Home / Articles / The Three Little Oligarchs: Latvia’s Corruption Scandal
“Screw the president,” “screw the government,” and “punch the prosecutor in the throat.” These are only three snippets of salacious conversations that took place between Latvian business and political figures. Transcripts of the conversations, which were released in June 2017 by the Latvian weekly magazine IR, continue to shake Latvian politics. The materials not only corroborate suspected corruption and abuse of power at the highest level of government, but they also shed light on plans to restrict press freedom, interfere with democratic processes, and take advantage of state institutions.
The respected Latvian journalists who published the transcripts did not disclose their sources. The conversations date from 2009-2011 and seem to have been recorded by the Corruption Prevention and Combating Bureau (Korupcijas novēršanas un apkarošanas birojs, here after KNAB) while investigating a case related to the so-called Latvian oligarchs: former Minister of Transportation Ainārs Šlesers, the Mayor of Ventspils Aivars Lembergs, and former Prime Minister Andris Šķēle.
The recorded conversations took place in a hotel room rented by Šlesers, who is the most active participant in the discussions. He appears to be the person who invited various Latvian businessmen and politicians to discuss his own plans and projects. Lembergs participates in some of the conversations, while Šķēle is occasionally mentioned, but never partakes himself.
Who are the Three Oligarchs?
Aivars Lembergs has served as the Mayor of Ventspils since 1988. Despite being accused of bribery, money laundering, and abuse of office, and despite being temporarily arrested in 2007-2008, Lembergs remains to this day one of the wealthiest men in Latvia. He still exercises considerable influence over the Farmers and Greens, the leading party in Latvia.
His one-time rival, and later partner, Andris Šķēle was the prime minister of Latvia during 1995-1997 and 1999-2000 when Latvia sought to join the European Union and NATO. Amid political scandals and allegations of corruption, Šķēle left politics in 2003. Despite leaving politics, Šķēle still maintained influence over the People’s Party, which was the leading political force in Latvia until 2009. His attempted comeback in the 2010 elections failed, as his party won only 8 out of 100 seats in the Latvian parliament. Latvian media outlets have accused him of fraud, money laundering, corruption, and abuse of office, but no official charges have ever been filed.
The youngest of the three oligarchs, Ainārs Šlesers, has faced collapsing political influence since 2010-2011. He first emerged in Latvian politics in the late 1990s as a member of the New Christian Party and briefly became Minister of Economy. In the early 2000s, he founded the Latvia’s First Party, another force that positioned itself as a Christian voice in Latvian politics. Promises to defend Christian values were accompanied by homophobic rhetoric that helped the party win 10 seats out of 100 in the 2002 elections. That same year, Latvia’s First Party entered the government coalition, and Šlesers became the Deputy Prime Minister and later Minister of Transportation. Like Lembergs and Šķēle, he has been investigated by authorities for money laundering, abuse of office, and corruption over the years.
In 2009, KNAB launched an investigation, suspecting that the true owners of the Riga Commercial Port were Šlesers, Šķēle, and Lembergs. It seems that the published transcripts come from conversations secretly recorded by KNAB during this investigation.
The investigation lasted for years and was finally closed in 2016, with no charges filed. Yet, it had a deep impact on Latvia’s political life—even before the leak of the transcripts. In 2011, when the parliament refused to authorize a search in Šlesers house, then-President Valdis Zatlers used his constitutional right to dissolve the parliament. In the following snap elections, Šlesers’ party did not win a single seat. Since then, both Šlesers and Šķēle have distanced themselves from political life, but can be found in the shady corners of Latvian business life. Meanwhile, Farmers and Greens, the political party that for years has been sponsored by Aivars Lembergs, today leads the government and the country.
Lembergs and Šlesers say that the transcripts have been altered. Meanwhile, Jānis Urbanovičs, the leader of the Russian-speakers’ party Harmony, whose conversations also appeared in the transcripts, has apologized for the strong language used in the conversations, thus appearing to admit their veracity.
The following sections highlight key parts of the leaked transcripts and the oligarchs’ reach in Latvia.
The recorded conversations provide a glimpse of Ainārs Šlesers’ continuous abuse of power in the pursuit of his business interests. Much of the discussion focuses on Šlesers’ attempts to officially declare his ownership of various companies that he has never declared as his property. His partners fear these moves are too risky. One of them points out that formally admitting that the property in question was his would-be political suicide because “Everybody will scream and shout that you took the decision for your own benefit while being a minister. They will scream and shout and you will have no chance to get reelected. Your weakest point . . . is that through politics you were making money for yourself.”
