Books on Lithuania
Update No: 308 - (29/08/06)
Russian oil supplies to Lithuania cut off
Given the recent assurances given by Russia at the G8 conference in St
Petersburg, the world should know about this new development. Since July 29th,
Russia's oil pipeline monopoly Transneft has stopped deliveries to Lithuania's
Mazeikiai refinery, the largest economic entity in that country and sole
refinery in the Baltic states. Russia is, nevertheless, keeping neighbouring
Belarus well supplied with crude oil even though it shares a pipeline with
Lithuania, which Moscow has cut off, after citing a leak, officials in Belarus
Their comments may add to speculation that Russian pipeline monopoly Transneft
used the minor leak as a pretext to cut flows to Lithuania as punishment for
choosing a Polish buyer for its Mazeikiai refinery over Russian bidders.
Mazeikiai was bought in May by Poland's PKN Orlen. Transneft's move seems
designed to block the consummation of the three-way deal whereby PKN Orlen is
acquiring the majority stake in Mazeikiai from Yukos International and a
minority stake from the Lithuanian government.
Russian companies -- first Lukoil, and ultimately the state-owned Rosneft -- had
sought to take over Mazeikiai from Yukos and Lithuania. But that intention was
thwarted on May 26 when Yukos sold its stake to PKN Orlen with Lithuania's
approval, opening the way for the Lithuanian government to follow suit. However,
Mazeikiai is fully dependent on Russian oil supplies.
Russian authorities are citing technical reasons for the stoppage of deliveries.
On July 29, an oil spill occurred in Russia's Bryansk oblast on the Druzhba
pipeline system. The accident occurred near the point where a line to Belarus
and Lithuania branches off the main export pipeline that continues westward to
Europe. The scare on European markets subsided on July 31 when Transneft
announced that the accident would not affect exports to Europe; "only"
Lithuania would be affected.
The Russian government is using its environmental and conservation agency,
Rosprirodnadzor [Natural Resources Oversight Agency], as the main
public-relations voice regarding oil supplies to Lithuania. According to
Rosprirodnadzor First Deputy Director, Oleg Mitvol, the damaged section of the
branch-off line to Lithuania can no longer be patched up, but must be replaced
entirely. That section, running for 70 kilometres from Russian into Belarusian
territory, has been shut down. That section actually consists of two parallel
pipelines, thus making possible small-scale deliveries if Moscow decides to
replace those two lines one with one. Transneft would need "one year and
nine months" to replace that entire section, according to Mitvol.
For its part, Transneft has instructed Russian oil-exporting companies to divert
their planned deliveries from Lithuania toward Black Sea ports during the month
These tactics are reminiscent of Lukoil's and Transneft's hostile-takeover
attempts in 1999-2002 against the Mazeikiai refinery and Latvia's Ventspils
oil-export terminal, respectively. In both cases, those Russian companies
reduced and ultimately discontinued altogether the oil deliveries, so as to
drive Mazeikiai and Ventspils into bankruptcy, sink their market value and buy
them on the cheap. The supply cutoffs were imposed gradually over a period of
many months -- a procedure designed to maintain uncertainty and confusion in the
West about Moscow's ultimate goals there. In the event, Mazeikiai survived and
indeed prospered thanks to a friendly takeover by Yukos in 2002, before the
Kremlin moved to destroy Yukos. Ventspils continues to operate thanks to oil
deliveries by railroad, a mode of delivery outside Transneft's jurisdiction.
Following the destruction of Yukos in Russia, the Mazeikiai refinery operates at
half capacity or less, on small-scale deliveries by pipeline mainly from Rosneft
and Lukoil (former claimants to the Yukos stake in Mazeikiai) as well as from
TNK BP. The refinery processed 500,000 tons of oil in July, and has not
confirmed any supply contracts for August by pipeline. TNK BP delivered 100,000
tons of oil by tanker to the Butinge maritime terminal -- which is part of the
Mazeikiai holding -- at the end of July and is expected to deliver three such
shipments in August.
PKN Orlen, along with Polish and Lithuanian government representatives, is
seeking talks with the Russian government and companies toward resumption of
deliveries in August and beyond. This situation casts additional doubt on the
Kremlin's assurances -- most recently reiterated during the G-8 summit -- that
Russia is a fully reliable energy supplier to European Union countries.
By the same token, the situation would seem to require the EU to uphold its own
credibility and make clear that it would not tolerate manipulation of energy
deliveries to a EU member country, whether for political purposes or for hostile
takeovers of assets. It was in Lithuania's capital Vilnius that U.S.
Vice-President Richard Cheney warned against Moscow's manipulation of energy
supplies. Thus, U.S. credibility will be at stake as well, should Moscow persist
with the cut-off to Lithuania.
