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Kaja Kallas scandal: The story so far

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Kaja Kallas.
Kaja Kallas. Source: Jürgen Randmaa / valitsuse pressiteenistus

ERR News sums up the scandal revolving around Prime Minister Kaja Kallas' husband Arvo Hallik's business activity in Russia during the Ukraine war.

ERR broke the news on August 23 that a transport company partly owned by Arvo Hallik, husband of Estonia's Prime Minister Kaja Kallas (Reform Party), has continued doing business in Russia since the start of its full-scale invasion in Ukraine.

While Hallik said his firm – Stark Logistics – was simply helping another Estonian company – AS Metaprint – wrap up its activities in Russia, it soon turned out the two companies have the same majority shareholder in Hallik's business partner Martti Lemendik. Eesti Päevaleht reported on August 23 that Metaprint had sold €17 million worth of goods to Russia between the start of the war and last November.

Prime Minister Kallas said she is not involved in her husband's business. ERR had previously written about a loan of €350,000 Kallas had given Hallik. In June, Kaja Kallas' financial interests declaration disclosed that she had lent €350,000 to Novaria Consult, a business owned in full by Hallik. That corporation holds a 24.8 percent stake in Stark Logistics AS. Kallas has said she did not ask her husband what he used the money for.

An interview with Metaprint and Stark Logistics owner Martti Lemendik from August 24 revealed that in terms of sales turnover, between February 24 and August 24, 2023, the company sold €29,817,709-worth of materials on the Russian market.

Stark Logistics truck on its way to the border. Source: Reader submission

EPL reported that contrary to the Estonian businessmen's claims of intentions to wrap up the business, Metaprint's Russian business partner OOO Aeroprom, owned in turn by Metaprint CFO Emeri Lepp, planned to expand operations instead.

This suggests that Metaprint, Stark Logistics and Aeroprom are essentially the same entity, with Stark Logistics functioning as its transport division.

Kaja Kallas has maintained throughout the scandal that she and Hallik did not talk business at home and that she was not up to speed on his business activities until this Monday. She has been a fierce advocate of supporting Ukraine and cutting business ties with Russia, urging state-owned businesses to have no dealings with Russia. She subsequently said that Stark Logistics will wrap up its Russia activities in September.

Arvo Hallik announced on August 25 that he has decided to sell his shares in Stark Logistics and resign in full from the firm. The PM's spouse apologized for not realizing sooner that his business dealings, while not in breach of sanctions, might still be construed as immoral.

However, Hallik still retains a stake in Stark Warehousing, another company he co-owns with Martti Lemendik. ERR asked Hallik if he also had plans to sell Stark Warehousing but had not received a reply by Tuesday morning.

Pollsters Norstat and Turu-uuringute carried out a survey of whether people think Kallas should resign in the wake of the scandal, with 57 percent of respondents feeling the PM should resign for Norstat and 48 percent that she should "definitely resign" and 21 percent that she should "probably resign" for Turu-uuringute.

The Estonian Internal Security Service (ISS) on August 25 told ERR that Arvo Hallik's business activities have not constituted a sanctions violation.

Arvo Hallik. Source: Siim Lõvi/ERR

Kaja Kallas said that she has no plans to resign as Estonia's prime minister, even after being confronted with evidence she visited Metaprint on January 28 and accompanied her husband to Metaprint events twice. She remarked that this was before the start of the war, maintaining once again that she never discussed the nature or purpose of her €350,000 loan to Hallik with her husband.

The Social Democratic Party and Eesti 200, partners of Kallas' Reform Party in Estonia's ruling coalition, have suggested the matter will not collapse the government, with Minister of Foreign Affairs Margus Tsahkna (Eesti 200) saying "trust needs to be restored."

Opposition parties have been calling for Kallas' resignation this week, suggesting the scandal sullies Estonia's international reputation and compromises Kallas.

On Monday, August 28, the prime minister said that she will not attend a joint sitting of Riigikogu select committees convened to discuss the matter of businesses' continued activities in Russia. Kallas said she would not attend on the grounds that business activities relating to Russia do not affect the state budget of Estonia.

She told members of the press Monday that the upcoming Riigikogu confidence vote will clarify what exactly she is being accused of, as the nature of accusations did not become clear to her.

