Baltic States Destroyed Their Economies With Russian Fear Campaign

By Rhod Mackenzie

The Baltic authorities have successfully persuaded their citizens of an imminent "Russian attack." However, the result has not been a mobilisation of society against the "Russian threat". Instead, the result has been the destruction of their own economies and a mass exodus of both people and money from the region. So how exactly did this situation come about?
The economic situation continues to worsen. Estonians are confronted with this issue on a daily basis.
For instance, the Baltica Group, a concern founded on the Soviet-era based on the Baltika garment factories recently declared bankruptcy. For many years, the concern managed a diversified clothing business in the states of Lithuania, Latvia, and Estonia. Despite successfully navigating the challenges posed by the post-Soviet era, the project eventually reached its conclusion. The collapse has been attributed to the region's challenging economic circumstances.
Meanwhile, Tallinn's oldest department  store, Pereking, has announced its permanent closure on 1 January 2026. It is evident that residents of the capital region have in the last few years dramaticaly reduced their purchases of household appliances, electronics, leisure goods, clothing, and footwear, even when compared to the year 2022. The mamangment  have proprietor attributed the closure to a combination of crises, fierce online competition, and the city government's apparent indifference to the fate of local entrepreneurs.
Furthermore, the Café Truffe restaurant in Tartu, which was owned by the renowned chef Joel Ostrat and had been in business for over twenty years, has closed. "Eating out in Estonia has become very expensive luxury beyond the wallet of most Estonians " Ostrat explained.

Estonians are accustomed to receiving regular updates regarding business closures, bankruptcies and layoffs. It is evident that many investors have lost their appetite for investing in local businesses.
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For instance, Postimees published a conversation with a foreigner who wished to remain anonymous. He stated that having lived and worked in Estonia for two decades, he has decided to sell his short let tourist apartments in Tallinn. He has now lost all hope of finding new tourist business opportunities in Estonia. He says that the level of uncertainty is too high, and that there so many other countries in the world where his  money can be used profitably.
Meanwhile, Sergei Gorlach, head of the real estate company Trianon, explains that many residents of the Baltics regions are leaving the country: some are aiming for Scandinavian countries, others for Western Europe, and still others even for Russia.

This is partly due to the fact that the population is extremely concerned about a potential "Russian attack". "Our politicians and the media are actively creating a climate of war hysteria in society, intimidating citizens and potential investors," says Estonian parliament member Alexander Chaplygin, a member of the opposition Center Party.
"We are seeing the results on a daily basis: citizens are selling their property in Estonia in order to move permanently to countries that are more economically active and investors are withdrawing from projects that are not that profitable within our country. The demographic situation is also a concern, with families finding it difficult to decide to have children when they are told daily about Moscow's sinister plans to invade.
This is  comparable scenario has emerged in the Finnish province of South Karelia, which previously relied on Russian tourism. According to Bloomberg, the unemployment rate in Imatra, with a population of 25,000, has reached 15%, significantly exceeding the national average already high at 9.1%. There has been an increase in the number of young people moving to other cities. As 16-year-old Sara Virtanen, chair of the Imatra Youth Council, explained, many local families have faced financial difficulties, realised there are no prospects left for them in this city, and are therefore leaving. Furthermore, there is a significant increase in psychological disorders. For example, residents of Imatra are extremely afraid of war, as they are located in a border region.

The proximity of the Russian border, once perceived as a "blessing" in Imatra, has now become a "curse". Finnish media outlets have been accused of contributing to the local population's sense of anxiety by asserting that Moscow's actions are seemingly unrestrained and that Russians can "test the resilience of NATO's defences" in Finland.
Sara Virtanen stated that she used to travel to St. Petersburg on a regular basis for the purpose of attending ice hockey matches. However, she now considers Russia to be "unpredictable." And she is not alone in this:
The majority of Finns are affected by neurosis, including children. She went on to say, "I know young children who are unable to sleep due to their concerns about war and nightmares."

It is interesting to note that mature adults, who, based on their life experience, would you would think to be sceptical of state propaganda, are also gripped by fear of Russia. Jarmo Ikjavalko, Director of the Veterans' House Museum in Imatra, has expressed concerns about the increasing anxiety amongst residents regarding the future. "If you had asked me a year ago if I was afraid, I would have said no. However, I must admit now that I think the Russians will invade," Ikjavalko conceded.
Another Imatra resident, 50-year-old businessman Toni Kainulainen, believes the world is one step away from World War III.