The end of political crisis; new government forms
Lithuania has been consumed by a political crisis for months that has now
been resolved. The Lithuanian parliament, the Seimas, has sworn in a new
government to replace that of Algirdas Brazauskas, the veteran giant of
Lithuanian politics, who was communist president of the country twenty years ago
and steered it towards independence, which was actually consummated by his
bitter rival, former president Vytautas Landsbergis, in 1990-91; (the two detest
On July 18 the Seimas approved the programme of the new Centre-Leftist minority
government and gave the green-light to the Cabinet led by Gediminas Kirkilas,
also a Social-Democrat like Brazauskas. 59 MPs voted for the programme, 49 -
against, 2 - abstained. Voting for the Kirkilas government's programme were
partners from the Centre-Leftist coalition: the Social Democratic Group,
Peasants and People's Political Group, Civil Democratic Group and Liberal and
Centre-Political Group. The opposition Homeland Union Group refused to vote,
thereby paving the way for the programme.
Voting against the programme were Labour Party Group, Liberal Union Group, New
Union Group (led by former Speaker Arturas Paulauskas) and Liberal-Democrats
(led by former President Rolandas Paksas). The same day, Seimas Speaker Viktoras
Muntianas swore in Prime Minister Kirkilas and 13 ministers. Attending the
ceremony was Lithuanian President Valdas Adamkus.
The Centre-Leftist Cabinet comprises 13 ministers. Social Democrats have 6
portfolios, Peasants and People's Party three portfolios and Liberal Centrists
and Civil Democrats two each.
Opposition mutes itself
The Conservatives neither supported nor blocked the new government. The
Homeland Union party has shown a special attitude towards the new government. On
July 17 the HU presidium decided to recommend its Seimas group not to support
the programme of the newly-appointed Social Democrat Prime Minister Gediminas
Kirkalas and not to take part in the voting.
Yet the HU presidium has approved HU's agreement with the Social-Democratic
parliamentary group.What is this agreement about?
The position of the Conservatives is as follows: they neither support nor oppose
the government programme. However, as Kauno Diena reports, the key goal of the
Right is not to let their political enemies - the Labour Party (founded and
formerly led by Viktor Uspaskich) and the Liberal Democratic Party of Rolandas
Paksas - into power. The Social-Democrats agreed and the leader of the
Conservatives Andrius Kubilius said that this concession was "a big step
The leader of the Social-Democratic Group Juozas Olekas, who has already been
appointed Defence Minister instead of Kirkilas, said "this government has
as many as eight ministers who have already worked as ministers before. This
means that the government is experienced. Second, there are five new ministers
who will bring new blood, new ideas in the work of the government. That's why I
can in no way agree with Mr. Kubilius that this government is weak."
He also recalled that among the team of the minority government are Sajudis
(independence movement) members and first government ministers, signatories of
Independence Act. "That's why I consider the government quite professional
and capable of achieving its goals," Olekas said.
The new Premier says that the EURO will enter Lithuania no earlier than three
New Lithuanian Prime Minister Kirkilas does not believe that Lithuania will
introduce the Euro in 2008 after the country was denied introduction from
During a DELFI press conference he said: "Let's analyse the whole situation
without delay, see how our economy is developing, what prospects it has and,
after coordinating this with the European Commission, decide when we can
introduce the euro. I believe that realistically we can do this in
2009-2010." On the other hand, Kirkilas says that Lithuania may join the
Schengen zone in 1.5 years. He says he "will undertake responsibility"
for this step.
The following is an intriguing piece on this vexed subject, whether and, if so,
when Lithuania should join the euro:-
"Lithuania is becoming a laughing-stock in the EU"
This is how one of the two leading Lithuanian dailies Respublika entitles
its article presenting the viewpoint of the well-known economist, European
Parliament member Margarita Starkeviciute. In this article Starkeviciute says
mostly the same as her compatriot, European commissioner Dalia Grybauskaite said
Starkeviciute is sure that the Lithuanian authorities "did almost nothing
to introduce Euro as they were blind and deaf." She says that foreign
parliamentarians fought for Euro introduction in Lithuania much more actively
than Lithuanian politicians did. The member of the Committee on Economy, Budget
Control and Budget Starkeviciute remembers that European parliamentarians from
other countries repeatedly asked European Commissioner for Economic and Monetary
Affairs Joaquin Almunia: "Why have you offended Lithuania?"
Starkeviciute says: "They in the EU show huge support for Lithuania and say
that the ban on EURO in our country was a great mistake. However, it was we, in
the first place, who showed little activity in the matter. What can others do if
the then - and now the future - Finance Minister did not even take the floor
during the EU Ministers Council meeting. How can you make the arguments of your
state known, if you keep silence during a crucial meeting."
There is a Lithuanian Embassy to the EU in Brussels. However, several dozens of
its employees "do not even know what is going on during the key EU meetings
because they don't even attend them or send there just middle-level personnel
who do not keep our leaders informed and they remain totally unaware, as a
result." "They in the EU are not standing idle, they are launching new
projects every day - projects that are essential for us - newcomers. Each
country will have an EU agency responsible for various economic spheres. In
Poland they are already opening an agency that will supervise all European
transport projects. Do we in Lithuania know anything about such agencies? I have
not heard anybody here nominating their people for presenting our
interests," says Starkeviciute.
