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Update No: 259 - (25/07/02)

Lithuania has every prospect of doing well. Accession to NATO and the EU beckons. The ten-strong Vilnius Group of NATO candidate members recently conreated in the capital, Vilnius.

The Brazauskas premiership
The key figure in Lithuanian politics is the veteran politician Algirdas Brazauskas, former communist leader of the country. He understands the Russians and their acute susceptibilities. He knows how to placate them, while keeping the confidence of his compatriots.
For years he was president of the country, but had an itch to return to the true place of power, the premiership. He expects to steer his country into NATO and the EU, a magnificent achievement, crowning his career.
He is against the idea of a referendum on NATO accession, as is curiously enough, his old foe Vytautas Landsbergis, the president of the country who declared independence from the USSR in 1990, with momentous consequences for all. EU accession is a matter of course. Lithuania is returning to its Western roots, which encompass Roman Catholicism and a penchant for capitalism and democracy, the guarantors of civilisation as defined by the devout population.

The Kaliningrad problem 
Lithuanian, unlike Estonia and Latvia, lacks a border with Russia proper. But it has one with Kaliningrad, the Russian enclave between itself and Poland. This will be the border where Russia will abut NATO on Lithuania's accession.
Nobody seriously supposes that Lithuania and Russia are going to go to war with each other ever again. Actually in an opinion poll on the question, 20% said that they still deem the Russians a threat. But they are obviously old-timers, conscious of the Soviet past.
Russian Defence Minister Sergei Ivanov and his Lithuanian counterpart, Linas Linkevicius, have settled disputed issues amicably between the sides on the question. Russians are to be allowed visa-free transit across Lithuanian territory to and from the enclave. The way ahead to NATO membership is clear.

Land becomes the snag
There is one problem as regards EU entry, whether foreigners should be allowed to own land. Lithuania had a troubled history, like Poland, with foreigners making lengthy and deep incursions into their lands. This led to the extinction of the Lithuanian empire, formerly stretching from the Baltic to the Black Sea in the sixteenth century and the incorporation of Lithuania under a foreign landlord class into Poland, ratified by the Union of Lublin in 1589. Poland itself was then dismembered by foreign powers, Russia, Prussia and Austria, in the three partitions of Poland in the 1772-95 period.
An extraordinary session of the Lithuanian parliament on July 1st adopted a resolution calling on the government to reopen negotiations with the EU on the previously closed chapter on the free movement of capital. The resolution was passed by a vote of 74 in favour to 28 against with 10 abstentions.
Lithuania had earlier agreed that it would amend its constitution to allow EU citizens to purchase agricultural land before it was admitted to the group. Yielding to pressure from farmers' organisations, the parliament approved the resolution calling for the introduction of a transition period of seven to 10 years before the land sales to foreigners would be allowed. It grants an exemption to farmers of EU member states who have lived uninterruptedly in Lithuania for at least three years, have registered a farm and have been engaged in farming activities. The fear is, of course, as in Poland, that German and Austrian chequebooks might re-colonise them, where swords can no longer do so. 

New party since March - The Liberal Democratic Party
The premier before Brazauskas was Rolandas Paskas, a former mayor of Vilnius. He appears to have noticed a trend in Baltic state politics for small parties to mushroom to become contenders for power. It has happened in Latvia where the ex-central banker, Einars Repse, has founded a reform party that will fight coming parliamentary elections.
In Lithuania's case elections for the presidency, at present occupied by Valdas Adamkus, are due in December. Paskas has set up the Liberal Democratic Party as his chosen vehicle to support him. It already has 55 branches and 1,800 members. He is campaigning on a programme of the need for a moral rebirth of the nation (a sure theme in a Catholic country), better social services and an overcoming of social problems, such as poverty and injustice. He is a popular figure, who has a distinct chance, being younger than the sexagenarian Adamkus and a long resident of his country, whereas Adamkus spent fifty years in the US.

FDI on the rise
The economy is doing better than in the 1990s, and not before time. GDP growth was 3.9% in 2000 and 5.7% in 2001; it is due to be 3.5% in 2002.
One key and welcome development is a serious surge in foreign direct investments (FDI). FDI was US$375m in 2000 and US$450m in 2001. It is due to be US$545m in 2002. This is the sort of attention Lithuania now needs.

NATO entry
The one plus of Adamkus having long been a resident of the US is that he has forged a special relationship with Bush. He was due to meet him in Washington on actually 9:11 itself. The meeting was obviously cancelled, but when it took place it was an emotional moment for both men, with Bush pledging US support for Lithuania's NATO entry.
The Lithuanians are awaiting Russian approval of a border treaty they signed with them in 1997. It is uncontroversial, there being no border disputes between the two countries. The treaty delimiting the 700km border with Kaliningrad, the Russian enclave between Lithuania and Poland, and a 50km sea border with the Russian mainland, has yet to be approved by the Duma, although this should be automatic later this year.
Nevertheless, there are some suspicions that ratification has been delayed, not by red tape, so much as officials wanting to give Putin a bargaining chip in negotiations with the EU. The Russians are certainly very sensitive on the issue of the enclave. Generally, Russia has better relations with Lithuania than the other two Baltic states. The proportionately much smaller local Russian population is being integrated under a generous citizenship law. The local Russians find it easier to learn Lithuanian than Latvian or Estonian, a major factor in their successful assimilation.

