Estonian PM Kaja Kallas faces calls to resign over husband’s business ties to Russia

The hardline anti-Kremlin politician has been dubbed ‘Europe’s New Iron Lady’ for her stance on the Ukraine war but is under pressure after a scandal erupted in the media

Kaja Kallas Estonia
The prime minister of Estonia, Kaja Kallas, during the last NATO summit in Vilnus (Lithuania), on July 11.INTS KALNINS (REUTERS)

She has publicly lectured European leaders such as French President Emmanuel Macron for picking up the phone to his Russian counterpart Vladimir Putin. She maintains an unwavering position on the solution to the invasion of Ukraine: the unconditional withdrawal of the Kremlin’s troops from all Ukrainian territory before any talk of negotiations. Estonian Prime Minister Kaja Kallas is one of the most hardline voices within the EU and NATO in terms of arms supplies to Kyiv and the tightening of economic sanctions against Moscow, to the point of banning the entry of tourists. Her stance has earned her the nickname “Europe’s New Iron Lady,” coined by New Statesman.

However, at the end of August, a media investigation reported that a company linked to her husband has continued to do business in Russia during the war. The revelations have shaken Kallas’ coalition government. The prime minister, whose center-right Reform Party won the elections last March and governs together with the Social Democrats and the liberal Estonia 200 party, was called to appear before a parliamentary committee and although the opposition is threatening a no-confidence motion, it has yet to get off the ground. Estonia’s president, the independent Alar Karis, lacks the power to dismiss her but has publicly called for her resignation. He has also said as much privately to Kallas herself, as the prime minister has acknowledged, but she is refusing to step down.

The news was broken by Estonian public broadcaster ERR on August 23. Kallas’ husband, Arvo Hallik, continued to conduct business in Russia through his trucking company Stark Logistics even after the invasion of Ukraine, despite the unequivocal position of his wife on stifling Moscow economically through sanctions and cutting any commercial ties with Moscow. Hallik defended himself against the accusations by claiming that his company was only trying to help another Estonian company, Metaprint, which is part-owned by his business partner, to wind up its activities in Russia. But Hallik’s partner, Martti Lemendik, admitted in local media that between February 24, 2022, the date of the invasion, and August 24, 2023, his company sold over $32 million in goods on the Russian market.

The icing on the cake was the declaration of interests that Kallas herself had to submit when she was re-elected as prime minister. It features a loan of €350,000 ($375,000) granted by Kallas to Novaria Consult, a company wholly owned by her husband. It is through the latter that Hallik controls a quarter of Stark Logistics, the trucking company. The question being asked by the opposition and her own coalition government is plain: did the Prime Minister’s money serve to circumvent the sanctions she so strongly defends? Kallas’ answer: she and her husband do not talk about business at home.

The main opposition party — the far-right EKRE — has openly called for new general elections due to the scandal. Isamaa, the conservative party that was part of the previous coalition and ruled with Kallas in her second Cabinet until March, is also demanding her resignation. The Social Democrats, with three ministers in the government, are divided on whether she should go, although for now they are maintaining their support. Critics of the government have pointed out that many Estonian companies have posted losses and faced layoffs after cutting commercial relations with Russia.

Meanwhile, the prime minister’s popularity is plummeting. According to a poll published Thursday by Norstat Estonia, 67% of Estonians believe she should resign, but Kallas is just as determined to keep her job as she is in calling for tougher action against Moscow. “The opposition has a constitutional way to oust me, to file a no-confidence motion. Bullying me until my nerves fail is not constitutional,” she said.

Ma olen alati olnud oma sissetulekute suhtes täiesti aus ja läbipaistev ning oma majanduslikud huvid korrektselt...

Posted by Kaja Kallas on Monday, September 4, 2023

Kallas learned of husband’s business ties through the press

Two weeks after the scandal broke and despite new details appearing in the press, Kallas remains in office and continues to defend Hallik. “My husband doesn’t have a ‘Russian business.’ They did have a very small volume of transport [relating to Russia] before the war started,” the prime minister said Monday during her appearance before a parliamentary anti-corruption committee, as reported by ERR. “They stopped it a month after this war started. Then they continued to help their majority owner. So how can this be considered a Russian business? If you don’t have Russian customers, you don’t leave behind a single euro, ruble or dollar there, you don’t buy anything there, you don’t sell anything there, so upon what basis could it be referred to as a Russian business?” she added, stating that she became aware of her husband’s Russian business ties when they were published in the press.

When asked about the loan to her husband’s company, Kallas confirmed its existence, but denied that the money could have been used toward conducting business in Russia as the firm in question, Novaria Consult, does not carry out any activity other than that of a “financial group.” She also stated that the loan was provided from the income she received as a lawyer, before taking office, and added that the loan and the corresponding interest had been repaid during the months of June, July and August of this year.

What Kallas was unable to specify in parliament was the exact date on which the loan was granted: whether it was before or after the beginning of the war, a fact that has triggered fresh speculation. Kallas reacted hours later with a post on Facebook. “Today, at the Riigikogu [parliament] commission, the opposition surprised me with the question of what day I signed the loan with my husband [...] To prove that I have nothing to hide, I have sent the members of the commission the contract and two annexes,” she wrote, adding: “The witch hunt against me, due to the activities of my husband’s partner, has crossed the limits of tolerance.”

Karis — whose position as President of the Republic is more representative than political, but whose statements carry great weight — is clear about what Kallas should do now. After meeting last Monday with the leaders of all the parties in parliament, he said: “Personally, I would have liked it if the prime minister had resigned at the beginning of the series of events that have made her the focus of the crisis,” ERR reported. “It would have spared her, her loved ones, the effectiveness of the government and the credibility of messages coming out of Estonia.”

“The next steps by the prime minister will show how serious she considers the problem to be and what she believes is the right solution for the Estonian state,” Karis said in a statement released on August 28.

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