If the choice of Yukos and the Lithuanian government doesn't fall on the Kazakhs, there is speculation that the latter will proceed with plans to build a new petrochemical refinery in the Baltics. Latvia is ideally situated for such a project and has the infrastructure 's pipelines and export terminal 's to make it successful.
In light of this, the recent invitation extended to Kazakh President Nursultan Nazarbayev to Latvia is particularly intriguing. The president met with Latvian PM Aigars Kalvitis just two weeks ago in Astana during the former's inauguration, and Latvian government ministers are perennially talking about reviving the Great Silk Road connecting Asia and Europe. If they have their way, a branch of this road will be laid down through Latvian territory.
What's more, Ventspils Nafta is up for sale 's at least part of it anyway. The government has agreed to sell its 38 percent stake later this year, and private investors may also be willing to sell if the price is right.
An economic adviser to the Kazakh president was quoted by the Telegraf daily this week as saying, "It would be beneficial [for Kazakhstan] to carry out a new refinery project together with Russian partners in Ventspils. This project is estimated to cost $800 million, which is not the $1.2 billion being asked for Mazeikiu Nafta, an enterprise that is 25 years old."
But there are obstacles. First and foremost, Kazakh leaders would have to convince the Kremlin to start piping crude again to Latvia, which it stopped doing in 2003. Second, there is still a standoff at Ventspils Nafta between state and private shareholders that needs to be resolved if the Kazakhs are to have decent export terms. This could prove more difficult than dealing with the Kremlin. A new refinery will serve no purpose without the export capability.
