Books on Lithuania
Update No: 303 - (27/03/06)
Lithuania persists in bid to join euro
Lithuania on March 16th formally applied to join the euro on January 1 2007, in
spite of warnings from the European Commission that the request might be turned
down because of its inflation rate.
The Baltic state's economy is one of the fastest-growing in the European Union
at over 8 per cent an annum, but inflation remains significantly above the
The Commission and the European Central Bank will produce a report on whether
Lithuania meets the Maastricht rules for joining the currency, with the final
say going to EU heads of government. Slovenia, which has also applied, is
expected to get the green light.
New nuclear power plant in Lithuania: will it be built?
The recent realization that nuclear power may be the only feasible answer to the
conundrum of finding a ready alternative on a large enough scale to carbon-based
forms of energy is having huge consequences across the world. Many countries are
dusting down plans to construct new nuclear plants, which had been shelved after
Chernobyl, the world's worst nuclear accident in 1986.
Lithuanian Prime Minister, Algirdas Brazauskas, won the backing of his Latvian
and Estonian counterparts on March 13th for the construction of a new nuclear
power plant in Lithuania. Brazauskas, Latvia 's Aigars Kalvitis and Estonia 's
Andrus Ansip signed a memorandum calling for the construction of the new nuclear
power plant at a meeting of the Baltic prime ministers in Trakai, some 28
kilometres (17 miles) west of the capital, Vilnius.
"It is very important that members of the EU sustain the right to choose
which energy sector they should develop," Brazauskas said. The three Baltic
states joined the EU in 2004.
There was no indication of when or where the new nuclear plant would be built,
or how it would be financed. As part of its deal to join the bloc, Lithuania
agreed to shut down completely by 2009 its existing nuclear power plant in
Ignalina, which currently provides more than 90 per cent of the country's
The Ignalina plant, located 130 kilometres (80 miles) northeast of Vilnius, is
similar in type to that at Chernobyl. Increases in the price of Russian oil and
gas imports have prompted some Lithuanian lawmakers to back the construction of
a new nuclear power plant.
"Latvian and Estonian energy companies will be invited to invest in the
nuclear power plant project," said Nemira Pumprickaite, Brazauskas'
Another energy issue involving Lithuania is that its main oil refinery is the
last big asset of Yukos to be sold off. Yukos was the fief of Mikhail
Khordokovsky, the jailed tycoon, before he lost it after his arrest on October
The following is an incisive account of the last act of that particular drama:-
Bidding for Yukos assets in Lithuania
By Vladimir Socor
The bidding is officially on for the Yukos company's last remaining major asset
-- the Mazeikiai oil refinery and associated enterprises in Lithuania. Those
enterprises, including the Butinge oil loading maritime terminal and Birzai
supply pipeline, together form the largest business entity in Lithuania. On
March 15, the Lithuanian government announced that it has made an official bid
for Yukos' 53.7% stake and operating rights in the Mazeikiai complex.
The Lithuanian government already owns a 40.66% stake. Should it acquire the
Yukos stake, the government intends to re-sell it to an investor of its choice
through a bidding process, along with at least half of the government's stake,
in a single package totalling 75% or more of the Mazeikiai shares. Under
Lithuanian law, the government must retain at least 10% of the shares and
The government has yet to disclose the value of its bid for the Yukos stake. The
other short-listed bidders are Kazakhstan's state company KazMunayGaz, which
recently offered US$1.2 billion; and Poland's refiner and trader PKN Orlen,
which is said to have bid US$1.5 billion. Earlier, the Russian-British company
TNK-BP and a Lukoil-ConocoPhillips partnership were said to have offered US$600
million to US$700 million each for the Yukos stake in Mazeikiai.
It is assumed that TK-BP and Lukoil-Conoco-Phillips bid less than the others
because, along with the cash, they can also offer to guarantee oil supplies to
Mazeikiai from operations in Russia. By contrast, PKN Orlen is not an oil
producer, and KazMunayGaz depends on Russian transit or, alternatively,
bypassing Russia through swap arrangements to supply oil to the refinery in
Lithuania. According to Prime Minister Algirdas Brazauskas, some Russian
companies (which he would not name) have explicitly warned Lithuania that they
would not supply crude oil to Mazeikiai if Yukos or Lithuania chooses Orlen (Kurier
Wilenski, March 10).
Yukos is said to expect at least US$1 billion as a starting bid for its stake in
Mazeikiai. The all-but-destroyed Russian company is under pressure to pay
ostensible back taxes to the Russian government and also debts to Western
creditor banks as well. Under its 2002 shareholder agreement with Yukos, the
Lithuanian government has priority rights of first offer and first refusal.
