Williams, Lithuania get closer, criticism swirls

  • 1998-09-24
  • Parker Ruis
VILNIUS - Lithuanian officials continued their efforts to pave the way for the expected arrival of the American oil company, Williams International, by starting to merge the three state-owned oil companies in which Williams is preparing to invest.

The government initiated new tax conditions and began putting the companies together Sept. 15, as part of the agreement signed June 29 between Williams and Lithuania in which Williams will buy a 33 percent stake in the three state oil companies.

The government says it is moving as quickly as possible to make the "rational" move of merging the three companies, Mazeikiu Nafta, Naftotiekis and Butinges Nafta.

The move, which requires the approval of both the Lithuanian Parliament and Williams' board of directors, already secured a blessing from the American side on Sept. 18.

"Approval by the board of directors gives us the green light to negotiate and conclude the final agreements and move on making Lithuania's oil sector into one of the most profitable in Europe," stated Randy Majors, general director of Williams Lithuania. "It is our hope that approval by Lithuania's Parliament will be given next week."

Andrius Kubilius, first deputy chairman of Parliament, said he expects the Parliament's approval in the coming week. He also said some proposed changes to tax conditions are also being put onto the table. The government claims that, while bigger foreign investors are not dissatisfied with Lithuania's tax system, efforts to make tax conditions more consistent for bigger investors are necessary.

"According to the protocol of intentions, some reforms will be made in the tax system of foreign companies that invest no less than 300 million litas ($75 million)," said Kubilius.

"If such a big amount is invested, the tax conditions [at the time of the investment] will not be changed for 10 years."

As the proposed deal worms its way closer to being realized, however, opposition factions are voicing their disgust with the whole process. The Labor Democrats (LDDP) quickly resumed their criticism of the oil privatization and joined with the Social Democrats in condemning the government's decision to negotiate solely with Williams.

"Because of such a case, the Lithuanian government finds itself in an unfavorable position to dictate any conditions," Burbiene stated. "All doubts we had are becoming reality."

Although Williams' offer totaled $300 million, half of which will come in the form of reinvestment, Burbiene claimed that a great deal of money could be lost due to the proposed payment plan.

"The cheap selling price for 33 percent of the shares of the oil companies only totaled $75 million with a guarantee that another $75 million will be paid only in 2002," said Burbiene. "This money isn't guaranteed, however, because if the profit is less than expected, it could amount to less than the expected minimum."

Povilas Gylys of the LDDP painted an even less appealing picture by claiming that Prime Minister Gediminas Vagnorius is attempting to create a "foggy" atmosphere around the privatization process while playing with public opinion in order to hide the lack of advantages that society will actually gain.

"The part of society that can actually view the entire process sees that it is dirty and that someone very powerful does not like clarity," Gylys stated. "The privatization of the oil complex is not only an economic question, but one of politics and foreign affairs as well."

Kubilius responded by telling TBT that the LDDP's criticism is based solely on politics. He stated that the arguments presented by the opposition are not substantial and that the economic point of view is hardly their main concern.

"If everything goes as planned and $300 million can be invested, the price of the company will increase by more than two times," said Kubilius. "The government can even sell more shares at that time and make really large gains."

While the politicians wrangled, the Williams company appeared in the headlines for a different reason. According to government officials, a Kaunas company called "Dingstis" is currently under investigation by the state security department for attempting to dig up information on Williams.

"There was a report in the newspaper that our security department was conducting an investigation into the company that took information upon the request of the Butinge administration," said Kubilius. "The company that was obtaining the information was owned by the KGB. I hope we will have more news about this matter when [State Security General Director Mecys] Laurinkus will have more information."

The parliamentary press service released a statement on Sept. 18 , stating that some fragments of information about Williams has already been discovered in Dingstis' computers. Additional searches through the many files are said to require more time.

Darius Silius, spokesman of Williams Lietuva, appeared puzzled by the entire event.

"Williams has always been open and has always freely given information," said Silius. "That policy will continue."