The transcripts suggest this is true. For example, Šlesers was recorded discussing how to use his and his colleagues’ influence over Riga city officials to gain approval to build the Riga Fertilizer Terminal project, in which he had hidden business interests. Other conversations suggest that the three oligarchs were the true owners of airBaltic. As IR journalist Indra Sprance notes, in the late 2000s, Šlesers devised a plan to secretly acquire a 47% stake in airBaltic—even though he was a minister at the time—while it was Šķēle who funded the project. Later, when airBaltic faced financial difficulties, Lembergs also got involved in the affair. In another episode, Šlesers and the current Minister of Agriculture Jānis Dūklavs discuss mutually beneficial deals: the latter promises to obtain the permission for Šlesers to cut down pine trees in his property, but asks Šlesers help to legalize a secret land property in the territory of the Riga Port.
Controlling Democratic Institutions
Other recorded conversations are devoted to schemes to gain control over government institutions. For example, Šlesers and a prominent member of the Farmers and Greens shared a laugh over Lembergs’ success in displaying his power after he managed to prevent the re-election of Jānis Maizītis as prosecutor general by the Latvian parliament. A few months later, Lembergs himself explained to Šlesers how crucial for him it is to have his man from Farmers and Greens to become the Minister of Justice.
The most challenging years for Latvia since 1991 were 2009 and 2011. Shattered by the 2008 financial crisis, the country was on the verge of bankruptcy. It received an emergency bailout from the EU and the IMF, and the government, led by Valdis Dombrovskis, had to implement a strict austerity program. This proved a golden opportunity for the oligarchs. Šlesers and Lembergs plotted to destabilize the government and discredit the prime minister, so Dombrovskis and his party (Unity) would lose the 2010 elections. The plan was simple: Lembergs would have his men in Farmers and Greens shatter the government from the inside, while Šlesers would do the same from the benches of the opposition. After the elections, a new government would be formed by Farmers and Greens, For a Good Latvia (Šlesers’ and Šķēles’ party), and Harmony. The plan failed when, against all odds, Dombrovskis’ party won the 2010 elections.
In 2011, in the light of the approaching presidential elections, the oligarchs sought again to influence politics. According to Latvia’s constitution, the parliament elects the president. Šlesers encouraged Lembergs to use his influence among the legislators to “appoint the president.” In their discussions, Lembergs mentioned that he had played a role in the election of President Valdis Zatlers, but felt betrayed by him. Meanwhile, Šlesers seemed to imply that the third oligarch Šķēle had bought votes for the election of President Guntis Ulmanis in the 1990s, and insisted that the former president of the Republic “should be kissing Šķēles’ hands.”
Controlling the Press
Even more worrisome than the oligarchs’ discussions about their influence over the presidential elections are their debates about how to control the free media. In 2009, Latvian daily newspaper Diena, until then owned by Swedish media group Bonnier, was bought by a foreign investor. Suspecting that the oligarchs were the real forces behind the foreign investors, several journalists resigned in protest and founded the weekly IR—the magazine that published the transcripts in question. The published material shows that the journalists were right. The oligarchs were indeed behind the purchase of Diena, and after acquiring the newspaper, they replaced critical-minded journalists with ones loyal to them.
According to Šlesers, in 2010, all of the largest Latvian private media had links with at least one of the Latvian oligarchs. Both Diena and the private TV channel Latvijas Neatkarīgā Televīzija were loyal to Šlesers and Šķēlē. Lembergs controlled the daily newspaper Neatkarīgā Rīta Avīze. The Russian-language First Baltic Chanel was sympathetic to both Šlesers and Šķēle and to Harmony. As for public TV, Šlesers was optimistic regarding the eventual cooperation of certain journalists. The only real problem in his eyes was public radio, which he seemed unable to control or influence.
The Russian Variable
The transcripts expose once again the close ties between the Latvian oligarchs and Harmony. The leader of Harmony, Jānis Urbanovičs, met with Šlesers to discuss forming a governing coalition between Harmony, For a Good Latvia, and Farmers and Greens. Indeed, Harmony seemed to be an active participant in the oligarchs’ schemes, especially in the Riga city government, where For a Good Latvia and Harmony formed a governing coalition. In this context, ethnic differences were completely irrelevant: Šlesers counted on strong cooperation with Harmony to unite ethnic Latvians and ethnic Russians to win both municipal and national elections.
