1939: Estonia

The increasing tension in international affairs began to curtail Estonian plans for internal progress as early as April 1939, when Minister of Economics Sepp announced important changes in the budget. The original 1939-1940 budget included provisions for reorganization of the credit market, establishment of a building loan fund, greater mechanization of agriculture, improvement of roads, and further electrification of the country. This program was to be effected without increasing taxes, but in April the Government announced that most of these reforms would be postponed, and that all direct taxes would be increased 10 per cent in order to initiate new defense measures. At the same time, military service was increased from one year to 18 months.

Estonia's policy of more intimate cooperation with other states in the Baltic region was extended to Finland on Jan. 29, 1939, when both countries celebrated the twentieth anniversary of assistance rendered by Finnish volunteers in Estonia's war of independence. General Laidoner, Commander in Chief of Estonian armed forces, stated at Helsinki (Helsingfors, Finland), that Estonia was prepared to discharge its debt of gratitude to Finland by cooperating loyally both in peace and in war: 'If circumstances demand the defense of our countries against an enemy, Estonia will be found on Finland's side.'

Relations with Germany.

While Finland and the Scandinavian States refused to sanction a political treaty with Germany in May, on May 5 the Estonian Cabinet approved in principle the German proposal for a non-aggression pact with Estonia, and the two countries signed such a pact in Berlin on June 7. Each country agreed not to resort to force against the other and to remain neutral in case of attacks by a third country. A protocol to the treaty stipulated that either country might trade with an enemy of the other without sacrificing its neutrality. This pact was to be valid for ten years. On June 26 the chief of the German General Staff arrived in Tallinn (Reval) on an official visit. The era of German-Estonian cooperation, however, was overshadowed by Soviet successes in the country in September. On Oct. 9 Hitler ordered all Balts (the German minority in Estonia and Latvia) to leave their homes, as German ships awaited them at Tallinn. Over 12,000 Balts had returned to the fatherland by the end of the year. The exodus involved heavy economic losses for Estonia, since the Germans, who formed a large portion of the Estonian landowning class, were permitted — by a German-Estonian agreement of Oct. 15 — to transfer much of their wealth to the Reich. On Nov. 22, during negotiations for a financial settlement, Tallinn reported that the Germans demanded a lump sum equivalent to $20,000,000; this sum would be extremely difficult to raise for immediate payment, since most of the emigrants' holdings were in land.

Relations with the U.S.S.R.

On Jan. 10, 1939, Estonia announced the conclusion of a new commercial treaty with Russia, and a better era of relations between the two countries was expected with revival of their mutual trade, which had become stagnant during recent years. Following German negotiations for a pact with Estonia during May, however, the Soviet Government became concerned about the safety of Leningrad. On May 31, Soviet Foreign Commissar Molotov, speaking at Moscow, demanded guarantees for the countries along the Soviet Union's northwest border, on the grounds that they were incapable of defending themselves. Throughout the summer-long Anglo-Russian conversations, however, the British Government refused to accept Molotov's point of view. After Britain, France, and Germany became involved in war in September, the U.S.S.R. was free to press its demands, which became particularly forceful after a Polish submarine escaped from Tallinn harbor on Sept. 18. Estonia signed its mutual assistance pact with the U.S.S.R. in Moscow on Sept. 28. The duration of this pact was set at ten years, subject to renewal for an additional five years. In it Estonia agreed to lease territory on the islands of Saaremaa (Oesel) and Hiiumaa (Dago), as well as the town of Paldiski (Baltic Port), to the U.S.S.R. for naval bases and airdromes. Both countries agreed to give each other military assistance in case of attack by any great power on the coasts of either country or through Latvian territory. Along with this political pact was a commercial agreement, which went into force on Oct. 1 and is to remain valid at least until the end of 1940. This agreement states that commercial, transit, and freight payments of the two countries are to be pooled, and the one with an unfavorable balance allowed to compensate with additional exports to the other. It was estimated in Estonia that this arrangement would increase Soviet-Estonian trade about 400 per cent. Estonia was given the right to ship and receive goods through the Soviet Arctic port of Murmansk and ports of the White and Black Seas. It was also granted the use of the Leningrad-Murmansk railroad and the new canal linking the White Sea port of Soroka with the Gulf of Finland. On Oct. 10 the pact's military provisions were reenforced by an agreement under which Soviet troops began to cross the Estonian border at Narva and Irbaska on Oct. 18.

Foreign Commerce.

The Estonian balance of trade was favorable to the extent of 8,250,000 kroons ($2,087,250) for the first nine months of 1939. In 1938 for this same period there was an adverse balance of 6,670,000 kroons. Exports rose from 75,870,000 kroons to 88,470,000, and imports declined from 82,540,000 to 80,220,000. The export of livestock increased 58 per cent. The next highest increase was in raw and semi-manufactured materials, which increased 38.6 per cent. Exports of manufactured articles increased 4.7 per cent, while exports of foodstuffs decreased 1 per cent. See also BALTIC ENTENTE.

Panevezys-Saldutiskis Railway Case.

See PERMANENT COURT OF INTERNATIONAL JUSTICE.