RIGA - Shareholders of Latvijas Naftas Tranzits, which controls the lucrative yet troubled Ventspils Nafta oil terminal, agreed last week to changes in the infamous management agreement signed with the government seven years ago.
The decision is the culmination of months of incriminations and open threats between several government ministers, most notably Deputy Prime Minister Ainars Slesers, and LNT shareholders, led by Ventspils Mayor Aivars Lembergs.
Talks between the two sides began in June when Economy Minister Juris Lujans met with LNT managers to work out ways to both resolve the contract dispute, which the state believes is detrimental to its interests, and the current crisis in oil transit.
The government, which was dead-set on working out a new agreement, even if it meant going to court, was aiming to have several clauses in the contract struck out, but LNT said last week it was willing to scrap the entire document.
As deputy director of LNT Vladimir Solomatin explained, removing the unfavorable clauses would essentially nullify the most important parts of the old contract that allowed LNT to manage and develop the oil terminal.
For his part, Lujans was reportedly perplexed by the company's proposal. "I only asked to strike out only several clauses and not cancel the agreement," he told the Kommersant Baltic daily. "It's unclear what kinds of repercussions there will be from such big changes."
Solomatin, however, said that no major changes would occur at the oil terminal if the old agreement were ditched in favor of a new one.
The government essentially wants to have more of an equal say in corporate decisions on dividends and privatization. Pursuant to the current agreement, if in the past the two sides – LNT and the Latvian Privatization Agency – disagreed, the final decision would be up to LNT.
As a result, the government has not received any dividend income from Ventspils Nafta since the moment the contract was signed in 1996.
"The first thing the government will do will be to vote for dividends," Solomatin said.
By compromising with the state, LNT is thinking long-term. "If we had lost a lot, we wouldn't have caved in," said Solomatin. "There are some local interests from the position of ongoing enterprise management where we will lose out. But as far as long term plans, then we will undoubtedly gain" by tearing up the old agreement, he explained.
Despite the lack of clarity as to the old agreement's exact fate, the fact that the two sides are about to reach a consensus on the future management of one of the country's most lucrative enterprises bodes well for both Ventspils and the economy, which have seen revenues from oil transit drop off drastically because of the current crisis.
LNT currently owns 37 percent of the terminal, though it has options to buy back a 9 percent stake it sold earlier this year in a repo transaction and a 5 percent stake reserved for it from the government. But due to a law that states a majority owner in an enterprise must offer to buy out minority owners, LNT is unlikely to move to consolidate its stakes.
LNT, which was founded in 1995, is 50.68 percent owned by Ventbunkers, 10.72 percent by Ventrans Riga, 16.12 percent by both Skonto Nafta and Puses, and 6.37 percent by Man-Tess.
Russia's Transneft oil pipeline monopoly has expressed an interest in buying a stake in Ventspils Nafta, though it is unlikely to settle for nothing less than a controlling stake.