ABSTRACT
Russia’s economic footprint in Latvia is most visible in energy, banking, goods transportation, and real estate sectors and often spills over into Latvia’s domestic politics. Russian companies have used their dominant role in key sectors of the economy to affect the decision-making of public institutions and state-owned companies as well as private companies of national importance. The channeling of Russian influence is further enabled by the relatively small size of the Latvian economy, geographic proximity, the existence of a large Russian-speaking minority, and the effective deployment of the Kremlin’s soft power tools. Although Russian economic influence in Latvia has been on the decline in the past five years on the back of liberalizing energy markets, less transport sector exposure on Russian goods transit and stricter banking supervision, Russia has proven that it can successfully coordinate different mechanisms of pressure to capitalize on local state capture practices and the vulnerabilities of the Latvian economy or to intentionally create weaknesses that can be later exploited. Moscow’s ability to convert its economic footprint into political leverage through the exploitation of Latvian governance gaps has been facilitated by wider political and media factors, which are susceptible to the Kremlin’s soft power tools of influence.
