RUSSIA HALTS CRUDE OIL TO LITHUANIA.
Publication: Monitor Volume: 5 Issue: 99
Having, since the beginning of this year, severely curtailed crude oil deliveries to Lithuania, Russia has halted the deliveries altogether as of May 19. It was Russia’s Lukoil company which had imposed the cuts; it is Russia’s Fuel and Energy Ministry which halted them, on the pretext that Russia needs to refine more crude oil into fuel in connection with the spring sowing campaign. Contradicting its own argument, however, Russia has recently maximized deliveries of low-priced fuel products to Lithuania. This combination of measures is inflicting massive losses on Lithuania’s Mazeikiai refinery–the largest in the Baltic states–which is slated for privatization by the U.S. company Williams International. Starved of Russian crude oil, Mazeikiai can hardly afford to switch to more expensive imports because its products would in that case lose out in the home market t0 Russian fuel products, which are based on cheap Russian crude. This has in fact started to occur. Raising Lithuanian import duties for Russian fuel products can only be a provisory solution.
The Russian side is retaliating against Lithuania’s choice of Williams over Lukoil for privatizing Mazeikiai and the other components of the country’s oil sector. The Lithuanian government recently decided to offer Williams a 66 percent interest–instead of the initially planned 33 percent–and to retain some 25 percent for Lithuania. That decision freezes out Lukoil. The retaliation seems designed to scare away American and other potential investors by demonstrating their potential vulnerability to Russian manipulation of supplies. By threatening to drive Mazeikiai out of business, Lukoil–and presumably the Russian government behind it–hope to extort a large share in the privatization of Lithuania’s oil sector. Official Vilnius, aware of the political risks of such a step, is sticking to the deal with Williams (BNS, May 20; see the Monitor, January 29, February 2, April 14).
RUSSIAN COMMANDER IN MOLDOVA SAYS TROOP WITHDRAWAL IS UP TO RUSSIA.