Mazeikiu Nafta Is To Be Sold Finally

The Lithuanian government will sign a deal closing one of eastern Europe's most controversial privatisation sagas - the sale of Mazeikiu Nafta, the only oil refinery in the Baltic states.

Yukos, the Russian oil group, will take charge of 27 per cent of Mazeikiu, the company at the centre of an energy industry Cold War since its management was handed to US-based Williams International in a sale designed to exclude Russian bidders.

Tuesday's deal is important for Yukos, which has ambitious plans to supply the expanding European Union with oil. But it is a strategic landmark for Lithuania, which recruited Williams in 1999 hoping that a US partner would break the country's Soviet-era dependence on Moscow and make the country a more appealing candidate for EU and Nato membership.

Mazeikiu, a result, say the management, of disrupted oil supplies and costly modernisation to meet EU standards.

Yukos will guarantee crude flows for 10 years in addition to paying $75m in cash and $75m in loans for its stake in Mazeikiu, the only refinery in the Baltic states.

The oil-for-shares deal ends years of politicking in Lithuania over the original sale, which involved costly state obligations to cover Mazeikiu's debts. Mazekiu's poor performance has plagued successive governments, filling domestic politics with allegations of mismanagement. .

Yukos is buying into Mazeikiu on terms almost identical to those offered to Williams, although the US group keeps management control. The government will retain 40 per cent of the company.

The latest deal is a far cry from 1999 when Lukoil, Mazeikiu's Soviet-era supplier, waged a campaign to scupper the privatisation, blocking crude flows and funding anti-Williams politicians.

Williams responded using contacts in Washington to have a diplomatic message sent reinforcing the idea that a big US energy investor was a plus point in Lithuania's Nato ambitions.

But today it seems the energy Cold War, in Lithuania at least, is over. Yukos and Williams have agreed to give each other first option to buy in the event that either partner wants to sell its Mazeikiu stake, although both sides insist that theirs is a long-term investment.

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