Books on Lithuania
Update No: 306 - (29/06/06)
Government falls amid corruption allegations
The coalition government of Lithuania collapsed after the largest member of the
coalition withdrew amid corruption allegations, forcing the prime minister to
The coalition was in power for nearly two years and its fall ends the longest
serving administration since Lithuania secured independence in 1991.
The crisis casts a shadow over the Baltic state that has developed a responsible
profile in Europe, leading by 2004 to membership of both NATO and the EU. Its
proximity to Kaliningrad makes the involvement of its top politicians with
Russian operators out of the Russian enclave an only too tempting affair.
Gravest crisis since independence
Tensions between the coalition partners came to a head when President Valdas
Adamkus on May 27th said that he had lost faith in two Labour Party ministers
accused of corruption.
He accused the labour party of deliberate and cynical confusion of private and
public interests" over the alleged use of funds for personal expenditure.
The Labour party denied the allegations.
The Labour party held 31 of the government's 61 seats in the 141-sear parliament
alongside the Social Democrats and the Peasants party, and its withdrawal made
the coalition untenable.
"There was no choice," Algridas Brazauskas, the outgoing prime
minister, said in a live television broadcast.
Mr Adamkus can now select a new prime ministerial candidate but his choice would
have to be approved by parliament.
Academics said finding an acceptable candidate was unlikely and described the
developments as the "most serious political crisis" to hit the former
Soviet state since 1991.
"Everything is in flux," said Professor Mindaugus Jurkynas at the
institute of Political relations and Political Science at Vilnius University.
"There is no viable coalition, meaning there will have to be an
Prof Jurkynas said the outcome of any future election was difficult to gauge. He
added that recent polls in the capital revealed the popularity of the Labour
party had fallen from 28 per cent to 12 per cent following the corruption
Economy is sturdy
Ricardas Kasperavicius, head of the Ministry of Finance's department of
macroeconomics in Vilnius, said the economy was robust enough to weather the
"The economy is demonstrating strength and flexibility. Our exchange rate
has been fixed to the euro since 2002 and we are already in effect functioning
as a member of the eurozone."
Gross domestic product grew by 7.5 per cent last year. Only Latvia next door has
had a better performance in the FSU or, indeed, Europe.
Parliament approves sale of refinery to PKN Orlen
The parliament of the Baltic state of Lithuania approved the sale of strategic
oil refinery Mazeikiu Nafta to Polish company PKN Orlen. "The Seimas
(Lithuania's parliament) agreed the deal by 97 votes in favour to one
against," economics ministry spokeswoman Orijana Jakimauskiene told
Deutsche Presse-Agentur (dpa).
The approval covers both Orlen's purchase of a 30.66-per cent stake in the
Mazeikiu refinery from the Lithuanian government and its purchase of the
53.7-per cent stake held by bankrupt Russian oil company YUKOS, Jakimauskiene
added. "We are happy with the decision and the fact that the process of
buying shares from the Lithuanian government is going very fluently," said
Orlen spokesman, Dawid Piekarz.
The price of the Lithuanian government's shareholding stands at just under
US$852 million. Orlen has agreed to buy YUKOS' stake for US$1.492 billion and to
invest almost US$ one billion in the plant in the next five years, a press
The deal is the largest foreign investment in Poland's history, and boosts
Orlen's status as the largest refining company in Eastern Europe. Orlen bought
Czech company Unipetrol in 2005 and owns some 485 petrol stations in Germany.
However, its ability to guarantee supplies of crude oil has been questioned,
since it owns no production facilities.
"Many refineries don't own their upstream supply, but manage to work
fluently. We are in the same case," Piekarz said. "PKN Orlen and
Mazeikiu Nafta will now be starting an upstream programme as our biggest
"Processing Russian crude is the best option, but we have two oil
terminals, Naftaport in Poland and Butinge in Lithuania, so we can use the
Baltic Sea to carry crude supplies if necessary," he added.
The Mazeikiu refinery is the only one in the Baltic states and the largest in
Together with the refinery, Orlen is buying the Butinge oil terminal and a 500km
network of pipelines for crude oil and oil products. The parliamentary decision
will come as a relief to all concerned.