On October 29, the Lithuanian government and the U.S. company Williams International Company signed the long-awaited investment contract and related documents concerning Lithuania’s oil sector. The signing crowned twenty months of negotiations which had at times seemed on the brink of collapse. Williams acquires, effective immediately, 33 percent of the shares in Lithuania’s oil sector, with the option to acquire an additional 18.5 percent, in accordance with Lithuanian legislation passed earlier this year and finalized in September and October (see the Monitor, October 6). The Lithuanian government retains for the time being 55.5 percent of the shares, including the stakes reserved for acquisition by Williams and by other interested international investors. On the day of the signing, Williams transferred US$150 million to Lithuania. The Lithuanian government in turn paid US$75 million into the accounts of the Mazeikiai oil refinery, which had recently been rendered insolvent through the de facto boycott of Russian crude oil suppliers (see the Monitor, October 21). Lithuania is further to provide US$344 million in loans next year to the oil sector, which includes Mazeikiai’s two affiliates: the Butinge maritime oil terminal and the Naftotiekis pipeline.
On October 30, Williams began its role as sole operator of Mazeikiai. The special shareholders’ meeting appointed Williams executives James Sheel and Steven Hunkus as chairman of the board and general manager of this largest-by-far among Baltic oil refineries. Williams plans to modernize Mazeikiai using state-of-the art technology, complete the second stage of Butinge, attract additional international investment on the strength of its business reputation and purchase either Russian or North Sea crude oil on commercial terms. None of this would have been within Lithuania’s means.
Lithuanian leaders, furthermore, underscored the political benefits of the deal in terms of reinforcing the country’s economic, political and security links with the West and independence of Russian suppliers. It was for these reasons that Vilnius resisted the Russian Lukoil company’s takeover bid. Lukoil retaliated through supply stoppages which brought the refinery to the verge of bankruptcy. Lukoil’s tactics unintentionally confirmed the wisdom of those Lithuanian political leaders–preeminently Parliament Chairman Vytautas Landsbergis and the conservative governing majority–which stuck to its initial choice of the U.S. strategic partner precisely in order to preclude the possibility of Russian manipulations of supply. The deal with Williams has, however, an inevitable downside–namely, those US$344 worth of loans which the Lithuanian government will have to provide from its scarce budgetary funds. That obligation has precipitated a government crisis in Vilnius (see below) (BNS, October 29-30, November 1; see the Monitor, April 14, May 21, July 27).
GOVERNMENT CRISIS IN VILNIUS.