Viewing cable 05VILNIUS1244
Title: DUTCH COURT FREES SHARES OF LITHUANIAN OIL

IdentifierCreatedReleasedClassificationOrigin
05VILNIUS12442005-11-25 14:30:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Vilnius
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 001244 
 
SIPDIS 
 
STATE FOR EUR/NB, EB/CBA, EB/ESC, L, P (DBAME) 
COMMERCE FOR ITA/ADVOCACY CENTER (PNUGENT) 
 
E.O. 12958: DECL: 11/24/2015 
TAGS: ECON ENRG EINV PGOV PREL LH
SUBJECT: DUTCH COURT FREES SHARES OF LITHUANIAN OIL 
REFINERY BUT MORE LEGAL PROBLEMS POSSIBLE 
 
REF: A. VILNIUS 1224 
     ¶B. VILNIUS 1186 
     ¶C. THE HAGUE 3119 
 
Classified By: Classified by Economic Officer Scott Woodard for reasons 
 1.4 (a) and (b) 
 
¶1. (C) SUMMARY:  A Dutch court lifted restrictions November 
24 on Yukos-owned shares of Lithuania's Mazeikiu Nafta oil 
refinery (MN).  The decision appears to allow Yukos to 
proceed with the sale of its majority stake in MN.  The 
larger legal battle over Yukos's holdings continues, however, 
and a different court case filed in the Netherlands by 
Western banks and Yuganskneftegaz (YNG) has the potential to 
cause a serious problem for the GOL.  End Summary. 
 
DUTCH COURT FREES SHARES IN MN . . . 
 
¶2. (U) An Amsterdam court on November 24 removed the 
temporary injunction it had placed on Yukos's shares of MN on 
October 12.  The court had restricted the sale or transfer of 
the shares in response to a lawsuit filed by the Russian firm 
YNG, a former Yukos subsidiary now controlled by Rosneft, 
against the Netherlands-registered Yukos, which is preparing 
to sell its stake in MN.  The court's decision effectively 
permits Yukos to sell its majority stake in the refinery in 
coordination with the GOL, which can veto a buyer it opposes. 
 The court had placed the injunction at the request of YNG, 
which claims that Yukos owes it money for supplies of crude 
oil YNG delivered.  The decision indicates that the court 
found that the ongoing process of liquidating Yukos's assets 
does not harm YNG's claims as a creditor. 
 
. . .BUT YUKOS IS NOT YET OUT OF THE LEGAL WOODS . . . 
 
¶3. (U) Another case in the Dutch courts may cause additional 
problems for Yukos and its plans for MN.  This case, filed by 
Western Banks (including Paribas and ING), Moravel 
Investments (which reportedly has links to Yukos owner 
Mikhail Khodorkovsky), and YNG, seeks to recover debts Yukos 
allegedly owes.  The Dutch courts will appoint on December 15 
a panel of experts to determine how best to liquidate Yukos's 
assets to satisfy its creditors. 
 
. . . POSSIBLY LEADING TO A NIGHTMARE SCENARIO FOR THE GOL 
 
¶4. (SBU) This case does not affect MN shares directly. 
Should the court, however, decide to forcibly auction Yukos, 
the buyer would also obtain Yukos's assets, which include the 
majority stake in MN.  In this case, MN would have a new 
owner, and the GOL would not be able to cast its veto to 
prevent the transfer of ownership.  A potential MN buyer 
could obtain the refinery without the GOL's approval by 
obtaining Yukos's assets at auction. 
 
GOL WARY OF RUSSIAN INTENTIONS 
 
¶5. (C) Saulius Specius, an adviser to the Prime Minister and 
a member of the GOL's three-man MN negotiating team, told us 
on November 22 that YNG's behavior was suspect.  He said that 
Yukos still owns assets in Russia and that Russian courts had 
already established YNG as a legitimate creditor, a status it 
does not yet enjoy in the Netherlands.  Rather than pursuing 
the forced sale of Yukos assets in Russia, however, YNG is 
going after Yukos assets in the Netherlands.   Specius said 
that it looked to him like YNG and, by default, the Russian 
Government, was looking for a way to acquire the Yukos 
corporate empire in its entirety--an empire that includes MN. 
 
¶6. (C) Specius said that the GOL had no good options if an 
entity of which it does not approve bought Yukos while it 
still owned its majority stake in MN.  He said that 
nationalizing the refinery was a possibility.  He stressed, 
however, that this was not desirable, emphasizing that the 
GOL would need to pay a fair market value to Yukos's new 
owner, which could cost the GOL USD one billion or more. 
 
¶7. (C) Specius told us on November 25, following the Dutch 
court's decision, that the GOL has an incentive to encourage 
Yukos to sell its share of MN quickly, before the other court 
decides to send all of Yukos (including MN) to the auction 
block.  He warned, however, that a quick sale might not be 
possible because Yukos and the GOL still needed to negotiate 
several issues before Yukos sells its shares. 
 
AN ODD ADVERTISEMENT 
 
¶7. (U) A full-page advertisement denouncing TNK-BP, 
reportedly the GOL's favored candidate to buy MN, appeared in 
one of Lithuania's leading newspapers on November 24.  The 
trilingual (Lithuanian/Russian/English) advertisement, in the 
form of a letter from Indian Ocean Petroleum Services LTD 
(IOPS) to President Adamkus and Lithuania's citizens, warns 
Lithuania against making a hasty decision that allows TNK-BP 
to buy a majority stake in Mazeikiu Nafta.  The letter states 
that the Seychelles-registered IOPS is a minority shareholder 
in the Saratov Refinery, part of TNK-BP's holdings.  The 
letter alleges that TNK-BP abuses the rights of minority 
shareholders in this refinery and warns Lithuania to expect 
the same if TNK-BP buys the majority share in MN.  The letter 
concludes by warning that TNK-BP "works counter to the rules 
and norms of corporate ethics" and "disregard(s) the rights 
of its minority shareholders." 
COMMENT 
¶8. (C) The GOL got what it wanted from the November 24 court 
decision, and will continue to press on with its negotiations 
with Yukos and the potential buyers (TNK-BP, 
ConocoPhillips/Lukoil, PKN Orlen, and KazMunayGaz) to find a 
suitable owner for MN.  The rather odd advertisement will 
only fuel speculation here that the Russians are out to 
torpedo TNK-BP's bid in favor of a company more beholden to 
the Kremlin. 
 
KELLY