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LITHUANIA


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 18,213 13,796 12,000 74
         
GNI per capita
 US $ 4,490 3,660 3,350 74
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 318 - (27/06/07)

The Balts stick together
Lithuania and Estonia were forcibly incorporated into the Russian-dominated communist Soviet Union, first as part of a deal with Nazi Germany and then again at the end of World War II, only regaining independence in 1991. They joined the European Union and NATO in 2004. 

Lithuania firmly sided with Estonia when the Baltic state was plunged into a row with Russia over the removal at the end of April of a Soviet war memorial from the centre of the Estonian capital, Tallinn. The Lithuanians are firmly pro-Estonian, despite great differences of language, religion and culture. They are after all fellow Lilliputians against a Goliath.

Lithuanian PM questions Russia's G8 membership
Lithuanian Prime Minister Gediminas Kirkilas questioned on June 8th whether Russia should remain a G8 member, saying it falls short on democracy and human rights criteria. "Russian leaders must meet the criteria for membership not only from the economic perspective, but also for democracy and respect for human rights," said Kirkilas in the Lietuvos Zinios newspaper. "Countries that belong to certain international forums and organizations should adhere to the same principles and values," he said. 

"Russia was invited to join the G8 with reservations when Boris Yeltsin was leader and with the hope it would proceed towards a market economy and democracy. But now we see other signs." 

Estonian President Toomas Hendrik Ilves, speaking at an international human rights conference in Prague on June 5th, also called for Russia's membership in the G8 to be reconsidered. 

Group of Eight leaders, including Russian President Vladimir Putin, were wrapping up their annual summit in the German Baltic Sea resort of Heiligendamm on June 8th.

Ignalina nuclear power essential says PM 
Poland and Lithuania are being drawn together by common fear of Russia. A good deal of the antipathy is about energy. Polish Prime Minister Jaroslaw Kaczynski has said that the construction of a nuclear power plant in the eastern part of Lithuania will greatly consolidate relations between Poland and Lithuania and will have a considerable impact on energy security, code words for freedom from dependence on Russia. 

Premier Kaczynski and his Lithuanian counterpart Gediminas Kirkilas, on a visit to Poland in early June, met with the executive board of Poland's oil giant PKN Orlen in the central city of Plock earlier today. Orlen has a majority stake in the Mazeikiai Lithuanian oil refinery.

Jaroslaw Kaczynski said the construction of a new Ignalina power plant, which is to come on stream by 2015, will change the situation in the region. The plant will cost 5-6 billion euros. The project will be realized jointly by Poland and three Baltic States - Lithuania, Latvia and Estonia.

Premier Kirkilas said that the Lithuanian government had approved a bill on the spelling of names, which enables ethnic Poles who live in Lithuania to write their names in Polish. "This solution will serve the consolidation of mutual trust", Kirkilas said. The spelling of Polish names in Lithuania has been one of the most sensitive problems in bilateral relations.

Poland is prepared for Russian Druzhba oil pipeline shutdown - PM Kaczynski 
Poland is prepared in the event that the Russian Druzhba oil pipeline is shut down, as it can import oil via other routes, Polish Prime Minister Jaroslaw Kaczynski, together with Lithuanian counterpart Gediminas Kirkilas, told a press conference, following the visit to top Polish fuel firm PKN Orlen."Regarding the Druzhba pipeline, there is the possibility that it will be shut down slowly or less slowly," Kaczynski said. "We are considering this, and this was the topic of our talks with PKN Orlen's management board."

"Poland has the technical capabilities to import oil through other routes," he added.

Baltic seabed gas pipeline project: far from a done deal 
Leaders of Estonia and Lithuania have publicly joined the growing ranks of critics and sceptics regarding Nordstream, the Russo-German Baltic seabed pipeline project for Russian gas. With Nordic countries along the proposed pipeline route raising environmental and security concerns, its commercial rationale increasingly questioned, and Russia's capacity to supply the projected gas volumes doubtful, this pipeline project seems far from a done deal, says Vladimir Socor. The European Union's initial approval of it looks overtaken by events as well as hardly making a practical difference.

Opening an international energy forum in Tallinn on May 14, Estonian President Toomas Ilves cautioned the European Union that over-reliance on Russian gas is "simply not rational" and that overall dependence on Russia's energy systems "involves high levels of risk." Estonian Economics Minister Juhan Parts, in turn, told the forum that the Nordstream consortium's recent proposal to lay the pipeline through Estonia's maritime economic zone "arouses serious concern."

On May 21, Lithuanian Prime Minister Gediminas Kirkilas told an international conference on energy security in London that the Gazprom-led consortium has not responded to his government's request for an independent environmental assessment to be undertaken regarding this project. Moreover, he noted, the project's cost is excessive and likely to outrun the consortium's already high estimates. Alluding to Germany's apparent assumption that it "would be stronger by dealing with Russia on a bilateral basis," Kirkilas called for EU solidarity in negotiating with Gazprom.

