Threat to the Economic Security of Lithuania
For the last several weeks the political and economical leadership of Lithuania is dealing intensively with the issue of the destiny of the largest of the Baltic’s oil refining enterprises, Mazheikiu Nafta. They are concerned because of the desire of the Russian oil giant, Lukoil, to take control of the shares of this Lithuanian company, shares which now belong to another Russian company, Yukos.
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Former Yukos chairman Mihail Hodorkovski
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The management of Yukos has been under attack by the Kremlin on political grounds. President Putin's team is trying in every possible way to destroy the economic potential of this disgraced company, both inside Russia, and abroad. On June 29, 2005, a little more a than month ago, the Russian Ministry of Justice has requested its colleagues in the Ministry of Justice of Lithuania to freeze the assets of Yukos, and also to suspend transactions involving securities of the company. Moreover, Moscow has demanded that Lithuanians forbid registration of transactions involving securities of Mazheikiu Nafta, a company belonging to Yukos. These papers, in the opinion of the Russians, should be in the possession of Russia, with Lukoil Company representing it, as repayment of Yukos' debts to the Russian treasury.
The leading Lithuanian politicians and economists reacted in an extremely negative way to the Kremlin's demands. The opposition parties in the Sejm even threatened the Prime Minister with impeachment if he were to meet the Russian demands. Arturas Paulauskas, Chairman of the Sejm of Lithuania,
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Arturas Paulauskas |
expressed a widespread opinion. According to his official statement, transfer of the Yukos shares of the petroleum holdings in Mazheikiu Nafta to the Russian state power companies would represent a direct threat to the economic security of Lithuania. "The example of Yukos has evidently shown to everybody that even private Russian companies engaged in the field of power resources, are compelled to obey instructions of the Kremlin" - declared this high-ranking Lithuanian politician. As he said, given the present political state of affairs, a situation in which the destiny of the leading power complex not only of Lithuania, but also of the entire Baltic region would depend on the Kremlin's will, is simply unacceptable.
Struggle for a Control Packet of Shares
This Russian company Lukoil sounded the claims to the shares of Mazheikiu Nafta, long ago. In 1999 it participated actively in the struggle for possession of the control packet of shares in the Lithuanian holding, however it lost to the American contender, Williams International , which was supported by the White House. After the American company's victory, its management carried out negotiations both with Lukoil, and with Yukos. As a result, Yukos, which offered Williams International more acceptable terms for the oil, has acquired the right to secure 12.5 % of Mazheikiu Nafta’s shares. Subsequently Yukos secured the controlling share holding of the Lithuanian company, (53.7 percent)
However, the management of Lukoil did not lose hope of gaining revenge. After the rout of Yukos at the end of March 2005, Lukoil addressed the board of directors of the disgraced company with an offer to sell the controlling shares of Mazheikiu Nafta.
It was supposed, that under the Kremlin's pressure, the board of directors of Yukos would agree to the offer. Experts even named the sum of $500 million dollars, which was supposed to be paid for the shares in the Lithuanian company. But the "blitzkrieg" in this case failed: almost six months passed from the beginning of negotiations, and the shares still remained in the hands of Yukos.
Then the abovementioned demand by the Russian Ministry of Justice to the Ministry of Justice of Lithuania appeared. Simultaneously, Leonid Fedun the Vice-President and Head of the Main Division of Strategic Development and Investment Analysis of Lukoil sounded again the desire of his company to acquire Mazheikiu Nafta shares. Having been informed on the negative r
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| Leonid Fedun |
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eaction of the Lithuanian politicians, Fedun declared that Lukoil would be satisfied only by acquiring of a control packet of shares in the Lithuanian holding. After this statement the abovementioned declaration by Arturas Paulauskas was made.
Hostages of the Kremlin
It is necessary to note that the fears of the head of the Lithuanian Parliament and his colleagues concerning the Russian company, Lukoil, have a solid basis. Currently the power market of the Baltics is substantially subjected to Russian influence. The share of income from just the rail transportation of Russian oil makes up about 30 % of the annual budget of Latvia,about $1.7 billion dollars. In addition, the Russian treasury is being filled due to transactions similar to those made in 2004 between the Latvian company Ventbunkers and the Russian company Slavneft., About 80 thousand tons of black oil monthly pass through the terminal of the city of Ventspils as transit goods, about 1 million tons a year, under the present circmstances. A similar situation is being observed in other Baltic countries. For example, the Russian gas giant, Gazprom, controls 34 % of the shares of the Lithuanian gasification enterprise, Lietuvos dujos, with whom a contract for long-term deliveries of gas and a formula for defining of prices, was made. Lukoil actively operates in the Lithuanian market through its affiliated company, Litasko.
Russia actively uses this situation, influencing pricing policies in the field of energy carriers in Latvia, Estonia and Lithuania. Last months all three countries experienced sharp increases in the price of fuel,, caused primarily by a corresponding policy in Russia. For example, in Estonia over the last several months, the price for automobile fuel increased by approximately 25 per cent. In its turn it affects the rate of inflation and, as a consequence, the general economic situation in the country and in the region. In June, 2005, in Estonia the rate of inflation has reached 3.1 per cent - first of all because of the increase in automobive fuel prices. In neighboring Latvia because of the rise in gas prices the continuation of delivery of gas to the apartment houses in the second-largest city of the country, Daugavpils, was threatened. References to the general situation in the world market of energy carriers are inappropriate in this case, as the Russian leadership is capable of changing price levels for fuel at its own discretion within certain limits and thus, can hold the governments of three Baltic countries as hostages to the Russian price policy.
Proceeding Economic Expansion
Up till the present moment the governments of three Baltic countries managed to keep in their hands monopoly on transit of power resources through the territory of their countries. However, the Kremlin does not lose hope for change of the situation to its own advantage. In May, a message from Latvia came on suppression of the attempt of the Russians to take control over the control share holding of the large transit company Ventspils Nafta located in Ventspils seaport. Simultaneous "attack" on Latvian Ventspils Nafta and Lithuanian Mazheikiu Nafta puts up a quite natural question on its true purpose. In this connection it is necessary to note, that Mazheikiu Nafta is a network of gasoline stations across all Lithuania, and also trading houses in Latvia and Estonia. There is also a quite practicable plan to open on the territory of these countries additional company's gasoline stations.
Thus, an attempt to acquire control over Mazheikiu Nafta and Ventspils Nafta gives out abundantly clear aspiration of Moscow to control the fuel sales in all three Baltic countries. On the background of the growing discontent with the European Community and voices predicting possible split of this organization, long-term strategy of Moscow, the purpose of which is in creation of a basis for the future economic conquest of the Baltics is seen very distinctly.
Russia - Baltic Countries:
Reaction of Russia to the policy of the Baltic Countries (May, 2005)
The Baltic Countries - Mutual Relations with Russia (May, 2005)
Seventh Baltic Economic Forum
Estonian Leadership Searches for Allies in Conflict with Russia
Activity of the Russian Secret Services in Baltic Countries
Chronicle of Russian Espionage in the Baltic Countries
The Baltic Countries - Local policy (May, 2005)
Lukoil:
Lukoil has begun deep exploratory drilling in Columbia (15.07.05)
Lukoil activity in Cyprus (09.06.05)
Lukoil president met Finnish Prime Minister (08.06.05)
Lukoil activity in Iraq (01.06.05)
Lukoil activity in Central Asia (18.05.05)
President of Turkmenistan met with president of Lukoil (09.05.05)
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