Country Trade Profile: Lithuania

Tue 14 May 2024
Posted by: Danielle Keen
Features
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Strong words and heightened fear dominated the Lithuanian presidential elections, as the Balkan country mulled the threat from Russia amid its invasion of Ukraine. Ensuring the success of sanctions against Russia, despite efforts to circumvent them is high on the country’s trade agenda.

Election

The weekend’s voting saw no candidate attain over 50% of the vote, with frontrunners including incumbent president Gitanas Nausėda achieving 44% and prime minister Ingrida Šimonytė 20%. Nausėda is expected to win a second term following a run-off vote on 26 May.

The Guardian reports that the two have a difficult working relationship, featuring periods in which they have refused to speak to one another. While aligned on defence and foreign policy, especially in the shadow of Russia’s war on Ukraine and fears of expansionism towards Lithuania, they differ in their views on social issues, with Šimonytė advocating for liberal measures such as same-sex civil partnerships.

A recent ELTA/Baltijos Tyrimai poll found that over half of Lithuanians fear a Russian attack is possible or very likely, although Russia has repeatedly dismissed claims that it’s planning attacks on a NATO member.

Nonetheless, fear-led rhetoric dominated the presidential campaigning, with all seven candidates telling audiences that they have stockpiled food during a televised debate.

Both Nausėda and Šimonytė have committed to increasing defence spending to at least 3% of GDP, with Nausėda calling for greater military support for Ukraine from allied nations.

Speaking in a press conference after the vote, he said:

“Ukraine President Volodymyr Zelenskiy already said it all. They don't need our declarations of good will; they are of no use in a fight – they need air defences ... Until they have air defences, Ukraine will stay vulnerable.”

Trade profile

The war has also affected trade policy, with Lithuanian foreign minister Gabrielius Landsbergis recently calling for a clampdown on new trade routes through central Asia that undermine EU efforts to curb trade with Russia.

Late last month Landsbergis said that “circumvention of EU sanctions is not only a shortsighted decision — it undermines the basic principles of our union”.

He called on EU members to “send a clear message both to third countries and to European companies… Values matters and cannot be traded for business as usual with [an] aggressor”.

However, this month investigators from Lithuania National Radio and Television (LRT) found Lithuania was a part of the network Landsbergis, with dual-use goods worth €130m making their way to Russia via third parties such as Kazakhstan, Kyrgyzstan and Uzbekistan.

Russia was formerly one of the country’s top trading partners, with bilateral trade worth US$2.88bn recorded in 2022. Following Russia’s invasion of Ukraine and the EU’s imposition of sanctions, Lithuania has attempted to reduce trade.

As an EU country, intra-bloc trade drives the country’s exports, with Latvia ($6.18bn), Poland ($3.91bn) and Germany ($3.54) its top trading partners.

Lithuania’s largest export is refined oil, worth US$5.46bn in 2022. This was followed by furniture exports, worth $2.24bn.

China tensions

Lithuania has also been a loud voice of Chinese criticism within the EU, wading into the dispute over the Asian superpower’s claim to sovereignty over Taiwan.

After pushing for closer economic and diplomatic ties with the island nation, Lithuania was subject to an effective Chinese trade embargo in 2021. The Centre for Strategic & International Studies described Lithuania as having “disappeared” from Chinese customs systems. When this proved ineffective given already minimal bilateral trade, “informal secondary sanctions” were placed on firms sourcing from Lithuania.

The EU lodged a WTO complaint in 2022 and adopted a new anti-coercion trade tool last year, which enables the bloc to escalate countermeasures against non-EU countries when negotiations fail. This includes restrictions of trade, investment and funding.

However, the EU was forced to suspend WTO proceedings in January owing to “technical reasons” surrounding the preparation of evidence for submission to the panel.

Last year, a Lithuanian government report on Indo-Pacific strategy was highly critical of China, doubling down on its commitments to Taiwan. In the publication, authors described China as “global economic and military power that has consolidated ever-intensifying autocratic control methods domestically and is exercising an increasingly aggressive foreign policy aimed at projecting its power externally”.

UK-Lithuania trade

Bilateral trade between the UK and Lithuania was worth £3.2bn in 2023, according to data from the Department for Business and Trade.

While imports from Lithuania, led by transportation services (£317m), travel services (£211m) and furniture (£198m), held relatively steady at £2bn, UK exports fells by over 25% to £1.2bn.

The reduction in UK exports reflects a significant drop in goods exports (38.9%), not enough to counteract an almost 10% rise in services exports, which reached £456m in the same year.

Travel (£211m) and transportation (£113m) services led UK exports, with sales of its top-performing good, crude oil (£233m), still a significant aspect of trade, at just over 30% of UK goods exports to Lithuania and 7% of total exports.