The Nordstream consortium estimates this project's cost at $6.6 billion. According to energy expert Alan Riley of London's City University, speaking at the same conference, that estimated cost exceeds by a factor of three the cost of building an overland pipeline of equivalent capacity. Moreover, the project's actual cost seems likely to escalate beyond that initial estimate (BNS, Reuters, May 21).

Thus, the choice of a seabed pipeline over alternative options means high prices of gas to end consumers in Germany and other European countries. The consortium would enjoy wide latitude to dictate prices to consumers if Gazprom and its German partners -- Ruhrgas and Wintershall -- lock in those markets thanks to the Nordstream pipeline. 

Politically, the Nordstream pipeline would "draw a new border across Europe," according to the Polish Sejm's [parliament] foreign policy committee chairman Pawel Zalewski. In Warsaw's view, the seabed pipeline would cut off the EU's new member countries, Poland and the Baltic States, from the old EU countries, particularly Germany: "The latter would be connected directly to the Russian valves while the others would be left alone [in a crisis], hoping for Russia's mercy" (Financial Times Deutschland, May 18).

The Nordstream pipeline was designed to carry 27.5 billion cubic meters of Russian gas annually starting from 2010 in the first stage and another 27.5 billion starting in 2012 in the second stage, for a total of 55 billion cubic meters over a 25-year period. Those projections, announced in October 2005 and not officially revised since then, look unrealistic by now. The time frame is being stretched out, investment is not lined up, and Russia itself faces a probable deficit of gas from 2011 onward, relative to its supply commitments internally and externally. The Yuzhno-Russkoye gas field in western Siberia -- which was touted to the German public in 2005-2006 -- can only supply a part of those projected volumes in the early years. Recognizing this fact, the Kremlin then defined the Shtokman field as the main source for Nordstream, but seemed to reverse itself again by announcing plans to assign Shtokman's early output primarily to liquefaction. All this is tentative and hypothetical, as Russia's exclusion of Western stakeholders from Shtokman is delaying by some years the field's development.

A series of recent developments have cast heavy doubt on Russia's reliability as an economic partner generally, not just with respect to gas. Russia is conducting several politically motivated commercial "wars" concurrently: agricultural produce and wine embargoes against Moldova and Georgia, interdiction of meat imports from Poland, cut-off of crude oil supplies by pipeline to Lithuania, and most recently the cyber-war launched from Russia against Estonia -- a novel form of economic warfare.

As Kirkilas informed the London conference, Russia's oil pipeline monopoly Transneft announced the preceding week that supplies to Lithuania are being suspended indefinitely. According to Transneft, use of the pipeline to Lithuania is "uneconomical" and consequently there are no plans to repair it. Transneft stopped deliveries in July 2006, citing a minor leak on that line in Russian territory, but in fact retaliating against Lithuania for selling the Mazeikiai refinery to a Polish company, in preference to a Russian one. During the intervening 10 months, the Russian government has ignored all Lithuanian and EU requests for information and offers of assistance if necessary to repair that pipeline. The oil cut-off is now all but official.

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DEFENCE

Interest in deployment of anti-missile defence system 

Lithuanian Defence Minister, Juozas Olekas, recently told a press conference that his country is interested in the deployment of an anti-missile defence system on its territory, similar to the US proposals currently being considered by Poland and the Czech Republic, in order to protect its planned nuclear power plant, "Our country needs these systems," the minister was quoted as saying, following a visit to the Moldovan capital, Chisinau. "There is a threat that in several years rogue countries could find technical capabilities for an attack. The world must prevent this. One of the solutions is the missile defence system offered by NATO (North Atlantic Treaty Organisation). This is how we would like to secure the power station we are planning to build in our country." 
He disagreed with the view that deployment of the US National Missile Defence (NMD) system in Eastern Europe would target Russia, or be a step towards a new "Cold War." Olekas also said that "the Moldovan military may join the NATO peacekeeping mission in Afghanistan, New Europe reported.
"Lithuanian troops in that country are involved in the reconstruction of the provinces that suffered during hostilities, and other humanitarian issues," he was quoted by dpa as saying. For his part, Moldovan Defence Minister, Valery Pleshka, said that his country cooperates with NATO, while remaining neutral as stipulated in its Constitution. "Currently, our cooperation proceeds under the NATO-Moldova Individual Partnership Action Plan (IPAP), one of the main goals of which is to modernise this sector and to enhance the ability to respond to new risks and threats," Pleshka said.

