Nicholas Vardy

For all of its recent successes, Russia's recent annexation of Crimea served as a stark reminder to Estonia that the geopolitical map redrawn after the collapse of the Soviet Union is hardly set in historical stone.

The mood today in Estonia is of strong resolve as the country is slowly and methodically preparing for the worst. I was told that thousands of Estonian men -- both young and old -- have joined a national defense league in recent weeks, prepared to defend to the death their hard-won freedom against any Russian aggression. Tallinn's Forest cemetery, which I visited, serves as a somber reminder of the fragility of freedom in this part of the world.

As I walked by Estonia’s Presidential Palace, my host pointed out three flags flying in front: the Estonian flag, the EU flag and -- rather unusually -- the flag of NATO. The latter was a reminder to both Estonians and Russians that that any attempt at annexation by Russia would be met with stiff resistance.

While discounting the chance of an immediate invasion, the Estonian defense minister last week expressed his dismay that the only resistance the Ukrainian army showed against the Russians was to sing the Ukranian national anthem before laying down their arms. He wanted to put the Russians on notice that any attack on Estonia would not happen without Estonia taking its pound of flesh -- measured in Russian lives lost.

I also was told that the United States quietly has dispatched 10 F-16s and the United Kingdom eight Typhoon fighters to Estonia, signaling to Moscow that NATO is willing to go to the mat to defend the territorial integrity of its fellow members. Having sent Estonian soldiers to die on NATO missions in Afghanistan, Estonia feels it has paid its dues to NATO and the West. It now is time for NATO to return the favor.

In the meantime, the Estonian government is making plans to put the entire government “in the cloud” should its officials ever be forced to run the country virtually.

Although they make up only 26% of the population in Estonia, Russians are a strong presence in Tallinn. I stayed in a Russian-owned hotel, chock full of Russian guests, with all TV channels tuned to the Russian state-controlled media. And there are plenty of other Russian-owned businesses in Tallinn, guarded mostly by ominous-looking square-jawed characters clad in all-black garb.

Russians and Estonians seem to get along well enough on a day-to-day basis. But there is clearly no love lost between the two groups. Many Estonian monuments don't have Russian descriptions, even as English is prominently featured. And it is English, not Russian, that is the language of choice among educated Estonians. All the young people I heard speak it surprisingly well.

Estonia: Off Investors' Maps

In the few years after independence, Estonia and the Baltics did creep onto the maps of investors in the late 1990s. But former regional titans like Hansabank eventually were gobbled up by larger Swedish, Finnish, Norwegian rivals -- all of whom view Estonia as an outpost of Scandinavia.

You can invest in the broader region through the MSCI Emerging Markets Eastern European Index Fund (ESR) or the SPDR S&P Emerging Europe ETF (GUR). The irony is that over 50% of these funds invest in Russia itself, with Estonia and the Baltic States collectively having no discernible weighting.

Russia's brazen annexation of Crimea reminded Estonia and the rest of the world that the Baltic States' history and unlucky geography make the region a geopolitical powder keg.

Let's hope Estonia's admirable resolve -- combined with NATO's military support -- can keep that powder keg from exploding.

In case you missed it, I encourage you to read my e-letter column posted last week on Eagle Daily Investor about my #1 pick in Russia, the world’s most hated stock market. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

Nicholas Vardy

Nicholas Vardy is currently editor of the monthly investment newsletter, The Alpha Investor Letter, which provides longer-term global investments. He also writes two weekly trading services, Triple Digit Trader and Bull Market Alert, which focus on making short-term profits in the hottest markets in the world.