U.S.-based Williams International, operator and owner of a 33 percent stake in the Lithuanian oil company Mazeikiu Nafta, had been in the process of finalizing a deal with Russia's second largest oil company, Yukos, in line with an agreement made on June 14 this year.
The deal would have seen Yukos pay $75 million for a 26.85 percent stake in Mazeikiu Nafta, as well as another $75 million in loans to be spent on modernization of the plant. The deal also included the supply of 4.8 million barrels of crude a year by Yukos.
Announcing the termination of negotiations on Dec. 11, Darius Silas, spokesman for Williams Lithuania, said the June agreement stipulated that either party could break negotiations if the process became unduly protracted.
"Williams exercised their right granted in the June agreement after it was clear that Yukos would not initial an agreement that was to be sent to the government for approval," explained Silas. He also said that the break was needed in order for Mazeikiu Nafta not to be held to previous agreements with Yukos on crude oil supplies, thus enabling it to negotiate a better deal on supplies for the first quarter of 2002.
On Dec. 17, Mikhail Brudno, vice president of Yukos, told journalists in Moscow that, "Yukos is surprised by the move and considers it to be inadequate and incomprehensible." He expressed Yukos' willingness to continue talks but with different negotiators for Williams, the Lithuanian government and Yukos.
Liberal MP Gintaras Steponavicius, who has been closely following the Williams-Yukos negotiations, believes Yukos has reneged on its June promises. "We've had talks with the chief of Williams and it was clear that Yukos had withdrawn from their previous positions."
Yukos seems to have backed out of a previous commitment to cover any losses resulting from a lack of supply.
In a statement on Dec. 13 the Ministry of Economy said: "The Ministry believes that Williams is trying to achieve the best possible deal for Mazeikiu Nafta, while YUKOS' requirements would worsen it. Neither the Ministry of Economy nor Williams is satisfied with the way negotiations have been proceeding."
Another apparent source of contention between the two companies is the struggle for control of Mezeikiu Nafta. While the Lithuanian government owns roughly 60 percent of the company, Williams retains full operational functions and Yukos now seems to want a piece of the action.
The recent split between Williams and Yukos has reopened a window of opportunity for Russian oil company LUKoil which expressed an interest in meeting Williams needs just three days after the collapse of negotiations with Yukos.
An earlier deal between Williams and LUKoil collapsed after 18 months of negotiations, also over who should have operational control.
Unsurprisingly perhaps, Williams is not yet running into the arms of Lukoil and seems keen to resume negotiations with Yukos. "This break gives us a chance to gain some perspective on the deal both for us and them, but Williams hopes they come back to the table," said Silas.Although Yukos appears willing to resume negotiations possible preconditions it might set for a resumption are unknown.
There is no doubt that with some members of the Lithuanian government becoming impatient and Prime Minister Algirdas Brazauskas accusing Williams of poor management, the company would like to cement a deal as soon as possible.
Adding to Williams' troubles have been the 11 investigations into allegations of embezzlement and corruption at Williams which the prosecutor general's office has launched in the last two years - without coming up with any evidence of wrong doing.
"Williams is concerned that there have been these developments. We are surprised and concerned about the possible political motives behind them," said Silas.
In a news release dated Dec. 17, Williams expressed its willingness to work with the prosecutor general's office in any way necessary as they have done in the past, even initiating the investigations at times to expedite the process.
Majors was quoted in the release as saying that, "Williams is concerned that the prosecutor general's investigation into Mazeikiu Nafta has become nothing more than a politicized tool for those that want to either revise a legally binding business agreement or force Williams to leave the country. Williams has nothing to hide from any investigation or audit."
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