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ENERGY

PKN Orlen hopes Mazeikiu will become profitable

PKN Orlen CEO, Piotr Kownacki, is certain that Lithuania's Mazeikiu Nafta, which is now controlled by the Polish oil company, will begin turning up a profit by the end of the year. "I am certain that Mazeikiu Nafta will be profitable by the end of the year. As yet it is hard to say whether the balance sheet will be positive. This depends on whether insurers will pay," Lietuvos Rytas newspaper quoted the CEO in an interview on May 29th, New Europe reported.
A fire occurred at Mazeikiu's refinery last October, reducing the company's output. This mainly explained why Mazeikiu Nafta ended the first quarter of 2007 with net losses of 135 million litas. It is expected that the second quarter will end with a loss for the company as well.
Kownacki said that he was optimistic that Mazeikiu Nafta will eventually become profitable, because a five-year plan envisaging an increase in the value of the Lithuanian oil company through the attraction of some US$1 billion in investment had been developed, together with PKN Orlen. An increase in output is expected. Moreover, measures to increase the quality of products will be taken.
PKN Orlen's CEO said that a pipeline from Mazeikiu Nafta to Klaipedos Nafta will be built. A working group headed by Lithuanian Economy Minister, Vytas Navickas, has been created to discuss the issues of selling Klaipedos Nafta to PKN Orlen.
"The issue of laying a pipeline to Klaipeda is linked to the issue of Klaipedos Nafta's shares. We are rather flexible at talks and we can accept various proposals; however there is one condition: Mazeikiu Nafta's interests should be taken into account," Kownacki said.
The CEO made no forecasts regarding oil deliveries from Russia to Lithuania. "I cannot believe that such an experienced Russian pipeline operator as Transneft cannot settle these problems on time," Kownacki said, adding that "there could be political reasons behind this fact." Mazeikiu Nafta includes the Mazeikiu refinery, the Butinge oil terminal and Lithuanian pipelines. YUKOS International sold PKN Orlen a 53.7 per cent stake in Mazeikiu Nafta for US$1.492 billion on December 14th.

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FOREIGN COOPERATION

FM calls for closer cooperation with Bosnia

Starting an official visit to Bosnia-Herzegovina, Lithuanian Foreign Minister, Petras Vaitiekunas, said on June 7th in Sarajevo, that the two countries should further improve their cooperation, Deutsche Presse-Agentur (dpa) reported. 
Lithuania, as Vaitiekunas said after meeting with his Bosnian counterpart Sven Alkalaj, is ready to support Bosnia's progress towards the European Union. 
The Baltic region, he said, is willing to help the countries of Southeastern Europe to join the EU family and therefore Lithuania is to host a summit of Baltic and Southeastern Europe's countries next year. Bosnia-Herzegovina and Lithuania, the two ministers said, should also further improve their economic cooperation. The current trade exchange between the two countries, as minister Alkalaj said, amounts to some 2.3 million Euro a year and should be significantly improved in the future. Lithuania, which has already been involved in Bosnia's business as investor in the Aluminium Factory Birac in the eastern Bosnian town of Zvornik, according to minister Vaitiekunas, also hopes to score success in the privatisation of the largest of Bosnia-Herzegovina's aluminium factories in Mostar, through a Lithuanian-Polish consortium. With Bosnia's Minister of Foreign Trade Slobodan Puhalac, Vaitiekunas signed an agreement to improve and protect investments between the two countries, as the first step towards boosting the economic relationship. While in Sarajevo, Vaitiekunas also met with the members of Bosnia's tripartite state Presidency and the country's Premier Nikola Spiric. 

Cooperation agreement on classified info with Bulgaria

Bulgarian and Lithuanian governments recently agreed to sign an agreement for cooperation in protecting of classified information, Bulgarian media reported citing the country's State Commission on Information Security (SCIS), according to Focus-Fen. 
The agreement was to be signed by SCIS chairperson Tsveta Markova for Bulgaria and the State Secretary of the Lithuanian Ministry of Defence recently.

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RETAIL

Retail sales on the rise this year

Preliminary data shows that retail sales in Lithuania and Latvia increased year-on-year in the January-April period of 2007, with Lithuania's growing by 21 per cent to 9.3 billion litas (2.69 billion Euro), excluding VAT, and Latvia's growing by 26.9 per cent year-on-year in constant prices, Kamcity reported. 
Lithuania's sales of food retailers increased by nine percent, while the revenue of restaurants, bars and other catering establishments rose by 1.6 per cent. In Latvia, the central statistics office said that sales in April fell 2.8 per cent month-on-month, but increased 24 per cent. Sales of catering companies in April fell 5.5 per cent from March, and increased 8.3 per cent from 2006. In the first four months of 2007, catering companies saw sales rise by 9.9 per cent year-on-year. 

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