In this period of time emerging from the USSR, all three countries experienced historical economic shocks:

1. Transition from Soviet Total State to Market Economy Shock (1991–93) ←
2. Market Economy to Soviet takeover and collapse (1940–41)
3. Financial crisis (2008–2011)

The Baltic countries’ Wild West 1990s

When I first moved to Latvia in 2012, I met another diaspora Latvian, who began our new discussion with: ‘So how do you like the “Wild West Latvia?” As it was already two decades past the country’s Re-Independence emergence, I wasn’t sure I knew what he was talking about.

However, in the next two years, I experienced from people I trusted: rental fraud, ethics violations, plagiarism and thefts for assets that were the equivalent of 100s of thousands to several millions of euros. For a mild-mannered academic diaspora ‘nobody’ like me in a brand new country, such experiences point to what was likely much larger for the local people in that period of time and in the previous years.

The in-place Red Army for those 1991-1994 years, along with the 1M+ Occupiers, who were not supported to repatriate to Russia in a decolonization, created survival conditions for everyone in the Baltic societies. In those fragile conditions, the local people lived with daily stresses about their currencies, citizenships, property, employment, business, and security situations that were either brand new, still in process, or completely out-of-reach, in the newly re-Independent countries. The Mafia, KGB and other criminal elements thrived.

The following chart on Deployment of the Baltic Gold point to some of those Wild West Stories. Some of the listed stories are in the chart simply appeared because searching on ‘Gold’ in my The Baltic Independent scanned newspapers put them there. They highlight the crazy world that people lived in,  in a period when Baltic Gold Deployment supported the new Estonian, Latvian, Lithuanian currencies. My folder of story topics in all of these themes are full, so expect more spin-off future Gold Journey and Wild West stories.

Deployment Phase (1992–1993)

Parex Bank: A Soviet Wild West Trading Post

 Parex, for Parity Exchange, was purchased in 1987 by Valērijs Kargins and Viktor Krasovitsky as a Komsomol, ready-made, "cooperative", enabled by the late 1980s, Gorbachev-era perestroika. [Komm96]

Komsomol, the “All-Union Leninist Young Communist League” for ages 14-28, was the official Soviet Communist Party youth organization, operating from 1918 to 1991. It functioned as a political, economic, and security instrument of the Soviet state. Komsomol was the primary recruiting pool for: Communist Party officials, Soviet ministries, State enterprises, KGB and GRU and Foreign service and trade missions. Komsomol membership was important for career advancement, and many future leaders entered the Communist Party through Komsomol.

In the period of perestroika (1987-1991), "cooperatives" linked to Komsomol were permitted. The first legal niches were tourism, currency exchange, and import/export. Such cooperatives were able to commercialize and accumulate cash early on thanks to its Komsomol status, independent of regulations, which rarely existed at this time. Then, as soon as possible, particular licensing and rules designed for their "business" or cooperative followed, where the cooperative owners could dictate terms. [Komm96]

Kargins talked about 1990-91: “Even in Moscow, there were no [money] changing offices yet. All of Russia came to us to change money. […] Fantastic queues formed near the changing offices. We made a margin of not ten rubles, but twenty, and earned crazy money. In three or four days, we made the same turnover that we made in a year.” [Komm96]

According to this 1996 interview [Komm96], Kargins handled Komsomol money, then tourism via the city Komsomol committee (“since 1989… all money went through me”), then they started the Parex currency exchange (FX) using the city Komsomol committee address, before legalization, then they pushed Parex into a formal licensing and then later a bank (1992). [ParexWiki]

 This structural pattern emerged with other post-Soviet bankers such as Mikhail Khodorkovsky and Vladimir Potanin.

One of the factors that helped Parex grow large and fast,  was that in Latvia, there were no restrictions on buying and selling hard currency. Unlike Estonia and Lithuania. See Fig. 1.

