C O N F I D E N T I A L SECTION 01 OF 03 TALLINN 000125
SIPDIS
FOR EUR/NB - GILCHRIST/RODRIGUES NSC FOR OVP - HAAVE DOE FOR APICELLI
E.O. 12958:
DECL: 05/08/2019
TAGS: PGOV, PREL, ENRG, NATO, ECON, EN
SUBJECT: SCENESETTER FOR ESTONIAN PM ANSIP'S U.S. VISIT MAY 12-15
Classified By: CDA Karen Decker for reasons 1.4 (b) & (d).

1. (C)
SUMMARY: Prime Minister Andrus Ansip will visit Washington and
New York May 12-15. Estonia's longest-sitting Prime Minister
is ardently pro-American, a leading advocate for Estonia's
military engagements abroad and the face of Estonian fiscal
restraint. In his meetings, the Prime Minister will underscore
that Estonia has been and will remain a good Ally of the
United States. He will express heartfelt appreciation for
President Obama's strong statement on collective security at
the NATO Summit and will reaffirm Estonia's plan to increase
its presence in Afghanistan this summer. Estonia has staked
its economic credibility on keeping its budget deficit low and
acceding to the Euro zone as soon as possible. Ansip will want
to highlight how Estonia's approach to the economic crisis is
distinct from the rest of Eastern Europe. Finally, Ansip will
highlight Estonia's efforts to diversify its energy supply
through nuclear and other clean energy sources and will
express interest in U.S. nuclear technology.

2. (C)
In Washington, PM Ansip hopes to meet with the Vice President
and Speaker Pelosi and speak at the U.S.- Baltic Foundation
(USBF) annual conference. In New York, Ansip will visit the
NASDAQ and N.Y. Stock Exchange and meet with the President of
the New York Federal Reserve and officials at Deutsche Bank.

3. (C)
In meetings with Prime Minister Ansip, it would be useful to:
-- Commend the Prime Minister's efforts to manage Estonia's
economic downturn, while also maintaining Estonia's
international commitments. -- Recognize that Estonia's
experience and response to the crisis has been different from
that of its neighbors. -- Express appreciation for Ansip's
decision to deploy a mechanized company to Afghanistan this
summer for election security (tripling his NATO summit pledge
of a platoon). -- Welcome the importance Estonia places on
participating in joint operations with U.S. forces and
emphasize there is significant scope for future cooperation in
Afghanistan. -- Acknowledge the importance of collective
defense to Estonia and reiterate U.S. commitment to this
principle. -- Applaud focus on climate and energy security.
Highlight interest in linking up American and Estonian
technologies to secure a cleaner, more diverse energy supply
that decreases Estonia's dependence on Russia. END SUMMARY.

ESTONIA'S ECONOMY - FOCUS ON THE FUNDAMENTALS

4. (C)
Ansip, who recently passed the four-year milestone as Prime
Minister, was re-elected Prime Minister in early 2007, when
Estonia still enjoyed high GDP growth and a budget surplus.
The economic crisis has taken its toll on his popularity, and
there is inevitable speculation about the future of his
coalition government. Estonia's GDP is expected to decline
more than 12 percent in 2009 and unemployment (now at nine
percent) will increase. The Prime Minister has staked his
credibility and Estonia's economic recovery on achieving Euro
accession by meeting the Maastricht criteria "as soon as
possible." To do this, the Government of Estonia (GOE) must
keep its budget deficit below three percent of GDP. The
government is now struggling to reach agreement on an
eight-percent budget cut (the second such cut this year). One
coalition partner has called for increasing income tax rates,
cutting defense spending to as low as 1.1 percent of GDP and
abandoning Estonia's hallmark flat tax system. These are
redlines for PM Ansip who believes Estonia's long-term
economic success is rooted in its core policies of
transparency, low taxes, a balanced budget and free trade. On
this front, Ansip will express appreciation for President
Obama's remark at the U.S.-EU summit that the U.S. has "no
room for protectionism."

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5. (C)
While acknowledging the region is integrated through trade and
investment, Ansip will want to distinguish Estonia's economic
situation and policies from those of its neighbors. In
particular, he will highlight that Estonia has one of the
lowest levels of public sector debt in the EU, significant
reserves accumulated during the boom years, and a relatively
healthy banking sector (dominated by Swedish banks). Ansip
will note that in recognition of these factors, international
credit agencies have kept Estonia's rankings high. However,
foreign investors lack confidence in the currencies of small
countries like Estonia and need a visible signal that Estonia
is a safe place to invest. Admission to the Euro zone would
help Estonia attract foreign investors (and create jobs).
Ansip will stress that he does not want the EU to relax
accession criteria to make it easier for new members to join.
From the GOE's perspective, this would weaken the credibility
of the Euro zone and dilute the benefits of membership.

