Lithuanian President Cites Russia Threat in Election Race

Lithuanian President Dalia Grybauskaite used the last debate before for the May 11 election to focus on Russia’s expansionism, which is fueling concern in the Baltic countries.

Grybauskaite said she used “fierce” rhetoric to persuade NATO partners to boost the alliance’s military presence in the region that regained independence as the Soviet Union collapsed more than two decades ago. Conversations with U.S. President Barack Obama and Vice President Joe Biden helped add warplanes for air patrols and surveillance and about 150 U.S. paratroopers for exercises in Lithuania, she said.

The North Atlantic Treaty Organization is upgrading contingency plans, holding military drills in eastern Europe and stepping up air and naval policing on its flanks as President Vladimir Putin masses troops on Ukraine’s border. The newest members are pushing for permanent NATO bases in the region.

“Russia is trying to impose its dominance by force and it’s a direct and open threat to the Baltic region,” Grybauskaite, 58, said in a televised debate late yesterday. “It’s only over the past five years we have established real contingency plans” in case of a Russian attack.

Russia is testing its army’s combat readiness, Putin said yesterday, ramping up tension in the region a day after pledging a troop pullback.

Grybauskaite Leads

Lithuania says that in the past two months Russia has conducted unannounced drills, disturbed civilian shipping in the Baltic Sea and suspended a 2001 treaty. Under the pact, it provided information to Lithuania about armed forces in the neighboring Kaliningrad enclave and the two countries carried out mutual inspections.

Grybauskaite is poised to win another five years in office, opinion polls show. Her support is at 41 percent, compared with 16 percent for former Finance Minister Zigmantas Balcytis, her closest rival, according to an April 11-24 poll for the ELTA news service by polling company Baltijos Tyrimai. The survey of 1,001 adults had a margin of error of 3 percentage points.

The president in the country of 2.94 million people is mainly responsible for foreign policy and nominates cabinets for parliamentary approval, appoints judges and can veto laws.

Euro Adoption

Over five years in office, Grybauskaite has supported the government’s efforts to control the budget deficit and inflation to qualify for euro adoption. Forecasts by the International Monetary Fund and Standard & Poor’s that Lithuania will get European Union approval to make the currency switch on Jan. 1 have helped push the country’s borrowing costs to record lows.

The yield on Lithuania’s 3.375 percent euro bond maturing in 2024, fell 1 basis point, or 0.01 percentage point, to 2.78 percent at 7 p.m. in Vilnius, the lowest since it began trading in January, according to data compiled by Bloomberg.

Lithuania is poised to follow the other two Baltic nations into the eurozone to become become the currency area’s fifth former communist member after Estonia joined in 2011 and Latvia this year. The other eastern European countries in the group are Slovenia and Slovakia.

Lithuania’s economy will grow at the 28-nation EU’s second-fastest pace this year and next, behind neighboring Latvia, according to forecasts by the European Commission. Expansion will accelerate to 3.5 percent this year and 3.9 percent in 2015 from 3.2 percent in 2013, it said.

“Economic trends are stable,” Nerijus Maciulis, Chief Economist at Swedbank’s Lithuanian unit, said by phone today. “No matter who wins the presidential election, neither the government nor current economic policy are likely to change.”

‘Firm Position’

Grybauskaite has spearheaded construction of a liquefied natural gas terminal on the Baltic sea that is scheduled to begin operations in December. The terminal now gives freedom to Lithuania to break off relations with Gazprom should any political pressure from Russia resurface, the president said.

Grybauskaite said her “firm position” in Lithuania’s battle with Russia’s OAO Gazprom (GAZ) over gas pricing that the Baltic nation says is at least a quarter more than other European buyers pay is yielding a discount “without compromising the interests of the country.” Prime Minister Algirdas Butkevicius said yesterday that Gazprom may reduce the cost of Lithuanian gas imports by as much as 23 percent next year.

‘Pressure Instrument’

“LNG is one of our pressure instruments that’s worked,” Grybauskaite said of talks with Gazprom. “Gazprom is now forced to cede and withdraw its demands that were completely unacceptable” such as compromises on transit to Kaliningrad and halting arbitration proceedings in Stockholm over what Lithuania calls unfair pricing.

Grybauskaite, an independent candidate and the country’s first female head of state, is a former finance minister and an ex-European Union budget commissioner. She won the 2009 presidential elections with 69 percent of the vote.

“Grybauskaite’s political clout and electoral support provide her with substantial informal influence on governmental policies,” Otilia Dhand, an analyst at Teneo Intelligence in London, said in a report on May 7.

To contact the reporters on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net; Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Andrew Langley

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