Trivia note for readers up to this point, this June 1991 issue of The Baltics Independent was the first of three that I hand-carried from Latvia to California, in my second trip to the Baltics, before I signed up for a subscription to my California home mailbox. My five-year, The Baltics Independent subscription, is part of my scanning project.

Figure 1. Currency Exchange in Latvia. The Baltic Independent, 20-26 June, 1991, page 4 [TBI41]

On December 19, 1991, Latvian Prime Minister Ivars Godmanis spoke to the Latvian Parliament and accused the government of negligence, corruption, and losing control over the hard currency budget. Mr. Godmanis explained to the Parliament that the private firm, Parex, which runs a chain of currency exchanges, “holds a monopoly on hard currency in the republic.” Mr. Kargin responded to Godmanis’ accusation that he expected an apology from Mr. Godmanis to the Parex staff for alleged moral and material damage. [TBI42]

The two men must have sorted their disagreement, because three weeks later, on January 9, 1992, Mr. Kargin and Mr. Godmanis met for four hours, when Mr. Kargin presented a financial and economic reform plan for Latvia that included about forty points. Mr. Kargin predicted an $800 million influx of hard currency into the Latvian economy. (Exchanged through Parex, no doubt.) See Fig. 2. [TBI43] Parex Bank was founded in January 1992.

Parex didn’t appear to run into financial and legal problems until the 2000s, when there began multiple warnings of large-scale money laundering at Parex with reports by former US and Parex banker: John Christmas to UK regulators and to the Bank of Latvia chairman. None of those warnings resulted in action. [PrEye] [Komarn][ParexWiki] As we see from the Deployment Table above, Parex’s Soviet Wild West behavior continued, including in the 2000s, which we’ll describe further in future stories.

Figure 2. Public vs. Private. The Baltic Independent, 24-30 January, 1992, page 3 [TBI43]

In 2008, Parex experienced bankruptcy and was nationalized by the Latvian government in late 2008 as part of the 2008 financial crisis, with authorities stepping in to provide liquidity and take control of Parex amid massive losses and deposit runs. [Decker] It was one of the most burdensome, single-bank rescues in Europe as a share of national GDP, and a major reason Latvia had to seek the €7.5 billion international bailout package in late 2008 from the IMF, EU, EBRD, and others, subject to structural adjustments and fiscal reforms. [ECIMF]

Latvia’s GDP collapsed: roughly 25% from late 2007 to 2009, austerity measures were severe (~15% GDP, spending cuts for 3 years) for the Latvian society [EESC], and ≈130,000 residents left the country in 2008–2011. [Chmiel] Latvia’s Financial crisis (2008–2011) was one of the three largest economic shocks in Latvia’s history.

Komsomol’s Death in the Baltics, then Rebirth, then Death

With a rise-to-financial-dominance process like Parex’s trajectory in place in 1991, did Komsomol survive after 1991?

No. Komsomol did not survive as a mass youth organization in Estonia, Latvia, or Lithuania. Attempts at “rebirth” in 1991-1993, for example, see Fig.3, especially among Russian-speaking communities and pro-Moscow network, collapsed due to loss of state backing, social stigma, and the Baltics’ integration into Western political, legal, and educational systems. That is, as far as the demographic situation (EE: 62% and LV: 52%) would allow.

What did survive were networks of people, not the organization itself, and new youth groups such as the Latvijas Jaunatnes progresa savienība (LJPS) to fill the vacuum. However, even LJPS failed to become “new Komsomols” because: 1) No state monopoly, 2) No cadre pipeline, 3) No economic arm, 4) Different legitimacy. By 'different legitimacy', I mean that there may be an ideological continuity with pro-Russian propaganda narratives (“progress,” “anti-fascism,” “social justice”), nostalgia among some constituencies, and alignment with post-Soviet left parties, but they were symbolic, not institutional. Youth no longer needed such organizations for careers.