European parliamentarians have attacked also Lithuanian business. They say that
not only politicians but also private structures in Lithuania are very passive
in building the future EU. "The European Commission has asked the EU
members to present their viewpoints regarding the policy of housing construction
credit and only Lithuania has failed to opine on the matter: not only the
Finance Ministry but also the Association of Banks of Lithuania. It was the only
private structure in the whole EU to act like that."
One more problem: the EU is planning to liberalize the market of free
professions. Starkeviciute asked the Union of Lawyers and the Notary Chamber of
Lithuania what they think about this plan. "They in the Union told me that
their position coincides with the position of Brussels." This sounds like a
joke as, in fact, they in the EU are heatedly debating who to give preference:
the British or French systems.
Starkeviciute says that Lithuanian clerks feel very comfortabe in the EU. She is
horrified what a low qualification many of them have. She says that some
Lithuanian translators from English often translate just half of the text - and
half of what they interpret is English terms. "Some Lithuanian lawyers in
the EU say they have higher education diplomas but I can't use their services as
my colleagues from other countries can't understand the documents they
Meanwhile, Lithuania is beset by difficulties of quite another kind, both from
nature and abroad:-
Lithuania announces emergency situation in agriculture
The Lithuanian government has announced an emergency situation in the
agricultural sector because of drought, the press service of the national
cabinet said on August 4.
An emergency situation may be announced when damage in the agricultural sector
exceeds 30 per cent.
Lithuanian farmers will sustain drought damage of more than one-third of the
planned harvest, or 174 million euros, an official at the Lithuanian Agriculture
The government plans to compensate 50 per cent of the damage within this and
However, Lithuania is located in the area of risk farming, an official in the
government said, adding that it is necessary to review the practice of budget
compensation of damages. The officials called on farmers to set up a system of
insurance for natural disasters.
The Lithuanian Agriculture Ministry reported that in the regions, where
harvesting is underway, this year's yield of grain was 50 per cent less than in
2005. Because of the drought, one out of ten districts of the country and seven
municipalities were declared a natural disaster zone back then.
Premier wants Poland to build nuclear reactor
Lithuania's new Prime Minister, Gediminas Kirkilas, has invited Poland to
participate in the construction of a strategic third nuclear power reactor at
Lithuania's existing Soviet-era Ignalina facility. Although no concrete
decisions were announced, energy policy dominated talks between the visiting
Kirkilas and Poland's new Prime Minister, Jaroslaw Kaczynski, in Warsaw
recently, New Europe reported.
Lithuania, Latvia and Estonia have initially agreed to push ahead with the
construction of a third reactor at the Ignalina station. Should Poland join, it
would be its first involvement with nuclear energy.
Kirkilas reiterated the need for a so-called "energy bridge" to link
electrical power grids between Lithuania and Poland, thus hooking the Baltic
state into Western European electrical power grids.
Both leaders expressed opposition to German-Russian plans for the construction
of a natural gas pipeline across the Baltic Sea floor. The leaders of the two EU
newcomer states concurred the project should not receive funding from the
The Baltic states and Poland have condemned EU partner Germany for striking the
energy deal over their heads with Russia and allege that it poses a threat to
their energy security. Such important decisions concerning energy strategy
should be made in consultations between EU partners, the four states insist.
In a move which recently strengthened economic and energy ties between the two
states, the Lithuanian state recently permitted Poland's largest oil refiner PKN
Orlen to buy a controlling stake in Lithuania's only oil refinery, Mazeikiu
Poland's status as a fellow-member of NATO and the EU is thought to have been a
significant factor in the decision to sell to Orlen. The trip to Warsaw was the
first foreign visit of Kirkilas. There are 3300 workers at the Ignalina power
plant and last week the Japanese ambassador visited there. Ignalina NPP has
produced 966 million kWh and has sold 894 million kWh of electricity.
Kirkilas meets Ukraine's Yanukovich on NATO talks
Lithuanian Prime Minister, Gediminas Kirkilas, arrived in Kiev recently for
talks with his Ukrainian counterpart, Viktor Yanukovich. Selected as head of the
Ukrainian government, Yanukovich met Kirkilas at Kiev's Borispil airport.
Kirkalis interrupted his summer vacation for the visit. It was the first public
meeting between a senior foreign government official and Yanukovich, since
Yanukovich become Ukraine's prime minister. Yanukovich has thus far remained
opposed to Ukrainian membership in NATO, and instead called for Ukraine
eventually to join not the European Union, but a four-way customs union led by
Russia, New Europe reported.
The two prime ministers were scheduled only to meet during a working luncheon at
Borispil airport, after which Kirkilas was planning to continue his vacation,
according to Lithuanian news services. Kirkilas said: "without doubt, I
will invite my counterpart to keep the Ukrainian state on the path of
Euro-Atlantic integration." Yanukovich said on his part that Ukrainian
relations with Russia "are more important" than with any other nation
or group of nations. The attitude is popular in Ukraine's Russia-speaking East
and South, but unpopular in the country's Ukrainian-speaking North and West.
Russian President Vladimir Putin vehemently opposes Ukrainian membership of both
NATO and the EU. The Kremlin supported Yanukovich during the Ukrainian's failed
Presidential bid in 2004.