Publication: Monitor Volume: 5 Issue: 20

According to Lithuanian press reports, Russia’s Lukoil state company is withholding crude oil supplies to Lithuania’s Mazeikui Nafta refinery and other processing facilities. Moreover, Lukoil threatens to line up lesser Russian oil suppliers behind this boycott threat. The tactic seeks to pressure the Lithuanian government into selling to Lukoil a 33 percent stake in the country’s oil sector, which is up for privatization.

Prime Minister Gediminas Vagnorius told a news conference yesterday that such political conditions to trade are incomprehensible in this day and age, and would adversely affect bilateral relations. Vagnorius urged the Russian side to trade with Lithuania on market terms and “without regard to political sympathies or antipathies.” Rejecting the linkage of supplies to equity acquisition, Vagnorius said that Lukoil is free to participate in an open international tender which Lithuania may hold later this year (Radio Vilnius, Russian agencies, January 28).

The centerpieces of Lithuania’s oil sector are the Mazeikui refinery, the Butinge maritime export terminal, and the Naftotiekis pipeline distribution system. The Lithuanian government’s partner of choice in their privatization is the U.S. company Williams International, which is also in the process of completing the Butinge terminal’s construction. Last year, Lukoil had offered to guarantee a steady flow of crude oil to both Mazeikui and Butinge as part of the deal for the 33 percent stake. At the same time, Lukoil had warned that it might give preference to other Baltic terminals and refineries, if the Lithuanian government does not go along. The government declined to negotiate under pressure.