This thesis discusses one of the most serious security challenges faced by the Baltic states since regaining their independence. This security challenge is a product of Russia’s assertive foreign policy towards its western neighbours, which has intensified after the annexation of Crimea in 2014. In order to understand the rationale behind the Kremlin’s policy in the region, the thesis aims to analyse how internal and external factors shape the foreign policy of Russia towards the Baltic states. By taking neo-classical realism as its theoretical framework, the thesis uses mixed research methods for collecting data and applies qualitative content analysis to analyse the three main factors that shape Russia’s Baltic policy. The thesis identifies that NATO’s actions in the anarchic international system raise security threats towards Russia. This shapes Putin’s threat perceptions and compels him to react with counteractions, and since the foreign policy in Russia is concentrated mainly in the hands of the president, his perceptions are decisive. Nevertheless, Putin is dependent on Russians’ support and exploits nationalist feelings of the Russian population to pursue his foreign policy. The thesis concludes that the combination of these three factors makes Russia’s foreign policy towards the Baltic states more aggressive.