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Lithuania struggles to maintain gas momentum

  • 2001-09-27
  • Bryan Bradley
VILNIUS - Lithuania has not yet managed to fix privatization terms for the 92 percent state-owned natural gas distributor Lietuvos Dujos despite the government's non-stop internal consultations and meetings with other interested parties over the past month.

Officials repeat they are close to finalizing plans to sell up to 68 percent of Lietuvos Dujos shares to a strategic investor, gas suppliers and maybe local companies.

But the government decided not to even discuss the sell-off at its Sept. 24 sitting, where Prime Minister Algirdas Brazauskas had predicted a decision would at last be made.

On the sidelines of that Cabinet meeting, Economy Minister Petras Cesna told The Baltic Times he could not predict when the issue would be resolved.

"After so much work, one more week is not much if it means getting a better decision," Economy Ministry spokesman Ricardas Slapsys said. He added it was clear that a 34 percent stake would be sold to a Western strategic investor by international tender, while 25 percent would be sold to a natural gas supplier, most likely Russian gas giant Gazprom.

What is undecided is whether to sell another 8 percent or 9 percent of shares to Gazprom's partners in Lithuania, or to offer those shares publicly on the stock exchange, as recommended by the World Bank. In coming days, government officials will debate the optimal economic and political solution with World Bank specialists in Washington by video conference, Slapsys said.

The hold-up seems to lie in the search for a proper balance between the national strategic goal of Western integration and the reality of dependence on supplies from the East. Lithuanian leaders often note that a rational agreement with Gazprom is essential to avoid the type of supply problems that Lithuania's Mazeikiu Nafta oil complex faced after Russian oil major Lukoil was left out of that company's privatization.

Brazauskas has been shuttling around Eastern Europe in search of a solution. Between Sept. 17 and Sept. 21 he received Gazprom Chairman Alexei Miller in Vilnius, flew to Moscow to discuss energy and transit issues with the Russian government and returned to Lithuania to meet World Bank's Regional Director Michael Carter.

Gazprom's Miller confirmed that his company would like, together with local partners, to buy a controlling stake in Lietuvos Dujos, or at least to stand on equal ground with the strategic investor. He denied that Gazprom was threatening to raise the price of natural gas sold to Lithuania by over 50 percent if its conditions were not met.

But Lietuvos Rytas reported on Sept. 24 that Gazprom was unwilling to negotiate with Lietuvos Dujos about gas prices for 2002 until the terms of the privatization have been finalized.

The World Bank says that if equal 34 percent stakes are sold to the strategic investor and to the supplier with its partners a contract should be signed guaranteeing the state - together with the Western investor - control over key decisions and granting the strategic investor priority in any further sale of shares in the company.

Lithuania may well go along with this plan, even at the risk of angering Gazprom, for the sake of a structural adjustment loan it is eager to get from the World Bank.