At the same time, on Monday, Eesti Päevaleht (EPL) discovered that Martti Lemendik's "system" company Metaprint, which incorporates several Estonian and Russian businesses, was selling goods to the company owned by Sergei Anatolevich Kolesnikov, a Russian oligarch currently under sanctions in Poland and Ukraine. EPL found Tyumenskie Aerozoli, a company that has supplied tear gas to the Russian Ministry of the Interior, also on the list of business partners of Metaprint.

Arvo Hallik, who sold his 25 percent share in Stark Logistics "for a peppercorn sum" back to the company, confirmed that he intends to keep his 30 percent stake in Stark Warehousing, which is another company co-owned by Martti Lemendik, the majority shareholder of Stark Logistics.

None of the three people, Premier Kaja Kallas, Stark Logistics CEO Kristjan Kraag, and Metaprint CEO Martti Lemendik showed up at the extraordinary joint public session on Tuesday morning. In their editorials published Tuesday morning, all of Estonia's major dailies strongly condemned a decision by Prime Minister Kaja Kallas (Reform) to not appear before a Riigikogu joint select committee session.

The same day, Kallas told Vikerraadio that she was not notified of Stark Logistics' Russia-bound transports when she was vetted for state secrets clearance by the Internal Security Service (ISS) this spring. Security experts disagreed over whether the ISS should have drawn attention to this matter or not.

A part of a €350,000 loan issued earlier in the year by Prime Minister Kaja Kallas (Reform) to a company owned by her husband, Arvo Hallik, went towards founding Stark Warehousing, daily Eesti Päevaleht reported. In a lengthy interview to ERR the same day, Kallas said that the loan has been fully repaid and with interest.

In the interview, Kallas has restated that her husband's business operations relating to Russia involved only supporting another Estonian company in winding up its activities in that country.

She also said and her husband's legal Russia-related business is "more acceptable, at least more easily acceptable [in other countires] than it is in Estonia, for the very reason that our moral standards are simply that much higher." Estonia continues to be a leader in tapping everyone's consciences on doing business with Russia, she said.

Tuesday evening, the Center opposition party proposed to set up a special committee of investigation on Stark Logistics' business operations in Russia.

Wednesday, August 30, Martin Helme, the leader of the opposition party EKRE, called for extraordinary elections, while coalition partner Ossinovski (SDE) said that the Social Democrats want to continue their collaboration with the government, but are also expecting exhaustive explanations from the prime minister.

Wednesday's poll showed no changes in Reform party support over the past week, so the issue involving Kallas' husband's Russian business operations has not affected the party's ratings.

On Wednesday, Kallas also proposed her own dates for when she could appear before Riigikogu select committees to provide answers, easing tensions after not attending on Tuesday. She explained to ERR that she would like to be treated no different than anyone one else, "quite a number of ministers have failed to attend select committees and I think the record is held by Martin Helme (EKRE)," she said.

The prime minister agreed to appear before the special committees on two occasions: next week Monday, September 4, and the following Monday, September 11. The first is a closed meeting of the security authorities surveillance select committee to investigate whether ISS adequately briefed Kallas about her husband's business in Russia risks, and the second is an anti-corruption select committee meeting to discuss her assets, income, and declarations of interest.

A poll on Thursday morning, August 31, showed that Kaja Kallas (Reform) remains the most popular candidate for prime minister of Estonia.

Martti Lemendik confirmed to ERR on Thursday that Hallik sold his shares back to the company. On the same day, Hallik stepped down from his position on the board of another Estonian company, Restate Property Developers, which has business ties in Russia.

On Friday ERR reported that one of the main clients of Lemendik's company is yet another Estonian-owned firm, Wolf Group, which is one of Russia's leading producers of polyurethane foam.

Special committee of investigation?

In an opinion issued Wednesday, Chancellor of Justice Ülle Madise wrote that there are four types of committees in the Estonian parliament: standing committees, select committees, investigation committees and study committees. "Investigation committees have the broadest scope of powers — even businessmen, for example, are obliged by this invitation to appear."

The opposition Center Party has made it clear that the party supports forming a special committee of investigation. Jüri Ratas, the party's leader, explained that the constitutional affairs committee must authorize the formation of an investigation committee, but coalition partners hold six of the committee's 11 seats. So the formation of the committee of investigation is ultimately dependent on the Social Democrats, as the coalition's other two partners, Reform and Eesti 200, are against it.

