Mixing oil and politics

When Lithuania's strategic investor at the nation's single oil refinery — the U.S. Energy group Williams — announced late last month it had sold its controlling share to Russia's Yukos, The Baltic Times reported there were only two options Lithuania could pursue. One would have been to roll over and do nothing, which the newspaper reported was the prevailing mood within the Lithuanian government. That was the government's subsequent course of action: to confirm the deal and dub Yukos the Mazeikiu Nafta refinery's new strategic investor.

The term itself, "strategic investor," is an unfortunate one to begin with.

It implies an economic policy servicing strategic considerations, while the point of privatizing large Soviet-era enterprises has been exactly to free them from the constraints imposed by state control in the interest of facilitating the creation of a market economy.

The term also implies there is a strategy.

The energy sector is of vital national interest in the Baltic states, and all the major sources of energy — oil, heating fuel, natural gas and nuclear fuel — continue to be provided by Russia. By locking LUKoil out of the privatization of Mazeikiu Nafta and putting Williams in, Lithuania's movers and shakers of years past said they were moving the country toward energy independence. The Butinge oil terminal on Lithuania's northern coast was the key element in that plan as it could receive imports of crude from the North Sea or elsewhere for refining at Mazeikiu Nafta.

Public opinion surveys back in the fall of 1999, when the Lithuanian government signed a series of contracts with Williams for Mazeikiu and Butinge, showed most people thought the Conservative government was more interested in lining its own pockets.

Now Lithuania's prosecutor general, Antanas Klimavicius, has opened an investigation into fraud and corruption surrounding the deal, and plans to question former members of the government who signed off on it.

Lithuania's second option was to fight the legality of the entire deal with Williams. Lithuania's Constitutional Court earlier ruled the deal was unconstitutional, but in Lithuanian jurisprudence that didn't automtacially send Williams packing its bags. Instead, parliamentarians sought explanation of which parts of the deal were illegal, and little came of it.

A more subtle legal challenge emerged last week when dark-horse Australian-Lithuanian presidential candidate and doctor of law Juozas Petraitis took President Valdis Adamkus to court.

Petraitis filed two suits simultaneously in two different venues charging Adamkus had violated the oath of office he gave to protect the state by not opposing the deal with Williams in 1999 and after.

Adamkus blew hot and cold on Williams. He claimed he was working behind the scenes back in 1999 to get Lithuania the best deal possible, but after then-Prime Minister Rolandas Paksas refused to sign on to the deal, calling it too great a burden for Lithuania to bear, Adamkus backtracked, saying he had had doubts all along. Paksas resigned and his wild ascension in the public opinion surveys carried him higher than the ever-popular Adamkus, which may have done more than anything else to instill new doubts into the president's position back then.

Petraitis, Paksas and Adamkus are all vying for the presidency in elections this December, and it would be easy enough to write off Petraitis' legal challenges as a campaign gambit, which is the tack the Lithuanian press has taken so far.

At the very least, the Williams deal won't go away for years to come because of the debt Williams ran up under its management at Mazeikiu. Williams and Mazeikiu could be the deciding factor in this year's presidential election, but there are no parties left arguing in Williams' favor, so the contest becomes one of outdoing the political opposition in condemning the deal, and coming up with a way out from under the awesome burden Williams left in its wake for the Lithuanian state to bear as its cross. The Social Democrats' government hopes Yukos has more incentive to make Mazeikiu fluid and profitable. So far the other political parties haven't come up with a better strategy.