Books on Lithuania
Update No: 298 - (27/10/05)
Lithuania steps up airspace security after crash, chides
The prime ministers of Estonia, Latvia and Lithuania vowed on September 29th to
improve Baltic airspace security after a Russian air force jet crashed in
Lithuania two weeks previously, The Associated Press has reported.
Andrus Ansip of Estonia, Aigars Kalvitis of Latvia and Algirdas Brazauskas of
Lithuania, said that they would work together to find ways to better protect
Baltic skies, which have been patrolled by NATO jets since the countries joined
the alliance last year. The Lithuanian air force and the German NATO jets that
currently patrol Baltic airspace have been criticized for responding too slowly
to the September 15th crash of a Russian Su-27 fighter bomber.
However, the three prime ministers, meeting on the Estonian island of Saaremaa,
said the foreign NATO jets, based in Lithuania, seemed to be doing a good job of
policing Baltic skies. They said cooperation was the best way to ensure regional
security, but did not give details.
The Russian plane was claimed to be part of a convoy travelling through an
agreed "corridor" from St. Petersburg to the Russian enclave of
Kaliningrad when it crashed in the Lithuanian countryside. Two of the four
German NATO fighters stationed in Siauliai, Lithuania, were scrambled, but
failed to intercept the Russian plane before it crashed.
In the meantime, The head of the Lithuanian commission investigating the jet
crash accused Russia of deliberately submitting what he called "wrong"
data. Speaking on national radio, General Vitalijus Vaiksnoras said Russian
officials had failed to provide his commission with radar data that would help
it decode the crashed plane's flight recorders and that the inquiry would now
have to be suspended.
A preliminary probe showed the crash had been caused by navigational equipment
failure. The pilot, Valery Troyanov, ejected safely and was questioned by the
Lithuanian Prosecutor General's Office.
Russia should demilitarize Kaliningrad
Defence Minister Gediminas Kirkilas suggested in the wake of the event that the
heavily armed and fortified region of Kaliningrad Oblast should be demilitarised.
Speaking on September 23rd, days after the crash, Kirkilas said, "Even
Russians say that [the accident] might have happened due to a very narrow
corridor for flying to Kaliningrad, so I wonder what that narrow corridor is
In his words, the Kaliningrad exclave is surrounded by friendly governments -
Lithuanian and Polish - and there is no reason for a heavy military presence
there. "Demilitarization of Kaliningrad is first of all in the interests of
Kaliningrad residents. Kaliningrad residents today lose millions of euros just
because there is such a situation there," he said, adding that the region,
by far the poorest in northern Europe, could be a prosperous one.
PM: Cabinet likely to choose TNK-BP for energy giant
In a move that will please Moscow, the Lithuanian government has narrowed down
the list of potential investors for the Mazeikiu oil refinery to two
Russia-based producers - Lukoil and TNK-BP. Then Prime Minister Algirdas
Brazauskas said on Oct. 11th that the most likely buyer would be TNK-BP, the
Russian-British venture. "We are heading toward starting negotiations with
TNK-BP because in many ways it meets the requirements that, in our opinion, a
company should meet," Brazauskas told Lithuanian Radio. The Lithuanians
would thereby have the best of both worlds, Western state-of-the-art technology
and Russian approval and cooperation.
Reports are circulating that both companies are willing to pay some US$1 billion
for an approximate 70 per cent stake in Mazeikiu Nafta, an oil refinery and
export terminal complex that accounts for some 10 per cent of Lithuania's GDP.
TNK-BP is a Russian-British joint venture, while Lukoil, Russia's largest crude
producer, said it might team up with its international partner, the U.S.-based
ConocoPhillips, in its bid for the Lithuanian refinery.
Yukos, the moribund Russian oil company, owns a 53.7 per cent interest in
Mazeikiu Nafta through a Dutch subsidiary. The company, which still has a
multi-billion dollar tax debt on its hands, has been forbidden by Russian
authorities to export crude to its subsidiary Lithuanian refinery.
To sweeten the deal, the Lithuanian government is prepared to part with about
half its interest, or some 20 per cent of Mazeikiu Nafta shares, to any
strategic investor. It is likely to keep only a 10 per cent stake.
The deal is enormously important for the Baltic state, which needs a stable
supply of crude to keep the refinery, its largest taxpayer, running. It also
represents an opportunity to strike a windfall of some 300 million euros for
Nerijus Eidukevicius, deputy minister of economy, said that the funds would be
transferred to the Privatisation Fund and used for deposit and real estate
Still, to make the deal work, the government will first have to borrow an
extraordinary amount of cash from foreign lenders to buy Yukos' stake. In all,
the state wants to borrow some 3 billion litas (850 million euros), a sum far
beyond its credit limit.
Lukas Tursa, deputy director of the ministry of finance's state treasury
department, told the members of Parliament's budget and finance committee that
the state's intentions to borrow the money would affect neither the introduction
of the euro nor the main fiscal parameters. Lithuania wants to introduce the
euro in 2007.