Thus, Yukos must first offer to sell its shares in Mazeikiai to the Lithuanian
government, before it can offer them to another entity; the government has also
the right to reject Yukos' first choice of another entity; and the government
can buy Yukos shares by matching another bidder's offer.
The Lithuanian parliament has authorized a litas-denominated credit line worth
US$1 billion from the national budget for the government to buy the Yukos stake.
This sum will almost certainly be insufficient, but the government expects to
receive up to US$700 million from the sale of half of its own shares to the
winner of the Yukos stake, if Lithuania is not the winner. According to some
Lithuanian press reports, the optimal scenario might be KazMunayGaz winning the
bid for the Yukos stake and buying half or more of the Lithuanian stake in
The bidding for Mazeikiai is more than a commercial issue for Lithuania. It is a
national security issue requiring that the country's most valuable economic
asset not fall under the control of a Russian company controlled or influenced
by the Russian government and prone -- as Lukoil proved to be in 1999-2002 -- to
use Russia's supply monopoly as an instrument of pressure on Lithuania.
The Mazeikiai refinery processed 9.25 million tons of crude oil in 2005, up from
8.66 million tons in 2004. The figures were well below the refinery's design
capacity of 13 million tons annually, as Yukos was no longer in a position to
fill that capacity from its production units in Russia. Even so, market trends
consistently ensured high profit margins for the refinery's European-standard
products, on the strength of the equipment upgrade by Yukos shortly before its
demise in Russia. Mazeikiai is the sole refinery in this Baltic region and uses
the Klaipeda oil-products terminal on favoured terms to export its products to
EU markets. These factors make Mazeikiai a highly attractive business
proposition to foreign buyers.
Neste oil interested in Mazeikiu Nafta shares
Finland's Neste Oil is interested in holding talks with the Lithuanian
government and with Russian oil company YUKOS regarding the sale of shares in
Lithuanian oil concern Mazeikiu Nafta, Interfax News Agency quoted the
Lithuanian government's press service as saying.
Recently Lithuanian Prime Minister, Algirdas Brazauskas, met with Neste Oil
President, Risto Rinne, and Vice President, Jarmo Honkamaa, and informed them
about talks that have been held with YUKOS.
Brazauskas said that the government still believes that the contenders for the
Mazeikiu Nafta shares should guarantee oil supplies. At the same time the press
service of the Lithuanian Economics Ministry said that Neste Oil management met
with Economics Minister Kestutis Dauksys, who heads the Lithuanian negotiating
team in talks about the Mazeikiu Nafta shares.
They are interested in the pace of the process for selling the Mazeikiu Nafta
shares, the statement said.
"For the government the future of Mazeikiu Nafta is important, ensuring oil
supplies, and not only the sales price for the shares. The main thing is that
the oil company continues to work successfully, develops its activity, receives
investment and is competitive," Dauksys said at the meeting. Meanwhile, the
Lithuanian government has announced the possibility of nationalising the
company. The Lithuanian newspaper Lietuvos Rytas reported that: "If YUKOS
does not agree to directly sell the shares (to Lithuania), the government will
nationalise the company and pay an acceptable price."
Lithuania is trying to buy the shares from YUKOS without any intermediaries and
then sell them to an investor that will be able to guarantee oil supplies.
According to its investment agreement, YUKOS may sell its shares only with the
agreement of the Lithuanian government, which has first right of refusal.
Lithuanian representatives are currently continuing dialogue with the Russian
side in Tel-Aviv. The nature of these talks has not been disclosed. Lithuanian
Prime Minister, Algirdas Brazauskas, said correspondence is being carried out
with YUKOS managers and that some steps would be taken. According to unofficial
reports KazMunaiGaz offered US$1.2 billion for Mazeikiu Nafta, while Orlen
offered US$1.5 billion. YUKOS has not yet announced the winner of the tender,
although the bids were submitted at the end of January. Dutch-registered YUKOS
Finance owns 53.7 per cent of Mazeikiu Nafta, and the Lithuanian government owns
40.66 per cent.
Lithuania 2005 exports soar 27%
Lithuanian exports in 2005 grew by 27.1 per cent to 32.807 billion litas (9.5
billion Euro) while imports rose by 25 per cent to 42.975 billion litas, the
statistics department reported recently.
Foreign trade deficit widened by 18.7 per cent year-on-year to 10.167 billion
litas, according to non-final data based on customs declarations and Intrastat
reports. The department warned, however, that the foreign trade data published
after May 1, 2004 were not fully comparable with those released before that date
due to the changed data source and methodological and structural differences. In
December, exports increased by 25.7 per cent from a year ago, while imports went
up by 28.1 per cent. Month-on-month, exports fell by 7.3 per cent and imports
were down 7.4 per cent.