Figure 3. Komsomol Rebirth. The Baltic Independent, 20-26 June, 1991, page 5 [TBI44]

The Baltic countries’ First Currencies

In 1991, introducing a national currency was essential for each of the Baltic countries to regain monetary sovereignty, stop inflationary spillovers from Russia, enable market reforms and Western integration. Here is a high-level view of the Baltic countries’ introduction of their currencies, which I’ll follow up on in separate future stories for the Estonian, Latvian, Lithuanian cases.

Estonia (fastest)

Key dates

• 20 June 1992 – Estonian kroon introduced

Transition

• Direct jump from Soviet ruble → kroon

Policy model

• Currency board system, fixed to the Deutsche Mark and Trees (!) See Fig. 4
• Full backing by foreign gold reserves

Difficulties

• Short preparation time
• Risk of social shock from tight monetary policy

Outcome

• Rapid stabilization
• Inflation brought under control faster than neighbor \
• Strong credibility with Western partners

Figure 4. Estonia prepared for kroon launch, with backing from $120m gold plus forests. The Baltic Independent, 24-30 April, 1992, page 4. [TBI16]

Backing up currency and state assets by utilizing natural resources and their calculated value is something that the Baltic countries creatively know how to do. A future story will describe Latvia’s unique strategy to calculate compensations for land expropriated under the Soviet regime with the market price of rye. The next Figure provides a snapshot of what the Estonians were celebrating in June 1992.

🇪🇪 Estonian Kroon (1992)

Figure 5. Currency Example of Estonian 1 kroon banknote of 1992. Mintage World. [EE1kroon]

Latvia (gradual)

Key dates

• 7 May 1992 – Latvian ruble introduced as temporary currency
• 5 March 1993 – Latvian lats introduced

Transition

• Ruble → Latvian ruble → lats

Policy model

• Managed transition with gradual tightening
• Avoided immediate hard peg at first

Difficulties

• Inflation during the interim phase

Outcome

• Smooth conversion to lats
• Strong national symbol and stable currency.

🇱🇻 Latvian Rublis (1992) and Lats (1993)

Figure 6 shows the 1 Latvian rublis, widely known as repšiki, named after then-governor of the Central Bank, Einars Repše. Fig.7 shows the 5 Latvijas lats.

Figure 6. Example of 1 Latvijas rublis temporary banknote (1992).[MoneyCurrencyPictures blog] [Monblog]

Figure 7. Example of 5 Latvijas lats [Bank of Latvia -PDF] [BankLV]

Lithuania (longest and most difficult)

Key dates

• 1 October 1992 – Talonas (“coupon”) introduced alongside ruble
• 25 June 1993 – Lithuanian litas introduced

Transition

• Ruble → talonas (coupon/voucher currency) → litas

Policy model

• Talonas used mainly to:
  • Control cash circulation
  • Reduce ruble dependence
• Full currency reform delayed until institutions strengthened

Difficulties

• Severe inflation
• Talonas widely disliked and seen as unstable
• Political debates over timing and design
• Printing problems

Outcome

• Litas restored (symbolically linked to interwar statehood)
• Inflation gradually stabilized afterward

🇱🇹 Lithuanian Talonas (1992) and Litas (1993)

Here’s what the Lithuanians were developing in those challenging years. I think that these currencies are beautiful. The Baltic people had them for only about 20 years before they gave them up for the Euro. Fig. 8 shows the Talonas and Fig. 9 the Litas.

Figure 8. Example of 1 Lietuvos Talonas [Banknote World] [BanknoteLT]

Figure 9. Example of 2 Lietuvos Lita [Banknote World] [BanknoteLT2]

And that’s it for this introduction to the Baltic currencies in the Deployment part of the Baltic Gold Journey. The next part will jump backward to 1940 to one of the most underreported stories of WWII. HOW did the Baltic countries get transformed so fast and deep into the USSR Total State structure in 1940? See you in Part 4, for my deepest dive yet:  Journey of the Baltic Gold: Six Months to Totalitarianism

--------

The Baltic Gold Journey Stories by Amara Graps are a symbol of the Baltic countries’ prosperity in 1938, a large education in Russian-Soviet intelligence operations in 1939-1940, and a sign of hope, a half-century later in 1992-93. And just when you think that you have learned all of these lessons, the Gold points you to a few more lessons in 2008 and 2025.

