VILNIUS - A Netherlands court has frozen the Yukos-owned shares of Mazeikiu Nafta, Lithuania's oil refinery and largest enterprise, a move that puts a major dent in the government's plans to find a new strategic investor for the company and raise as much as $300 million in cash for coffers. The freeze will last for 30 days.
Right-wing politicians have already hinted that the state should consider nationalizing the enterprise rather than suffer an uninvited investor.
The Dutch court's decision was made on request by Yuganskneftegaz, a former Yukos production subsidiary that is now part of the state-owned Rosneft. Yukos owns a 53.7 percent stake in Mazeikiu Nafta via its Netherlands-based subsidiary, Yukos Finance BV and Yukos International UK BV.
Rosneft's request appears to be the work of the Russian government, which tried to block any possible transfer of shares in Mazeikiu by appealing to Lithuania's Justice Ministry.
On Oct. 14 Russia's court marshal service said that, in order to repay the $7 billion in tax arrears, Yukos' remaining assets may be sold off. Sergei Sazanov, deputy chief of the Federal Court Marshals Service, said that Yukos has paid $14 billion of its bills so far.
West European banks, in the meantime, are seeking to recover some $475 million lent to Yukos, while Yuganskneftegaz alone is claiming that it is owed almost $2.5 billion.
The Lithuanian government has essentially ignored the Russian government's appeals and continued courting possible investors, particularly Lukoil and TNK-BP, a Russian-British joint venture. Last week Prime Minister Algirdas Brazauskas even said TNK-BP was the most likely candidate, though talks had to be postponed after news from the Netherlands.
Economy Minister Kestutis Dauksys acknowledged that, if the freeze was not removed, it would be unclear who would be selling the shares in Mazeikiu Nafta. "I imagine that those shares will be put up for sale, but it's unclear by whom. In this case, it will be a hurdle for us," the minister said.
The government, which owns some 40 percent of the refinery, is hoping to buy Yukos' stake and then turn around and sell it, along with half of its own stake, to a strategic investor who first and foremost will guarantee oil supplies.
Dauksys said that the government would proceed with its plans to buy out Yukos' stake.
In a worst-case scenario, Yuganskneftegaz would be granted all or part of the stake, leaving the Lithuanian government with an investor it did not negotiate with. At the same time, Rosneft, Yugansk's parent company, could offer Vilnius an olive branch and buy the 20 percent stake for a large chunk of cash.
Rosneft's executives have indicated in recent months that they intend to put together Russia's largest oil company. Historically, the company has struggled to find its place in the Russian oil market, but with the Kremlin's backing, it has taken over Yuganskneftegaz and expanded its production profile in the Far East as well. The company may soon produce up to 100 million tons of oil per year.
Still, many politicians fear for the worst. For this reason they have openly floated the idea of nationalizing the refinery. Andrius Kubilius, leader of the Homeland Union, said the state's taking control of the refinery could be based on the need to defend national security and on a Constitutional provision demanding fair payment for assets.
Egidijus Sileikis, a law professor at Vilnius University, is convinced that such a decision would be beneficial to Lithuania as it would "solve the problem immediately."
"In such a case, Lithuania would have to negotiate over a fair payment rather than taking the shares itself, which would be a unilateral act, and the only problem would be to decide whom to negotiate over a fair payment with," Sileikis told national television last week.
Gytis Kaminskas, a lawyer with Jurevicius, Balciunas & Bartkus, agreed with Sileikis. As he explained, there are many examples of nationalization in Western Europe. "All that would have to be done would be to pass a law on nationalization of shares and allow the government to negotiate over compensation. It would no longer be Lithuania's concern who that money would go to 's it would be decided by court," Kaminskas told the same show.
Economy Minister Dauksys, who attended the broadcast, said he was convinced that investors would be afraid to invest in Lithuania after any such nationalization.
