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Lithuania: Oil Refinery Privatization Hits Rocky Road

Vilnius, 12 March 1998 (RFE/RL) -- A row has broken out in Lithuania over the privatization of a local oil refinery. The affair involves not only French and American interests, but has also differing government ministries. Even Prime Minister Gediminas Vagnorius and the U.S. Ambassador to Lithuania have been drawn in.

At the center of the affair is the Mazeikiu Nafta refinery, in the northwestern town of Mazeikiai, which produces more than five and a half million tons of oil products per year. Although much of its equipment is worn out, it is still the country's biggest single producer of fuel oil. France's Banque Paribas was chosen by the Lithuanian government nearly six months ago to advise the authorities on the privatization of the refinery.

However, Paribas is concerned about a letter of intent signed by the Lithuanian Economy Ministry some three weeks ago (Feb. 14), with the U.S. oil group Williams International. According to that agreement, Williams will take a 33 percent share of in the planned Butinge oil terminal. That's not the point at issue however. What worries Paribas is that the agreement also expresses Williams' interest in possibly taking a stake in Mazeikiu Nafta.

Paribas also says that under the arrangement with the Economy Ministry, Williams has been promised access to information on Mazeikiu Nafta. Paribas says that the privatization has been put in jeopardy by these moves, because many prospective investors might be significantly deterred by the signing of a private agreement between the government and Williams. In addition, Paribas says it has not been officially informed of Williams' plans -- which is information needed by a consultant.

The French company has expressed its concern to Lithuania's European Affairs minister Laima Andrikiene, who also oversees the privatization process in Lithuania. Andrikiene's ministry subsequently complained to Prime Minister Vagnorius, saying the letter of intent signed with the Economic Ministry represents a possible legal breach. According to officials of the European Affairs Ministry, the concerns of the Banque Paribas are justified, in that it has signed an agreement with the government to keep information on the refinery confidential.

Lithuanian Economy Minister Vincas Babilius countered by telling RFE/RL that it's impossible for the agreement to contravene the law. He said he has not seen the letter of intent, and that neither he nor officials from his ministry will comment on it for the moment. But he said Williams will obtain information about Mazeikiu only if the government approves that, and he said he is waiting for Paribas to present its privatization program for the refinery before deciding on anything.

The U.S. Ambassador in Vilnius, Keith Smith, has commented on the matter. He issued (March 4) a press release saying that the U.S. "strongly and consistently supports the participation of Williams in stabilizing Lithuania's energy sector and the country's economic performance". He called Williams a "solid, experienced and reputable American company".

Lithuania's major privatization project is the sale of the national Telecom service for a price expected to be about $1 billion. The government is set to announce the successful bid for the utility in May. Three big foreign companies which had earlier expressed interest in bidding, namely the French, Italian and Greek telecom companies, have however now decided not to participate, for various reasons. That leaves the Danish TeleDenmark and a Scandinavian consortium consisting of Sweden's Telia and the Finnish Telecom, as the main bidders.