References

Of The Baltic Independent (1991–1993): The links TBI1-43 are to The Baltic Independent (TBI) scanned folders from my personal Scanning Project. Example: “1b.tif” is page 1, bottom half. The links TB38-40 go to yet unscanned TBI full-page phone snapshots as a source reference. 

1. Amara Graps. The 1992 Six-Month Journey to Uncensored Press. April 2025, NAFOForum. [NAFOGr1]

2. TBI9 Public_vs_Private_24-30_Jan_1992.txt Parex Bank pushed for free gold trade in Latvia; forecast hard-currency inflow. The Baltic Independent, 24 -30 January, 1992, page 3.
3. TBI16 Estonia_Set_24-30_Apr_1992.txt Estonia prepared for kroon launch; backing with $120m gold + forests. The Baltic Independent, 24-30 April, 1992, page 4.
4. TBI17 Kroon_tied_D-mark_15-21_May_1992.txt Laws tied kroon to Deutsche mark, guaranteed by gold & FX reserves. The Baltic Independent, 15-21 May, 1992, page 4.
5. TBI20 Estonia_Leaps_19-25_Jun_1992.txt Estonia announced kroon introduction (20 Jun), backed by gold & forests. The Baltic Independent, 19-25 June, 1992, page 1
6. TBI21 Bankers_Bank_19_Jun_92.txt. The Bank for International Settlements (BIS) welcomed the Baltic countries back in their membership and stated that the Baltic bullion has been returned. The Baltic Independent, 19-25 June, 1992, page 5. Latvian bullion quantity. Lithuanian bullion quantity.
7. TBI22 a. Estonian_Kroon_debut_26_Jun-2Jul_1992.txt Kroon launched; convertibility guaranteed by $120m gold + $150m forest assets. The Baltic Independent, 26 June – 02 July, 1992, page 1 b.Kroon_Smooth_Entry_26_Jun-2Jul_1992.txt Report on smooth kroon launch, gold backing as key to credibility. The Baltic Independent, 26 June - 02 July, 1992, page 4
8. TBI23 Siim_Kallas_26_Jun-2Jul_1992.txt Profile of Siim Kallas; negotiated gold restitution; managed kroon launch. The Baltic Independent, 26 June - 02 July, 1992, page 5
9. TBI25 Copycat_Money_04-10Sep_1992.txt Latvia’s temporary rouble criticized; only small prewar gold reserves noted. Baltic Independent, 04-10 September, 1992, page 2.
10. TBI26 Bank_of_Estonia_09-15_Oct_1992.txt Estonia reserves grew: $104m (Jul) → $155m (Oct) in gold & FX. Baltic Independent, 09-15 October, 1992, page 5
11. TBI27 Estonias_Reserves_13-19_Nov_1992.txt Estonia reserves reached $172m by Nov 1992. Baltic Independent, 13-19 November, 1992, page 5.
12. TBI28 Diamonds_and_Gold_12-18_Feb_1993.txt Latvia introduced licensing system ($1,000) for gold/diamond traders; Parex among first. Baltic Independent, 12-18 February, 1993, page 5
13. TBI29 Lats_Hits_the_Streets_05-11_Mar_1993.txt Lats introduced. Baltic Independent, 05-11 March, 1993, page 1
14. TBI30 End_the_Money_Monopoly_16-22_Apr_1993.txt Free banking debate; gold as commodity-backing option. Baltic Independent, 16-22 April, 1993, page 8
15. TBI31 Opposition_23-29_Apr_1993.txt Lithuania’s Brazauskas in London; met Bank of England about gold deposits. Baltic Independent, 23-29 April, 1993, page 6
16. TBI32 Bank_of_Lithuania_07-13_May_1993.txt Bank of Lithuania listed gold abroad (UK, France, Switzerland, US, Sweden cash). Baltic Independent, 07-13 May, 1993, page 16