Meanwhile, Parliament approved a draft law on acquiring and disposing of Mazeikiu Nafta shares, a mandatory precondition for any sale. In accordance to the law, the new investor may not pose a threat to national security.
If passed by Parliament, the law will allow negotiators to obtain the highest possible price for the 20 percent that the government intends to sell.
This block of shares is expected to yield some 1 billion litas (290 million euros).
TNK-BP's executive director German Khan was quoted as saying this week that Yukos wanted almost $1 billion for its stake in Mazeikiu Nafta. He told the Lietuvos Rytas daily that TNK-BP would invest about $300 million in the refinery's modernization if it becomes controlling owner. The British-Russian venture would also consider building an oil product pipeline, investing in the Butinge crude oil terminal (a subsidiary of Mazeikiu Nafta) and creating a retail chain in the Baltic countries.
Interestingly, Khan confirmed that the group was holding regular consultations with Russian authorities regarding its investment plans. "We have consulted with the government on the possible acquisition of Mazeikiu Nafta. But we did so only because we are speaking about nearly a billion dollars, which is what Yukos is asking for the stake in the Mazeikiai plant," Khan said.
"You can say that this money won't be invested in the Russian economy, that's why we need to consult. Moscow has to understand that this won't affect the Russian economy. Talking about political coordination of such transactions is mere speculation," he said.
Khan added that Russian government officials had not mentioned which company they would like to be the next owner of Mazeikiu Nafta. "Since Russian oil is supplied to Lithuania, it should be a Russian company. That would help to maintain a certain balance of economic interests. But there are no exceptional requirements or political support for one specific company," he said.
Egidijus Sileikis, a law professor at Vilnius University, is convinced that such a decision would be beneficial to Lithuania as it would "solve the problem immediately." "In such a case, Lithuania would have to negotiate over a fair payment rather than taking the shares itself, which would be a unilateral act, and the only problem would be to decide whom to negotiate over a fair payment with," Sileikis told national television last week. Gytis Kaminskas, a lawyer with Jurevicius, Balciunas & Bartkus, agreed with Sileikis. As he explained, there are many examples of nationalization in Western Europe. "All that would have to be done would be to pass a law on nationalization of shares and allow the government to negotiate over compensation. It would no longer be Lithuania's concern who that money would go to – it would be decided by court," Kaminskas told the same show. Economy Minister Dauksys, who attended the broadcast, said he was convinced that investors would be afraid to invest in Lithuania after any such nationalization.Meanwhile, Parliament approved a draft law on acquiring and disposing of Mazeikiu Nafta shares, a mandatory precondition for any sale. In accordance to the law, the new investor may not pose a threat to national security. If passed by Parliament, the law will allow negotiators to obtain the highest possible price for the 20 percent that the government intends to sell. This block of shares is expected to yield some 1 billion litas (290 million euros).TNK-BP's executive director German Khan was quoted as saying this week that Yukos wanted almost $1 billion for its stake in Mazeikiu Nafta. He told the Lietuvos Rytas daily that TNK-BP would invest about $300 million in the refinery's modernization if it becomes controlling owner. The British-Russian venture would also consider building an oil product pipeline, investing in the Butinge crude oil terminal (a subsidiary of Mazeikiu Nafta) and creating a retail chain in the Baltic countries. Interestingly, Khan confirmed that the group was holding regular consultations with Russian authorities regarding its investment plans. "We have consulted with the government on the possible acquisition of Mazeikiu Nafta. But we did so only because we are speaking about nearly a billion dollars, which is what Yukos is asking for the stake in the Mazeikiai plant," Khan said. "You can say that this money won't be invested in the Russian economy, that's why we need to consult. Moscow has to understand that this won't affect the Russian economy. Talking about political coordination of such transactions is mere speculation," he said.Khan added that Russian government officials had not mentioned which company they would like to be the next owner of Mazeikiu Nafta. "Since Russian oil is supplied to Lithuania, it should be a Russian company. That would help to maintain a certain balance of economic interests.
