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LITHUANIA

REPUBLICAN REFERENCE

Area (sq.km)
65,200 

Population 
3,592,561 

Principal 
ethnic groups 
Lithuanians 81.3%
Russians 8.4%
Poles 7.0%

Capital
Vilnius 

Currency 
Litas

President
Rolandas Paksas

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Background: Independent between the two World Wars, Lithuania was annexed by the USSR in 1940. On 11 March 1990, Lithuania became the first of the Soviet republics to declare its independence, but this proclamation was not generally recognized until September of 1991 (following the abortive coup in Moscow). The last Russian troops withdrew in 1993. Lithuania subsequently has restructured its economy for eventual integration into Western European institutions.

Update No: 278 - (01/03/04)

The Lithuanians are transfixed by a major scandal. Their president, Rolandas Paksas, is being impeached for transgression of the law. A stunt pilot in his spare time, he is not going to retire without a fight.
Following a damaging report by the Lithuanian Department of State Security, the press mounted a campaign in the autumn that his office has had extensive links with organized crime, notably Russian ones. Four of the counsellors in his office had to resign. Now he is under strong pressure to resign himself. Indeed, impeachment proceedings are already under way in parliament. A parliamentary commission prepared a report for December 1st, which confirmed various devastating allegations, at least sufficiently to justify him stepping down. If he does not, the impeachment process will gather momentum.
The investigating committee reported that the 47-year-old president was responsible for leaks of sensitive information and that he had allowed Almax, a public relations firm suspected of links to Russian intelligence, to influence his decisions. An inappropriate source, local Russian businessman Yuri Borisov, allegedly helped to finance his presidential campaign.

The West is expecting his end
The people that matter in Western policy towards Lithuania, mostly in the State Department, are not expecting Paksas to survive.
The scandal in Lithuania has been continuing for three months. It started after materials were released from the Lithuanian Security Department, which showed that the president and some members of his administration might be tied to international crime and possibly foreign intelligence services. Paskas flatly denies these charges. A parliamentary commission formed to investigate the political scandal said in early December that "the president was and is vulnerable, which endangers Lithuania's national security, bearing in mind his special status, responsibility and role in domestic and foreign policy." The Seimas is preparing to impeach the president on the basis of the commission's resolution.

The parliamentary impeachment commission has completed the questioning of witnesses. "The commission will now have to determine whether the witnesses' testimony is sufficient to start drawing conclusions," its deputy chairman, Julius Sabatauskas, told journalists on January 23rd. "We will start looking into everything we found out over the two weeks of questioning witnesses. The commission's conclusions will either confirm or disprove the accusations brought against Paskas. The conclusions were to be made available by February 13th. Parliament could vote on the impeachment of the president in April.

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BANKING

Lithuanian banks record 27.8% assets increase

Commercial banks in Lithuania increased their assets 27.8% to 22bn litas in 2003, the Lithuanian central bank said in a press release. Credits paid out by banks in 2003 amounted to 12.085bn litas, up 52.3% from 2002. Net profit at banks last year increased 63.4% to 239.9m litas. There are currently 10 banks and three branches of foreign banks operating in Lithuania. The 10 Lithuanian banks and one foreign bank branch earned combined net profit last year of 241.1m litas, while the other two foreign bank branches - Kredyt Bank SA and Nordea Bank Finland Plc - ended the year with a net loss of 1.5m litas. Vilniaus Bankas earned the most net profit - 137.264m litas, followed by Hansabankas - 61.043m litas, Nord/LB Lietuva - 12.743m litas. Profit at the Vilnius branch of Vereins and Westbank amounted to 1.23m, reported New Europe recently.

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CREDIT RATINGS

Fitch upgrades ratings of 2 Lithuanian banks

Fitch Ratings has upgraded the long-term and short-term ratings of Vilniaus Bankas and of Bankas NORD/LB Lietuva (NORD/LBL) to BBB+ and F2, respectively, the agency said in a press release. The move follows the recent upgrade of Lithuania's foreign currency rating to BBB+ and of its short-term foreign currency rating to F2. The individual ratings of both banks are affirmed at C and D/E, respectively, and their support ratings are affirmed at 2. The outlook on the long-term rating of Vilniaus Bankas remains positive, in line with that of the sovereign; the outlook of NORD/LBL's long-term rating is revised from positive to stable, New Europe reported recently.

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ENERGY

Mazeikiu nafta predicts net profit of US$20m

Mazeikiu nafta, a Lithuanian oil concern managed by Russian oil major YUKOS, plans to obtain net profit to US GAAP of US$20.05m in 2004, company spokesman, Giedrius Karsokas, said recently, Interfax News Agency reported. 
The Mazeikiu nafta board approved the year's budget recently. Net profit to Lithuanian accounting standards is planned at 310.9m litas. The company reduced its net losses to US GAAP 55.8% in 2002 to 122.7m litas. Net losses to Lithuanian accounting standards amounted to 158m litas. MN refined 5.0% more oil in January-September at 4.96m tonnes. The Butinge terminal handled 8.29m tonnes of oil in the nine months, up 115%. Eighty-one tankers were filled, compared with 40 in January-September 2002. Oil transportation through the Birzai pipeline dropped 12.3% to 15.76m tonnes of oil and diesel fuel. MN includes Butinges nafta (oil terminal), Mazeikiu nafta refinery, the only refinery in the Baltic States, and Naftotiekis (oil pipeline). YUKOS owns 53.7% of MN and the Lithuanian government owns 40.66%.

