VZCZCXYZ0025
RR RUEHWEB

DE RUEHTL #0433/01 1791418
ZNR UUUUU ZZH
R 281418Z JUN 07
FM AMEMBASSY TALLINN
TO SECSTATE WASHDC 9961

UNCLAS TALLINN 000433 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV OREP AMGT ASEC AFIN EN
SUBJECT:  ESTONIA:  SCENESETTER FOR CODEL BOEHNER 
 
 
¶1. (SBU) Summary:  The last eight months have been a banner 
period for U.S.-Estonian bilateral relations, including 
President Bush's November visit to Tallinn, Foreign 
Minister Paet's recent visit to Washington for a 
celebration of the 85th anniversary of diplomatic 
relations, and President Ilves' just-completed visit to 
Washington.  Estonians are very grateful for U.S. support 
in the aftermath of their government's decision to relocate 
a Soviet war memorial known as the "Bronze Soldier" in late 
April.  The only issue of any contention in the bilateral 
relationship is Estonia's desire to join the Visa Waiver 
Program. 
 
¶2.  (SBU) Three and a half years after NATO and EU 
accession, Estonia remains a strong ally on all fronts.  It 
is deeply committed to trans-Atlantic security institutions 
and pro-free market economic policy.  Estonia is a 
steadfast ally in the Global War on Terror (GWOT) in both 
Afghanistan and Iraq, and an effective role model for 
democracy in the former Soviet states and beyond.  Estonia 
is gradually becoming a more vocal member of the EU and is 
a strong supporter of both EU and NATO enlargement.  The 
Estonian economy continues to boom, although inflation and 
the current account deficit remain high while the labor 
market is increasingly tight.  Relations with Russia remain 
difficult, particularly after the move of the "Bronze 
Soldier" monument.  Following cyber attacks on Estonia's 
high-tech infrastructure in May, the GOE raised the 
national security implications of the issue at NATO, within 
the EU and bilaterally with its allies. 
 
¶3.  (SBU) It would be helpful to U.S. objectives in Estonia 
if members of the Codel would thank the Estonians for their 
stalwart support in Iraq and Afghanistan, express 
condolences for the recent deaths in action of two Estonian 
soldiers in Afghanistan, and assure them of continued U.S. 
support. 
 
End summary. 
 
¶4.  (SBU) This has been a big year for U.S.-Estonian 
bilateral relations.  President Bush came to Tallinn last 
November, the first ever visit to Estonia by a sitting U.S. 
President.  Last week, Estonian President Toomas Hendrik 
Ilves met with President Bush at the White House. 
Following riots, cyber attacks and deteriorating relations 
with Russia in late April and early May, the United States 
voiced strong public support for Estonia.  (Note:  The 
United States strongly supported the Estonian government's 
right to decide what to do with the "Bronze Soldier" and 
decried Russia's failure to provide adequate security for 
the Estonian embassy in Moscow.  At the same time, we 
called for dialogue, both between Estonia and Russia and 
between ethnic Estonian and Russian residents of Estonia as 
the best way to resolve difficult issues and build mutual 
understanding.  End Note.)  In addition, the three Baltic 
Foreign Ministers recently met with Secretary Rice to mark 
85 years of relations with the United States.  Appreciation 
for U.S. non-recognition of the Soviet occupation of 
Estonia remains an important source of good will towards 
the United States.  However, one major challenge for our 
public diplomacy efforts is to engage the next generation 
of Estonians to ensure that American-Estonian relations 
will remain strong for the long term. 
 
FOREIGN POLICY AND SECURITY 
 
¶5.  (U) GLOBAL WAR ON TERROR.  Estonia is a strong 
supporter of the U.S. position in the GWOT.  Estonian 
troops participate in NATO operations (in Afghanistan, 
Kosovo, and Iraq), EU operations (the EU's Nordic Battle 
group), Operation Enduring Freedom in Iraq, and other 
missions (including the UN mission in Lebanon).  In 
Afghanistan, Estonian troops serve as part of a UK-led 
Provisional Reconstruction Team in Helmand Province, the 
epicenter of Afghanistan's poppy producing region.  In 
Iraq, Estonian soldiers are embedded with U.S. troops in 
some of the toughest counter-insurgency operations outside 
of Baghdad.  On June 23, 2 Estonian soldiers were killed in 
Afghanistan.  In 2004, 2 others were killed in Iraq. 
Overall, 8.2% of Estonia's military is currently deployed 
overseas, while the country is on track to meet its NATO 
commitment of devoting 2% of its GDP to defense spending 
(currently at 1.83%).  Estonia is a vocal supporter of NATO 
enlargement; GOE officials often speak out on the 
importance of bringing Balkan and Eastern European 
countries into NATO in order to cement democratic and free- 
market reforms there. 
 
¶6.  (U) REGIONAL DEMOCRACY PROMOTION.  Estonia plays an 
active role in encouraging democratic reforms and economic 
development in several former Soviet states.  Estonia's 
experience of transforming itself from a Soviet-occupied 
country into a healthy democracy with a booming economy has 
given it immense credibility in the region in promoting 
democracy and transformational diplomacy.  The GOE has 
provided training in law enforcement, judicial reform, 
freedom of the press, democracy building, economic and 
market reforms, and IT to civil servants from the Balkans, 
Georgia, Moldova, and the Ukraine.  Georgia is of 
particular importance for the GOE -- Estonian President 
Ilves, Prime Minister Ansip, and Foreign Minister Urmas 
Paet have all visited Tbilisi to strengthen ties between 
the two countries.  Former Prime Minister Mart Laar serves 
as a personal advisor to Georgian President Mikheil 
Saakashvili on political and economic reform. 
 
