Publication: Monitor Volume: 7 Issue: 20

As was noted with concern regarding the elections in Lithuania (see the Monitor, March 28, July 6, August 4, 11, October 6, 9, 20, 26, 2000), the now governing New Politics bloc includes influential groups which have not yet grasped the need for transparent privatization of state property and for an open-door policy toward Western capital investment. The bloc consists of the right-of-center Liberal Union and the left-of-center New Union/Social Liberals. Some vested interests within New Politics would seem to aim for an illusory national control of the industrial and infrastructure assets by making deals with Russia’s energy giants, instead of welcoming Western investments to modernize those obsolescent Lithuanian enterprises. Less than three months after its installation, the government has come perilously close to undermining its credibility with Western strategic investors and has also been shaken by conflict-of-interest scandals involving several ministers.

Meanwhile, the strong Social-Democrat opposition is dominated by a generation of politicians who continue to believe in state control of “strategic” enterprises, and some of whom are also involved in conflict of interest situations which can affect their attitude toward Western capital (see below). The Conservatives had launched the overdue privatization program and opened the door wide to Western capital during their tenure of office (1996-2000), but their austerity policies led the Conservatives to disastrous defeat in the October 2000 elections. Under the circumstances, President Valdas Adamkus and most local observers consider that it would make little sense to change the present government. But Adamkus, who had put his prestige behind the New Politics bloc ahead of the elections, is now publicly urging the government to clean up its act.

In the last few weeks, four cabinet ministers have become involved in political and business scandals. Transportation Minister Gintaras Striaukas, a Liberal Union member, was forced to resign at Adamkus’ request without awaiting an official verdict of the Commission on Public Service Ethics. The local press reported that the minister’s family are top shareholders in a firm that received lucrative contracts for sign-posting Lithuania’s highways while Striaukas was serving as general director of the State Highway Authority.

The Commission on Public Service Ethics found the agriculture minister, Kestutis Kristinaitis, to have been involved in a fraudulent private land deal during his earlier service in the same ministry. But Kristinaitis has ignored the commission’s verdict and stays on as minister without objection from Prime Minister Rolandas Paksas, who is the Liberal Union’s leader. The New Union/Social Liberals nominated Kristinaitis as minister, but his selection was meant to please the left-wing populist Peasant Party Union of Ramunas Karbauskas, whose three parliamentary votes are crucial to the government’s survival.

Environment Minister and Liberal Union member Henrikas Zukauskas stands accused by neighbors of threatening behavior in a banal domestic dispute over property. Far more seriously, Economics Minister Eugenijus Maldeikis recently held unauthorized talks in Moscow with the gas giant Gazprom and its Lithuanian affiliate, which seeks to privatize Lithuania’s state gas company Lietuvos Dujos. Maldeikis did not coordinate his Moscow visit with Lithuania’s Foreign Affairs or other ministries, bypassed the Lithuanian embassy in Moscow, and sought initially to deny his contacts with Gazprom’s affiliate.

While Adamkus publicly criticized Maldeikis and Parliament Chairman Arturas Paulauskas–the New Union/Social Liberal leader–called for Maldeikis’ resignation, Paksas is protecting his minister and fellow-Liberal Union member. He passed the buck to the Commission on Public Service Ethics, notwithstanding the fact that he had most recently allowed the agriculture minister to ignore the commission’s judgment and stay in office. But because the commission seems headed for a negative verdict on Maldeikis, Paksas declared on January 26 on national radio that were Maldeikis to resign, the government’s internal and international credibility would suffer.

By contrast, Adamkus told the country in a broadcast that actions such as those of the economics minister were damaging the government’s credibility. Adamkus warned ministers against “confusing the government with a private company,” “privatizing government policy” and trying to make deals “through the back door” that ignore the country’s foreign policy. The president, furthermore, asked the government to stop making personnel changes that are motivated by political or group interests in the management of state companies, including those slated for privatization. Warning the government that it risks exhausting its credit of confidence with the public, Adamkus demanded that the government should combat official corruption and submit soon its strategy for economic reforms, including privatization. The president made clear that he expects this government to continue in office and improve its performance.

Meanwhile, however, the government has begun publicly sniping at the American company Williams International, the single largest foreign investor and taxpayer in Lithuania, holder of a 33-percent stake and the operating rights in Lithuania’s oil sector. Russia’s Lukoil company has for the past year tried to muscle its way into co-ownership and co-operatorship of that sector by limiting the crude oil supplies and forcing the sector into losses. Paksas, Finance Minister Jonas Lionginas and others have in recent days made polemical statements blaming the situation on Williams, and the opposition Social-Democrats have pushed through a parliamentary motion calling for an investigation of the company’s operations. The initiator of the January 26 motion is a Social-Democrat faction which–according to its own financial disclosure data–had been the top recipient of electoral funds from a local affiliate of the Lukoil company (BNS, ELTA, Vilnius Radio, January 21-27; see the Monitor, November 7, 2000, January 25).