• 2006-08-09

cartoon by Jevgenijs Cheksters

No matter what one's assessment is of the sudden pipeline damage in Belarus that led to a complete halt in crude oil supplies to Lithuania's Mazeikiu Nafta, one thing is clear: whoever designed the Butinge terminal deserves Lithuania's most prestigious medal. Thanks to their ingenious foresight, the terminal was built two-way: it can both pump in as well as pump out oil and oil products. (Many oil terminals are designed for unidirectional oil handling.) So for the next few months, or as long as it takes Russia's Transneft to remedy the pipe problem, Mazeikiu Nafta executives can import raw material through the port and keep the Baltics' only refinery operating.

So a round of the Great Cross of the Order of Great Duke Gediminas for the Butinge engineers, please.

But is there indeed a faulty pipeline, or is Russia punishing Lithuania for not facilitating a Russian takeover of the Mazeikiu Nafta? The Kremlin, after all, was swift to demonstrate its indignation that Vilnius would allow a non-Russian company purchase the refinery. (Pending EU approval, Poland's PKN Orlen will become the refinery's new owner.) On the other hand, unexpected accidents do happen, and pipelines do corrode and leak and break down. Last week's incident in Alaska is a perfect example: a damaged pipeline operated by British Petroleum suddenly removed 8 percent of U.S. oil production from the market, propelling crude prices by over a dollar per barrel.

But we're not convinced. Judging by available information (or, more precisely, the lack thereof), as well as Russia's new-found assertiveness in foreign affairs, it would seem Moscow wants to punish Lithuania. We don't have to look far from home for evidence. In 2002, after Latvia refused to grant Russia ownership (even partial) of Ventspils Nafta, Transneft, the sole operator of Russia's vast oil pipeline network, ceased supplying. For the past three-and-a-half years Latvia hasn't received a drop of oil via pipeline from Russia. When Lithuania first sold Mazeikiu Nafta, which accounts for nearly 10 percent of the nation's gross domestic product, to a U.S. company in 2000, Russia responded by shutting down supplies. And then there's the recent debacle with Ukraine. Granted, Russia's motivation there was more political, but the result was the same: energy supplies were unilaterally cut off.

In regards to last week's incident, Russian officials have offered Lithuania little information; a lack of transparency surrounding the supposed accident raises suspicion.
At the same time this latest pipeline imbroglio seems to be part of a much larger plot involving regional energy supplies and increasing tension between the European Union and Russia. Through Eastern Europe the entire energy industry is being transformed. Estonia is working hard on a power link with Finland, and Lithuania is pressing for one with Poland. All three Baltic states want a new nuclear power plant. Just last week Russia slashed railway tariffs for Caspian oil by 50 percent in order to compete with the new Azeri-Georgia pipeline. And Georgia, exasperated by its big neighbor to the north, announced this week that it would no longer buy Russian energy supplies.

Time will tell whether the Belarus pipeline incident was genuine, but given the overall atmosphere in both the Kremlin and energy industry, one can't help but think that Russia is deliberately trying to harm Lithuania.