The loan would only influence borrowing indexes, said Jaunius Simonavicius,
deputy finance minister. "If we take the loan, Lithuania's debt ratio would
rise to 23 per cent of gross domestic product (GDP), from its current 18
percent," he told committee members.
Tursa said that the government would likely borrow on foreign markets. "We
may also borrow on the domestic market; however, we might not be satisfied with
interest rates.' The interest levied by foreign banks might range at 2.3-2.5 per
cent, which would burden the national budget by an additional 5 - 8 million
litas per month.
Economy Minister Kestutis Dauksys said on October 5th that the loan would not
threaten the country's plans to adopt the euro. He said the government and
Eurostat, the European Union's statistics agency, unofficially agreed that the
said loan would not be factored in while estimating Lithuania's fiscal deficit,
one of the Maastricht criteria.
Indeed, on Oct. 10 EU Budget Commissioner, Dalia Grybauskaite, said that the
government's plans to borrow would have no impact on the country's fiscal
deficit if the loan was repaid the same year. "If the borrowing takes place
in the same year as the sale, it will not affect the deficit," Grybauskaite,
who was in Lithuania recently, was quoted as saying.
The commissioner said the European Commission did not intend to respond to the
transaction unless it had an adverse effect on the fiscal deficit. "It is
an internal matter of the country - the European Commission could only intervene
if it had an effect on the fiscal deficit," she said.
Eidukevicius confirmed that the government would try to buy Yukos' stake in
Mazeikiu Nafta before the Russian company sells the asset on its own behalf.
This, he said, would require some two-and-a-half months if the process begins
If the government doesn't strike a deal with Yukos, "we could not negotiate
the price - we would have to buy for the price negotiated by Yukos and the
prospective buyer. If we launch the negotiations before, Yukos would win some
time," Eidukevicius said. He added that Yukos had authorized Lehman
Brothers to find a buyer for its stake in Mazeikiu Nafta.
Meanwhile, Lukoil said it would change Mazeikiu Nafta's pricing policy if the
company takes over the refinery. "If Mazeikiu Nafta becomes part of Lukoil
and ConocoPhillips, we will introduce a pricing policy that would enable us to
stabilize the prices of gasoline and diesel fuel," Ivan Paleichik, Lukoil
Baltija CEO, said in a press release in October. In early October Lukoil became
the first Russian oil company to announce a freezing of retail fuel prices at
its Russia-based filling stations until the end of the year. Later the drive was
taken up by other oil companies.
Mazeikiu Nafta, which refines the crude supplied by Lukoil and other Russian
suppliers, changed the formula for estimating wholesale gas and diesel prices
early this year. The estimates, previously based on the average Rotterdam price
for the last 10 days, were modified to apply a three-day average.
The refinery has been charged by Baltic officials for exploiting its
monopolistic position during the current spike in world oil prices.
ConocoPhillips controls 14.8 per cent of Lukoil and aims to raise its stake to
20 per cent by the end of 2006. Lukoil Baltija operates the largest chain of
filling stations in Lithuania - a network of 114 outlets servicing some 200,000
drivers per month, the Baltic News Service reported. Mazeikiu Nafta is the
indirect owner of the Ventus-Nafta chain of filling stations
Lithuania mulling over gas storage in Latvia
Lithuanian Prime Minister, Algirdas Brazauskas, said his government is
considering arranging underground natural gas storage on Latvian territory and
may arrange financing from funds earmarked for the decommissioning of the
Ignalina nuclear power plant, The Baltic Times reported recently.
"The new project is feasible - the facility could be arranged on Latvia's
territory since we have no geographical locations suitable for this
purpose," Brazauskas said in an interview with the Ziniu Radijas radio
Lithuania plans new gas pipeline for Kazlu Radu
Lietuvos Dujos (Lithuanian Gas) announced that it would build a new gas pipeline
to Kazlu Ruda in the southeast part of the country, The Baltic Times reported on
The pipe will supply natural gas to local companies and residents, though the
main consumer will be a new particle board plant being built by Vakaru Medienos
Grupe (Western Timber Group), a major domestic timber and furniture group.
Tamro acquires Lithuanian pharmacy Ramuciu Vaistine
UAB Tamro has signed an agreement to purchase the Lithuanian pharmacy Ramuciu
Vaistine, New Europe reported on October 11th.
The company currently operates 18 pharmacies and supplies pharmaceuticals to 238
medical stations and dispensing doctors in Lithuania. It has a market share of
20 per cent. The Lithuanian Competition Council has approved the acquisition.
The central pharmacy of Ramuciu Vaistine was opened in 1995. Since then
seventeen pharmacies have opened in the district of Kaunas. Tamro Group operates
pharmacies in Lithuania, Latvia, Estonia and Norway and is the leading
pharmaceutical wholesaler in Northern Europe. Tamro is a subsidiary of the
pan-European Phoenix Group. Headquartered in Vantaa, Finland, Tamro employs over
4,000 people and produces annual revenues of more than 4,400 million Euro.