Chancellor of Justice Ülle Madise. Source: Siim Lõvi/ERR

Lauri Läänemets, chair of the Social Democrats (SDE), said that he does not think that a special Riigikogu investigation committee is necessary. Anti Allas, an SDE member of the constitutional affairs committee, told ERR that the group is still undecided.

In a lengthy interview with ERR, Jürgen Ligi, a member of the Riigikogu and deputy chair of the Reform Party, said that his party strongly opposes the formation of the committee as these usually boil down to "political mockery" and fail to uncover new information.

Prime Minister Kallas and the Reform Party

On Friday, September 1, Reform party leadership and parliamentary group members held an online discussion with Prime Minister Kaja Kallas (Reform) about the situation involving her husband, Arvo Hallik.

Reform fully supported Kallas' decision not to resign. "We were reassured that her public statements reflect her knowledge and feelings," Hanno Pevkur, the minister of defense and member of the Reform Party leadership, said. There was no discussion of Kallas' resignation, he added.

Jürgen Ligi, the deputy chair of the Reform Party, said after the meeting of the party's leadership with Kaja Kallas that replacing the prime minister, so that the press and the opposition can "satisfy their bloodthirst" is not reasonable. "Even though the situation is embarrassing, this does not mean that the government has to resign. And it seems like coalition partners share the same view."

And speaking of embarrassing behavior — Ligi has accused the media of pro-Kremlin bias and mentioned Putin as possible ERR informant. How the Estonian public broadcaster uncovered the story that led to the scandal involving Prime Minister Kaja Kallas is detailed in an article published on the Russian language portal of ERR.

According to political scientist Tõnis Saarts, Kristen Michal, Hanno Pevkur, and Urmas Klaas are the most likely candidates for the position of prime minister if Kaja Kallas were to resign. Michal, the media's favorite candidate, supported Kallas unequivocally. "I believe my position as Estonia's climate minister in the administration of Kaja Kallas is more exciting than any other," he said.

Kallas and the opposition

Tanel Kiik, the leader of the Center group, said that when parliament resumes its work on September 11 and the prime minister is still in office, the opposition will be pressing the same questions.

On Saturday, former Riigikogu member, politician and literary scholar Mihhail Lotman (Isamaa) told ERR's Vikerraadio that Prime Minister Kaja Kallas' husband's business operations shattered "Estonia's moral compass."

Mihhail Lotman. Source: Ken Mürk/ERR

"We are talking about morality, values, etc. I do not like these big words. They represent small things that have very big consequences. I object to the investigation into Kaja Kallas' family life, and Mr. Hallik has done nothing wrong, or at least nothing illegal; the rest is a matter of moral compass. However, our prime minister is the head of state, and her actions were wrong. I did not want to believe it when I first heard about the scandal. When it came out that everything was real, I was deeply hurt and ashamed."

"The Estonian government and the Reform Party often emphasize that the war began in 2014. So we have been at war for a long time. Say what you want, but the prime minister has invested in and has profited from this war. And, regardless of what the press says, as Kaja Kallas has often pointed out, other heads of government support and understand her. Naturally. /.../ But I do not want things to turn out that way in Estonia."

Kallas fails to tell Riigikogu committee when Novaria loan was issued

Prime Minister Kaja Kallas (Reform) was unable to state when exactly she provided a loan to Novaria Consult, a company owned by her husband, Arvo Hallik, when asked about it by the Riigikogu's Anti-Corruption Select Committee at an at times fairly boisterous sitting Monday morning.

Later on Monday evening, Kallas revealed in a social media post that she has decided to make contracts for a loan she gave her husband's company available to members of the Riigikogu Anti-Corruption Select Committee, while she also described the opposition's activities as a "witch hunt" and suggested those coming after her are not interested in the truth.

On Monday (September 9) evening, President Alar Karis said, after meeting with heads of parliamentary parties, including Kaja Kallas, in Kadriorg that he would personally have preferred to see Kallas resign when the scandal first broke.

"It would have spared her, her loved ones, the effectiveness of the government and the credibility of messages coming out of Estonia. But everyone needs to make their own decisions in such a situation, after weighing the moral problem," Karis said.

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Editor: Marcus Turovski, Kristina Kersa

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