CONFIDENCE IN COLLECTIVE SECURITY

6. (C)
Ansip called President Obama's message on collective security
at the NATO summit "music to his ears." He will seek
assurances that a new Strategic Concept will maintain
collective self defense as the core function of the Alliance
and will stress that this is of primary importance to Estonia.
Despite the budget crisis, Ansip is a vocal proponent for
upholding Estonia's NATO commitments, and points to the
Russian invasion of Georgia in August 2008 as one reason
countries should invest in defense capabilities. "Defense is
not a luxury," he will say, and although the GOE must make
additional budget cuts, we expect Ansip to stick as closely as
possible to Estonia's commitment to spend 2 percent of GDP on
defense by 2010. (Note: Defense spending is currently about
1.75 percent. End note.)

AFGHANISTAN

7. (C)
Estonia has one of the highest deployment rates in NATO (about
eight percent of its forces are deployed abroad) and
Afghanistan is the GOE's top foreign policy priority. Estonia
has a company of 140 soldiers embedded with UK forces in
southern Afghanistan (Helmand province) where they operate
without caveats. At the NATO Summit, PM Ansip answered the
President's call for more troops for Afghanistan: the GOE will
deploy a mechanized company in July to provide security for
the Afghan national elections. While we understand the new
company will be collocated with U.S. Marines in Helmand, this
is not yet a done deal, and we expect PM Ansip will highlight
the importance Estonia places on participating in joint
operations with U.S. forces (as Estonia did in Iraq for six
years).

8. (C)
Reflecting the GOE's desire to match its military
contributions with civilian assistance, Afghanistan is also a
priority development assistance country for Estonia. The GOE
has focused its efforts on building health sector capacity in
Helmand but is also considering education sector projects in
Kabul, providing training for Afghan diplomats and is looking
at ways to enhance the Afghan parliament's IT capabilities.

WELCOME TO THE NEIGHBORHOOD

9. (C)
The GOE remains a staunch advocate for EU and NATO
enlargement, including MAP for Georgia and Ukraine, as well as
a firm supporter of democratization in the Balkans. In fact,
Estonia decided to maintain its contingent in KFOR, unlike
several other Allies. Ansip will emphasize the importance
Estonia places on NATO and the EU maintaining an "open door
policy" toward aspirant countries. While the GOE is not
reluctant to deliver hard messages to transition countries, it
also believes these countries need concrete targets and
encouragement to keep them on the right path. Estonia's own
remarkable post-Soviet transition experience gives it a high
degree of credibility as a model for reform in Georgia,
Ukraine, Moldova, Belarus and the Balkans. Estonia has
provided training on issues ranging from law enforcement,
border security, economic and market reforms to cyber security
and IT to civil servants and military personnel from

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these countries. PM Ansip will arrive in Washington fresh from
the EU's Eastern Partnership Summit in Prague.

9. (C)
In discussions of the "neighborhood," Russia remains the
thousand-pound elephant in the room. Ansip may express
concerns about the possibility of increased Russia-Georgia
tensions and speculate another regional flare-up this summer.
He will also reiterate Estonia's long-standing position that
Allies must not forget that Russia has invaded a sovereign
country. Ansip may also ask about the future of U.S.-Russia
relations and for more details on the "re-setting" of
relations with Russia.

OTHER CHALLENGES: CYBER AND CLIMATE SECURITY

10. (C)
In addition to enlargement, Estonia has a keen interest in
NATO strategic challenges like cyber and energy security. The
GOE was pleased the NATO communique at Strasbourg-Kehl
specifically referenced Estonia's Cyber Center of Excellence.
The U.S. was the first Ally to send a representative to the
COE (in 2007) and Secretary of Defense Gates committed us to
become a "Sponsoring Nation" during his visit to Tallinn in
November 2008 (although that process is not yet complete). Six
other Allies are Sponsoring Nations (Germany, Italy, Latvia,
Lithuania, Slovak Republic and Spain).

11. (C)
Estonia's energy policy is at a crossroads. While domestic oil
shale reserves provide significant energy independence
(supplying 95 percent of Estonia's electricity needs), oil
shale also makes Estonia the heaviest polluter per capita in
the EU. The GOE is working to diversify supply (to reduce
dependence on Russian gas), bring Estonia in line with EU
environmental standards, and invest in a mix of new supply
options, including nuclear power, cleaner oil shale technology
and renewables (wind and biofuels). PM Ansip met with his
counterparts in Lithuania, Latvia and Poland on April 27 to
try to advance plans for a regional nuclear power plant (NPP)
in Visaginas, Lithuania. His is, however, frustrated by the
lack of progress on this project and will want to highlight
Estonia's growing interest in building its own domestic NPP
using U.S. technology.

12. (U)

We appreciate the support Washington has provided for this visit.

DECKER