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ENERGY

Yukos buys 26.85% of Lithuania's Mazeikiu Niftier shares

The arrival of Russian oil major, Yukos, in Lithuania and the signing with it of a contract on investments in Mazeikiu Nafta concern is the single event that will bring about significant changes for the better, local radio quoted Lithuanian Prime Minister, Algirdas Brazauskas as saying , in an interview on June 18th.
The arrival of Yukos as a partner and a shareholder must change the way Mazeikiu Nafta is managed, Brazauskas said. Yukos' investment of US$150m in Mazeikiu Nafta and the deferment of payment for crude oil of nearly the same amount will enable the Lithuanian concern to overhaul the plant and improve the product quality, he said.
The Williams International Company (WIC) that has been managing Mazeikiu Nafta since October 1999 had promised to invest US$600m in the overhaul, but two years have passed and no investments to speak of have been made, Brazauskas complained.
"Yukos' participation will hopefully remedy the situation. Indeed, all oil refineries in Central Europe make a profit, but Mazeikiu Nafta loses nearly one million litas daily," he said.
Asked why Lithuania does not discontinue the contract with WIC, which makes no economic sense for the country, Brazauskas said the consequences would be more than painful to the Baltic state.
The contract signed is the sole possible solution to all the parties involved, Brazauskas said. Lithuania will support every step enabling the oil refinery industry to improve the operation, he added.
Under the contract Yukos will purchase 26.85% of Mazeikiu Nafta shares for US$75m, make a long-term loan worth the same amount available for modernising the concern's plant and guarantee supplies of about five million tonnes of crude oil to the concern's refinery annually for 10 years.

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EU ACCESSION

Lithuanian deputies set to re-open EU chapter

Members of the Lithuanian parliament hope to follow Malta's lead in asking the EU for special restrictions on the sale of land to foreigners, New Europe reported recently. The Baltic state's parliament wants the government to re-open the chapter on the free movement of capital with the EU.
The chapter was closed last year under the former government, and a motion for any transitional period for sale of land to EU citizens was turned down at the time.
But parliament members of the new ruling left-wing coalition unanimously backed a re-think. Lithuania is a front-runner in the accession negotiation with 28 out of 31 chapters on EU legislation closed.

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INFORMATION TECHNOLOGY

Sonex establishes new subsidiary in Latvia

Lithuanian information technologies group Sonex has set up its second subsidiary in Latvia to provide business process management services. BNS News Agency quoted Sonex Managing Director, Arunas Bartusevicius. He said that the new company, called Softex, had been set up to separate business operations in Latvia.
Sonex Riga, an IT company established by Sonex last year, is to focus on software distribution and integration services, while Softex should take over business process management services.
The Sonex Group consists of 12 companies operating in the information technologies and telecoms areas. Bartusevicius said the group had not abandoned its intentions to acquire a business in Estonia.
The Sonex Group is projecting a turnover of 43.48m Euros for this financial year, up from last year's 30m Euros turnover of 30m Euros.
The group's first-quarter turnover reached 6.6m Euros, a 24% increase from the same period last year.

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SHIPPING

Freight volumes at Lithuanian port 10 per cent up on last year

A total of 9,798m tonnes of freight were handled at Lithuania's Baltic Sea port of Klaipeda in the first half of this year - a 10.46 per cent increase from 8,871m tonnes over the same period a year ago, the port authority announced, BNS News Agency has reported.
As much as 1,415m tonnes of freight were handled in June alone, up by 0.46 per cent compared with June 2001.
Excluding fuel oil and other oil product exports, the volume of freight handled at the port in the six months [of this year] declined by 2.58 per cent, year-on-year, to 5,810m tonnes.
The volume of freight loaded into ships increased by 11.47 per cent to 7,613m tonnes and the volume of freight unloaded grew by 7.05 per cent to 2,185 tonnes.
In January-June of this year, 2,571 wagons (up by 58.07 per cent against the same period in 2001), 32,200 containers (up by 32.64 per cent), 62,800 road vehicles (up by 9.39 per cent) and 49,300 trailers and auto trailers (up by 3.01 per cent) were transported via the Klaipeda port.
A total of 3,121 ships were served at the port in the six-month period, a rise of 5.05 per cent year-on-year.
The annual volume of freight handled at the port came to 17,236m tonnes in 2001, which represented a decline of 11.14 per cent over the previous year.

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