Minister: Scrap the Ventspils Nafta agreement

Latvian Economy Minister Juris Lujans said he believed that the time had come to terminate the state's agreement with Ventspils Nafta shareholders.

According to the minister, who spoke in an interview with the daily Diena, the agreement is "discriminatory" and "imposes strict restrictions" on the state of Latvia.

In talks with Ventspils Nafta's primary shareholder Latvijas Naftas Tranzits last week, Lujans reportedly said that the government would insist on termination of the shareholder agreement in future talks with the company.

The minister said he expected a response from Ventspils Nafta shareholders on June 7 when he goes to Ventspils to meet with LNT owners and managers.

The shareholder agreement, which was signed in September 1997, grants LNT, which in turn is owned by several Ventspils businesses, some with offshore connections, full control over Ventspils Nafta management.

To the government's chagrin, the agreement also bars the state from selling its stake - over 38 percent - in the oil terminal.

This clause alone has been criticized for years by various ministers, but it has proven impossible to change.

LNT Deputy Board Chairman Vladimirs Solomatins said the company had not received any official notice about the economy minister's wish to terminate the shareholder agreement.

Solomatins said LNT would not agree to terminate the agreement because it had complied with all requirements under the agreements made with the Latvian Privatization Agency upon the privatization of Ventspils Nafta.

"There are no grounds for amending the agreements now after we have paid for Ventspils Nafta shares in full," said the LNT representative.

Furthermore, LNT will not tolerate unilateral termination of the shareholder agreement and will defend its interests at the court if needed, said the deputy board chairman.

Solomatins nevertheless hoped to find a solution acceptable to both parties at the June 7 talks.

According to the original agreement, no amendments can be made without mutual consent between the parties. So far, however, LNT has never agreed to any changes in the agreement provisions.

There is also a renewed agreement barring the state from altering Ventspils Nafta privatization regulations, approved in 1997, without LNT consent.

The shareholder agreement is valid as long as the state-held share in Ventspils Nafta is at least 27 percent.

Currently the state holds 43.6 percent in Ventspils Nafta. The LPA board resolved recently to allow LNT to buy another 5 percent in the oil terminal that had been set aside for the shareholder once all investment obligations had been fulfilled.

The purchase price was set at 4.54 million lats (6.85 million euros), or 0.87 lats per share.

It is believed that with the purchase of this 5 percent stake, LNT will acquire a controlling stake in Ventspils Nafta.

The purchase agreement has not been signed yet since the privatization agency is still working on the terms of the agreement and expects to submit them to LNT in the next few days.

The purchase agreement has to be completed in three weeks, and Lujans told the newspaper there would be no rush and that things would be analyzed thoroughly.

Diena believes the minister's comment imply possible new developments concerning Ventspils Nafta's privatization.

The Latvian Prosecutor General's Office launched a probe into alleged illegalities in Ventspils Nafta privatization but did not find any reason to question the legitimacy of the privatization.

Prosecutors did detect signs of possible violations by some officials and have instructed the Corruption Prevention and Combating Office to look into actions by these so far unnamed officials.

Lujans said earlier that the investigation tino Ventspils Nafta privatization could continue in the light of the prosecutors' findings.

"More questions may be raised," he said.