The history of the Baltic states in WW2 is complex. My experience is mainly with Estonia, but I believe the dynamics in Latvia were similar.

In 1939 the Baltic states were independent countries with their sovereignty recognised by the international community. That year, as a result of the Molotov Ribbentrop pact, the USSR received carte blanche to annex them from Germany. Since Germany was the only power that could effectively prevent the Soviets from moving in, the USSR was able to move at its leisure, manufacturing flimsy pretexts (in Estonia's case it was the escape of an interned Polish submarine from Tallinn harbour, which allowed the USSR to claim Estonia was no longer neutral in the Polish Defense War) which allowed the USSR to send troops into the Baltics. The USSR then turned its de facto control into actual control by having the governments stand down and appoint puppet governments who then 'chose' to become part of the USSR. There was no real fighting against these Soviet occupations and invasions, since the governments chose not to resist and Soviet force was overwhelming.

In 1941 Germany attacked the USSR, and rapidly occupied large areas of Soviet territory, including the Baltic states. The Germans worked to recruit Latvian, Lithuanian and Estonian volunteers to assist them in their war against the USSR, and there was a response, since to many people in the Baltics, the USSR was the "greater evil". Many of these units fought bravely and successfully, and since they were technically serving in the German army or the Waffen SS, they able to receive German decorations.

What you have there looks like the the Iron Cross. The 1939 refers to the date the award was established. It was awarded to numerous Latvians serving in the German armed forces during Barbarossa. I'm guessing your grandfather was one of them. I hope it doesn't offend or upset you to hear this, but although I'm sure your grandfather was not a Nazi, he was almost certainly fighting under German command.

The issue of how the veterans of WW2 should be treated is quite controversial both inside and outside the Baltic states, as an aside. Russia tends to view them as fighting for fascism, while many inside the Baltics believe that they were patriots making the best of a bad situation.