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WALK THE LINE

  • 2006-08-23

cartoon by Jevgenijs Cheksters

It was one of those soundbites that bespoke volumes of truth. In an interview to The Moscow Times last week, Semyon Vainshtok, CEO of Transneft, Russia's monopoly oil pipeline operator, came out and said what many had suspected: that Russia has no intention to renew supplies of crude to Lithuania via pipeline for a long, long time. The pipe, he said, is 42 years old 's 12 beyond the normal lifespan of such infrastructure. Pending an investigation into the extent of the damage, which is entirely on Belarusian territory, Transneft may have to mothball the pipeline. Besides, Vainshtok made it clear that Transneft has different priorities now.

"We need to hurry with the East," he said in reference to a pipeline under construction to the Far East, one that will eventually supply Japan and China. "If we start up the eastern route we will not have any problems." In other words, given the choice of building a new pipe to the East or rebuilding an old one to the West, Russia will go for the former.

The frank interview set off alarm bells in international media, and Transneft's PR people were forced to put a spin on the damage. Vainshtok, they said, had been misinterpreted. Just the opposite: Vainshtok was interpreted correctly. Russia wants control over all downstream oil and gas assets in neighboring states, and if it doesn't get its way, it is prepared to play the sore loser and cease supplying crude to Lithuania's refinery. There is plenty of off-the-record testimony that the Kremlin is extremely dissatisfied that Poland's PKN Orlen has been given the green light to purchase Mazeikiu Nafta. The pipeline accident, then, is merely academic.

To be fair, there may have indeed been an accident in the pipeline. But this begs a rhetorical question: if the end-user of the oil in the pipeline was a Russian company 's say, Rosneft 's would we be having this discussion now? The answer is obvious.
Many observers, including The Baltic Times, warned about this predicament. Granted, Lithuania's leadership was stuck between a rock and a hard place, since it was a private company 's Russia's Yukos 's that sold the majority stake to PKN Orlen. Yet the former government of Algirdas Brazauskas (which had originally chosen TNK-BP, an Anglo-Russian consortium, as the preferred investor in Mazeikiu Nafta) could have taken measures to prevent this situation 's most drastically, nationalizing the corporation and then reselling to a reliable investor, one who could truly guarantee supplies. As things turns out, the Poles fell woefully short in this regard, and now the Lithuanian refinery has to import crude from the sea, which costs some $8 more per ton.

But many in Lithuania are angry now 's including President Valdas Adamkus 's and are looking for retribution. Last week they "threatened" Russia with repairs on the railroad leading to Kaliningrad Oblast, which at most would amount to delays with cargo and passenger trains and most likely a temporary halt in military transit (the region is home to Russia's Baltic Fleet). It is, to be sure, a counter-measure incommensurate with Russia's cutting off the oil supplies, but perhaps the Lithuanians should follow through and give the Russians a taste of their own medicine. Any such confrontation, of course, would ultimately be resolved in Brussels, but if Moscow wants to play hardball, then Lithuania has to fight back any way it can. It's the only way they'll learn to respect the Baltic state.