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TNK-BP, LUKOIL, ROSNEFT VIE FOR YUKOS LEGACY IN LITHUANIA
Publication: Eurasia Daily Monitor Volume: 2 Issue: 195
By:
On October 18, the Lithuanian government decided unanimously to begin negotiations
with TNK-BP regarding the sale of a majority stake in Lithuania’s oil-refining and
oil-transport sector, the last major remaining asset of Yukos. The government’s
decision follows Prime Minister Algirdas Brazauskas’ unexpected October 11 statement
that TNK-BP was better placed than others to meet Lithuania’s criteria for selecting
the strategic investor. The decision puts TNK-BP ahead of Lukoil, hitherto the
frontrunner in the contest for the highly attractive legacy of Yukos in Lithuania.
Lukoil’s subsidiary in the Baltic states, LukoilBaltija, immediately and publicly
deprecated the Lithuanian government’s October 18 decision as “ill-conceived” and
“actually meaningless.” LukoilBaltija chairman Ivan Paleichik, whose political and
business connections with certain left-of-center Lithuanian politicians in past
years are on the public record, nevertheless insinuated that the government’s
decision “looks very much like corruption.” Paleichik is urging Lithuania to
negotiate also with the Lukoil and ConocoPhillips companies that intend jointly to
bid for the Yukos assets in Lithuania. The heads of Lukoil and ConocoPhillips, Vahid
Alekperov and James Mulva, had discussed that intention — along with other aspects
of the two companies’ partnership — with Russian President Vladimir Putin during
the latter’s visit to the United States in September.
By teaming up with ConocoPhillips in Lithuania, Lukoil seeks to reassure the country
that there will be no repetition of the 1999-2001 scenario. At that time, using its
monopoly on crude oil deliveries to Lithuania, Lukoil attempted a hostile takeover
of the country’s oil-refining and oil-transport sector by cutting those deliveries
drastically, so as to scare off other investors and depreciate the market value of
those assets, preparatory for a takeover by Lukoil on the cheap. Ultimately, it was
the American-friendly Yukos company that acquired the majority stake, ensured steady
supplies of crude oil, and turned the Mazeikiai refinery into a modern and highly
lucrative enterprise. However, the Russian government’s destruction of Yukos in its
own country has reopened that issue in Lithuania.
Meanwhile, Russian government agencies are targeting Yukos assets outside Russia as
well, under the same excuse of tax arrears. The state company Rosneft seems to lay a
claim to Yukos’ assets in Lithuania. Rosneft became a successor to Yukos in Russia
earlier this year through coercive takeover of the main Yukos production unit,
Yuganskneftegaz. During the second week of October, at the Russian company’s
request, a court in the Netherlands issued a temporary injunction against any
transactions with shares in Yukos assets. Moscow’s move is targeting the Yukos
assets in Lithuania, which technically belong to a Netherlands-registered subsidiary
of Yukos.
Those assets include the Mazeikiai refinery, Butinge maritime oil handling terminal,
and Birzai supply pipeline. The refinery alone outranks all business entities in
Lithuania with respect to turnover and net profits, and is the country’s top
taxpayer. Yukos owns 53.7% of the shares in the entire complex, and has the option
of a acquiring another 20%. The shares and the option are up for sale, but Russian
authorities seem to be aiming to derail a sale through confiscation or at least
litigation to that end.
For Lithuania, the national security implications of this issue are no less
significant than the economic ones. Lithuania understands that involving a Russian
company to replace Yukos as strategic investor is inevitable, because Russia is the
only possible source of crude oil supplies in the short- and perhaps medium-term.
However, Lithuania will clearly give preference to a partnership formed by a Russian
company with a major Western company, one with the power to block politically
motivated decisions detrimental to Lithuania. Along with supply guarantees, the
criteria to be met by the new Russian strategic investor include: adherence to
Western standards of corporate governance and management, public accountability and
full transparency of business practices, and a commitment to refrain from
interfering with Lithuania’s political processes.
The criteria also include independence from the Russian authorities; but, as
Lithuanian Economics Minister Kestutis Dauksys recognizes, the new Russian owner
will nevertheless have to maintain good relations with the Russian authorities: “The
situation in Russia’s oil sector today shows that an oil company that does not
cultivate good relations with the Kremlin will hardly be able to survive” (ELTA,
October 13). Ultimately, whichever Russian company replaces Yukos, it may depend on
the Russian government not only for approval of guaranteed oil supplies to
Lithuania, but even for the company’s fortunes in Russia.
(BNS, ELTA, October 11-18)