VILNIUS - High gas prices have put Mazeikiu Nafta in the center of a storm, as the nation's competition authorities stated this week that the Baltic's only oil refinery may have abused its near monopoly position on the market and breached both Lithuanian and EU competition legislation.
If the allegations prove to be true, the company faces penalties that could run in the tens of millions of euros.
The Competition Council stated in its preliminary conclusion that its investigation "revealed numerous facts and circumstances" that Mazeikiu Nafta and its trading arm, Mazeikiu Naftos Prekybos Namai, "might have abused its dominance on the market via its strategy and pricing for customers in Lithuania, Latvia and Estonia, which might have affected the prices of fuel, and through various commercial restrictions, which might have led to discrimination of certain companies."
The council added that companies might have been forced to sell fuel for Lithuanian consumers at higher prices compared with those in Latvia or Estonia.
Rimantas Stanikunas, Competition Council chairman, told the Baltic News Service that the maximum fine could total up to 10 percent of the company's turnover in 2004.
Mazeikiu Nafta, an oil refinery and export terminal complex, posted sales of 7.66 billion litas (2.2 billion euros) for 2004, which would put the maximum penalty at 776 million litas.
The Competition Council intended to make a final decision concerning Mazeikiu Nafta in September, Stanikunas said.
Prior to the council's announcement, Prime Minister Algirdas Brazauskas said that the company would not escape punishment if it the allegations of price-gouging were proved to be true.
"If we reveal any such facts, they would run into deep troubles of the European scale because the company trades its products on other markets as well, and will face huge penalties," he told the news radio station Ziniu Radijas.
At the same time Brazauskas pointed out that fuel prices were climbing throughout Europe and not just in Lithuania. "It seems like a natural calamity, which has gripped the whole continent," he said.
Retail fuel prices in Lithuania have crossed the psychological threshold of 3 litas per liter and are hitting new highs almost on a daily basis.
But in the opinion of the Competition Council's experts, Mazeikiu Nafta might have abused its dominant position and thus violated Article 9 of the Law on Competition and provisions of Article 82 of the Treaty establishing the European Community on the fuel markets in Lithuania, Latvia and Estonia.
The Competition Council will report its findings to the European Commission, which may extend the investigation or take it over as per its jurisdiction, or authorize Lithuania's competition regulator to proceed with its investigation efforts.
Meanwhile, the ever-present question of who will eventually control Mazeikiu Nafta hovered in the air over the past week, with new reports indicating that the government and Yukos, the current controlling owner, were close to finalizing a deal.
Nerijus Eidukevicius, deputy economy minister, told the Baltic News Service on July 18 that talks on the transfer of rights to a new stock issue 's worth 10 percent of the company's capital 's had been practically completed, and the results would be submitted to the Cabinet in two or three weeks. "However, we still have a lot of legal and technical work to do so as to work out the final draft agreements," he added.
In accordance with agreements signed back in 2002, Yukos, the Russian oil company that is slowly being dismantled by the Kremlin, is entitled to acquire an additional 9.72 percent in Mazeikiu Nafta via a new share offering for approximately 206 million litas. But given the company's financial difficulties, it may yield this right to the Lithuanian government, which in turn would become the company's new controlling owner.
The government is currently looking for a new strategic investor for the enterprise, one who could guarantee stable crude oil supplies for several years into the future. Already several well-known companies 's TNK-BP, Lukoil, Gazprom 's have expressed interest in the asset.
On July 20 it was reported that the government finally received the official request from Russia's Justice Ministry not to allow the sale of any Yukos-owned assets to take place. The ministry said that the request should be regarded within the framework of international and national legislation.
It was unclear how the government would react to the request.
Nevertheless, the Cabinet will do everything in its power to ensure that Mazeikiu Nafta acquires a strategic investor acceptable to Lithuania.
"We have the right to know who the buyers will be. Moreover, we may use the first-hand rule 's we have the right to acquire the shares from Yukos. If the buyer was unacceptable, we would probably take adequate measures, offer to buy the shares up," Economy Minister Kestutis Dauksys was quoted as saying.
