WHEN Lt. Vladimir Zaitsev was transferred to Riga in 1954 to serve at the Soviet military's Baltic headquarters, he thought he was set for life.He married a local Russian-Polish woman, had two daughters, and eventually retired here like many of his military comrades. It was a relatively comfortable existence: Food was more plentiful than in his native Russia, and in the summer he could relax in a spacious beachfront dacha rented from the Soviet Writers Union by his son-in-law, a well-known Russian satirist. Now Lieutenant Zaitsev is an alien in a foreign land. Under newly-independent Latvia's citizenship decree, current or retired Soviet military posted here may not vote, own property, or become citizens. The dacha is also history: Two Latvian brothers from Canada recently turned up with the deed to the house, and by law it is now theirs. "I wouldn't even take Latvian citizenship if they offered it," scowls Zaitsev, which is not his real name. "Latvia doesn't want me, and I have no place to go in Russia," he says. And he is worried that he will lose his pension. Thousands of Zaitsevs live in Latvia, and they are but a fraction of the people caught in the citizenship dilemma that has consumed this nation since the Soviet coup allowed a sudden renewal of independence in August. Zaitsev's fate has already been settled. He will not become a citizen. According to an Oct. 15 parliament resolution, only those who were Latvian citizens on June 17, 1940 - when the Soviets invaded - and their descendants will automatically be granted citizenship. Officially, only 52 percent of Latvian residents are ethnic Latvian, the result of five decades of Russification, though many local officials privately admit that figure is likely below 50 percent. Russians account for 34 percent; the rest are Byelorussian, Ukrainian, Polish, or of other origin. The citizenship question has immobilized the Latvian parliament, which can pass little other legislation until this issue is solved. Privatization and other market reforms are virtually paralyzed, since property ownership is tied to citizenship. "I fear Western businessmen won't be willing to invest their capital here until stability is guaranteed," says Vladimir Steshenko, chief of the government's nationalities department. The problem is also exacerbated by a leadership vacuum, say Latvian and Western analysts. Leaders have created their own personal fiefdoms and shown no willingness to form a badly needed centrist political party that could offer some direction on the citizenship problem, these analysts say. None of the top five leaders participated in parliament's Oct. 15 resolution. All were either out of the country or abstained from voting, calling none of the options satisfactory. "They know they have an explosive situation on their hands and they're trying to protect themselves," says a Western diplomat. In the past, Latvian parliament chairman Anatolijs Gorbunovs has supported something close to the so-called "zero option," in which all people living in Latvia on the day it restored independence - Aug. 23, 1991 - would automatically become citizens. At one time, the Popular Front, the broad anticommunist citizens' movement, also supported this option, but since independence, Latvian politics have radicalized. The Popular Front's stand looks increasingly like that of the Citizens' Congress, which holds t hat only those who were citizens of pre-Soviet Latvia and their descendants have the right to vote on a naturalization process. The issue remains far from solved, and could drag on for several months, says Aivars Endzins, chairman of the parliament's legislative committee. The Oct. 15 resolution constitutes only a framework for resolving the question. One point of debate is over the length of time a non-citizen must have lived in Latvia before he or she is eligible for citizenship. The resolution states 16 years, but Mr. Endzins says the parliament will likely settle on five or 10 years. But since much of Latvia's foreign population has been here a long time, that won't be the toughest requirement for applicants to fulfill. Much more trouble for some will be the language requirement: A "conversational level" is required by the Oct. 15 resolution. Only 21 percent of the nation's Russians speak Latvian, and a May 1989 law requiring the teaching of Latvian to non-speakers has been poorly implemented. As Latvia incorporates itself into Western organizations, non-citizens hope Western pressure will force the Latvians to deal "reasonably" with this problem. Western diplomats, however, have little sympathy for the non-Latvians who moved here under the Soviet occupation - especially the military. As long as they have citizenship somewhere, be it Russia or the Ukraine or wherever, their human rights are not being violated, says one diplomat. "Of course, politically speaking, it's not smart to disenfranchise a large portion of your population," the diplomat cautions. Latvia's demographic dilemma is complicated by the fact that its cities are overwhelmingly Russian. Riga, the capital, is only one-third Latvian. Daugavpils, the second largest city, is only 13 percent Latvian. And more than 80 percent of Latvia's private capital is controlled by non-Latvians, says Mr. Steshenko of the Nationalities department. Latvians are more involved in agricultural and professional work, while much of Latvia's skilled laborers are Russian. If a large portion of them decide to leave, it would be a blow to the Latvian economy, he says. "Those who are coming to my department saying they want to leave are engineer PhD candidates," Steshenko adds. "In that case, I'm not so much a government worker but a priest. I try to calm people down, tell them to wait for a decision."