Under the terms of the law, which narrowly passed its third reading on Tuesday night, up to 500,000 mainly ethnic Russian residents of Latvia are set to find themselves almost indefinitely excluded from citizenship - and with it the right to vote and own property.
If approved by President Guntis Ulmanis, the new legislation will play right into the hands of Moscow, which has long accused the Baltic state of human rights violations against its large non-Latvian population. It may also jeopardise the agreement covering the final withdrawal of some 10,500 Russian troops from Latvia by 31 August.
In addition to Russian protests, the law stands to be condemned by the Council of Europe and the Conference on Security and Co-operation in Europe (CSCE), both of which indicated prior to Tuesday night's vote that they found its provisions unacceptable.
'The Latvians certainly haven't done themselves any favours in passing this law,' said a Western diplomat in Riga. 'It will be much more difficult for us to stick up for them when Moscow starts protesting.'
Nearly all of those set to be excluded from citizenship are workers from Russia and other Soviet republics who were brought into Latvia under Stalin's orders during the period of heavy industrialisation after the Second World War. To many Latvians, who as a result of such policies now make up just 52 per cent of the country's 2.7 million population, they were seen as uninvited colonists. When the country finally regained its independence from Moscow in 1991, many felt that, in addition to having no rights to citizenship, the immigrants should be encouraged to leave.
While some on the far right of Latvian politics have pushed for deportations, most of the country's leaders realised that such a policy was untenable. Indeed, under pressure from the CSCE and the Council of Europe, the government itself has been pushing for a more liberal citizenship law, similar to those passed in neighbouring Lithuania and Estonia.
Under the law now passed, the descendants of the some 700,000 who came to the country between 1945 and 1989 - those born in Latvia - will be naturalised by the end of the decade. According to most estimates, 200,000-300,000 will thus qualify for citizenship. The rest, up to 500,000 original immigrants, will be subjected to strict naturalisation quotas: less than 3,000 a year will be able to become citizens.
The Latvian government, fearful of the consequences such a policy will have on its hopes of joining the Council of Europe and the EU, yesterday appealed to President Ulmanis to reject the law.
Leading article, page 19