Russian oil baron tough on competitors

VILNIUS - Russian oil baron Vagit Alekperov seems to be very fond of Cold War ghosts resurfacing and doesn't mind contributing to them himself.

First of all, he would give not a single extra gallon of crude either to the Lithuanians, to Latvia's port of Ventspils, or to Americans wherever they might be. Secondly, he knows enough nasty words to say them in correct Russian grammar.

True, he himself would not like to bear the label of an oligarch and would be glad if someone just called him a loyal Kremlin soldier.

"Since it is obvious that one cannot be a successful and influential entrepreneur within the Russian Federation without at the same time being a political player, it is true that the superficially commercial interests of significant Russian concerns active abroad are inextricably interlinked with the goals of the new elite inside the Kremlin," said Jane's Intelligence Group in a recent report on Russia.

Alekperov, chief executive at the Russian oil giant LUKoil, has charged that competitors in Lithuania are behind the statements by U.S. Senator Jesse Helms against the Russian oil concern.

Helms, chairman of the U.S. Senate's Foreign Affairs Committee, sent letters to New York Stock Exchange President Richard Grasso and Chairman of the U.S. Securities and Exchange Commission Arthur Levitt a month ago, bringing their attention to LUKoil's inappropriate conduct regarding U.S. companies.

The influential senator's letters expressed concern over plans to list LUKoil shares on the New York exchange in the form of American depository receipts.

"These statements by the U.S. senator are the initiative of our competitors in Lithuania. But no one will get concessions from us in this way," Alekperov said in an interview with the Russian weekly business newspaper Ekspert.

Helms had said LUKoil was locking other Russian and Kazakh suppliers out of the Lithuanian market, thus using its control of the pipeline to Mazeikiu Nafta to blackmail the refinery and Lithuania itself.

Alekperov objected.

"We want equal conditions for companies from the East as well as the West to enter the Baltic states. The Lithuanian government itself has declared such a position. But I wouldn't call it equal conditions if a 15 to 20 percent customs tariff is levied on petroleum products, lubricants, diesel fuel and gasoline from the East, while there are no such barriers to imports from the West," Alekperov said.

These tariffs have been introduced by the Lithuanian government for what it said was protection of the local market from low quality products.

Helms also pointed out in his letters that Alekperov, one of Russia's most powerful oligarchs and who was suspected of tax fraud and violations of currency transaction rules, was LUKoil's chief executive.

Meanwhile, a spokesman for Williams Lietuva, the Lithuanian subsidiary of the U.S. company Williams International, which owns one-third of shares in Mazeikiu Nafta, said Alekperov's statements about competitors in Lithuania showed that LUKoil had not abandoned its intentions to control the Mazeikiai plant.

"It is not clear what competitors Alekperov is speaking about, as Williams looks upon LUKoil as its potential partner both in selling oil products processed at Mazeikiu Nafta and buying crude from LUKoil," said Darius Silas, a company spokesman.

He also pointed out that Mazeikiu Nafta had no retail fuel business in Lithuania and, therefore, was not a competitor to LUKoil in this field.

Alekperov has confirmed recently that his strategy includes not only a retail network in the Baltic states but also a refinery, "and we are striving for that in a planned manner."

Lithuania's oil refinery Mazeikiu Nafta has been operated by the U.S. company since 1999.

From that time onward, the refinery has been subject to frequent shutdowns because of interruptions in the flow of crude from Russia. LUKoil has declined to sign long-term agreements with the American company, saying it has no interest in locking itself into obligations with a company in which it holds no stake.

After a year and a half of negotiations, Mazeikiu Nafta and LUKoil failed to agree on an alliance. The cooperation agreement would have ensured long-term supplies to Mazeikiai.

Following a visit in March 1998, Alekperov is expected in Lithuania again this May on an invitation from the Lithuanian government which is very much eager to strike a deal on long-term supplies. Such agreements would open the way for Williams to get loans for a reconstruction program at Mazeikiai Nafta.

However, the wording of both sides has changed very little – if at all – ahead of the visit.

Councilor at the Russian Embassy Andrey Tikhonov reportedly said last week that Lithuania should state its position on the privatization of strategic objects "more clearly."

In a meeting with MPs from the opposition Social Democratic coalition, Tikhonov underscored that it would be good to achieve that clarity by the time of Alekperov's visit. So, Vilnius once again has to meet a Cold War veteran who has never retired.