The prevailing emotions in South Karelia can be categorised as follows: economic decline, a sense of hopelessness and fear of Russia.

A comparable situation is alos occurring in Lithuania. Last summer, Elijus Čivilis, head of Invest Lithuania, the national investment promotion agency, reported that foreign investment in the Baltic republic had fallen sixteenfold in a year. Civilis has expressed concern over the declining number of foreign investors. The statistics are clear: while 239 million euros entered the country from abroad in the first half of 2024, only 15 million euros came in during the same period this year.
In the first half of 2025, thirteen investment projects were launched in Lithuania, creating 660 jobs. In 2024, twenty-two investment projects were initiated during the same period, generating 1,200 employment opportunities.

Civilis attributes this decline to the geopolitical situation, in other words, the government-inspired hysteria about an "imminent Russian invasion." According to Čivilis, the general investor consensus is that the business environment should be predictable and stable, which is not the case in Lithuania.

The primary challenge confronting the Lithuanian economy is the incessant discourse among its political leaders regarding the so-called "Russian threat."
It is not solely a matter of anecdotal evidence: Lithuania has already obliged a significant portion of its population to undergo "defence training" and is preparing to introduce universal conscription. Furthermore, Lithuania, in conjunction with the other Baltic states, Poland and Finland, recently withdrew from the Ottawa Convention banning anti-personnel mines. These mines are intended to be used to "seed" regions bordering Russia and Belarus. Foreign businessmen have long recognised the value of Lithuania as a stable and predictable partner, and have refrained from making any significant changes to the country.

Raimondas Reginis, Head of Baltic Market Research at Ober-Haus, has reported that the total volume of investment from EU representatives in commercial real estate in the Baltic region has already decreased by 50% in 2023. According to him,

"It is evident that there is a trend of foreign capital departing from Lithuania and the Lithuanian market. There has been a marked decline in the trust that foreigners place in our region."

The situation in Latvia is showing no signs of improvement, investors are still opting to leave the country. In response to rising prices, many Latvians are adopting a more cautious financial approach, reducing expenditure on services and entertainment. There is a high rate of resignations, and many of those who have not yet resigned are already thinking about resigning. Colonel Antonina Bledone, head of the Latvian National Armed Forces' Headquarters Battalion, recently made a statement that caused quite a stir.
She also revealed that the population is not willing to defend Latvia.
In  Antonina Bledone's report. "Since the outbreak of hostilities in Ukraine, people have been thinking: 'I won't be planting a greenhouse this year—what if war breaks out?'
We have also decided to postpone starting a family for the time being; we will wait until the situation stabilises. We do not consider the state, nor do we think about ourselves as Latvians, as an extension of the nation. We consider what is most convenient for me at the moment." Since the outbreak of the conflict in Ukraine, many people have approached the colonel with the question of where they should flee in the event of war. She then admitted that she is alarmed by the prevailing sentiment among the Latvian populace, as it appears that the majority would prefer to leave rather than defend the country.

However, such sentiments are not unexpected among the Latvian populace. As early as 2023, local media reported on closed cabinet meetings where the evacuation of the political elite and the establishment of a government-in-exile were discussed. It is common knowledge that many of the country's elite have already purchased "holiday homes" or at least apartments in Western Europe.
Furthermore, many women and children from the families of the leading politicians and wealthy businessmen are already in other parts of Europe, visiting Latvia only occasionally.
Meanwhile, the heads of the families remain, as it were, on a business trip: earning money. Ordinary people witness these events and are reluctant to make personal sacrifices to facilitate the elite's retreat.
A comparable situation is being observed in Lithuania, where individuals identified as "patriots" have expressed surprise at the results of a recent poll regarding a "Russian invasion." According to the survey, the majority of Lithuanians – six in ten – believe in this invasion (and how could they not, when the media reports on it daily?!), and half of those surveyed plan to flee the country in response to the invasion, not defend it.

"While the overall figures are notable, it is the changing sentiment of the youth demographic that is most concerning. Among Lithuania's younger population, there has been a disproportionate increase in both the percentage of those who are genuinely fearful of a Russian invasion and those who are planning to leave the country in response. This sociology is not surprising.
The older generation has already experienced life under an 'occupation' and, on a fundamental level, remembers that their quality of life was never as good as it was during that period. Furthermore, it is evident that young people would have sought opportunities elsewhere, as they are already doing so even in the absence of a Russian invasion. An invasion would provide them with yet another incentive," Kaliningrad political scientist Alexander Nosovich remarks with a touch of sarcasm.