Ventspils terminal to run dry 'forever'

The situation with the transit of Russian oil through Latvia further deteriorated during the past week, with both sides downplaying the prospects of any solution materializing over the next few months.

In fact, rhetoric between the two sides appeared to have taken a turn for the worse, while the stance of both the Latvian government and private shareholders in Ventspils Nafta remained divergent.

"Anything is possible when you have to deal with Russia," Aivars Lembergs, mayor of Ventspils and the key figure upon whom any deal depends, told reporters in Ventspils on March 17.

"They thought about it too long, and our interests have now changed," Sergei Grigoriev, vice president of Transneft, Russia's pipeline monopoly that has agreed in principal to buy the Ventspils oil terminal, told the Interfax news agency.

Lembergs, for his part, didn't rule out the possibility that the pipeline running from Russia to the port in Ventspils could run dry for a long time, leading him to attack the intransigence of the Russia government, which owns Transneft.

"Since their salary doesn't change, this is a loss suffered by Russia's oil companies and taxpayers. (Russian officials) are taking steps with the property of others, and they have no problems," said Lembergs.

The sense of exasperation comes after negotiations over a deal which would allow Transneft to participate in the ownership of the Ventspils terminal apparently broke down.

Vladimirs Solomatins, vice president of Latvijas Naftas Tranzits, which owns 47 percent of Ventspils Nafta, the oil terminal, told the Russian daily Vedomosti that LNT shareholders had offered Transneft a stake in a front company tied to Ventspils Nafta in return for guaranteed oil deliveries.

The price tag for such a deal, explained Solomatins, was based upon a professional assessment by Deloitte & Touche, one of the world's leading accounting firms.

The deal, however, was rejected by Russian officials as "unsatisfactory."

Grigoriev had earlier stated that Transneft would buy the terminal for $143 million, though it was unclear what size stake he was talking about.

Lembergs, for his part, had named $200 million as an acceptable sale price, which Grigoriev rejected outright.

Prime Minister Einars Repse was quoted last week as saying that the government currently didn't have plans to sell its interest - 43 percent - in Ventspils Nafta, though it was prepared to discuss the feasibility of such a deal as soon as the Economy Ministry drafted a proposal.

Still, the government is cognizant of the fact that its stake would be too small to satisfy Transneft.

"The problem is that the state has just 43 percent of (Ventspils terminal) shares. It is not a controlling stake, therefore the state alone can't push this process without involvement of private shareholders," Ainars Slesers, deputy prime minister, told the Baltic News Service.

Apparently, however, both state and private shareholders have failed to work together on the crucial issue - estimated to be worth 2 percent - 3 percent of Latvia's gross domestic product - and instead are shuttling off to Moscow in separate negotiation teams.

The Latvian government, said Slesers, has not made any concrete offers to Russia, nor is it aware of any private initiatives to this extent.

Speaking of an alleged offer on the table, Slesers said, "Something like this could have been said by Lembergs. Everyone knows that Lembergs is running around and trading off the company's shares."

The sardonic tone of one of Latvia's highest officials reflects the widening gap in Latvia on how to solve the oil transport crisis.

This week a special interdepartmental government commission that decides oil exports priorities is meeting in Moscow, and while Russia's oil majors will push for crude supplies to Ventspils to begin again, Transneft's Grigoriev on March 13 said that the pipeline operator would not renew deliveries to the Latvian port.