17. TBI33 Bank_of_Lithuania_counts_its_gold_07-13_May_1993.txt Details: LT gold = 5.6–9.3t; breakdown by country. Baltic Independent, 07-13 May, 1993, page 16
18. TBI34 Bank_of_Latvia_16-22_Jul_1993.txt Latvia reserves at $400m; lats pegged to SDR. Baltic Independent, 16-22 July 1993, page 3
19. TBI35 Parex_Gold_09-15_Jul_1993.txt Parex Bank expanded gold retail via jewelry store in Riga. Baltic Independent, 09-15 July, 1993, page 15.
20. TBI36 Litas_arrives_02-08_Jul_1993.pdf.txt Litas launched (25 Jun 1993); backed by gold & FX reserves. Baltic Independent, 02-08 July, 1993, page 13
21. TBI37 Baltics_insulated_30_July-05_Aug_1993.txt EE, LV, LT insulated from Russia’s rouble collapse thanks to gold/FX backing. Baltic Independent, 30 July – 05 August, 1993, page 7
22. TBI38 Bank_Sells_Gold_Sep_3_1993.txt Estonia’s Innovation Bank started retail gold bar/coin sales. Baltic Independent, 03-09 September 1993, page B3 snapshot
23. TBI39 Bidding_for_Nafta_Oct_1_1993.txt Latvia’s “Latvijas Zelts” consortium bid for Ventspils Nafta. Baltic Independent, 01-07 October, 1993, page B2 snapshot
24. TBI40 Tallinn_bank_sells_gold_Nov_5_1993_b.txt Tallinn Bank launched retail sales of gold, silver, platinum, palladium. Baltic Independent, 05-11 November, 1993, page B3 snapshot
25. Magazine "Kommersant Money" Valery Kargin: "I love it when people survive.", №32, 11/09/1996, p. 16. [Kommersant in Russian] [Komm96]
26. [TBI41] Currency Exchange in Latvia. The Baltic Independent, 20-26 June, 1991, page 4 scanned+stitched
27. [TBI42] Godmanis Attacks the Parliament. The Baltic Independent, 27 Dec 1991-8 Jan 1992. [page 1]
28. [TBI43] Private vs. Public. The Baltic Independent, 24-30 January, 1992, page 3
29. Private Eye. (2018, September 28). Looting with Putin: How City of London suits joined the Moscow gold rush (R. Brooks, Special Report). Private Eye Ltd. [PDF] [PrEye]
30. Stephen Komarnyckyj (2019). The insider who revealed the Russian money nexus in Latvia. Byline Times.[Komarn]
31. Parex Bank. Wikipedia [ParexWiki]
32. Decker, Bailey (2024) "Latvia: Parex Bank Restructuring, 2008," Journal of Financial Crises: Vol. 6 : Iss. 1, 344-391. [Yale][Decker]
33. European Commission (2010). Financial assistance to Latvia. [ECFinan] [ECIMF]
34. European Economic and Social Committee. Economic and Social Situation in the Baltic States: Latvia. EESC-2013-26-EN, European Economic and Social Committee, 2013. [Web archive] [EESC]
35. Chmielewski, B. (2024, July 16). Looking for a way out: Latvia’s demographic crisis. OSW Centre for Eastern Studies. [OSW] [Chmiel]
36. [TBI44] Komsomol Rebirth. The Baltic Independent, 24-30 January, 1992, page 5 scanned+stitched
37. Currency Example of Estonian 1 kroon banknote of 1992. Mintage World. [EE1kroon]
38. Currency Example of 1 Latvijas rublis temporary banknote (1992) .[MoneyCurrencyPictures blog] [Monblog]
39. Currency Example of 5 Latvijas lats [Bank of Latvia -PDF] [BankLV]
40. Currency Example of 1 Lietuvos Talonas [Banknote World] [BanknoteLT]
41. Currency Example of 2 Lietuvos Lita [Banknote World] [BanknoteLT2]