irresponsible, endangering their business relationships, etc. However, because the people were positive, they did not do it openly, but behind closed doors.

We took a calculated risk. If we could make sure that we could have access to oil from other sources, we would be OK. Remember, the Soviet Union was at the time in steep economic decline. They offered low prices for low quality products. We could secure more profitable markets elsewhere. So we took a calculated risk. It turned out also to be right.

The Soviets protested, accusing Iceland’s government of interfering into their domestic affairs. They recalled their ambassador from Reykjavik and threatened to terminate the trade relationship. I took it very seriously. I put together a team of legal experts (one of them was from Estonia), and together we prepared a legal document, proving that Iceland was not interfering into the domestic affairs of the Soviet Union. We supported our case by citing Soviet obligations under international treaties, such as the Helsinki Final Act of 1975 and many other binding international agreements and precedents. We clinched the matter by citing the Soviet Congress of national deputies, which had recently declared the Molotov-Ribbentrop pact invalid. It meant that this infamous pact, which was the major justification for the division of Europe between the two dictators, Hitler and Stalin, was by now null and void.

When you look back, a quarter of a century later, how do you evaluate the progress made by the newly independent Baltic countries, with a special reference to Lithuania?

Broadly speaking the Baltic post-independence story is a success story. Why? You have succeeded in consolidating your democratic institutions. You have integrated your economies with the inner market of the European Union. And you have taken out an insurance policy against potential external threats by joining NATO. NATO is the collective security organization of Western democracies. By striving to fulfill the entrance requirements of those two major organizations, you adopted a long-term strategy and internal discipline, despite political turmoil and economic hardship during the transition period. This is a testimony to a certain level of political majority.

Of course you have plenty of problems to deal with. But believe me –  you are not alone in facing difficult problems. Look at Europe! Europe seems to be lurking from one crisis to another. There is no unity of purpose. No long-term strategy. Her leadership is reacting to problems – too little and too late – instead of solving them.

But a more realistic comparison is with your neighbors in Ukraine. Ukraine started off as a sovereign state at the same time as you did. But, what difference! We have to admit it – the political leadership in Ukraine has failed utterly to do what had to be done during the transition period. The oligarchs are parasitic. The corruption is endemic. Hence, Ukraine is tragically vulnerable, facing external aggression and weak in forging internal unity. They can learn a lot from the post-independence Baltic experience.  I hope it is not too late.

After independence the Baltic countries adopted, to a different degree, the so-called neo-liberal model of free markets and minimum government. What is your opinion on that – from the point of view of a Nordic social-democrat?

Although I am a convinced social-democrat, I am also a political realist. After independence you had to start from scratch. The centralized, soviet-type command economy was paralyzed. The top-priority was to restart the engine. Create incentives for individuals and companies for wealth-creation. You had to liberate prizes but keep inflation under control. For the sake of stability you had to link your national currency to a stable one (first the deutsche mark, then the euro), without losing competitiveness. You had to design a tax system with incentives for economic growth.

If there is no wealth creation, there is no welfare state. The Nordic model does not reject markets, but puts them under democratic control. First you create the wealth. Then you make sure that it is fairly distributed. Extreme inequality in the distribution of income and wealth has become, in the last few decades, a global problem. Accumulation of wealth in the hands of a tiny elite of financial oligarchs is incompatible with genuine democracy. It is the role of the democratic state to make sure that all citizens have equal opportunity, when it comes to education, health care, housing, pensions, etc. –  in other words to maintain social cohesion on the basis of fair distribution of income and wealth.

This is what social-democracy is all about. It is the only socio-economic model of the last century which has withstood the test of globalization of the 21st century. The record of the Nordic countries is the proof. But each country must find its own way in approaching this ideal. What we know for sure is that in the near future – due to the forces of technological change and globalization – the need for effective social-democratic policies will be greater than ever. If social-democratic solutions were unknown, we would have to invent them.

Mr Jón Baldvin Hannibalsson was leader of the Icelandic Social-democratic party (SDP) 1984-96.He has been Minister of Finance and Foreign Affairs and External Trade of Iceland (1987-95). He is an honorary citizen of Vilnius and an honorary doctor of the University of Vilnius.

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