ECONOMIC PERFORMANCE 
 
¶7.  (U) Estonia's economy is probably the most dynamic of 
the "Baltic Tigers," and has been growing at 7-11% per year 
for the past seven years.  The state budget has been in 
surplus since 2001, (currently 3.3% of GDP) and 
unemployment is currently 5.3% and falling.  The biggest 
challenges facing the economy are:  a labor shortage, a 
growing current account deficit, and inflation (caused 
primarily by rapid growth, rising energy costs and rising 
wages).  The national currency, the Kroon, is pegged to the 
Euro.  Estonia hopes to join the Euro zone by 2011.  (Note: 
Estonia meets all Euro criteria except for inflation.  End 
Note.) 
 
¶8.  (SBU) Since the early 1990s, consecutive Estonian 
governments have backed a business- and investor-friendly 
economic policy featuring a flat 22% tax on personal income 
and no tax on reinvested profits.  Leading sectors include 
computer, software and cellular technologies, tourism and 
manufacturing.  The United States is the eighth largest 
foreign direct investor, but U.S. direct investment 
accounts for less than 2.5% of total FDI, well behind the 
Swedes and Finns, who together account for more than 80% of 
the total.  Estonia is best known for its highly developed 
IT sector and widespread use of technology in government 
and daily life.  Internet usage in Estonia is over 60%, and 
online banking is upwards of 80% - both the highest in 
Europe.  Cabinet ministers work on the basis of e- 
government and Estonia was the first country in the world 
to offer e-voting in a nationwide election.  The 
development and support offices of the internet-telephone 
giant Skype -- now owned by E-Bay -- are located here. 
 
¶9.  (U) Another central issue to the Estonian economy is 
energy security.  Large domestic oil shale reserves allow 
Estonia to remain relatively independent of Russian energy 
supplies.  The proposed NordStream gas pipeline from Russia 
to Germany may pass through Estonia's economic zone in the 
Baltic Sea, very close to its territorial waters.  GOE 
officials state firmly that Estonia will closely study the 
environmental and security issues related to the project. 
Speaking at CSIS in late June, President Ilves said that 
Germany's "failure" to consult with other EU members 
regarding NordStream undermined trust and highlighted the 
need for a common EU approach to energy security. 
 
RUSSIA 
 
¶10.  (SBU) RUSSIAN RELATIONS.  Estonia's relationship with 
Russia is difficult and complicated following nearly 50 
years of Soviet occupation.  While the countries share 
trade and investment ties, they have not been able to 
conclude a border treaty.  Depending on the political 
climate, trucks crossing from Estonia into Russia may 
encounter delays of up to several days.  Estonia's decision 
to relocate the "Bronze Soldier" prompted riots by ethnic 
Russians in Tallinn.  Following the riots, Russia put heavy 
economic and diplomatic pressure on Estonia - including 
refusing to disperse a mob outside the Estonian Embassy in 
Moscow for several days, limiting rail and truck traffic 
across the border and encouraging a boycott of Estonian 
goods.  At the worst point, rail traffic (oil, coal, wood 
and other materials) was down by 50% - significantly 
reducing Estonia's transit revenues and complicating supply 
lines for Estonian companies.  While rail traffic has 
increased, it has still not returned to normal levels. 
 
¶11.  (SBU) Ethnic Russians make up approximately 25 percent 
of the population of Estonia.  Russia has frequently 
complained about GOE treatment of its Russian speaking 
minority.  However, until the Bronze Soldier riots, 
Estonia's efforts to integrate its minority population were 
viewed as a model for the region.  While Estonia can still 
point to significant accomplishments of its integration 
strategy, the riots revealed deep fissures remain between 
ethnic Russians and Estonians living in Estonia.  The GOE, 
which has traditionally engaged in language-based 
integration programs, is working on a new strategy that 
will continue with language programs, but also focus on 
society building and cultural understanding among Estonians 
of all ethnicities. 
 
CYBER WARFARE 
 
¶12.  (SBU) Immediately following the Bronze Soldier riots, 
Estonian websites, routers, and servers came under a wave 
of coordinated cyber attacks.  The attacks targeted GOE 
websites (e.g., of the President, Prime Minister, MFA, and 
MOJ) as well as commercial and media sites (e.g., online 
banking and news portals).  The attacks were not highly 
technical and mainly employed botnets (robot networks of 
computers and/or servers) to shut down targets through 
"denial of service" attacks.  Russian-language internet 
chat-forums were used to discuss the times, targets, and 
methodology of these attacks.  The GOE cannot prove a 
direct link between the Russian government and the attacks, 
but Estonian officials believe there is significant 
circumstantial evidence implicating Russia.  The GOE has 
raised the cyber attacks at NATO, within the EU and 
bilaterally with its allies -- with a focus on the national 
security implications.  Estonian President Ilves discussed 
the cyber attacks with President Bush and other U.S. 
officials during his visit to Washington at the end of 
June. 
 
VISA WAIVER 
 
¶13.  (SBU) Securing visa-free travel to the United States 
for Estonian citizens remains a priority for both the GOE 
and Estonian public.  Senior GOE officials regularly raise 
the issue of membership in the U.S. Visa Waiver Program at 
all levels with the USG. 
 
SUGGESTED POINTS 
 
¶14.  (U) During the meetings in Tallinn, the CODEL may wish 
to: 
 
-- Express our condolences for the recent casualties in 
Afghanistan and our appreciation for Estonia's ongoing 
support in Iraq and Afghanistan at this critical time and 
encourage Estonia to extend its troop commitment in both 
countries beyond December 31. 
 
-- Note Estonia's formidable economic progress.  Underscore 
importance of maintaining continued transparent, investor- 
friendly environment to further economic success. 
 
-- Express U.S. solidarity with Estonia in light of recent 
cyber attacks. 
 
Phillips