The largest of the three Baltic Republics, Latvia has, like Estonia to the north and Lithuania to the south, been an important trading center and strategic pawn in the Baltic region. The various Latvian tribes were self-governing until the end of the 13th century when the territory was conquered by the German Teutonic Knights. Latvia was then subject to sporadic invasions by the Poles and the Swedes until the 18th century when Russia, under Peter the Great, emerged as a major European power. By 1795, the entire Latvian territory was under Russian control. The Bolshevik revolution of 1917 heralded the end of Russian suzerainty: this was decided at the 1918 Treaty of Brest-Litovsk under which Russia was obliged to cede its Baltic territories.
The Bolsheviks invaded Latvia the following year, but were driven out by a joint Latvian-German force. The Treaty of Versailles then forced the Germans to leave, allowing the Latvians to assert their independence for the first time in more than 600 years. However, World War II again threatened the country with foreign domination and, in 1940, the Russians took over once more. Latvia had, that same year, signed a bilateral non-aggression pact with the Germans and a pact with Moscow. The Russians were driven out by the Nazi invasion of the Soviet Union in 1941, but returned three years later, after which Latvia was incorporated into the Soviet Union along with Estonia and Lithuania as one of the 15 Soviet republics. The process that led eventually to Latvia’s present independence began with the accession of Mikhail Gorbachev as Soviet leader in 1985.
Campaigning for democracy and independence began in earnest in October 1988 with the formation of the Popular Front of Latvia (LTF). In contrast with neighboring Estonia, the Latvian Communist Party adopted an anti-reform stance and called for the establishment of presidential rule (by decree). At elections to the Supreme Soviet in March 1990, the Popular Front of Latvia won a convincing victory. The new Latvian Supreme Soviet thereupon adopted a series of resolutions to prepare the transition to full independence. The new state was quickly recognized internationally and re-admitted to the UN.
Gradually, the trappings of sovereign statehood were assumed and, in March 1993, a new currency, the Lat, was introduced. Three months later, the first post-independence elections were held. These brought to power the first of a dozen governments which have held office in the country’s first decade of independence. The proportional representation system used by Latvia tends to promote coalition politics and, in the early stages of its post-Soviet order, any significant dispute has seemed sufficient to undermine a particular administration. Political parties emerge and fade with bewildering speed. The present administration is headed by Indulis Emsis, who was appointed and approved by the Saiema (national assembly) after Repse's government resigned in early 2004. Emsis's government is another center-right government; a coalition of the Union of Famers and Greens (Emsis's own), the People's Party and the Latvia First Party. The president of the republic, who also chairs the Saiema,is Vaira Vike-Freiberga; she was elected to a second term in June 2003.
Irrespective of their complexion, almost all Latvian parties agreed on two essential issues: that Latvia should join NATO and the European Union as soon as possible. Substantial progress has been made towards both objectives. The NATO issue is a delicate one, given that Latvia borders Russia: though initially hostile, it now appears that the Russians will concede the entry of all three Baltic states into the treaty and an invitation to join NATO was offered at the NATO summit in Prague in November 2002. Membership of the EU demanded at least a decade of major structural reforms to Latvia’s political and economic systems. The first steps were taken with the signing of an Association Agreement with the EU and, in 1995, admission to the Council of Europe. By the end of 2003, all the EU’s entrance criteria had been met. In 2003, the final hurdle of popular endorsement was overcome when a national referendum returned a two-thirds majority in favor. Latvia joined along with nine other applicants - including its Baltic neighbors - in May 2004.
Other than the economy, the other major issue for the Latvian government concerns citizenship and relations between Latvians and ethnic Russians living in Latvia. The suppression of Latvian language and culture during the Soviet era has left a legacy of hostility which is only gradually being overcome, while Russians now feel subject to discrimination in certain areas. Though there has been no serious conflict between the communities, it remains a delicate issue.
Under the current constitution, legislative power is vested in the elected 100-member Saiema (Supreme Council) which is elected for a four-year term by proportional representation. Executive power is held by the Prime Minister who heads an appointed cabinet of ministers. The head of state, the President, is elected by - and chairs - the Saiema.
With few raw materials, the Latvian economy is principally dependent on producing manufactured goods from imported materials. Key industries include vehicle and railway rolling stock manufacture, electronics, and the production of fertilizers, chemicals, timber and wood products, light machinery and food processing, which draws on Latvia’s own dairy and fisheries products as well as imported raw materials from the Russian Federation. The infrastructure is, in common with the other Baltic States, comparatively well developed. Latvia relies on power supplies from its Baltic neighbors and on imported fuel from the Russian Federation to meet its energy needs; energy imports account for one-third of Latvia’s total import bill. Through the Ventsplils Nafta terminal on the Baltic coast, Latvia is one of the major outlets for Russian oil exports. In the service sector, Riga is now an important regional financial center. Latvia has pursued economic reform in a gradual manner. The government’s reform program during the 1990s was limited by political opposition which prevented, for example, the sale of major state enterprises. The economy performed steadily during most of the 1990s, although the effects of the immediate post-Soviet period and the 1998 Russian economic crisis meant there was an overall contraction between 1990 and 2000 of about 20 per cent. Since 2000 annual growth has accelerated to its current level of about 8 per cent, possibly conferring on Latvia the status of a ‘Baltic tiger’. The country introduced its own currency, the Lat, in 1993: this is now the sole legal tender. The following year, a free trade zone was established with Estonia and Lithuania. In June 1995, Latvia signed an Association Agreement with the European Union, as the first stage on the path towards joining the EU – a major objective of successive governments since independence. Negotiations proceeded more rapidly and successfully than had been expected, and Latvia was able to join the EU, along with nine other countries (including both of Latvia’s Baltic neighbors) on 1 May 2004. Latvia had previously been admitted to the European Bank for Reconstruction and Development in 1991, then in 1996 to the World Bank and IMF (which in 2001 provided a loan of US$40 million to finance structural reforms). The EU – especially Germany, Sweden and Finland – now accounts for half of total Latvian trade; the Russian Federation and the other Baltic states are the other main trade partners.