Ignalina increases electricity sales by 10.5% in 2003

Ignalina Nuclear Power Plant increased electricity sales 10.5% to 14.25bn kWh in 2003, a source at the plant said, Interfax News Agency reported. 
Lietuvos Energija, which buys electricity from the plant, exported 7.5bn kWh over the year, up 10.3% from 2002. The plant increased electricity production 9.2% to 15.442bn kWh in 2003. The two power-producing units at the plant are currently operating with a capacity of 2,600 megawatts. Ignalina produced 14.143bn kWh of electricity in 2002, up 24.5% from 2001. Sales in 2002 amounted to 12,897bn kWh. Lithuania has promised the European Union to close the first power-producing unit at Ignalina by 2005 and to shut the plant altogether by 2009, if it receives sufficient financing.

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FOREIGN ECONOMIC RELATIONS

Lithuania to keep trade deal with Russia after EU entry

Russia and Lithuania have agreed to keep their bi-lateral trade agreement after Lithuania's accession to the European Union, Russian Deputy Economic Development and Trade Minister, Maksim Medvedkov, said after meeting with Lithuanian officials in Vilnius recently. "Lithuania said it has no intention of renouncing the agreements. They can only be adjusted to comply with EU requirements," Medvedkov said, Interfax News Agency reported.
The two nations have outlined some 20 issues connected with Lithuania's upcoming accession to the EU that need to be discussed soon, he said.
One group of these issues is connected with the transit of Russian cargo through Lithuania to the Kaliningrad region. Medvedkov said earlier losses incurred by operators shipping goods from Kaliningrad to other parts of Russia were approaching 6bn rubles a year and that the financial and administrative burden on these carriers must be reduced as much as possible.
Medvedkov said another group of these issues has to be with transport tariffs. "The sides have agreed that the tariff rates should be economically substantiated," Medvedkov said.
He said earlier he thought the EU's enlargement after May 1st this year would cost Russian exporters another US$150m annually because the import duty on a number of commodities would increase and anti-dumping measures would be imposed on others.

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FOREIGN LOANS

EBRD to offer 35m Euro credit to VP Market

The European Bank for Reconstruction and Development is to provide a credit of 35m Euro (120.85m litas) to the large Lithuanian retail company VP market.
The bank and the company were set to sign a contract agreement in Vilnius on December 8th, VP Market Press Secretary, Viktorija Jakubauskaite, said in a statement recently, Interfax News Agency reported.
The credit will allow VP Market to develop logistics and its retail chain. The money will also allow the company to improve supervision of activity at its stores, the news agency reported.

Lithuania to receive over 5m Euros from EU to renovate railways

Finance Minister, Dalia Grybauskaite, and the European Commission's acting director-general of the regional policy directorate, Graham Meadows, have signed a financial memorandum under which Lithuania will receive €3.975m to modernise the infrastructure of its railway networks, aimed at ensuring a speed of 160 kilometres per hour. This is the largest technical assistance project financed by the ISPA [EU Instrument for Structural Policies for Pre-Accession] in the transport area, Delfi web site reported recently.
The Finance Ministry's said that the total value of the project was €5.3m, of which 75 per cent would be financed by ISPA and €1.325m would be allocated by the joint-stock company Lietuvos Gelezinkeliai [Lithuanian Railways]. The money will be used to modernise the railway sections Kena-Vilnius-Kaisiadorys, Kaisiadorys-Kaunas-Kybartai and Kaisiadorys-Radviliskis-Siauliai-Joniskis.
According to the memorandum, the project will have to be completed by the end of 2007. Like other projects, the transport investments inspectorate at the Transport Ministry will carry it out and the final beneficiary will be Lietuvos Gelezinkeliai.

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MINERALS & METALS

Gold, currency reserves grow to 1.54bn litas

Lithuania's gold and currency reserves increased 19.3%, or by 1.539bn litas, in 2003 to amount to 9,528bn litas at the end of December, the press secretary of the Lithuanian central bank said recently, Interfax News Agency reported. 
Reserves increased by 597.5m litas or 6.7% month-on-month in December. The press service said that growth in gold and currency reserves in 2003 was due to operations carried out by the central bank with the central government, which increased reserves by 804.8m litas. Reserves also increased due to the fact that commercial banks sold 669.7m litas more foreign currency to the central bank than they bought. In addition, gold and currency reserves increased in 2003 due to growth in the reserves of commercial banks in foreign currency and the receipt by the Lithuanian central bank of revenue from the investment of foreign currency.

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