The Russian Federation is rarely mentioned in the conversations, but when it is, the tone is positive. When Šlesers considered an alliance with Šķēle, he envisaged a joint party that “would be like United Russia,” referring to the ruling party of Vladimir Putin’s regime, which he said has “managed to bring order to Russia.” While discussing how oligarchs control state media, Vilis Krištopāns, who was Prime Minister of Latvia in the 1990s, encouraged Šlesers to create a vertical of power “like in Russia.” Another of his interlocutors casually mentioned that Ingūna Sudraba, the former auditor general, should become the prime minister because “Moscow thinks she would be a good candidate.”
The publication of the transcripts raised an obvious question: why did the investigation of the oligarchs end without any charges? When asked by IR, the authorities explained that the investigation was obstructed by constant leaks. The leakers are alleged to be a KNAB officer and a member of the National Security Council. IR also reported that, according to the prosecutors, the conversations alone have not provided enough evidence to justify bringing charges against Šlesers. Investigators say they have not gathered additional evidence of wrongdoing. Not all Latvians have found these explanations convincing, and some have called for the prosecutor general to resign.
Spurred on by the release of the transcripts, two protests have taken place in Riga, and numerous public figures have condemned the corruption that the transcripts reveal. A crowd funding campaign has raised funds to send a hard copy of the transcripts to every public library in Latvia.
At the same time, as noted by IR, the media that Šlesers in 2010 described as being under the oligarchs’ control either declined to report the published transcripts or did so weeks after publication. The public television that Šlesers claimed to manipulate has rejected these claims and protested against the denigration of its journalists. President Raimonds Vējonis, who is member of Farmers and Greens, mentioned the transcripts only after facing public pressure. He stated only that these conversations were unacceptable. When a protest occurred in front of the presidential palace, the president tried to address the protesters, but was booed. Prime Minister Māris Kučinskis, a member of the same party, has avoided giving any substantial comments about the affair. A parliamentary investigatory committee has been formed, but Ingūna Sudraba, the very same woman who was mentioned as Moscow’s supported candidate for prime minister, is its chair.
What’s Next for Latvian Democracy?
Considering the inability or unwillingness of the authorities to prosecute the oligarchs, action against them is only possible in the voting booths. Šķēle, Šlesers, and the parties linked to them have already suffered spectacular losses in the 2010, 2011 and 2014 parliamentary elections. Given these losses, they will not run in the 2018 elections. Lembergs’ story is very different: Farmers and Greens is currently the leading party in Latvia. Some people claim that the younger generation of Farmers and Greens leaders are distancing themselves from Lembergs. For example, despite Lembergs’ anti-NATO rhetoric, Farmers and Greens’ leaders are committed to Latvia’s pro-Western orientation.
The 2018 election will be the first that Farmers and Greens will face as the leading government party, and their record is far from compelling. They have failed to implement badly needed reforms in healthcare and education, and their tax reform has been widely criticized. The key question, however, is whether the published transcripts will affect the Farmers and Greens voters. The most likely answer is no: the party has a strong base in rural Latvia that is unlikely to be moved by yet another corruption scandal. Lembergs’ alleged crimes have been discussed for a decade, but judging by social media commentary, his voters dismiss them as George Soros-driven conspiracies.
Unity, the traditional challenger of the oligarchs, is on the verge of collapse because of internal conflicts between the conservative and the liberal wing of the party. But at least three new parties will run in 2018 elections, each promising to fight corruption: the New Conservative Party, which includes former KNAB officers; the liberal Par! that has emerged from the ruins of Unity; and the leftist Progresīvie that assembles various civil society activists. The New Conservative Party has a good chance to win votes from traditional supporters of the right wing National Alliance. For Par! and Progresīvie, the task will be more challenging as their support for an open and inclusive society will struggle to find supporters outside Riga’s urban elites. However, their willingness to reach out to the Russian-speaking electorate might enable them to win votes of those Russian speakers who are not happy about Harmony’s links with oligarchs and alleged corruption in the Harmony-led Riga city council.
Ultimately, Latvians must realize that corruption is not only an issue of law or economics, but also a question of national security. While nationalist politicians have often accused Latvian Russian speakers of being a fifth column, the published transcripts demonstrate that the real threat lies in those oligarchs who, in the pursuit of personal profit, try to hijack democracy and weaken state institutions. Many people fear that the Kremlin may destabilize Latvia by using Russian media to mobilize Russian speakers. The new transcripts, however, suggest that Russia could just as well manipulate greedy elites, who have proven more than willing to slowly dissemble the state.