Latvia is a republic in north-eastern Europe, bordered on the north by Estonia and the Gulf of Rîga, an inlet of the Baltic Sea; on the east by Russia; on the south by Belarus and Lithuania; and on the west by the Baltic Sea. Latvia is one of the Baltic states, along with Lithuania and Estonia. Rîga is the capital and largest city, as well as the chief port. Latvia is situated on the eastern shore of the Baltic Sea. Ethnic Latvians constitute a slight majority of the population, while Russians represent the largest minority group. Many of the Russians or their ancestors settled in Latvia after the Union of Soviet Socialist Republics (USSR) annexed the republic in 1940. Latvia was a republic of the USSR until 1991, when it regained its independence. In 1993 the country held its first post-Soviet democratic elections. Since the early 1990s, Latvians have been working to transform the country's centralized, Soviet-developed economy into one based on the principles of the free market.